1. finance
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CREDIT POLICY - HOME LOANS
Version
2015.2
Type of
Document
Credit Policy
Application
All ME Staff
Effective Date
30 March 2015
Review frequency
Annually
Approver
Credit Risk Committee
Document Owner
General Manager - Credit Risk
Contact
Credit Risk : Policy & Controls
[email protected]
th
Contents
1
2
3
4
5
6
7
Introduction ...................................................................................................................................................................................... 1-5
1.1
Summary Information ............................................................................................................................................................... 1-5
1.2
Common abbreviations ............................................................................................................................................................. 1-7
1.3
How to use this document......................................................................................................................................................... 1-7
1.4
Roles and Responsibilities......................................................................................................................................................... 1-8
1.5
Staff lending ............................................................................................................................................................................. 1-8
ME Bank Obligations ........................................................................................................................................................................... 2-9
2.1
Responsible Lending ................................................................................................................................................................. 2-9
2.2
Credit Assessment Report (CAR)............................................................................................................................................. 2-10
Mortgage Insurance.......................................................................................................................................................................... 3-11
3.1
What is Lenders Mortgage Insurance (LMI)? .......................................................................................................................... 3-11
3.2
When does LMI apply? ............................................................................................................................................................ 3-11
3.3
Delegated Underwriting Authority (DUA) Exceptions for “insured” Lending ........................................................................... 3-11
Borrowers ....................................................................................................................................................................................... 4-14
4.1
Acceptable Borrowers ............................................................................................................................................................. 4-14
4.2
Joint Borrowers ...................................................................................................................................................................... 4-14
4.3
Guarantors .............................................................................................................................................................................. 4-15
4.4
Borrower and Guarantors background checks......................................................................................................................... 4-15
4.5
Unacceptable Borrower / Guarantors ..................................................................................................................................... 4-15
Maximum Loan to Valuation Ratio (LVR) ............................................................................................................................................. 5-15
5.1
Maximum LVR based on Loan Purpose .................................................................................................................................... 5-16
5.2
Unacceptable Loan Purposes .................................................................................................................................................. 5-17
5.3
Maximum LVR based on Security Type .................................................................................................................................... 5-17
Documentary Requirements based on Loan Purpose ............................................................................................................................. 6-20
6.1
Age of documents ................................................................................................................................................................... 6-20
6.2
Documentary requirements .................................................................................................................................................... 6-20
Credit Check .................................................................................................................................................................................... 7-23
7.1
8
Credit History .......................................................................................................................................................................... 7-23
Account Conduct .............................................................................................................................................................................. 8-24
1-2
9
Genuine Savings .............................................................................................................................................................................. 9-25
9.1
10
Age of evidence....................................................................................................................................................................... 9-25
Employment and Income ............................................................................................................................................................. 10-26
10.1
Age of documents .............................................................................................................................................................. 10-26
10.2
Verification Checks ............................................................................................................................................................ 10-26
10.3
Eligible Employment and Income Type .............................................................................................................................. 10-27
Pensions: .................................................................................................................................................................................................................................................. 10-27
Carer Payment/Allowance: ...................................................................................................................................................................................................................... 10-27
Parenting Payment (Single or Partnered) ................................................................................................................................................................................................ 10-27
Family Payment ........................................................................................................................................................................................................................................ 10-28
PAYG: Salary / Wages (Full Time / Permanent Part Time / Second Job/Casual) ..................................................................................................................................... 10-28
PAYG: Overtime / Penalty Payments / Shift or staff allowances ............................................................................................................................................................. 10-29
PAYG: Commission / Bonus Income ......................................................................................................................................................................................................... 10-29
PAYG: Contracted Employees .................................................................................................................................................................................................................. 10-30
Independent Contractors ......................................................................................................................................................................................................................... 10-30
Child Support / Maintenance ................................................................................................................................................................................................................... 10-30
Maternity/Paternity Leave ....................................................................................................................................................................................................................... 10-31
Investment Income .................................................................................................................................................................................................................................. 10-31
Rental (includes display homes) .............................................................................................................................................................................................................. 10-32
Motor Vehicle - fully maintained company MV ....................................................................................................................................................................................... 10-32
Motor vehicle - allowance........................................................................................................................................................................................................................ 10-33
Salary Sacrifice Arrangements ................................................................................................................................................................................................................. 10-33
Self Employed........................................................................................................................................................................................................................................... 10-34
11
Serviceability .............................................................................................................................................................................. 11-35
11.1
Income .............................................................................................................................................................................. 11-35
11.2
General Living Expense ...................................................................................................................................................... 11-35
11.3
Liabilities and Commitments .............................................................................................................................................. 11-35
1-3
11.4
Notional Rent ..................................................................................................................................................................... 11-36
11.5
Apportioning debt .............................................................................................................................................................. 11-36
11.6
Interest Only (Owner Occupied purpose only) ................................................................................................................... 11-37
12
Security and Valuation ................................................................................................................................................................. 12-38
12.1
Acceptable Security ........................................................................................................................................................... 12-38
12.2
Ineligible Security .............................................................................................................................................................. 12-38
12.3
Acceptable valuation types ................................................................................................................................................ 12-39
12.4
Determining the valuation type.......................................................................................................................................... 12-41
12.5
Property suitability ............................................................................................................................................................ 12-41
13
Special Asset Classes................................................................................................................................................................... 13-42
13.1
Construction Loans ............................................................................................................................................................ 13-42
13.2
National Rental Affordability Scheme (NRAS) .................................................................................................................... 13-43
14
Credit Contracts .......................................................................................................................................................................... 14-44
14.1
Approval in Principle Letters .............................................................................................................................................. 14-44
14.2
Letter of Offer (LoO) .......................................................................................................................................................... 14-44
14.3
Counter Offers ................................................................................................................................................................... 14-45
15
Post Origination .......................................................................................................................................................................... 15-46
15.1
Top Ups .............................................................................................................................................................................. 15-46
15.2
Interest only (owner occupied purpose only) .................................................................................................................... 15-47
16
Appendix A: Valuation criteria....................................................................................................................................................... 16-48
16.1
Full Valuation ..................................................................................................................................................................... 16-48
16.2
Valuation criteria for Additional Loans (Top Ups and Additional Advances) ....................................................................... 16-48
16.3
Postcode listing / Categories ............................................................................................................................................. 16-49
16.4
Restricted Valuation Policy ................................................................................................................................................ 16-52
17
Appendix B – Control Sheet .......................................................................................................................................................... 17-57
1-4
1
1.1
Introduction
Summary Information
Policy Objective:
The policy objective is to outline the acceptable parameters by which ME Bank considers and assesses applications for residential lending.
Application:
This policy applies to all ME Bank employees (including contractors and temporary staff).
Effective Date:
This policy came in to effect on the March 2015.
Review Requirements:
Annually
Approval:
Credit Risk Committee
Document Owner:
General Manager, Credit Risk
Contact:
Email: ME Consumer Credit Risk inbox [email protected]
Conflicts with Other Policies:
Should this policy conflict with any other ME Bank policy please email the ME Consumer Credit Risk inbox to resolve the discrepancy.
Confidentiality:
All ME Bank policies are confidential documents. Only the document owner can approve the release of this document to third parties.
1-5
Applicable Legislation:
-
Corporations Act (Cwth) 2001 (Corporations Act)
National Consumer Credit Protection Act (Cwth) 2009 (NCCP)
Anti-Money Laundering /Counter Terrorism Financing Act (AML/CTF) 2006
Australian Prudential Regulation Authority (APRA)
Privacy Act
Financial Services Reform Act (FSRA)
Migration Act 1958
First Home Owner Grant Act 2000
First Home Owner Grant Amendment Act 2003
Related Documents:
•
•
Delegated Credit Authority Policy: Click on this link and scroll down
Guidance Notes - Home Loan Origination: Click on this link and scroll down
Penalties for Non-Compliance (organisation):
Failure to comply with the ‘Credit Policy - Home Loans’ under NCCP and the Corporations Act could lead to ASIC taking action against ME Bank. This
action could include the imposition of fines/penalties (up to $1.1 million), imposing additional conditions on ME Bank’s Australian Financial Services or
Australian Credit Licences, or suspension/cancellation of these licences.
Penalties for Non-Compliance (individual):
Failure to comply with the ‘Credit Policy - Home Loans’ under NCCP and the Corporations Act, could lead to ASIC or ME Bank taking action against
individuals. This action could include the imposition of fines/penalties (up to $220,000), disciplinary action and dismissal.
Record Keeping:
ME Bank is required to maintain records showing what it has done to comply with its obligations under the Corporations Act and NCCP in relation to
any breaches. These records must contain the following information:
•
•
•
•
•
•
Description of the actual or potential breach;
A full analysis of the breach;
Details of any action taken to resolve the breach;
Details of who reported the breach or how the breach was identified, and the date of breach;
Details of the report submitted in relation to the identified breach and any disciplinary action taken (if any); and
Confirmation how or whether the breach has any direct impact on our customers (if applicable).
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1.2
CAT
DCA
DUA
FHB
LMI
LVR
Common abbreviations
Credit Assessment Tool
Delegated Credit Authority
Delegated Underwriting Authority
First Home Buyer
Lenders Mortgage Insurance
Loan to Valuation Ratio
For the purpose of this policy the terms “borrower”, “consumer”, “applicant” and “customer” are all interchangeable.
