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FBAA slams LMI providers

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Australian Broker | 21 Feb 2011, 06:00 AM Agree 0
The FBAA has gone into bat for LMI portability and slammed LMI providers for not disclosing the terms of their policies
  • Ritchie McGuinness | 21 Feb 2011, 12:04 PM Agree 0
    One has to wonder sometimes what our so-called industry heads are talking about. Whilst Mr White is quite right is his comments that LMI should be portable and refunds appropriate, to make comments that clients don't get a PDS is in my understanding because doesn't actually buy the policy, the lender does to secure their position, and then chooses to hand the charge on to the client.
    In relation to the client's not gaining a benefit from paying a LMI premium ...of course they do, they gain the benefit of being able to borrow in excess of 80% of the property value...that says to me if you have a limited deposit you gain a HUGE benefit, you still get to buy a home!!!
  • countrybroker | 21 Feb 2011, 01:13 PM Agree 0
    Mr White is correct in his sentiments, but as an industry professional he must know there are limitations on portability, some mortgages allow portability if the valuation of the new security is the same or less and the valuation of the new property is OK, and the loan is the same or less than the acturial value of the current loan, the loan can be transferred to the new security providing the lenders and LMI approve it. It is that simple-it is there already . What will be more difficult will be if the client wants to refinance with another lender , as the LMI policy is an insurance contract between the lender and the LMI and as such it would be very difficult to transfer . if you were the lenders would you want to assign or transfer the policy if you were being refinanced.
    If we really want to turn the home loan market on its head , The federal goverment needs to re-enter the LMI market as it once was in the old HLIC days and they could make the policy portable !!!!!!!!!

    That is what the professional bodies should be lobbying for . More action less talk is needed from both the FBAA and the MFAA.
  • Mark | 22 Mar 2011, 01:17 PM Agree 0
    Mr White should inform himself of the facts and not talk through his hip pocket. LMI is a contract between the Insured (the lender) and the Insurer (QBE or Genworth). While it is true in some cases that the borrower reimburses the lender for cost of the premium, that is quite different in law to the borrower paying the premium or buying the insurance. Also, for many non-ADI lenders, the cost of the LMI premium is borne by the lender for loans less than 80% LVR and $750k.
    As far as portability of LMI is concerned, APRA requires LMI providers to hold significant capital over the first 3 years of the LMI policy, after which time the capital requirement decreases. As soon as a new loan is advanced, APRA considers that to be a new insurance contract and the 100% capital requirement starts again.

    Mr White does his constituency a great disservice by his uninformed comments - but they do say that you get the representation that you deserve. My belief is that brokers' representations about portability of LMI and barriers to refinance are just a smokescreen for the issue that is really bothering them - barriers to churn. Just be cafeful what you wish for - you can be certain that lenders will beef up their clawback provisions if the government goes ahead with its politically motivated but economically stupid ban on DEFs.
  • goldcoastmanager | 22 Mar 2011, 08:45 PM Agree 0
    Has anyone at the FBAA ever done a home Loan??
    Or do they still just Take fees doing Private Mortgage;s
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