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LMI complaints triple: Industry head calls for 'major reforms'

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Australian Broker | 26 Nov 2013, 08:05 AM Agree 0
This year COSL received three times as many complaints about LMIs compared to previous years, and one industry association is calling for "major reforms".
  • Country Broker | 26 Nov 2013, 09:06 AM Agree 0
    If it not an insurance policy what is it ?

    Yes disclosure is need and as a broker I take time to explain what it is and how it works.

    Perhaps COSL should be more focusing on the behaviour of the lender and how they handle mortgagee in possession procedures , and how the properties are sold.
  • SA | 26 Nov 2013, 09:56 AM Agree 0
    No problems in SA - on refinances. Our valuers deliver valuations so far below real market prices, that any sale of property would always cover the debt..and more.

    Just a shame when clients are paying LMI for a 90% lend, whereas in many cases a realistic valuation would put the loan below 80% LVR. Collecting monies where monies shouldn't be collected - lucky it's mortgage insurers doing it and not Brokers - or all hell would break loose.
  • Positive Broker | 26 Nov 2013, 10:13 AM Agree 0
    I would actually argue the lenders need to do better here. Technically it is the lender who takes out and pays for the LMI to cover a potential shortfall upon default. It is the lenders choice to pass the cost on to the consumer. I.e. they usually absorb the cost under 80% LVR. LMI definitely needs a shake but the lenders need to be more upfront as well.
  • mac | 26 Nov 2013, 10:50 AM Agree 0
    It's really a fee charged by the lender if you think about it. The lender chooses to insure the loan and has to pay the premium to the insurer. The fact that this is directly passed through to the borrower via a third line enforcing exemption is a masterstroke by the big players.
  • MMS | 26 Nov 2013, 11:29 AM Agree 0
    No need for LMI if the borrowers knuckle down and save the required deposit.
  • Observer | 26 Nov 2013, 12:02 PM Agree 0
    Sorry Peter you are wrong yet again. LMI is in fact insurance. It is legislated under the Insurance Contracts Act, and LMIs are registered and regulated by APRA as general insurers. If you are indeed an "Industry head" then you have an obligation to get your facts straight. If the borrower is not aware of what LMI is then it surely is the responsibilty of the party arranging the loan to explain it to them.
  • Positive Broker | 26 Nov 2013, 12:13 PM Agree 0
    Very true MMS, but lets look at an entry level 3 bedder on the outskirts of a major city for $300k. Deposit required would be $60,000 plus say $20,000 for costs. That's a lot of money to save. LMI is a necessity unless lenders are prepared to take the risk themselves.
  • North Sydney Broker | 26 Nov 2013, 01:23 PM Agree 0
    It's quite simple that LMI is a fee that occurs as a condition for the lender to approve the loan and pass the cost onto the consumer. It is also the consumer's responsiblity to find out what they are signing at the time of borrowing. Trust me, if the borrowers had any other option, they won't be stupid enough to pay a dear premium unnecessary. The key issue here is to find out why there would be a mortgagee situation, whether the customer's conducts, the market, or the lender. then deal with it. Regulation can't always be the only solution.
  • Papery | 26 Nov 2013, 05:16 PM Agree 0
    yep...there needs to be a lot more disclosure, especially in respect of a recovery & short sale situation. Its only ever disclosed as a fee to the borrower & its policy between the LMI provider & Lender.

    its also one of the biggest & most expensive rorts in our industry....lets hope Dave has it on the agenda for his little review...betcha he doesnt, tho!
  • Billy Bob Blogger | 27 Nov 2013, 12:45 PM Agree 0
    Stop calling it Insurance. Full stop.
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