1.3
How to use this document
This document is to be used in conjunction with the Residential Lending Procedures document owned by Credit Operations when assessing
applications for a home loan.
Neither policy nor process document’s should be used in isolation.
Should an application not fall within policy or the policy is silent in relation to a certain matter, the application needs to be treated as an exception
and referred to:
• Uninsured Loans - a DCA holder with the appropriate exception ability
• Insured Loans - a DCA holder with the appropriate exception ability and the Mortgage Insurer
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1.4
Roles and Responsibilities
The major roles and responsibilities within ME Bank that impact this Credit Policy are as follows:Role
Responsibility
ME Board
•
Delegate appropriate authorities to develop, create and manage Credit Policy
Credit Risk Committee (CRC)
•
Ensure Credit Policy reflects risk appetite in consideration of the Banks strategy, brand and reputation
Credit Risk
•
•
•
•
•
Establish and maintain the Credit Policy
Monitor trends impacting the credit quality of ME Banks portfolio
Provide effective leadership in the recommendation of coaching and training requirements when identified in
Business Unit monitoring programs
Review credit processes and provide recommendations
Conducting regular reviews to ensure the appropriateness of lending decisions made and ensuring they meet
appropriate Delegated Credit Authority and policy requirements
Exercise Level 3 DCA
Managing the Delegated Credit Authority (DCA) policy
Business Units (BU)
•
•
•
•
•
•
•
•
Manage internal and external customers in a timely and conducive manner
Assist in the development of credit skill by providing ongoing and regular training
Establish and maintain adequate processes
Ensure compliance with policy and processes
Ensure compliance with statutory and other regulatory requirements
Ensure sound credit decisions are made when exercising delegations
Ensure quality and integrity of data is maintained with the Banks core banking systems
Ensure compliance with segregation of duties
Delegated Credit Authority
(DCA) Holder
•
•
•
Assess the loan application for its credit worthiness
Is accountable for the decisions of the assessment
Has the ability to approve, decline or seek additional information in relation to applications
•
•
1.5
Staff lending
To avoid conflicts of interest and provide privacy any loan to ME Bank employees, their spouse or immediate family must be reviewed and approved
by Level 3 DCA holders.
1-8
2
2.1
ME Bank Obligations
Responsible Lending
ME Bank has an obligation to comply with the National Consumer Credit Protection Act 2009 (NCCP). The key concept is that ME Bank must not enter
into a credit contract with a consumer, suggest a credit contract to a consumer or assist a consumer to apply for a credit contract if the credit contract
is unsuitable for the consumer.
The responsible lending obligation under NCCP applies when ME Bank:• Enters a credit contract with a consumer; or
• Increases the limit on an existing credit contract
As part of the application assessment ME Bank must conduct reasonable inquiries about the customer. This is completed by undertaking the following
actions:Requirement and
Objective
Inquiries
When establishing a customer’s requirements and objectives ME Bank should as a minimum establish the customers situation
concerning:• The amount of credit being sought
• The purpose for which the credit is sought and the benefit to the consumer
• Its impact on the customer’s standard of living
It may also be necessary to establish:
• The type of features the customer is looking for in their loan; and
• How long credit is sought for
Financial Inquiries
When
•
•
•
•
making financial inquiries the following information should as a minimum be collected on :Income or benefits
Expenses i.e. living expenses, other debts etc.
Extent of other debts that are to be repaid from the credit
The customer’s credit history
Smaller amounts(<$50k): for smaller amounts of credit and where information about the customer is already held, a customer’s
past behaviour and their confirmation that they had a minimum available monthly income will constitute reasonable inquiries into
their financial situation.
Foreseeable changes: staff should ask the customer about any foreseeable changes to their financial situation that may impact
their ability to meet their repayment, such as impending retirement or a change in employment.
2-9
Depending on circumstances, additional financial information may need to be sought from the customer (e.g. number of
dependents, savings/assets). These requirements are detailed in this policy.
Verification
Verification of a customer’s financial declaration, such as income and employment information from independent sources must be
undertaken in all circumstances. Verification requirements are detailed in this policy.
There is limited information and means to verify living and other expenses, ME Bank applies the greater of the customer provided
information or the Banks minimum standard.
The proposed credit application will be unsuitable if, at the time of assessment, it is likely that:
• The consumer will be unable to comply with their financial obligations under the proposed credit contract or could only comply with substantial
hardship; or
• The proposed credit facility will not meet the consumers requirements or objectives
Documented evidence is required from the customer where the customer’s requirements or objectives change after applying for a loan.
2.2
Credit Assessment Report (CAR)
If the consumer requests a copy of the final assessment, ME Bank must give the consumer a written copy of the assessment (Credit Assessment
Report) within the following timeframes, free of charge;
• Before entering the contract or increasing the credit limit if the consumer’s request is made before this time
• Within 7 business days if the request is made within 2 years of the contract being entered into or the credit limit increased
• Within 21 business days for requests made more than 2 years after the contract is entered into or the credit limit increased
ME Bank is not required to give a consumer a copy of the assessment if the:
a)
Contract is not entered into or the credit limit is not increased; or
b)
Request is made more than 7 years after the credit contract is entered into or the credit limit is increased.
The Credit Assessment Report must:
• On request, provide a customer with a written summary of the factual information provided by the customer that ME Bank used to assess the
credit as ‘not unsuitable’
• Contain information that helps the customer understand why the credit has been assessed as not unsuitable for them
2-10
3
3.1
Mortgage Insurance
What is Lenders Mortgage Insurance (LMI)?
The LMI protects the lender in the event of the borrower defaulting on their loan and where there is a shortfall on the sale of security. The borrower
must be advised that LMI applies. The payment of the premium provides the lender with protection in the event of a default &/or loss and not the
borrower.
Failure to advise the borrower that LMI is applicable may cause reputational damage or result in an Ombudsman claim.
The fee for LMI is paid as a once only fee at loan settlement and varies depending on the amount of money being borrowed and the LVR.
To ensure the premium charged reflects the agreement with the insurer, the LMI Premium Calculator must be used in all cases. Failure to use the
calculator may result in a shortfall or overcharging of the premium.
3.2
When does LMI apply?
LMI is driven by the LVR of the transaction. Unless otherwise advised LMI applies when LVR exceeds 80%.
There are situations when ME Bank’s mortgage insurer will not insure the application. In these instances where the application is considered to be
credit worthy a submission for approval to DCA Level 3 can be made.
3.3
Delegated Underwriting Authority (DUA) Exceptions for “insured” Lending
DUA is a delegated authority provided to ME Bank by the Banks mortgage insurers and not the Board of the Bank.
Under certain circumstances ME Bank’s insurers seek to review the application for funding to ensure that the risk is acceptable.
The following situations will require the application to be forwarded to the Bank’s insurer for consideration.
3-11
Exception
Explanation
Aggregated
borrowers
exposure
Any insured loan where the asset is located in:-
ACT, NSW, QLD, SA, VIC & WA that takes the ME Bank aggregated mortgage insured exposure to any borrower above
$1,000,000
TAS & NT that takes the ME Bank aggregated mortgage insured exposure to any borrower above $750,000
Genuine Savings
Any insured where the genuine savings requirements apply and have not been completely satisfied
Non-Arm’s Length
or Favourable
property
purchases
Any insured loan where the purchase is a non-arm’s length or favourable transaction and where the borrower is seeking more
than the contracted price
Credit Checks
Any insured loan where the Credit Check reveals that the borrower has recorded:-
Borrower type
Any insured loan above $500,000 to a borrower type who:-
Security type
Is not an Australian or New Zealand Citizen
Does not have permanent residency status
Any insured loan secured by:-
Valuation age
an inquiry by Genworth within the past twelve months
paid &/or unpaid defaults, judgements or writs
any form of prior bankruptcy
Vacant land with a land area greater than 2.2 Ha
Un-serviced vacant land
Improved property with a land area greater than 10 Ha
Hotel / Motel redevelopment
Aged housing
A boarding house
Small sized property between 30-<40m2
Luxury housing
Any application for ineligible securities
A property that has a known unauthorised structure/s
Any insured loan that uses a Contract of Sale or Full valuation older than 90 days at the time of application.
3-12
Valuation Report
Any insured loan where the full valuation report that identifies:-
A minimum of two “4” or one “5” risk rating, or
A selling period of greater than six months, or
The property is located within 50 metres of high voltage transmission power lines, or
A comment by the Valuer that identifies a material impact in saleability for the property in isolation
Postcode Referral
Certain post codes where the LVR exceeds 90% will require referral to insurer. These post codes are highlighted in Appendix A:
Valuation criteria
Income evidence
Any insured loan not supported by a fully documented evidence of income. This excludes additional advances on the existing
loan or mortgage.
