The majority (82%) of Australians feel that when people can’t pay their mortgage, banks first should be required to mediate with the mortgage holder, to either renegotiate a repayment plan or allow a reasonable time for the borrower to sell the property and avoid eviction.

This would bring Australia in line with the US, where legislation was introduced to ensure banks initiate mediation with those defaulting on their mortgage before seeking a warrant to evict and take possession of the home, says Mortgage Mediators CEO, Terry Hunter.

“On average, foreclosures are now running at 50 a week and increasing. That’s pushing up the cost of lenders mortgage insurance (LMI), adding to bank costs, and creating more stress — often accompanied by aggression – among those affected.”

A change in the bank’s approach to mortgage foreclosures could not only reduce the number of evictions, but also help banks to lower costs in this area, he believes.

“Introducing an independent mediator to help manage the early stages face-to-face after a default is a proven way to reduce the pain and suffering that goes with foreclosures. It also reduces bank and LMI costs,” he says.

Fitch Ratings earlier this year reported the number of mortgage defaults across Australia was increasing, particularly in holiday and retirement centres. In those areas, this time of year is often a particular time of reckoning for people and small business owners that are financially stretched after the Christmas break, Mr Hunter observes.