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Broker calls for age discrimination overhaul

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Australian Broker | 26 Jun 2012, 06:00 AM Agree 0
A WA broker wants legislative change to prevent discrimination against older borrowers
  • ozboy | 26 Jun 2012, 09:31 AM Agree 0
    Good luck this is certainly one area of NCCP that needs some attention and sooner rather than later.
  • John Robbo | 26 Jun 2012, 10:03 AM Agree 0
    This badly needs looking at. Classic eg is a client of mine who is 56 & has a very high salary. Lives in a 9 bedroom 5 bathroom home in Sydney. Property is worth $2.7M & wants a $1.1M refinance. Nobody will do it. He wants to sell the home on or before retirement as it is massive & far too big for 2 retirees - but all lenders say that selling the property is unacceptable - even though he would have to sell the property if it was unencumberred because of its size. This polici is REDICULOUS!
  • Allan Faint | 26 Jun 2012, 10:04 AM Agree 0
    good luck, though I think the lenders are happy with being able to use the unsuitable criteria to avoid giving what could end up as short term loans (with less profit) to people.
  • SteveOz | 26 Jun 2012, 10:05 AM Agree 0
    It's just not that simple though. Given today's environment where people are unable to take responsibility for their actions, and change their minds like the weather here in Melbourne, you can't just take a clients undertakig that they will "Sell" their property upon retirement if they can't afford the repayments. You've basically put them into hardship anyway! ASIC and the lenders are right on this one. It isn't's protecting all parties to the transaction...Borrower, Lender and BROKER (Especially). No sufficient exit strategy should mean no loan!
  • David | 26 Jun 2012, 10:08 AM Agree 0
    Ha, I just had a loan declined for a 46 year old with an unsatisfactory "exit strategy". Aparently the future accumulation of Super cannot be considered.
  • Judy West | 26 Jun 2012, 10:22 AM Agree 0
    SteveOz comment made me see red! People are not unable to take responsibility for their actions - they are being denied the right to take responsibility! We certainly live in 'Nannysville' in Australia where we treat anyone over the age of 55 (the new 75) as incompetents. I personally hope all these "oldies" take legal action down the track against those who denied them the right to improve their situation prior to retirement.
  • Melbourne GIRL | 26 Jun 2012, 10:24 AM Agree 0
    I totally agree, NCCP need to have a look at it's critera and clean it up a little. John Robbo i had a situation very similar, no lender would touch it.
  • The Credit Manager | 26 Jun 2012, 10:31 AM Agree 0
    The only time a 30 year loan is suitable for a 55 year old is when they have good equity in current property which will allow them to down size with no mortgage at a later date. High LVR loans on 30 year terms for people over 50 are inappropriate. This was always the case pre NCCP. This proposal is all about the Broker not the customer as once a loan settles most brokers dont give a two hoots as to how they wil manage to clear it before retirement.
  • Chris Heywood | 26 Jun 2012, 10:35 AM Agree 0
    It is about time this was looked at. I had a client with a mortgage with a non conforming lender for a situation she was in 10 years ago. Her current interest rate is 12.5% on a debt of $122,000- at an LVR of 38%. Good income, never missed a payment and no one would touch her. It highlighted the shortcomings of this part of the legislation.
  • Linda | 26 Jun 2012, 10:39 AM Agree 0
    Interesting comments, what about the Governments' plan to keep us all working, and paying taxes no doubt, until we are 70
  • Sue | 26 Jun 2012, 10:50 AM Agree 0
    I agree. I had a customer that had an o/o house with 4 flats within 1 minute of capital city with fantastic city & bridge views. Of course her exit strategy was to sell the property and down size...but this was unacceptable.
  • Judy West | 26 Jun 2012, 10:53 AM Agree 0
    Who was talking about High LVR Loans on 30 year terms? Try doing a small loan at 50%LVR and The Credit Manager will make amazing assumptions about how irresponsible that is. And who are these brokers who don't give two hoots about a client once the loan settles? Certainly no broker I know - they wouldn't be in business long if they didn't look after their clients both before and after the loan settles.
  • Paul | 26 Jun 2012, 10:53 AM Agree 0
    There's no problem with providing a loan to someone aged 58 who intends to downsize and ASIC's Regulatory Guide has an example (no. 7) where this would be acceptable. It's a matter of looking at all the circumstances but I think most lenders struggle with loans that don't produce a computer generated answer. I'm a 57 year old solicitor with good income, stable job, strong equity and plenty of super'n and I've struggled to get an acceptable loan after years of being offered loans for basically anything. I think there's an opportunity for a second tier lender to provide some expertise in this area and capture a great niche market.
  • Loz | 26 Jun 2012, 11:04 AM Agree 0
    I find NCCP to be fascinating legislation, a complete over reaction to the GFC, not recognising that we had some of the best credit laws in the world already.
    On the one hand wis seeks to make sure borrowers are not put at risk but at the same time NCCP is preventing mature age borrowers from escaping from high interest loans, into better deals, which is crazy.