Income type
Any insured loan where all or part of the income required for servicing is from:-
Workers compensation payments
Rent from boarders
Child maintenance
Unemployment benefits
Previous Insured
application
Any application that has been submitted for insurance that has been declined
Credit Policy is
silent
Any insured loan where this Credit Policy appears to be silent
3-13
4
Borrowers
4.1
Acceptable Borrowers
An acceptable borrower is anyone that:• Is a natural person (over the age of 18); and
• Is either a citizen or permanent resident of Australia or New Zealand; and
• Has a beneficial interest in the loan transaction either by way of joint ownership of the security and/or dependence on the mortgage in a
marital or de-facto relationship
• Any discharged bankrupt greater than 24 months (can only be an acceptable borrower where DCA Level 3 is exercised as well as Mortgage
Insurer referral for insured loans).
There is no DCA exception ability available for this section of Credit Policy: 4.1 Acceptable Borrowers.
Where the borrower is a non-resident (an individual without permanent residency status in Australia living overseas) or temporary resident, they
are considered acceptable when the following criteria are met:•
LVR is no more than 80%
•
Servicing must be derived from salaried income of a non-related entity and not be self employed
•
The borrower must be acceptable to the Foreign Investment Review Board (FIRB)
•
A Power of Attorney in favour of an Australian permanent resident
Where the non-resident is a joint borrower refer to section 4.2
4.2
Joint Borrowers
A joint borrower is where there is more than one borrower on the application.
Joint borrowers are both jointly and separately liable for the debt.
All joint borrowers must be an acceptable borrower.
All borrowers under a joint application must receive a benefit from the loan and must not be acting under duress.
4-14
4.3
Guarantors
A guarantor is an individual who agrees to be liable for the debt of another borrower. A guarantee is obtained from a mortgagor when they are not
named as a borrower on any of the loans secured by that property.
Guarantors must obtain independent legal advice prior to executing any legal documentation including the Letter of Offer.
Guarantor/s who currently live overseas must execute a Power of Attorney in favour of an Australian resident.
4.4
Borrower and Guarantors background checks
With the exception of existing customers, all borrowers and guarantors must have been identified in accordance the current Know Your Customer
(KYC) regulations and have had a Fraud Check completed.
4.5
Unacceptable Borrower / Guarantors
An unacceptable borrower or guarantor includes:• Minors – a natural person under the age of 18
•
Borrower of convenience - is a borrower / guarantor that is added to a loan application to provide serviceability and/or security however does
not receive a tangible benefit from the loan transaction
•
A Bankrupt – an individual that is an undischarged declared bankrupt or have a judgement pending in a bankruptcy case or a have a
bankruptcy discharged < 24 months. For any discharged bankrupt >24 months refer section 4.1 Acceptable Borrowers
•
•
•
•
Associations – a group of individuals organised for a joint business activity
Company – an incorporated entity that conducts business activity
Trust – is a relationship whereby an asset (i.e. property, shares) is held by one party for the benefit of another
Not a citizen or permanent resident of Australia
There is no DCA exception ability available for this section of Credit Policy: 4.5 Unacceptable Borrowers.
5
Maximum Loan to Valuation Ratio (LVR)
To ensure maximum LVR’s are complied with, first determine that the loan purpose is within the maximum LVR then ensure that there are no
restrictions based upon the security type.
Instances where the maximum LVR exceeds either by purpose or security type escalation to DCA Level 3 is required as well as Mortgage Insurer
referral for insured loans.
5-15
5.1
Maximum LVR based on Loan Purpose
Loan Purpose
Max LVR
Uninsured
Max LVR
(Base Loan)
Purchase of a new or existing residential
property
80%
95%
Max LVR
including LMI
Capitalisation
95%
Refinance of a home loan/s
Refinance of a home loan/s and any nonmortgaged related debt/s
80%
80%
95%
90%
95%
95%
Construction of residential property as an
owner builder
Construction of residential property with a
registered builder
50%
50%
-
80%
95%
95%
Equity Release / Cash Out
80%
90%
95%
•
•
Note
- Max LVR including LMI capitalisation for FHB only can be
extended to 97%. If FHB and Interest Only, max LVR
remains 95% (inclusive of LMI capitalisation).
- Internal and external
- Debt consolidation
- LVR for the base loan cannot be exceeded when capitalising
the LMI premium
Nil
- Max LVR including LMI capitalisation for FHB only can be
extended to 97%. If FHB and Interest Only, max LVR
remains 95% (inclusive of LMI capitalisation).
- Where the borrower is an owner builder and a registered
builder the owner builder’s Max LVR applies
- LVR for the base loan cannot be exceeded when capitalising
the LMI premium
If the transaction includes loan funds that are released directly to the borrower, i.e. equity release or cash out, then the following LVR limits
and dollar restrictions apply:
•
0% to 85% LVR - no limit applicable to cash out component.
• >85% to 90% LVR - cash out component is limited to 20% of the security value.
• >90% LVR - no cash out component allowed.
First Home Buyer (FHB): Where a
• residential dwelling or vacant land is being purchased, or a
• residential dwelling is being constructed (by a registered builder)
for the sole purpose of owner occupation by the applicant/s. Applicant/s who have owned or currently own an investment property, are eligible
provided that they do not currently or have not previously owned an owner occupied premises.
• Interest Only (Owner Occupied purpose) is available to a maximum LVR of 95% (inclusive of LMI capitalisation).
From time to time there will be applications with strong mitigating circumstances that require consideration for approval. Where an application is
assessed as creditworthy and is fully mitigated, Any application that exceeds these maximum LVR limits requires referral to DCA Level 3 is required.
5-16
For insured loans, referral to DCA Level 3 and the Mortgage Insurer is required.
5.2
Unacceptable Loan Purposes
Unacceptable loan purposes include:• Loans for business purposes, e.g. working capital (used to fund a customer business cash flow requirements to pay for stock and creditors)
• Loans to pay tax liabilities
• Loans dependant on future savings plans
• Loans for construction where it is a cost plus contract
From time to time there will be applications with strong mitigating circumstances that require consideration for approval. Where an application has
been assessed as creditworthy and is fully mitigated, Any application for an unacceptable loan purpose requires referral to DCA Level 3. is required.
For insured loans, referral to DCA Level 3 and the Mortgage Insurer is required.
5.3
Maximum LVR based on Security Type
There are some security types where ME Bank has set certain maximum LVR’s as its preferred position, which are outlined in the following table.
From time to time there will be applications with strong mitigating circumstances that will be considered. Where the maximum LVR without LMI is
being exceeded, referral to DCA Level 3 is required. For insured loans, referral to DCA Level 3 is required as well as Mortgage Insurer referral.
Applications with multiple security types which have a different maximum LVR limit/s will require a calculation for the maximum loanable amount.
This amount equals the sum of the maximum loanable amount of each security. The resulting LVR from this calculation is the acceptable Maximum
LVR
Security type & definition
ACT Leasehold
Leasehold is a system of land tenure. For Residential leases the lessee buys the right to use land under a lease for
a term of 99 years. In every practical way though, the lessee builds the house and owns it just as anywhere else in
Australia. Rural leases are usually granted for up to 50 years. Although the Land Act (ACT) does not provide any
certainty of tenure by way of lease renewal it is nevertheless acceptable for the loan maturity date to exceed the
leasehold maturity date.
Display house
A residential property that has been built by a builder or developer for the purpose of advertising / display
purposes &/or offered for sale as an investment opportunity under a leaseback agreement
Maximum LVR
without LMI
80%
Maximum LVR
with LMI
95%
80%
Above 80%
refer to DCA
Level 3 and
Mortgage
Insurer
5-17
High density house
Uninsured : A residential property located in specific postcodes (as detailed below) and is within a development
complex comprising more than 35 units / apartments
Insured : A residential property located in specific postcodes (as detailed below) and is within a development
complex comprising more than 10 units / apartments
State
Postcodes
NSW
2000 - 2006, 2017, 2138
NT
0800
QLD
4000 - 4004, 4215, 4217, 4218, 4870, 4879
SA
5000 - 5005
TAS
7000
VIC
3000, 3001, 3004 - 3009, 3141, 3205
WA
6000 - 6005, 6210
Luxury Housing
A residential property that are in excess of the medium price for that State and are usually of high value in either
land or property due to location or quality
State
NSW
VIC / WA
NT/ACT/QLD/SA
TAS
Property value of Land, Units,
Townhouses above:
$2.5 million
$2.0 million
$1.5 million
$1.0 million
80%
Above 80%
refer to DCA
Level 3 and
Mortgage
Insurer
70%
Above 80%
refer to DCA
Level 3 and
Mortgage
Insurer
Property value of Houses
above:
$3.5 million
$3.0 million
$2.0 million
$1.5 million
Multi Dwellings on one title
Properties where there are two fully self-contained residences constructed on one title (i.e. not subdivided / strata
title)
80%
Properties where there are three or four fully self-contained residences constructed on one title (i.e. not subdivided
/ strata title)
65%
Residential
Houses, townhouses, units, flats, apartments which are free standing or attached (semi-detached) and which are
used exclusively for the purpose of private housing which is either tenanted or owner occupied
80%
Above 80%
refer to DCA
Level 3 and
Mortgage
Insurer
Above 80%
refer to DCA
Level 3 and
Mortgage
Insurer
95%
(note 97% for
FHB inclusive of
LMI
Capitalisation is
5-18
acceptable)
Residential Vacant Land
Unimproved allotments less than 2.2 hectares which are zoned for residential or rural residential housing
80%
95%
A property >2.2 and <=10 hectares which is ready for the construction of a residential dwelling
80%
Note: these property types must be situation in fringe city / town location (i.e. must have a postcode which is
nominated within the metro or regional locations). If not located within nominated metro or regional locations
referral to DCA Level 3 is required
A property >10 and <=20 hectares which is ready for the construction of a residential dwelling
70%
Note: these property types must be situation in fringe city / town location (i.e. must have a postcode which is
nominated within the metro or regional locations). If not located within nominated metro or regional locations
referral to DCA Level 3 is required
A property >20 and <=40 hectares which is ready for the construction of a residential dwelling
Above 80%
refer to DCA
Level 3 and
Mortgage
Insurer
Above 80%
Not available
60%
Note: these property types must be situation in fringe city / town location (i.e. must have a postcode which is
nominated within the metro or regional locations). If not located within nominated metro or regional locations
referral to DCA Level 3 is required.
