KEY POINTS:
Auckland barrister Paul Dale plans to apply for injunctions against finance companies involved in Blue Chip properties in cases where the loan application documents appear to be false or fraudulent.
He argues the mortgages should be set aside and is preparing to launch a precedent-setting battle against finance companies, including GE Finance, other lenders and their agents. The action could prevent the mortgagee sales of homes owned by desperate Blue Chip investors, many retired, who face losing everything.
To date, Dale has looked closely at four case studies, collectively worth about $2 million in disputed mortgages. "My own view is some of these mortgages are not enforceable," he said. "I think I have four good cases."
If Dale is successful, finance companies could collectively face multi-million dollar challenges involving hundreds of investors. In some cases, where there is no actual property to fight over, the finance company could face a total loss.
In Dale's sights are the agents and finance companies who brokered and issued Blue Chip loans, including GE Custodians, a subsidiary of GE Finance, owned by the New York Stock Exchange-listed US company General Electric.
The case file on his desk tells a familiar story - a retired North Shore couple, aged 68 and 69, signed up to buy a $500,000 Blue Chip apartment in Auckland's Symonds St. The couple stated in a signed loan application document that they were retired with a combined income of $21,000 a year - not nearly enough to service a loan of that size. But a second form, also with their signature on it, states they are self-employed investors and their income is not given. The couple say they have never seen that form.
Dale is assuming the signature has not been forged. More likely, he said, the couple were asked to sign a pile of documents and the alternative loan application document, describing them as investors, was among them.
One Blue Chip broker who worked in the Bay of Plenty area admitted to the Herald on Sunday that he put retired people's occupations down as "self-employed investors" otherwise the loan would not have been approved. He denied any fraudulent activity and said he would never have changed an applicant's income.
John Grant, director of New Zealand business GE Money Home Lending, told the Herald on Sunday that any alleged inappropriate lending would be investigated fully if it was brought to the company's attention.
But apart from a Blue Chip "issue" which was raised some time ago, and was still being investigated, he knew of no other complaints.
"We are only part of the lenders involved in this. There are numerous groups that have lent money and our view on it is that if there is any question about anything inappropriate, we will fully investigate it." Dale said the agents who had persuaded people like the North Shore couple to sign had "misled them in various ways". It was too early in the investigation to be sure where the blame lay.
"For all I know GE Custodians may have been duped itself. They may not have realised and wouldn't have lent had they known."
A source in the mortgage securitisation market said last night there appeared to have been a "double-edged fraud", a fraud on the mortgagee (who provides the funds) and fraud on the "little old ladies" who have mortgaged their houses.
"No mortagee in their right mind would lend a 90-year-old lady $300,000 when she has no income. Somewhere in the middle, in the paper-flow to get the mortgage approved, some fibs have been told. Some middle men have made a lot of money," the source said.