    It is also descriminating against pregnant women. I know of couple who are choosing abortion now due to this discrimination, was that the intention of the act????

    How these two areas of NCCP do not breach the anti discrimination act I do not know.
  • PC | 26 Jun 2012, 11:09 AM Agree 0
    Attention "The Credit Manager", 15 years ago maybe it was about the Broker,but have a look around nowadays and you will see that there are not too many "new" brokers so the only ones left are the ones who have been around for a while. The reason that they have been around a while is because they care about their clients.
    Common sense is what is missing in the areas of credit policy and there are too many credit managers who have a "tick box' mentality.
    "The Computer says No" seems to be the common cry !!
  • SteveOz | 26 Jun 2012, 11:19 AM Agree 0
    Re: Judy West, it makes me see red too, however the fact is contract law isn't what it used to be.....Personally, I would love to see no credit criteria with the exception of a client signing off on their own situation. However.....too many victims out there nowadays. As usual, the few ruin it for the many!
  • Mary Roderick | 26 Jun 2012, 11:21 AM Agree 0
    It's credit officers like the Credit Manager who cannot think or see common sense. Perhaps that's why they're in those jobs. Everyone else has common sense and not just look at the book and think "Oops! that has one letter outside the square, so we will decline it." I find non-bank lenders are more accommodating. Forget the Majors.
  • Judy West | 26 Jun 2012, 11:26 AM Agree 0
    With the catch-cry of Not Unsuitable Lending(which by the way is a ridiculous term - only governments would use 2 words when 1 would have been more than adequate - SUITABLE)Credit Managers are able to break all the rules, or at least operate in a manner which is detrimental to the borrowers best interests. Is any consideration given to the fact that to rent a house will become increasingly more expensive over a number of years? If rates go up, so do rents, yet if rates drop, rents do not - in fact rents very rarely drop.
  • BJ | 26 Jun 2012, 11:40 AM Agree 0
    This topic has raised its head once again.
    Credit Manager and brokers would appear to not fully appreciate other fundamentals at play.
    Australia is unique in as much that older borrowers find it difficult to arrange finance. Not so, in other developed countries, say Canada, USA, South Africa, the United Kingdom, Germany and France to name but a few.
    Cash flow, ability to fund, serviceability and overall asset position etc is a big driver.
    I commented in the past posts:- The issues relates to longevity risk and mortality curves and the like.
    Well what does that mean? Simply put, borrowers over the age of 55 have a life expectancy “the mean” in developed countries of circa 73 years. Rather than drill into specifics and use complex actuarial tables, let’s say that the average life expectancy is 73. How is the loan to be extinguished, paid off? I hear you say sell, pass it to the estate etc. Well, this is not a problem lenders want. Sure they model for such scenarios, but no party wants to be overweight on the longevity downside.
    The lender has these criteria for sound commercial reasons. I don’t agree with them, but they exist. Sure it would be easier to say, ‘look Mr and Mrs Jones you may live too long or die too soon and we will need to dispose of the asset and um, well we just don’t want that risk.
    Oh, I hear you say, lets insure the longevity risk. In Australia the cost of life cover is expensive, we only have insurance on a rent basis and most cover will cease at age 70.
    Back to the countries noted above. Lending criteria allows for insurance to cover the debt and can be a pre-requisite. Furthermore, cover extends to age 99 and certain underwriters to age 100. Most also pay the full benefit on survival to age 95. See the solution in part?
    The NCCP will never address the longevity matters raised and no government will legislate to lenders take on risk. Shareholders would not want it either.
    Access to finance is not a right, it is a privilege which to be frank is earned over time.
    “once a loan settles most brokers dont give a two hoots as to how they wil manage to clear it before retirement”. This comment from Credit Manager is not only insulting to good brokers, does not bode well and reflects “us and them”.
    I wonder if Credit Manager could give a hoot, hence their comment. Credit Manager sees the client as but a number, no pulse, no feelings, no dreams and desire. Brokers deal with real people, listen to their story and work to find solutions to their needs.
    Maybe Credit Manager needs to get out and about and not be as critical and slate brokers in this forum.
  • Palms | 26 Jun 2012, 11:43 AM Agree 0
    No where other than communist countries does the government tell you where you will live and how you will invest your money. If I want to buy a large house now and scale down in 15 years that is my business and has nothing to do with the government. If I invest $100k today and my property doubles in 10 or 15 years (last 200 years historical return)I will be less of a burden on the government in my retirement. Who decided that public servants have the wisdom to determine my investment stragedy? If they were smart enough to do that they wouldn't be public servants.
  • Tim McQueen | 26 Jun 2012, 12:18 PM Agree 0
    This is a ridiculous policy, based on a simplistic interpretation. if this was ever tested in court, it would be thrown out, as there are so many other simlar areas that could have a loan rejected. There are a million ways for a loan to be defaulted on, you cant forsee every situation. You can forsee age creeping up on people,but shouldnt we allow people to sell their asset or pay from their super, without deciding FOR them, what they should do when they no longer need to own their 6 bedroom house?
  • AussieBen | 26 Jun 2012, 12:24 PM Agree 0
    BJ - not convincing. After NCCP kicked in, there was some notable, significant policy changes with numerous lenders over night. I am sure there are commercial concenrs for longevity risk, but the NCCP has added a whole new level of risk to the lender that has significantly decreased appetite for >50's lending.