Residential – large sized properties
A property >2.2 and <=10 hectares with residential improvements
Above 80%
Not available
80%
95%
A property >10 and <=20 hectares with residential improvements
70%
Note: these property types must be situation in fringe city / town location (i.e. must have a postcode which is
nominated within the metro or regional locations). If not located within nominated metro or regional locations
referral to DCA Level 3 is required
A property >20 and <=40 hectares with residential improvements
Above 80%
Not available
60%
Above 80%
Not available
Small sized properties greater than 40m2 less than 50m2
Any residential property where the floor area of the property is >= 40m2 & <=50m2. This excludes outdoor
alfresco areas, carports and garages
80%
University Apartments / Students Accommodation > 30m2
Often set up in a similar fashion to a serviced apartment or as a standard residential unit and, where the whole
unit complex is marketed as a university apartment or student apartment.
50%
Above 80%
refer to DCA
Level 3 and
Mortgage
Insurer
Above 80%
Not available
Note: these property types must be situation in fringe city / town location (i.e. must have a postcode which is
nominated within the metro or regional locations). If not located within nominated metro or regional locations
referral to DCA Level 3 is required.
5-19
6
Documentary Requirements based on Loan Purpose
6.1
Age of documents
Age of documents will be as at the submission date.
6.2
Documentary requirements
The following table outlines required documentation based on the acceptable loan purposes.
Purpose : Purchase – the acquisition of residential real estate
Documentary Requirements
•
•
•
•
•
•
Borrowers identification (as required)
Fully completed loan application form
Income verification documents (refer employment & income section of this policy)
Contract of Sale or equivalent (note: a fully executed Contract of Sale is required prior to settlement)
Vendors statement (where applicable)
Evidence of the funds to complete the purchase
When the property is purchased Off the Plan and is a residential dwelling:•
•
•
The subject property must be near completion and access is available for valuation purposes
Certificate of Occupancy or equivalent is to be provided prior to settlement
Settlement can only occur upon completion
When the property is purchased Off the Plan and is vacant land:•
Submission of the loan application can only occur within 90 days of the verified settlement date
Non-Arm’s Length Purchase (excludes Marital Separation which is assessed under “Purpose: Refinance / Debt Consolidation”)
A non-arm’s length transaction relates to the sale of a property where:-
A registered Real Estate Agent is not acting for the vendor
The sale provides an advantageous / favourable purchases to family members at a discounted price
The vendor is selling the property to a person to whom they are indebted
Different valuation methods apply when the purchase is non-arm’s length.
6-20
Purpose : Refinance / Debt Consolidation – the act of repaying one loan or loans with another new loan or loans
Documentary Requirements
• Borrowers identification (as required)
• Fully completed loan application form
• Income verification documents (refer employment & income section of this policy)
• Bank statements (refer below)
Bank Statements
Satisfactory conduct of loan facilities being refinanced must be established.
If the loan is to repay:-
another Financial Institution loan: Obtain latest issued loan statement/s that displays the account name and cover a consecutive six
month period
another Financial Institution credit card facility: Obtain latest issued bank statement/s that display the account name and cover a
consecutive three month period
ME Bank facility: The provision of bank statement/s is waived as reference to internal systems will suffice
Statements (including internet) are only acceptable if all of the following are present:-
Borrowers name
Account number
Individual transactions are itemised and there is a running account balance
The logo of the bank or financial institution is displayed
Where the borrowers name or logo is not displayed on the internet statement, a separate bank issued statement must be provided to verify
these details
If the loan involves a Marital Separation:-
Obtain a copy of the separation agreement or court order
6-21
Purpose : Equity Release / Cash Out – when a borrower requests a loan for personal use from the equity held in their property
Documentary Requirements
•
•
•
•
Borrowers identification (as required)
Fully completed loan application form
Income verification documents (refer employment & income section of this policy)
Written advice from the customer on the purpose of funds (or written advice from a ME Salesperson or Broker, outlining the conversation with the
customer)
Purpose : Construction - When finance is required to construct or structurally alter a residential dwelling for owner occupation or long term personal
investment
OR
when non-structural renovations are proposed to an existing residential dwelling and the finance amount sought is > $100,000
Documentary Requirements
•
•
•
•
•
•
Borrowers identification (as required)
Fully completed loan application form
Income verification documents (refer employment & income section of this policy)
Evidence of the capacity to complete
Building Permit
Home warranty insurance certificate (if applicable to your state or territory)
Where construction is by a Registered Builder:• Fully executed fixed priced building contract
• Plans and Specifications (Council approval is required prior to settlement)
• Builders all risk and indemnity insurance certificate/s
Where construction is by an Owner/Builder:• Plans and specifications
• A fully costed project report prepared by owner or owners representative (i.e. project manager)
• Owner’s construction works insurance certificate
Refer ‘section 13’ for additional requirements
6-22
7
Credit Check
Each time a new application is assessed, it is a requirement that a credit report is obtained for each borrower (under all known names/related
entities) and guarantor (under all known names/related entities).
7.1
Credit History
ME Bank consider the following indicators to be satisfactory credit history:-
Credit Check feature
Enquiries
Satisfactory Credit History if:
• Not more than 7 enquiries in the last 12 months to
other financial institutions
Assessment Guidelines Requirements
•
•
Defaults, Judgements and
Writs
Care: DUA Exception may
apply
Company Directorship
Enquiries should need to be matched with the
liabilities section in the application form and to any
loan payments appearing in banks statements.
All enquiries to other financial institutions in the last
24 months must have their current status advised
Paid Items
• There are no more than 2 defaults, judgements or writs
totalling less than $2,000, and;
• It has been more than 3 months since the paid items
were satisfied
Unpaid items - Uninsured loans:
• There is no more than 1 default, judgement or writ
totalling less than $500, and;
• The item is repaid in full, on or prior to settlement
• Any defaults, judgements or writs are required to be
understood.
• The assessment is to include a satisfactory explanation
from the borrower to the default, judgement or writ.
•
•
No adverse items recorded
The assessment is to include a satisfactory
explanation of any unusual trading history (e.g.
external administration)
7-23
8
Account Conduct
Satisfactory account conduct is achieved when:-
Loan / Overdraft accounts
Credit Cards
-
Currently no arrears
Has not been in excess of its limit in the previous 6 months
Not more than 1 missed payment over a 6 month period
Currently no arrears
Is not over the limit
Not more than 1 missed payment over a 3 month period
Consistent minimum monthly payments can be verified
For the purpose of this policy arrears means more than $100 accumulative across all loan / overdraft accounts and credit cards.
8-24
9
Genuine Savings
A minimum deposit of 5% of the property price must be evidenced from genuine savings where the base loan LVR, prior to any capitalisation of
lenders mortgage insurance is > 85%.
Genuine savings must be held in the borrowers name and sourced from the following:
• Funds held or accumulated in savings accounts for 3 months or more (including gifts or inheritance)
• Equity in residential property
• Term deposits held for 3 months or more
• Shares held for 3 months or more
• Employee funded superannuation contributions
• Re-drawable funds in a mortgage or line of credit
• Proceeds from sale of real estate
Unacceptable forms of genuine savings include:• Tax refunds
• Work bonuses
• First Home Buyers Grant (FHOG)
• Gifts or inheritance held for less than 3 months and/or not in the name of the borrower
• Gambling proceeds
Any application where genuine savings cannot be evidenced;
•
•
9.1
Must demonstrate servicing on ME Bank servicing tools AND the Genworth Servicing calculator; AND
Must be referred to Mortgage Insurer as it falls outside of the Delegated Underwriting Authority (DUA).
Age of evidence
Age of evidence will be as at the submission date.
9-25
10
Employment and Income
A loan is only offered to borrowers who can demonstrate an ability to repay over the life of the loan.
An ability to repay is determined by:• Determining eligible income
• Verifying income documents
• Assessing the borrowers living arrangements, for example single, single with dependants, married with no dependants; etc.
• Adding all ongoing liabilities and commitments
• Considering the borrowers situation i.e. apportioning debt, adding in rent for those borrowers living at home.
10.1
Age of documents
Age of documents will be as at the submission date.
