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APRA 'pathologically worried' about lending standards

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Australian Broker | 28 Nov 2013, 07:00 AM Agree 0
APRA chairman John Laker says the regulator is “pathologically worried” about poor credit standards becoming pervasive.
  • Country Broker | 28 Nov 2013, 09:23 AM Agree 0
    If APRA audits have found no "cause for concern" what are APRA on about , perhaps justifying their existence and very high costs in the face of Federal Government reviews of coast and staff audits
  • What a crock | 28 Nov 2013, 10:29 AM Agree 0
    Middle of the article he contradicts his own assertions??

    High LVR's are caused - in part - by the dodgy practice of undervaluing - yet no-one in authority will go there.

    Had one valuer in a regional city, who did a private valuation for a client. Then 7 days later when a home loan was lodged, refused to value the same home.
    Because he knew he couldn't value it at the same price for the Bank; & he couldn't justify reducing the value in just 7 days. So he just refused to value it, and another valuer was brought in from 140km away. And we wonder why everything is moving to LMI territory.
  • King Wally | 28 Nov 2013, 11:00 AM Agree 0
    I think majors relying on desktop vals and contracts of sale may prove to be a problem, time will tell.
  • JB | 28 Nov 2013, 11:14 AM Agree 0
    We're concerned but we've found no cause for concern? More worried about being seen to be doing something in case they get downsized out of existence. Banks are not falling over themselves to approve unsound loans, quite the opposite. Ill informed industry outsiders need to find a different headline to peddle.
  • Broker | 28 Nov 2013, 11:37 AM Agree 0
    APRA is jumping at shadows here!
  • dpathle | 28 Nov 2013, 11:49 AM Agree 0
    Jahn Laker knows what he is talking about people. You are only worried that lending might get harder for you and therefore harder to earn a dollar. Why should a borrower at 95% LVR be on the same rate as someone on 50% LVR? If you think that they should be on the same rate, then that shoots down the Reward/risk theory and we should all be investing in Greece. Comments by salespeople criticizing John Laker with limited accounting and economic basis should pay attention to what APRA are saying an not rely so much on the supporters of the ABA and BCA. Give the guy a break and try to find out a little more information about how bad it is getting out there apart from thinking that what your BDM tells you is gospel.
  • sigh.... | 28 Nov 2013, 11:58 AM Agree 0
    dpathle - once we declare a different rate for a 95% lend, valuation figures will plummet to ensure more people get pushed into the higher more profitable rates bracket.
    The usual assumptions are being dragged out...if someone disagrees with you, it can only be because they're ill informed - both sides can use the same argument.
  • dpathle | 28 Nov 2013, 12:13 PM Agree 0
    Sigh.... - That's funny. Crazy theory in regards to plummeting house prices, but still funny.
  • Papery | 28 Nov 2013, 12:35 PM Agree 0
    Last I looked, most Lenders were charging a pretty heavy LMI premium as well as a loaded IR for high LVR loans....
  • Papery | 28 Nov 2013, 12:39 PM Agree 0
    Heres a little more food for thought....
    Realisation of the security for repayment of the debt is meant to be the final risk assessment not the first consideration for loan repayment. I thnk we've all see cases where a low LVR loan is in effect more riskier due to the tenous nature of ongoing income which is meant to support the contracted monthly debt repayment arrangements.
  • sigh.... | 28 Nov 2013, 12:52 PM Agree 0
    dpathle - the point was not real house prices dropping, it was Banks using their influence to force down valuations - not the real value of the property. eg Bank Valuations vs real property value. Strange being from APRA, that you don't know that.
  • dpathle | 28 Nov 2013, 01:06 PM Agree 0
    Sigh.... stop it, my sides a splitting from laughing at your theory about valuations and the other crazy thought that I work for APRA. Papery.. Lower LVR is lower Risk plain and simple. Lower loan from repaid debt, not property speculation is literally zero risk. Would like to see the stats on lower LVR are riskier... is there a web site you can point me to, to back that claim up?
  • Denise Brailey BFCSA (Inc) | 28 Nov 2013, 04:27 PM Agree 0
    The time for APRA to chat about housing bubbles was back in 2001................bit late Mr Laker. Horse has bolted. LVR's now sitting on 130%, when sold at 95%. There will be a price to pay.
  • mac | 29 Nov 2013, 09:47 AM Agree 0
    97% today, 80% in a couple of years time, 50% in 15 years time. Same borrower same borrower assessment risk. Of course higher LVR's are more of a systemic risk but the credit practices of our lenders are sound, you just have to just have to look at the very low default rates. The biggest risk to the system is not high LVR loans but a property market crash caused by a major recession. The banks cant assess for that at the micro level sorry just not possible no matter what Apra says (unless they want to introduce 50% LVR maximums).
  • dpathle | 29 Nov 2013, 10:26 AM Agree 0
    Systemic risk (systematic risk) is non-diversifiable. If a lender has a high percentage of low LVR securitised loans, then that has diversified the risk for the investor and therefore that investor should be paid less for their investment, than the high LVR loans with less non-systematic risk. To bundle up High LVR loans and low LVR loans into one CDO package allows the bank to say that they have the same risk because of the cocktail of facilities. Rates are unfortunately based on profit and not risk, which is bad lending practice. If a person has a loan of $800k and a residential property worth $1mil and the $200k equity came from great Aunt Maudes estate, they will be sitting on a rate of say 5% (with all discounts), whereas someone that has a $500k property and a $100k loan will be closer to 6%. Lowest risk should be on a lower rate ..... but it's not because the rate is based on profit return on the investors money and not the reward v risk theory. Would you rather lend your $800k to one person or $800k to 8 X $100k borrowers? Profit will be better on the one loan, but risk is much higher. Banks don't care as they ultimately sell the asset and claim any loss as a tax deduction, but that is after they have claimed on the mortgage insurance which was paid for by the sucker borrower in the 1st instance. MIP's are very low at the moment because mortgagees are being left in the property as they go through bankruptcy and the title is in part transferred to the trustee for the bankrupt to 3 years. All unsecured creditors miss out, but the bank does not, because in 3 years time the property is then transferred back to the bankrupt for a small fee the the trustee. If median house prices do not surge forward over the next few years there will be a problem and APRA will be right and the ABA will blame the brokers.
  • Marni | 29 Nov 2013, 07:22 PM Agree 0
    Isn't the housing bubble just that. Created by the fact that overseas investors are snapping up.
    I heard about 90% of sales in cities. Don't know if that is correct though. Country/rural properties just the reverse from my experiences. A big flop.
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