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Consumers 'ripped off' by LMI greed

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Australian Broker | 26 Feb 2014, 08:15 AM Agree 0
FBAA chief executive Peter White's martial arts background is preparing him for a LMI battle at a time when the industry is "dragging their feet".
  • MJL1959 | 26 Feb 2014, 09:53 AM Agree 0
    Pepper Homeloans has always offered No LMI loans.
  • Rip-Off | 26 Feb 2014, 10:02 AM Agree 0
    The mortgage insurance premiums keep increasing, yet the loan delinquency rates as reported remain quite steady. More and more borrowers have to cut back on their lending because when the ever increasing LMI premiums are added to the loan, the LVR easily exceeds lenders 97% limit. Also the out of control greedy Stamp Duty charges by state govt's is a huge disincentive for buyers. Genworth and QBE clearly monopolise the market and they know it. Once again, the consumer is being treated as "muppets" (reference to how Wall St traders viewed their clients/suckers)
  • Country Broker | 26 Feb 2014, 10:06 AM Agree 0
    Under the NCCP all commissions are to be disclosed . Will the lenders as a credit provider disclosed the commissions that they earn from each deal that is LMI insured ? I
    The real solution for this is to have the governments both state and federal start their own LMI and create some real competition , it would be a profitable Government Owned enterprise . The Old HLIC was sold off to GE / Genworth , and I doubt the wet economic stance of the federal government will see that happen .
    Something needs to be done to A; Stop the disparity in pricing for premiums between lenders , B ; Reduce premium costs . C; Somehow allow portability with the insurers approval and perhaps an small administration fee for refinance loan.
  • Paul | 26 Feb 2014, 10:25 AM Agree 0
    I Like the outline of Peters comments everyone has an opinion to do with this subject the lenders don't want to be open to Disclosure.They will need to show how much they make from The Insurers I feel they should be disclosure all the way its unfair process for the customers to pay and pay !!
  • Shane | 26 Feb 2014, 10:36 AM Agree 0
    LMI used be a Government Owned body called HLIC. Created to help people into their own homes sooner. Like everything else it was flogged off and privatised and now we are reaping the rewards of greed and profit. Funny how things created to help the least well off end up being sold of to benefit the most well off while ripping off the least well off.
  • Broker | 26 Feb 2014, 10:59 AM Agree 0
    LMI Duopoly= Genworth & QBE - Specialising in collusion, price fixing and not much else.

    The increase in premiums over the past 3-4 years is unwarranted and completely absurd
  • Maria Rigoni | 26 Feb 2014, 11:21 AM Agree 0
    Lenders Mortgage Insurance is a policy to protect a particular lender against default by a borrower whom the lender has taken a risk to lend to. It is not a retail insurance product.

    The asset being insured belongs to the lender and not the borrower.

    A car buyer does not expect the current owner's insurance company to transfer the policy as part of the deal. The car is the asset being insured and the owner has a right to choose an insurance policy to suit their risk appetite and cost. An insurer has a right to say to the new car owner I don't want to insure you as you are far too risky for me to take a chance on you.
    I agree that borrowers who can least afford it are being ripped off via LMI and other named "risk" premiums I do not see portability as a suitable or practical solution.