10.2
Verification Checks
Payslips: Payslips are considered acceptable when they identify:
- the employers name
- the employees name
- the date of payment
- the pay period
- the gross and net amount of payment
- any loadings, monetary allowances, bonuses, incentive based payments, penalty rates or other separately identifiable entitlements paid
Letter from
-
Employer: Letters from an employer are considered acceptable when:
No older than 4 weeks old
On employer letterhead
Signed by the employer
Confirms gross income excluding superannuation or any other additional benefits
Details within the letter must be confirmed verbally by the employer. The employer contact details must be obtained from an independent source
(e.g. Telephone directory). Details of the conversation must be recorded and include:
- Date and time the conversation was held
- Name and position of the person at the employer’s premises
10-26
10.3
Eligible Employment and Income Type
The following tables outline a variety of income sources, the minimum documentation requirements, any pertinent restrictions or conditions of use,
verification requirements and the maximum usage limit of that income source.
Foreign currency income: Where any of the income sources have been provided in currency other than AUD a conversion to AUD is required. The
maximum amount of income that can be included in serviceability is 90%.
Insured Loans: Any insured loan where an exception to policy is required must be referred to a DCA Level 3 holder as well as the Mortgage Insurer
referral
Pensions:
•
•
•
•
•
Age: A payment by the Government to support living costs
Armed Services: Pension paid to current and previously serving members of the Australian Armed Forces
Invalid / Disability: A Government payment that provides income support for individuals with special needs
Overseas: A payment from an overseas Government for borrowers who have retired from the workforce
Private: Income derived from an investment acquired by a client’s superannuation
Carer Payment/Allowance:
•
A Government payment to support the cost of caring for family members with special needs
Restrictions
Verification process requirements
% used for servicing
None
Evidence must be provided confirming the amount being received.
100%
This can be achieved through one of the following:-
90% (for overseas
Pensions)
1) A Centrelink statement or equivalent (i.e. statement from
Veteran Affairs for Armed Service pensions), no older than 6
weeks confirming benefit amount; OR
2) Bank Statements, most recent showing regular payments over
a period of 3 months
Parenting Payment (Single or Partnered): A payment by the Federal Government as income support for parents or guardians to help with the
cost of raising children
Restrictions
Verification process requirements
% used for servicing
100%
•
Must be payable for the next 5 years
Evidence must be provided confirming the amount being received.
•
Single - Child must be < 3 years old
This can be achieved through one of the following:-
•
Partnered - Child must be < 1 year old
1) A Centrelink statement, no older than 6 weeks confirming
benefit amount; OR
2) Bank Statements, most recent showing regular payments
over a period of 3 months
10-27
Family Payment: A Government payment to support the cost of raising a family. This payment is separated into two parts: Part A and Part B. The
Large Family Supplement (if applicable) is also eligible as an acceptable form of income and is usually paid in conjunction with the Family Payment.
Restrictions
Verification process requirements
% used for servicing
Evidence must be provided confirming the amount being received.
See below
This can be achieved through one of the following:-
1) A Centrelink statement, no older than 6 weeks confirming
benefit amount; OR
2) Bank Statements, most recent showing regular payments over
a period of 3 months
% used for servicing:• 100% of the dependants apportioned share in Part A where the dependant is <13 years of age
• 30% of the dependants apportioned share in Part A where the dependant is >13 years and < 18 years of age
• 100% of the dependants apportioned share in Part B where the dependant is <18 years of age
• 100% of the Large Family Supplement (if applicable)
PAYG: Salary / Wages (Full Time / Permanent Part Time / Second Job/Casual): An individual who is employed by a business on a salary or
wages basis
Restrictions
Verification process requirements
% used for servicing
Base income (excludes overtime)
Evidence must be provided confirming the amount being received.
100%
This can be achieved through the following:At time of assessment, borrower has had 6
months in current job, OR 12 months in the
same field / line of work. Probationary periods
are acceptable
Insured Loans: Loans that require referral to
the Mortgage Insurer must have two of the
three most recent computer generated/paper
pay slips
1) A Payslip no older than 4 weeks old, OR
2) Letter from Employer (dated, signed and on employer
letterhead) no older than 4 weeks; AND
Any one of the following:
3) Most recent PAYG Payment Summary / Tax Assessment
Notice, no older than 18 months; OR
4) Most recent Personal Tax Return, no older than 18 months
10-28
PAYG: Overtime / Penalty Payments / Shift or staff allowances: Income paid by an employer at or above the base rate of pay for time
worked beyond their scheduled hours. This also includes allowances that are standard conditions of employment (e.g. car, meal, shift etc.)
Restrictions
Verification process requirements
% used for servicing
Overtime can be used when it can be
evidenced as being consistent over a 12 month
period with the same employer or where it
forms a condition of the role; e.g. industry type
Evidence must be provided confirming the amount being received.
100% of the most
recent financial
information can be
included in gross
income
Verification of overtime is not required when
servicing can be satisfactorily demonstrated
from the borrowers base income
This can be achieved through the following:1) A Payslip no older than 4 weeks old where the Year To Date
income supports the overtime component, AND
Any one of the following:
2) The most recent PAYG Payment Summary / Tax
Assessment Notice, no older than 18 months; OR
3) Most recent Personal Tax Return, no older than 18 months
Penalty Payments/Shift or Staff Allowance
can be used when, at time of assessment, the
borrower has had 6 months in current job, OR
12 months in the same field / line of work.
Insured Loans: Loans that require referral to
the Mortgage Insurer must have two of the
three most recent computer generated/paper
pay slips
PAYG: Commission / Bonus Income: Income paid above the base retainer when sales targets/incentives have been achieved and at the
employer’s discretion
Restrictions
Verification process requirements
% used for servicing
At time of assessment, borrower has had 6
months in current job, AND
Evidence must be provided confirming the amount being received.
100%
A minimum of 2 years history of the customer
receiving commission/bonus income
Insured Loans: Loans that require referral to
the Mortgage Insurer must have two of the
three most recent computer generated/paper
pay slips
This can be achieved through the following:-
1) A Payslip no older than 4 weeks old; AND
Any one of the following for each of the preceding 2 years:
1) PAYG Payment Summary; OR
2) Personal Tax Return
Use the most recent
year’s amount.
Exception – Where the
most recent year is >
120% of the previous
year then the last 2
years average is to be
used
10-29
PAYG: Contracted Employees: A contracted employee is an individual employed by an employer to do work for a specified period of time. They
have similar working conditions and salary arrangements as PAYG employees
Restrictions
Verification process requirements
% used for servicing
At time of assessment, borrower has had 6
months in current job, OR 12 months in the
same field / line of work
Same as PAYG – Salary / Wages
100%
In addition:1) A copy of current contract
Independent Contractors: An independent contractor is an individual who is paid for services &/or results by one or more businesses. They
usually have an ABN or ACN and get paid a gross amount for their services. They pay their own tax and incur operating expenses
Restrictions
Verification process requirements
% used for servicing
At time of assessment, Borrower has had 6
months in current job, OR 12 months in the
same field / line of work
Same as Self Employed
100%
In addition:-
1) A copy of current contract
Child Support / Maintenance: Income received from an ex-partner or spouse to assist with the care of dependent children
Restrictions
Verification process requirements
% used for servicing
Payments must be payable for the next 5 years
(dependents are < 13 years of age)
Evidence must be provided confirming the amount being received.
100%
Insured Loans: Loans that require referral to
the Mortgage Insurer must have two of the
three most recent computer generated/paper
pay slips
This can be achieved through the following:1) Court Order / Child Support Agency Statement or original
solicitors letter; AND
2) Bank Statements, most recent showing regular Child Support
payments over a period of 6 months with the last payment being
within the last 4 weeks
10-30
Maternity/Paternity Leave: A source of income that provides financial support to working parents of a newborn or recently adopted child
Restrictions
Verification process requirements
% used for servicing
To use income whilst on maternity leave the
following criteria must be met:
Evidence must be provided confirming the amount being received.
100%
(1) the income must be employer or
government paid
(2) the borrower has notified their employer of
their intention to return to work and the
employer has acknowledged this intention in
writing
This can be achieved through the following:1) A Payslip no older than 4 weeks old; AND
2) Letter from Employer (dated, signed and on employer
letterhead) no older than 4 weeks acknowledging the borrowers
intention to return to work and confirmation of the return to
work date
(3) the income is currently being received and
will continue to be paid until the confirmed
returned work date
Insured Loans: Loans that require referral to
the Mortgage Insurer must have two of the
three most recent computer generated/paper
pay slips
Investment Income: A regular income stream that is derived from bank interest, dividends, capital gains, or any other profit made from an
investment vehicle of any kind
Restrictions
Verification process requirements
% used for servicing
None
Evidence must be provided confirming the amount being received.
100%
This can be achieved through the following:-
1) Two of the most recent Tax Returns, no older than 18 months;
OR
2) Bank Statements, most recent showing regular Dividend
payments over a period of 6 months
10-31
Rental (includes display homes):
Standard Income paid by a tenant for the exclusive use of a building owned by the borrower/s
National Rental Affordability Scheme (NRAS) – is a Federal Government initiative aimed at providing affordable rental accommodation to lower
income individuals and families
Defence Housing Australia (DHA): – is a Federal Government initiative where housing is rented to Defence force families over longer periods of
time than typical rental agreements
Restrictions
Verification process requirements
% used for servicing
Future rental: Where future rental income is
being used (typically for investment properties
under construction), the income source is
acceptable provided there is a building contract
in place with a registered builder
Evidence must be provided confirming the rental amount.
