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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: NAB deep dive probe into borrower debt sparks backlash fears

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NAB deep dive probe into borrower debt sparks backlash fears

Australian Financial Review Apr 23, 2019 11.16am

Duncan Hughes

 

NAB is set to crack down on new lending, with an exhaustive probe into borrowers’ total debt ranging from tax bills to family loans, overdrafts and lines of credit.

The bank is trying to head off a potential backlash from mortgage brokers, borrowers  and financiers who fear the deep diving into borrowers’ applications will slow loan processing, particularly for property investors.

It follows NAB’s bruising criticism from the Hayne royal commission into lending standards and disclosures that contributed to the departure of the chairman and chief executive and a top-level shake-up.

Lenders are increasingly worried about borrowers’ capacity to repay as household debt levels peak at record highs and mortgage arrears begin to rise, albeit off a low base.

“We are committed to lending responsibly and continue to back Australians with their home ownership goals,” a bank spokesman said. “We are constantly looking for ways to simplify our processes and speed up approval times while ensuring customers can meet their home loan repayments.”

The bank spokesman said its “appetite to lend has not changed” but it was taking a more detailed approach to ensure responsible lending.

From next Monday it will introduce a debt-to-income ratio to improve understanding of the borrowers’ full financial circumstances by considering existing long- and short-term debt commitments.

Debt-to-income (DTI) is the ratio of a customer’s total debt from all sources divided by their total income.

It will complement the existing loan-to-income ratio, which is less comprehensive.

Total debt may consist of a new loan limit, existing home loans, lines of credit, credit cards, overdrafts, personal and business loans, tax office debt and family loans.

For example, an applicant with total debt of $650,000 and total income of $100,000 will have a debt-to-income ratio of 6.5. The cut-off threshold will be a DTI of nine.

Income can include PAYG, self-employed income, rental and investment income.

The bank has written to intermediaries “encouraging detailed conversations” to check on spending. This could include cancelling unused credit cards or line of credit facilities, and including additional income such as dividends, bonuses and overtime.

Different methods of calculation will apply where there is supporting business income. Business debt is not included in the ratio but business income will be offset against business tax and business debt repayments.

There will also be different methods for assessing trust income.

In addition, for revolving debts, like credit cards, the credit limit will be used rather than outstanding debt.

For non-revolving debt, such as a principal and interest home loan, the scheduled limit, which is balance and available redraw, will be used.

DTI calculations will also include 100 per cent of a joint loan because the customer is jointly and severally liable for it.

The launch, which is yet to be formally announced, comes amid industry warnings that strict interpretation of responsible lending laws has created a bottleneck of mortgage applications with massive delays in the approval process contributing to a rise in the cost of credit and vastly reduced borrowing capacity in the post-royal commission environment.

Analysis of more than 30,000 mortgages from online broker Lendi found approval times have more than doubled for investors over the past 18 months, while the wait time for owner-occupiers has increased by more than 50 per cent as the banks demand more information from borrowers.

NAB is also attempting to address the fallout from mortgage brokers from processing delays and the hike in variable interest rates.

The bank has lost the support of the country's largest mortgage broking group, with its market share among borrowers seeking to refinance more than halving from 8.5 per cent to less than 4 per cent, forcing it to begin offering sweeteners to shore up support.

Australian Finance Group said NAB had lost market share across fixed interest, investor, homeowner and refinancing over the past 12 months.

NAB disputes the concerns, claiming it is committed to its existing customers, has "strongly improved" customer retention, and is the best-performing major bank for home loan market share growth over the past 12 months.

But an NAB spokesman blamed recent loan application losses on "many factors", including the controversial hike in variable rates in January, five months after its rivals after former CEO Andrew Thorburn pledged they would be held to restore trust.

 

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