11 lenders implicated in ASIC home loan investigation

by Miklos Bolza02 Mar 2017
The Australian Securities & Investments Commission (ASIC) has revealed the recent action against Westpac involved investigating the home loan practices of a total of 11 lenders.

Appearing before the Senate Economics Committee today, ASIC’s senior executive responsible for banking Michael Saadat has said the enquiries have been conducted for a number of years, reports ABC News.

“It started really when we conducted our review of interest only loans in 2015,” he told the committee.

“We have announced action against Westpac but we have been in discussions with other lenders and we hope to make an announcement about the work that we've been doing with other lenders in the next few weeks.”

Saadat told the committee that Westpac had changed its lending practices after ASIC made these concerns known back in 2015.

“Despite the fact that they stopped the practice ... we’ve decided to bring this action because of the importance of the issues that it raises,” he said.

In a statement released yesterday, Westpac said it will defend Federal Court proceedings commenced by ASIC in relation to the home loan allegations.

All loans identified by ASIC were “currently meeting or ahead in repayments,” the bank stated.

“It is not in the bank’s or customers’ interests to put people into loans that they cannot afford to repay. It goes hand in hand that we have robust credit approval processes while helping customers purchase their home,” Westpac Group, chief executive of consumer bank, George Frazis said.

The bank’s credit policies are informed by a “deep experience and understanding” of the Australian mortgage market, he added.

“They include a consideration of customers’ specific circumstances, including income and expenditure, previous repayments history and the overall customer relationship. We build into our processes a range of conservative inputs, including the addition of buffers to take into account possible future interest rate increases.”
 

COMMENTS

  • by Simon 2/03/2017 1:27:36 PM

    There is now a substantial niche for a progressive lender to come to market with "realistic" assessments of true expenses.

    As compliance calls for greater documentation and scrutiny, there presents the potential for adoption of "true" historical expenses as method of calculating servicing. For many people, the hurdles artificially enforced to obtain finance leads to negative outcomes.

    Especially in lower socio-economic and regional areas, where it is common for basic rent expenses to far exceed equivalent mortgage loan repayments (even at a deemed figure of 7% for example). If someone has consistently proven they can afford a rental payment of $300pw whilst maintaining perfect credit behaviours, is it reasonable to then state they cannot afford a mortgage with a P&I repayment of only $230pw?

    The adoption of HEMs - in and of itself - as a baseline expense for servicing calculations without consideration of the applicants actual expenses is a misappropriation of data. (The methodologies of the HEMs figure calculations are available online). The current methodology applied (higher of HEMs or actual) is an understandably conservative step towards a true assessment, however the current climate of investigation and accusation is not conducive to any potential reduction of "minimum".

    I welcome increases in compliance requirements - presuming they lead to improved customer outcomes.

    At present, they simply lead to more work, without any associated benefit to the consumer.

  • by Papery 2/03/2017 1:28:32 PM

    But the loans identified are either within or ahead of arrangements..... maybe ASIC should be considering how current assessment policy vs reality vs regulation is out of step with everyday reality......Chicken Little...I think the sky is falling again!

  • by Dean 2/03/2017 1:42:24 PM

    Really a bank that does not adhere to the requirements of the responsible lending act....where is the surprise in that?