Coming to the rescue of defaulting homeowners, the NSW government has sprung a proposal for tighter fire-sale legislation.
Minister for Lands, Tony Kelly, told the NSW parliament that in the current climate many home owners faced the forced sale of their home through foreclosure, however it was "immoral" that they have been exposed to the risk of "unscrupulous lenders seeking to force through a fire sale of their property" the Australian Financial Review reported.
He said that the proposed law would prevent instances of properties being sold for "well below market value simply to recover the lender's debt" by imposing a statutory duty requiring a mortgagee who exercised a power of sale to take reasonable care to sell for not less than the market price.
However, chief executive of the Australian Bankers Association, David Bell, said banks did not hold fire sales.
"The bank/mortgagee already has a legal duty to the borrower/mortgagor not to sacrifice the interests of the borrower/mortgagor," he said.
"We're not sure what additional protection this proposed law is intended to confer. The ABA was not consulted on this proposed NSW legislation."
According to the AFR, there is currently no statutory duty imposed on mortgagees by legislation, but the duty is governed by the courts under common law.