Where more than one
source of income
verification is received,
the lowest figure must
be used
This can be achieved through the following:1) A current lease/tenancy agreement no older than 12
months; OR
2) A rental statement issued by the managing agent or
property manager no older than 90 days; OR
3) ME Bank’s valuation report; OR
4) Rental appraisal from a registered Real Estate Agent which is
no older than 4 weeks
For DHA only:
1) Copy of the lease agreement no older than 12 months; OR
2) A rental statement no older than 90 days
Standard rental 80%
NRAS 65% (*)
DHA 100% less
management fee (*)
(*) must be input as tax
free income into CAT
For Display Homes only:
1) via an ME Bank Valuation Report
Motor Vehicle - fully maintained company MV
Restrictions
Verification process requirements
% used for servicing
Allowed provided it is part of Employment
Contract / conditions. Vehicle must be fully
maintained (e.g. insurance, registration,
running costs, etc.) with no restrictions on
personal use
Evidence must be provided confirming the provision of the fully
maintained motor vehicle.
Notional $7,500 can be
added to the gross
income
This can be achieved through the following:-
1) Letter from the employer (dated, signed and on employer
letterhead); OR
2) Employment Contract
10-32
Motor vehicle - allowance
Restrictions
Verification process requirements
% used for servicing
Must be permanent part of income
Evidence must be provided confirming the amount of payment being
made / received.
100% added to gross
income
This can be achieved through the following:1) A Payslip no older than 4 weeks old; AND
Any one of the following:
2) Most recent PAYG Payment Summary / Tax Assessment
Notice, no older than 18 months; OR
3) Letter from Employer (dated, signed and on employer
letterhead); OR
4) Employment Contract
Note: any loan
commitments must be
included in the
expenditure to calculate
servicing
Salary Sacrifice Arrangements: is an arrangement between an employer and an employee, where by the employee agrees to forgo part of their
future entitlement to salary or wages in return for the employer providing them with benefits of a similar cost (to the employer). Salary sacrifice
arrangements may also be referred to as salary packaging or total remuneration packaging.
Common salary sacrifices include: motor vehicle, non-compulsory superannuation payments, loan repayments, expense repayments (i.e. school
fees, child care costs, home phone costs), laptop computers, mobile phones
Restrictions
Verification process requirements
% used for servicing
To include this in servicing the borrower must
confirm that they can cease the arrangement at
any time
Evidence must be provided confirming the amount of payment being
made / received.
100% of gross income
Normal PAYG verification rules are to apply. However the salary
sacrifice component can be verified through the following:-
Note: any loan
commitments must be
included in the
expenditure to calculate
servicing
1) A Payslip no older than 4 weeks old; OR
Any one of the following:
2) Letter or statement from the supplier (dated, signed and on
letterhead) no older than 6 months old confirming the level of
salary sacrifice
10-33
Self Employed: When an individual derives their income from an enterprise to which they are an owner or director and the enterprise is in the form
of a sole trader, partnership, company, trust or a non PAYG contractor
Restrictions
Verification process requirements
% used for servicing
There must be a minimum of 2
financial years trading
Evidence must be provided confirming the amount
of income.
Use the most recent year’s personal taxable income plus net
profit/loss before tax of the business. Where taxable income
has increased over the last two years by more than 20%,
the maximum of 120% of the previous year’s income must
be used.
This can be achieved through the following:Where 2 years trading is not
evident an application can be
considered on a case by case
basis. In these instances, for
uninsured loans DCA Level 3
approval is required. For
insured loans DCA Level 3 and
Mortgage Insurer approval is
required.
Sole proprietorship or partnership
1) Last 2 most recent years’ Personal /
Business / Company / Trust Income Tax
Returns (the most recent being no more
than 24 months old); AND
2) Most recent Tax Assessment Notice, no
older than 18 months
Company or trust
1) Last 2 most recently lodged Personal /
Business / Company / Trust Income Tax
Returns (the most recent being no more
than 24 months old); AND
2) Most recent personal Tax Assessment
Notice, no older than 18 months
3) Last 2 most recent years Financial
Statements (the most recent being no
more than 24 months old)
Net Profit/Loss before tax of the business
The net profit/loss before tax of the business is calculated as
the net profit/loss correlating to the borrowers ownership
portion (with the exception of superannuation) plus any of
the allowable expense outlined below:Interest expense: Interest on debt/s where these are being
refinanced by the Bank
Rent: if it is paid to the borrower
Superannuation: any additional voluntary contributions paid
by the business to the borrower that is above the minimum
government requirement
Non reoccurring expenses: expenses that will occur outside
the normal course of business
Depreciation Expense Add-back
Up to a limit of 20% of the most recent financial year’s
business net profit before tax may be added back as taxfree income. Where a loss is incurred no depreciation addback is available.
Note:
•
•
Where the applicant’s self-employed income is not being used for servicing: To understand if there are any associated liabilities or
losses an accountant’s letter, most recent tax return or profit and loss statement is required.
Where the applicant’s company or business has ceased trading or deregistered: A letter from the customer’s accountant confirming
current status of the entity, and any personal liability of the customer is required.
10-34
11
Serviceability
ME Bank use a Net Income Surplus (NIS) method to assess the risk related to a borrower’s ability to meet regular loan commitments.
ME Bank use buffers and interest rate floors to cover interest rate movements and/or unexpected expenses of a customer.
To meet ME Banks servicing requirements the NIS must be greater than or equal to $0.
ME Bank assess serviceability via the application work flow tool Pega (T24 originated loans) and a calculator known as the Credit Assessment Tool
(CAT) (Ultracs originated loans).
11.1
Income
Allowable income sources and % used for servicing are outlined in section 10 of this policy.
11.2
General Living Expense
The application form enables the borrower to provide ME Bank with a figure that adequately represents their general living expenses.
Where the general living expenses provided by the borrower are less than the ME Bank standard for the borrower type (i.e. single, single with 1
dependant, married with 2 dependants etc.) the ME Bank standard baseline for assessment purposes will apply. This will be undertaken automatically
in the serviceability assessment.
ME Banks standard baseline is the Household Expenditure Measure (HEM).
11.3
Liabilities and Commitments
All of the borrower’s liabilities and their associated commitments need to be considered when determining the capacity of a borrowers servicing &
repayment ability.
Identifying liabilities and commitments should be made through the borrower’s disclosure on the application form. However care should be taken to
review other source documents that may identify undisclosed liabilities / commitments. Other source documents that may be used to identify
undisclosed liabilities / commitments include the:• Credit Check
• Bank statements
• ME Bank systems
11-35
The following outlines the type of liabilities that should be considered when assessing a borrower/s capacity to service and repay.
Existing commitments
Personal Loan
Other Commitments (i.e. Overdrafts /
Margin Lending Loans)
Other Mortgages – other financiers
Credit Cards – with an authorised limit
Credit Cards – with no authorised limit
Other ME Home Loan Contracts
HELP / HECS
11.4
Inputs into the Credit Assessment Tool (CAT)
The current loan repayment amount and the frequency of repayment
Manually calculate a monthly commitment figure by using the authorised limit multiplied by (interest rate
plus 1.50%) divide by 12
The current loan repayment amount and the frequency of repayment
The aggregated total credit card limits
The average balance of the last 3 months statements plus 20% of this figure represents the monthly
commitment
Balance and redraw amount over the remaining term of the loan/s
The interest rate to be applied is the higher of;
(a) the Standard Variable Rate plus 1.5% interest rate buffer, or
(b) the Floor Rate (currently 7.4%), or
(c) the Fixed Interest Rate of an existing loan/s.
Refer tax return or payslip to identify the liability and mark in the CAT that HELP / HECS is applicable
Notional Rent
When a borrower has minimal rent expense ($0 to <$150 per week) a notional rent of $150 per week per borrower must be included in the
serviceability calculation. The notional rental expense does not need to be included in servicing for owner occupied construction loans.
11.5
Apportioning debt
Where a sole borrower declares that they have joint liabilities (with married / de-facto partner) 50% of the debt can be apportioned provided it can be
determined that the non-borrower receives sufficient income to service their apportioned amount of the debt.
Evidence of the non-borrowers income is required and must be retained on file typically this will be evidenced on the borrower’s tax return as spousal
income. Where evidence of income is not supplied the liability & repayment of the full debt is to be applied to the sole borrower assessment.
Notes to the assessment should outline reasons for apportioning the debt.
11-36
11.6
Interest Only (Owner Occupied purpose only)
Where a borrower requests interest only for an owner occupied purpose (at origination), the following parameters apply;
• Maximum interest only term of 10 years over the life of the loan;
• Serviceability must demonstrate ability to meet Principal and Interest repayments, based on loan term minus the interest only period.
11-37
12
Security and Valuation
12.1
Acceptable Security
In all instances a first ranked registered mortgage over a residential property must be taken as security.
12.2
Ineligible Security
The following tables outline certain types of securities that are considered ineligible by ME Bank. Accordingly any proposal to use ineligible security
must be referred to DCA Level 3 for approval for uninsured loans, and DCA Level 3 and Mortgage Insurer for insured loans.
