Churn is a term used to refer to mortgage loan turnover.
Borrowers refinance regularly to take advantage of cheaper
interest rates offered to them and sometimes, as a recent case
has illustrated, to service accrued but unpaid interest on a
The recent case of Permanent Mortgages v Cook in
Australia is worthy of comment for two reasons:
Operational and compliance risks can be critical at the coal
face of origination of small ticket financial assets. A
financier of retail mortgage assets will need to ensure it is
satisfied that the steps that were taken on origination were
legally compliant and in accordance with procedures manuals.
Increased consumer credit regulation may not be necessary in
places like Australia. As the case below demonstrates, the
current laws can, and do work. In the case Mr and Mrs Cook had
a history of defaulting on their loans and refinancing. Over
the period 1992...