    "Nanni-stralians let us all rejoice"
  • MelbBroker | 26 Jun 2012, 12:42 PM Agree 0
    Clients who had a valid strategy of selling their $2MM house and downsizing when they wanted to retire from their own business are now stuck with the lender they have who wants to amortise repayments over a short loan term, putting undue pressure on their cash flow. We had no problems writing the original loan 10 years ago however, despite perfect repayment history and 25% LVR, no-one will lend to them now. I'll be 55 soon and reckon I'll be working for another 20 years at this rate. Why should someone else dictate to me whether or not I can afford a loan, if my financial history says I can for the next 10 or 15 years? Are we all expected to move into a retirement village at 55?
  • PeterT | 26 Jun 2012, 01:08 PM Agree 0
    Whilst this is a challenging issue, I'm personally not finding it to be a sestemic one. I recently obtained finance for a 73 year old on a proposed owner occupied purchase.
    We demonstrated how he would be able to release the debt when he closed his business. We also showed that he would be in a position to manage a reasonable retirement. It took some arguing, but the deal got through.
  • Dean | 26 Jun 2012, 01:19 PM Agree 0
    Thanks for your input "The Credit Manager". Please get off you high horse, put your cardigan back on and go and check some more black and white credit policy so you can easily make a computer generated "decision". Your value add to this conversation is a non-existent so go and quote your know it all policy somewhere else.
  • Peter Simmons | 26 Jun 2012, 02:38 PM Agree 0
    Part of the problem today is the army of legal people making a living out of canvassing for borrowers who maybe looking for a free lunch i.e. "how can I get out of this loan without losing my property?". The legal people are making fortunes out this in our comsumer 'cannot be at fault' society court actions. The media support of this situation is atrocious.
  • Frank | 27 Jun 2012, 09:41 AM Agree 0
    Some of the comments on here are ridiculous. If a customer refuses to sell their asset at retirement and cannot afford to meet repayments despite their original intention to downsize, the bank is then left with the PR nightmare of kicking retirees out of their homes, possibly being found of non-responsible lending, and being left to write off the debt.

    Banks will usually extend debt for older applicants for investment debt as opposed to o/occ debt which makes sense.

    Pushing for legislative reform on this issue highlights the fact that there is still huge gap between financial planners who plan for tomorrow, and mortgage brokers who plan for today.
  • David V | 27 Jun 2012, 09:43 AM Agree 0
    Typical govt "over control" as in most areas of all our lives. "Older" borrowers ie over 50 say with income and equity should eb able to borrow on teh assumption of downsizing on or near retirement. WE all know there is always a price at which a property can be sold. I am certain that older borrowers understand what they are doing and realise the future implications of what they wish to do. Perhasp they need to sign off on something along the lines?
  • The Credit Manager | 27 Jun 2012, 10:05 AM Agree 0
    ok, I was probably a bit harsh in my 'too hoots' comments however I note no-one commented on what my main point was. Unfortunately in the finance world a few poor brokers tarnish a lot of good brokers it is the same with customers who try and get out of their loan contracts. If you refer to FOS they will advise you that a lot of people and now making complaints trying to get out of their loan contracts because ' the Bank should not of given me the money' - their reasoning is 'we canont clear it before retirement' - therein lies the issue that needs to be addressed before the Banks will change their policies. The situation as detailed by John Robbo 10.03am 26/6 should be supported by any lender. Customer has clear exit strategy and this is all that should be required to have loan approved (and providing they can service whatever debt they have now). I understand your frustration but with the Financial Ombudsman Service now being heavily advertised is reflected by the number of complaints we see. Whilst such complaints about 'you should not of given me the money' continue Bank's policies will continue to tighten. I wish you all the best.
  • Anthony Judd | 27 Jun 2012, 11:29 AM Agree 0
    The retirement age has continued to be pushed up, and is again in the news as it is a problem for the government to pay out pensions to everyone, so our working life is to be extended, my kids are expected to have an average life of about 100years, so will will still be saying you can't get a loan when you're only 1/2 way through your life? Clearly if the individual is a just on average salary, and is looking to buy their first home at 50+, then this is a very risky strategy. The computer needs to understand that there are many other factors involved, and the banks over-raction to NCCP needs to be revised now we have headed away from the knee jerk reaction to the GFC.
  • Positive Broker | 27 Jun 2012, 02:05 PM Agree 0
    Agree with you Anthony. NCCP isn't the problem in my opinion. It is the lenders over reaction and literal interpretation. I'm 50, live in a Mac Mansion on quarter acre and fully intend to downsize before paying the mortgage out (when the kids move out!).
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