Title Types
• Company Title
• Group Title
• Leasehold Title (except ACT leasehold or simular perpetual type lease arrangements)
• Purple Title / Moiety Titles
• Stratum Title is excluded in all States and Territories, with the exception in Tasmania where stratum title is permitted. This is not to be
confused with strata title, which is permitted
• Time Share
Property Types
• Aged Housing
• Commercial Usage Properties
• Converting from another purpose
• Hotel/Motel Redevelopment
• Income Producing Property (apart from Rent)
• Mixed Usage Properties
• Properties larger than 40 hectares
•
•
•
•
•
•
Property Development
Recreational or special use properties
Serviced Apartments (including time share)
Transportable or relocatable homes
Unique Properties
Vacant Land: Un-serviced
12-38
Environmental Issues
• Properties which are the subject of any resumption order or adversely affected by a notice from any Local, State or Commonwealth
department authority
•
•
Properties which have a frequent notified flood affectation
Properties which are within an area of known site contamination as advised by the Panel Valuer or Solicitor
Other
Where the security property requires repairs which would cost more than 10% of the valuation (or contract price in the case of a purchase) and the
borrower does not hold sufficient funds to carry out those repairs or will not hold sufficient funds immediately following settlement. The extent and
cost of essential repairs are to be advised by a Quantity Surveyor at the borrower’s costs.
12.3
Acceptable valuation types
The following table outlines ME Banks acceptable valuation types and any specific conditions of use:Valuation methods
Automated Valuation Model (AVM)
AVM is a mathematical technique used
to provide an estimate of value for a
specified property at a specified date
Conditions of Use
An Automated Valuation Model can be used when:
• It has a confidence score of 4.5 or greater.
•
It is less than 90 days old
The AVM is valid only for the application submitted.
12-39
Valuation methods
Contract of Sale (CoS)
A Contract of Sale is a contract between
parties for the purchase and sale of real
estate
Conditions of Use
A Contract of Sale can be used when:• It is less than three months old at submission date
• The transaction can be verified as being conducted through a licensed real estate agent
• The transaction is an arm’s length transaction. Where the sale is not at arm’s length a full
valuation is required. Refer 6.2 for definition of arm’s length
Verification process:• The property must be verified as on the market through an independent website. ( e.g.
www.realestate.com.au or www.domain.com.au or independent agents web site); OR
• Contact the real estate agent to confirm purchase price and sale address. The real estate agents
details must be obtained from an independent site i.e. white/yellow pages
Rates Notice
A Rates Notice is from a Local Council
outlining the rates payable on a
property. It also includes the rateable
owners and (often) the vacant land and
capital improved value of the subject
property
Full valuation
A full valuation is an appraisal of a
property conducted by an ME Bank panel
Valuer
A rates notice can be used when it is:• Less than 13 months old from the date of submission
• Where the name of the borrower is on the rates notice
• Where a rating value is provided
A full valuation report can be used when the valuation report is considered acceptable.
An acceptable valuation report:• Is conducted by a panel ME Bank Valuer
• Is addressed to ME Bank, the Mortgage Insurer and Trustee
• Confirms the property is zoned for residential use
• Outlines any encumbrances or restrictions on title (excluding title search details)
• Provides a minimum of 3 comparable sales
• Confirms that the property has power, water and sewerage connected (or tank water and septic
system similar to other properties in the area). Properties with connections and services that run
immediately to the property boundary (allowing connection at minimum cost) are acceptable)
• Confirms a selling period of 6 months or less
•
Must be less than 90 days old
12-40
12.4
Determining the valuation type
To determine the type of valuation required use the Valuation tool located on WIKI at: http://wiki/bin/view/Main/CreditRisk
Appendix A – the valuation methodology and post codes
12.5
Property suitability
When a full valuation is received by ME Bank the report is to be reviewed to determine if there are any risks associated with the property that require
further investigation and/or mitigation.
If any of the following conditions apply escalation to DCA Level 3 (uninsured) or our Mortgage Insurer (insured) for consideration as required:-
Selling period
Saleability
Uninsured
three “4” risk ratings or a minimum of one “5”
risk rating
No referral required
No referral required
Environmental
No referral required
Risk Ratings
Insured
two “4” or one “5” risk rating; OR
A selling period of greater than six months; OR
A comment by the Valuer that identifies a
material impact in saleability for the property in
isolation
The property is located within 50 metres of high
voltage transmission power lines
Further DUA exceptions may apply – refer to Section 3.3
12-41
13
Special Asset Classes
13.1
Construction Loans
A construction loan is defined as finance being provided for the purpose of:Building a residential dwelling.
A structural alteration to a residential dwelling
A non-structural renovation to an existing residential dwelling where the finance amount sought is > $100,000
Any loan where a ‘on completion’ valuation is used
Valuation
The value of the security must be determined by a full valuation. The valuation type ME Bank must request is ‘upon completion’.
As a condition of a construction loan, progress payments will be subject to the completion of a first and final ‘progress inspection report’ which is to
be undertaken by a panel valuer. Where the LVR is above 80%, a progress inspection report is required at every drawdown request.
Split Contracts (House and Land)
When a split contract is provided for the construction of a dwelling:
In a multi-dwelling development, or
Where there is a common party wall to an adjacent dwelling
The assessment must be done on the basis that full funding of the approved finance will occur when the construction of the dwelling is completed (i.e.
the same as an “off the plan” purchase).
Documentary Requirements:
Refer section 6.1 of this policy
Release of funds
-
A copy of the approved plans and building permit is required prior to first progress payment
Release of funds must only occur after owner’s equity has been provided
Where the construction is by an owner builder; release of funds must only occur once ‘lock up’ or equivalent stage has been satisfactorily
achieved.
13-42
Prior to or at final draw down
Certificate of Occupancy/Completion (SA/WA only: ME Bank Valuer’s final inspection report)
Buildings Replacement Insurance certificate or Certificate of Currency
-
13.2
National Rental Affordability Scheme (NRAS)
NRAS is a Federal and State Government initiative that aims to increase the supply of new rental dwellings and improve rental affordability. It is also
designed to stimulate investment in affordable housing by providing tax incentives to investors.
Approval
• LVR <= 80% requires DCA Level 3 or 4 with exception ability
• LVR > 80% requires DCA Level 3 and Mortgage Insurer
Maximum LVR &
loan amount
• 90% plus LMI premium capitalisation.
Loan purpose
• Purchase of newly completed residential dwelling
• Construction loans are permitted for house and land packages where the contract of sale for the land
purchase and fixed price building contract are provided at the time of loan approval
• Excludes:
Vacant land
Off-the-plan strata purchases
Refinance
Serviceability
• Serviceability assessment to include the market rental as per the Valuation Report, discounted to 65%
• Tax free incentive to be excluded from serviceability assessment
Valuation
• A full valuation is required
• The Valuer (if applicable) is to note that the property is part of the NRAS
Eligible
consortiums
• All NRAS consortiums need to be approved by the Banks Mortgage Insurer prior to the submission of any
new loan proposal secured by a property participating in an NRAS scheme. Refer to this link for the most
current listing of eligible NRAS Consortiums
Feature Additional underwriting policies
13-43
14
14.1
Credit Contracts
Approval in Principle Letters
An Approval in Principle Letter (AIP):Is an indicative quote only of a loan amount that might be acceptable to provide to a prospective borrower based upon the minimum
assessment of the prospective borrower/s ability to service that amount.
Is not an offer and ME Bank are not obligated to lend funds to the prospective borrower after the letter has been issued.
Is typically sought to support a purchase at auction or where a new home has not yet been identified.
Is valid for a period of no greater than 120 days from issuance
Can be issued subject to certain criteria including valuation, mortgage insurance or credit checks
Note: Care is required when seeking or issuing AIP’s due to the reputational risks associated with AIP’s.
14.2
Letter of Offer (LoO)
A Letter of Offer (LoO) (inclusive of Part B):Is an offer to provide funds subject to the terms and conditions that are outlined within the LoO.
Is a contractual agreement between ME Bank and the borrower.
Is legally binding and therefore enforceable once it has been signed (executed) by the borrower and guarantors (where applicable)
Can only be issued by Authorised Officers within Credit Operations
Is only valid for acceptance by the borrower for a period of 90 days from issuance. Should the borrower wish to proceed with the loan offer
after this period, it must be resubmitted to the Bank and treated as a new application.
Where a LoO has been accepted by the borrower/s however has not drawn down within 90 days of acceptance (150 days for construction
loans) a re-verification is required. This includes:
o Confirmation in writing from the borrower/s outlining any changes to their financial position since the original submission
o The most recent income verification documents i.e. payslip, pension statements to confirm no change to employment status and income
o An updated credit bureau check to confirm no additional debts or adverse items since the original application
The re-verification is valid for a period of up to 90 days past the expired LoO. Should the borrower wish to proceed with the loan after this
period, a new application can be resubmitted to the Bank.
14-44
14.3
Counter Offers
A counter offer:Is when a borrower varies the original LoO prior to its return to ME Bank consequently resulting in different terms and conditions from the
original assessment. For example the borrower changes the loan amount or term before returning the LoO.
To meet NCCP obligations written confirmation from the borrower is required to confirm that the counter offer meets the customers’
requirements and obligations.
