(ANZ), the Australian bank group, is preparing for major changes in the way it evaluates and checks mortgage applications, including an in-depth analysis of applicants` income and the introduction of complex credit checks.
Bank clerks and mortgage brokers are receiving a brief description of what needs to be asked during the initial interview, the required financial documents, and the third-party validation changes that will be launched on November 20.
Banks are targeting big-to-small workers who are still working after retirement, as well as people who use retirement savings to pay for loans, and will make additional demands on them.
"We are doing these change to make sure our customers continue to do the right thing," according to confidential briefings to bank clerks and mortgage brokers.
"We know that it is our responsibility to reasonably inquire about our customers` requirements, financial position and take reasonable steps to verify their financial position through responsible loans."
Elliot (Shayne Elliot), chief executive of ANZ, recently warned retail banks faced "strong resistance to a slowdown in real estate growth and a decline in their ability to borrow."
Elliot also said the "disciplined" approach meant sacrificing short-term income growth and higher margins, particularly for investor loans and interest-only loans in the housing market.
The bank recently announced that since housing loans have risen 6 percent in the past 12 months, overall net interest income has fallen by 2 percent.
One of the toughest measures
After the boom in East Coast real estate, particularly Sydney and Melbourne, and the introduction of stricter macro-prudential controls, the change in the ANZ plan was one of the toughest measures imposed by major lenders.
At the height of the housing boom, ANZ and Western Pacific Bank (Westpac) also tightened lending standards when they approved "hundreds" of home loans backed by forged Chinese income certificates. Now, the auction liquidation ratio has fallen below 50%, raising concerns that the credit crunch will make things worse.
From Nov. 25, the bank will use a new "consolidated credit report" check, asking third-party agencies to check the applicant`s credit card, home, personal or car loan debt.
It will allow banks to cross-reference the details of the application to find out if there are other debts, credit lines or arrears that have not been disclosed.
In addition, mortgage brokers will be asked to provide "enhanced verification" of the applicant`s income and lease costs. This will include more details about changes in the financial situation, including whether or not to retire.
Borrowers will be asked more details about the cost of living and any financial commitments.
A trail of economic hardship
This includes checking rent payments over the past three months, especially as investors continue to rent.
Brokers will be asked to keep an eye on any signs of financial difficulties, including late payments, overdraft accounts, gambling and loan usurpation.
"it`s also important to know how clients get paid." The bank told the broker.
The broker will ask for detailed questions about overtime, bonuses, commissions and whether to work part-time and ask for a six-month salary bar.
Older clients, such as large-to-small homeowners, will also face tougher questions about their ability to pay their debts by selling homes, saving or other investment income.
