Is anyone able to tell me what would happen in the event that the wraper defaults and the bank forecloses?
Where does that leave the wrapee?
Is it possible that they could make their payments to the wraper on time for 20 years but due to the wraper not paying the bank the house is taken.It all comes down to structuring. The wrappee could lose the lot. It is possible they could lose the property after 20 years but they would deserve to lose the home because they would be crazy wrapping for so long!
In any case, there are a lot of posts about this. Do a search for “wrap”. Go to the drop down box at the bottom right hand side of the page and click on ‘search page’.
Good luck.
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHi,
Just a thought, why not speak with bank you have your accounts with. See if there is a way where you can set up a joint signatory account where the wrapper and wrappee jointly sign. Then arrange two direct debit facilities (which are also jointly signed);
#1 to pay for 1st mortgage
#2 to pay for wrapper’s marginThis way money cannot be taken (drained) from this account without wrappee authorisation.
Whenever the repayments change – just get a new authorisation to alter the direct debits from the wrappee.
When a default occurs, you top up the account to sustain the first mortgage (since you can deposit at anytime).
In the event of a termination of the contract – you have a limited power of attorney in the contract which allows you to take full control of the account and remove the wrappee as a signatory (i.e. limited power under specific conditions).
The contract would have clauses that say that insist the wrapper only makes payments to the first mortgage from a joint account (thus protect the wrappee).
With such a setup – the only way a wrapper can default on a first mortgage is if the wrappee fails to pay into the account – placing the responsibility on the wrappee.
The issue is the cost of administration of the joint account – however such bank fees would be listed on the statement of accounts and passed onto the wrappee (like banks do with account keeping fees).
Again, just a thought
Michael Gruber
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