Commonwealth Bank adds to mortgage funds freeze problem
The Association of Independent Retirees (AIR) wants the Federal Government and national regulators to examine the treatment of investors in frozen property funds, as it says, the Commonwealth Bank has now added to the problem by freezing withdrawals from its $850 million mortgage income fund after being caught out through drastic lending losses.
Australian investors have been unable to recover most of an estimated $25 billion worth of investments in property and mortgage funds since freezes were imposed in late 2008.
A number of high-profile property managers including the Centro Properties Group have effectively locked investors into unlisted property trusts while the value of their holdings have been greatly reduced.
Barry Ritchie, the chairman of the AIR’s income research group has written to the Minister for Financial Services, Superannuation, and Corporate Law, Chris Bowen, and the Australian Securities and Investments Commission stating that many investors had had their capital frozen for 18 months and had not been paid distributions.
“In most cases it would appear that banks have insisted on distributions being paid to them that would normally be used to repay capital and interest to investors,” Dr Ritchie said.
“Banks have also imposed penal interest rates. Effectively investors’ funds are being used by the banks as an asset on which to lever their repayments. It is suggested that this process is improper ethically, if not legally,” he said.
A spokesman for the Commonwealth Bank’s Colonial First State said their new freeze, which had been lifted on withdrawals a month ago, was reinstated because a “small number” of mortgage loans in the fund’s portfolio had fallen behind in repayments.
“We have commenced a review of the fund’s assets to fully assess these loans and determine the impact on the fund and investors,” said the spokesman.