  • Alex | 26 Feb 2014, 12:00 PM Agree 0
    I am not sure how you can have an insurance premium that is portable? If you could then you would need the mortgage insurers to have the exact same credit policy which would then be detrimental to the industry or you would need an agreement between the insurers to accept each others policy which would either lead to massive problems for the end underwriters of these policies as well as the lenders that still rely heavily on securitisation. Mr White please explain the mechanics behind how LMI portability would work and the potential outcomes, all I have heard is an agenda without any actual policy.
    I am not committed to there being no portability I just find it hard to understand how it could possibly work, now that would be an article well worth reading and debating.
  • Andrew | 26 Feb 2014, 12:42 PM Agree 0
    All interesting points that have been offered in the comments here. From being an interested observer in the financials of the companies mentioned here, it is quite noticeable that the amount they have paid out in claims over the past couple of years has significantly increased. Mention also has to be made of the prime reason these companies (part of larger insurance groups) are in business - to make a profit! Of course, if the average Joe doesn't want to pay these high premiums, and the Banks (understandably) don't want to take the risk on without some form of insurance, then an 80% lend is on the cards. Who can afford that?
  • Abhi Sen Gupta | 26 Feb 2014, 12:58 PM Agree 0
    For most homebuyers paying LMI is a big concern. Often explaining that it is good for then is hard, but if the cost is not passed on to the banks it would be a lot easier for the average borrower to purchase.
  • Paul Sheedy | 26 Feb 2014, 02:54 PM Agree 0
    It shouldn't be too hard to implement. There are only two insurers & the risk should stay with the original insurer. They would be given the opportunity to review & re-approve proposal. A review fee would be appropriate & if approved the risk transferred to the new lender. Each loan could be given a "Risk Rating", depending on the LVR, the financial position of applicants & quality of the deal. If the Insurer deemed that there was an increased risk, then a "top up" premium would be charged as well as a review fee. The risk would not be able to be transferred to the other LMI provider. The Insurer retains the right to decline the new application, if they deem it beyond their risk appetite.
  • Alex | 26 Feb 2014, 03:22 PM Agree 0
    CBA has DUA to 95% LVR, if it fits CBA policy its ticked off in house. Other lenders don’t have DUA or if they do it is limited to a lower LVR. I don’t believe it would be that easy to implement a “Risk Rating” that all participating lenders and mortgage insurers would agree to.
    ANZ, St George, WBC, CBA have their own LMI products. Other lenders like Liberty have their own risk fees as well.
    What I am concerned about is bank credit policy and LMI policy becoming homogenous across all lenders. Again Id like to see more details from Mr White on this issue.
  • Mikeh | 26 Feb 2014, 04:43 PM Agree 0
    What's the problem? Forget about portability; if the insurers were required to give partial refunds to borrowers at refinance time, something akin to what happens with car insurance and registration, the borrower would then be able to at least partially pay for new LMI with the refunded premium!
  • Vicky | 26 Feb 2014, 09:46 PM Agree 0
    mmm - let's have it fair for the borrowers and have a rampant refinance regime with loans being refinanced willy nilly every twelve months. Don't hear much about having it fair for the broker who will cop mucho claw back's in this proposed client utopia.. I would much rather place my clients in a suitable product that they can utilise for a few years and hopefully get sub 80% then talk about refinancing....and finally.... what's the difference to the client between having to pay a lenders risk fee in place of lmi - not sure I'm following the logic on these "No LMI" facilities.....
  • Michael | 26 Feb 2014, 11:10 PM Agree 0
    Outstanding article Peter I agree with every word here. If a client wishes to refinance to a more competitive deal they should not be penalized with having to repay LMI twice. At the very least a refund should be issued to the borrower.

    Great words,
  • Papery | 27 Feb 2014, 04:47 PM Agree 0
    They way the property market is being talked up, wont matter soon as the freehold will all revalue up & everyone's refinances will be under 80%!

    Except the poor old first Home Buyer who is going to be slugged left right & centre with ludicrous LMI premium & statutory charges, not to mention a loaded interest rate for the priviledge....that is of course if they can raise the deposit & costs, qualify for the loan, pass the new Credit scoring & afford the loan repayments.
  • Dave Robinson | 28 Feb 2014, 10:02 AM Agree 0
    ASIC have announced they are looking into "add on" insurance.
  • Romesh de Silva | 14 Dec 2015, 11:12 PM Agree 0
    Have there been any further developments, with regards to LMI refunds? I have just had to pay LMI twice! The refusal to refund, I believe is an anti competitive act, where the lenders hold or could hold the borrowers virtually to ransom! The savings one could achieve by switching would be negated by the need to pay LMI again! Any advice as to the steps I should follow for a refund?
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