A hot issue for brokers last week was to do with lenders mortgage insurance, as highlighted in FBAA
slams LMI insurers for non-disclosure.
focused on LMI in its submission to the Murray inquiry, calling for greater transparency and disclosure on behalf of lenders and LMI insurers to make sure consumers are not being ripped off by having to pay the extra insurance.
said consumers not being provided with LMI product disclosure statements and not being able to transfer LMI when moving lender were real problems the industry faces.
Many brokers commenting on the article agreed that FBAA
was on the right track with bringing this to the attention of the inquiry.
went as far as to say he was now convinced to leave the MFAA
to join the rival association.
“It's apparent that first home buyers are greatly affected by LMI. Look I totally understand the risk involved for lenders here, they are in a business. However, LMI premiums are far too expensive. At the very least if premiums aren't going to reduce there needs to be some sort of portability aspect between lenders.”
also thought it is an important issue to tackle. “The LMI companies (2 in Australia - QBE and Genworth) have a duopoly and hold all borrowers to ransom. Needs more transparency and more competition.”
agreed: “The duopoly of the mortgage insurers QBE and Genworth has to be dismantled and there is an urgent need for more disclosure to the consumers - the borrowers. The fact that LMI is not transferrable between one lender to another is also something which needs to be urgently addressed.”
said it will be interesting to see if the inquiry understands and recommends legislation or regulations to change the status quo – but he or she doubts any change will happen in the next five years.
There is no need to rip off the public by charging such high LMI premium, said CaptV.
“It is hard enough for young people to get into the housing market these days without adding to their burden. Personally, I think it is just another greedy grab for money by the money men.”
But Marty McDonald
disagreed with that, saying no lender would do high LVR loans at comparable interest rates to lower LVR loans without LMI cover, it is APRA
who really wants LMI cover in place to be sufficient cover for a big crash.
“One or more of the big banks going down would be an absolute unimaginable disaster for this country for years and years.”
But Comment of the Week goes to Denise Brailey BFCSA (Inc).
“I am looking after 1262 consumers of mortgage products. Everything the FBAA
is saying is true, and we have material suggesting banks were underwriting their own insurance but not telling the consumer, yet charging high rates as a pass on ‘cost’. Needs a Royal Commission into banking and insurance. The banks refusing to hand over the ‘policies.’ Consumers pay and then are left in the dark like mushrooms. If there is insurer, consumers unaware if a settlement with lender, that they can be then pursued for bank claim to insurer. Agony never ends. We are at the coalface of all the problems listed by FBAA
submission. The moment the customer is asked to pay for ‘insurance’ the policy should be sent to consumer. Of course there are no PDS given to customer - no transparency at all. Average cost is $12,000 to insure THE BANK. No rules, no choice, no portability. Not a good look.”
Read the article and more comments here.
Thanks to all our commentators!