All counter offers must be reassessed by an appropriate DCA holder to ensure the variations made by the borrower are acceptable.
To ensure obligations under NCCP are adhered too, it is important that no financial advice is offered to the borrower and guarantor during this
process.
14-45
15
Post Origination
15.1
Top Ups
Additional borrowings are where an existing ME Bank customer seeks to increase their ME Bank debt levels.
There are different assessment procedures required depending upon the loan situation. These are:
Situation
1
2
3
Top Up
Where an additional loan is sought that may, but not necessarily always, have a different
purpose &/or security
Where the additional loan will be documented with the customer using a new and
separate Letter of Offer
Where an additional amount of > $50,000 is sought from the existing loan contract
Where the additional loan will be documented with the customer using Variation Letter of
Offer
Where an additional amount of ≤ $50,000 is sought from the existing loan contract
Where the additional loan will be documented with the customer using Variation Letter of
Offer
Assessment type
Standard
Standard
Top Up Decision Tree
15-46
15.2 Interest only (owner occupied purpose only)
Where
•
•
•
•
•
•
•
•
a borrower requests interest only (after origination) for a loan with an owner occupied purpose the following parameters apply;
Request is not due to financial stress or hardship
Loan is not currently in hardship or arrears and has no missed payments within the last 6 months
Minimum documentary requirements include; Statement of Financial Position detailing borrower(s) income, expenses, assets and liabilities
Serviceability must demonstrate ability to meet principal and interest repayments over the loan term minus the interest only period
Credit check satisfactory
Maximum LVR 95%
Maximum interest only term is 10 years over the life of the loan
Loan to be repaid within the original loan term
15-47
16 Appendix A: Valuation criteria
16.1
Full Valuation
The following security types / application will always require a full valuation.
Display Home, Student Accommodation or ineligible security type
Type
Construction Loan
Favourable purchase or non-arm’s length transaction
High Density Postcode (refer below) and property type is Apartment/Unit >10 units in development and greater than 80% LVR
Luxury Properties – A property that is in excess of the value listed below
State
NSW
VIC / WA
NT/ACT/QLD/SA
TAS
Property value of Land, Units,
Townhouses above:
$2.5 million
$2.0 million
$1.5 million
$1.0 million
Property value of Houses
above:
$3.5 million
$3.0 million
$2.0 million
$1.5 million
National Rental Affordability Scheme (NRAS) Homes
Vacant Land >2.2 hectares not located in ‘Metro’ or ‘Regional’ postcode locations
Off the Plan Purchase
16.2
Valuation criteria for Additional Loans (Top Ups and Additional Advances)
Where a customer has an existing loan where the security will be collateralised with the new application, otherwise complete as a standalone security
type.
LVR Limits
Valuation Method
Conditions
Proposed LVR <=80%
Existing Full Valuation
Existing Full Valuation <2 years old
Proposed LVR <=80%
Existing Contract of Sale (COS)
Existing COS <2 years old
Proposed LVR >80%
Existing Full Valuation
Existing Full Valuation <3 months old
Proposed LVR >80% to <=90%
Existing COS
Existing COS <3 months old
In addition to the above, the valuation methods outlined in 16.4 Restricted Valuation Policy may also be used.
16-48
16.3
Postcode listing / Categories
The base loan, prior to any capitalisation of LMI premium, is to be used for this table
Definitions
Mortgage
Insurer
Referral
Postcodes
(if LVR
>90%)
ACT
Nil
NSW
2259, 2320,
2321, 2325,
2330, 2335,
2382, 2878
NT
Nil
QLD
4207-4211,
4556, 4680,
4700, 4705,
4709, 4712,
4715-4723,
4737, 4741,
4742-4746,
4804, 4825,
4869, 4874
SA
Nil
TAS
Nil
VIC
Nil
WA
6208, 6213,
6225, 6236,
6254, 6280,
6346, 6390,
6423, 6426,
6429, 6430,
6438, 6440,
6442, 6443,
6479, 6511,
6518, 6519,
6537, 6620,
6640, 6642,
6707,6710,
6711-6714,
6716, 6718,
6720-6722,
6743, 6751,
6753, 6754,
6758, 6760,
6762, 6770
16-49
The whole loan including any capitalisation of LMI premium is to be used for this table
Definitions
High Density
Postcodes
ACT
Nil
NSW
2000 – 2006
2017
2138
NT
0800
QLD
4000-4004,
4215, 4217,
4218, 4870,
4879
SA
5000 - 5005
TAS
7000
VIC
3000, 3001,
3004 - 3009,
3141, 3205
WA
6000 - 6005,
6210
Metro
Postcodes
2600 - 2619,
2900 - 2914
2000-2011,
2015-2234,
2250-2265,
2267, 2278,
2280-2308,
2315-2319,
2444, 24852487, 25002534, 25582573, 27452774, 27762785
0800, 08100820, 08280832
4000-4022,
4030-4179,
4205-4221,
4223-4229,
4280, 43004306, 4350,
4500-4512,
4516 - 4520,
4550 - 4567,
4572 - 4573,
4575, 47004701, 4711,
4740, 4750 4751, 48104815, 4817
5000-5174,
5231-5234,
5240-5252
7000-7019,
7021, 70507055, 71707172, 72497250, 7258,
7277, 7290,
7300
3000-3207,
3211-3212,
3214-3216,
3218-3220,
3222-3227,
3335-3341,
3429, 3752,
3754-3755,
3765-3767,
3781-3796,
3802-3810,
3812, 39103920, 39263944, 39753978
6000-6214
16-50
The whole loan including any capitalisation of LMI premium is to be used for this table
Definitions
Regional
Postcodes
ACT
Nil
NSW
2320-2327,
2330, 2340,
2350, 24282430, 2443,
2445, 2450,
2452, 2456,
2460, 24772484, 24882490, 25382541, 25742577, 2580,
2620 - 2621,
2640-2641,
2650-2651,
2680, 27382739, 2795,
2800, 2830
NT
0870
QLD
4271-4272,
4352, 4370,
4514, 4521,
4568, 4655,
4670, 4680,
4703, 4710,
4720, 4753,
4819, 48654870, 48774879, 4883,
SA
5211-5214,
5290, 53525353, 5355
TAS
7248, 7307,
7310-7315
VIC
3221, 3228,
3230, 32323233, 3280,
3350, 33553356, 34373438, 3460,
3500-3501,
3550-3556,
3630-3631,
3690-3691,
3756-3757,
3844
WA
6230-6233,
6280 - 6282,
6284-6285,
6290, 6330,
6450, 6530
Rural
Postcodes
Nil
2333, 2360,
2380, 2400,
2431, 2440,
2446, 2448,
2470, 25352537, 2550,
2582, 2594,
2630, 2731,
2790, 2794,
2850, 2870
0850
4405, 4570,
4610, 4650,
4802, 4805,
4807-4808,
4816, 4818,
4820, 4825,
4850, 4860,
4880
5253, 5255,
5280, 5333,
5341, 5343,
5345, 5453,
5501, 5540,
5600, 5606,
5608-5609,
5700
7316, 7320,
7325
3249-3250,
3300, 3305,
3352, 3377,
3400, 3444,
3465, 3564,
3585, 3677,
3759, 3761,
3770, 3775,
3777, 3820,
3825, 38403843, 3850,
3875, 3922,
3980-3981,
3995
6430, 6714,
6721-6722,
6725-6726
16-51
16.4 Restricted Valuation Policy
The whole loan including any capitalisation of LMI premium is to be used for this policy reference.
Restricted Valuation Policy
Acceptable Restricted Valuation Methods
Any of the restricted valuation methods may be used to value property under the LVR and property/loan value restrictions
Maximum Loan Amount
The maximum amount of funds being borrrowed
Selected Postcodes
High Density Postcodes
To use any of these restricted valuation types, the property must be located in the selected postcode list
Where the security a unit development comprising more than 10 units > 80% or apartments and is located in a High Density Postcode the property does not qualify under the
Acceptable Valuation Methods policy and a full valuation must be conducted. Please refer to 'High Density Housing ' within the policy for these conditions.
Council Rates Notice or Valuer Generals
Estimate
 for valuation method
 for valuation method
Must be latest rates notice and < = 13 months old. 100% of the property rateable value may be used
Where a valuation method is
Where a valuation method is
 the valuation method can be used up to the prescribed maximum LVR and maximum loan amount.
 the valuation method cannot be used. (You can only use a valuation method up to the maximum prescribed limits given a
)
16-52
ACT
NSW
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
$1.0 Million
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
Metro Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Metro Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$600,000 (AVM $560,000)
$300,000 (AVM N/A)
< = 80%
$600,000
$300,000
< = 85%
$500,000
$250,000
< = 90%
$400,000
$250,000
< = 95%
$400,000
$250,000















Regional Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Contract of Sale
Council Rate or Valuer
Generals Estimate















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$800,000 (AVM $560,000)
$550,000 (AVM N/A)
< = 80%
$800,000
$550,000
< = 85%
$700,000
$450,000
< = 90%
$600,000
$450,000
< = 95%
$600,000
$450,000
Regional Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$500,000
$200,000 (AVM N/A)
< = 80%
$500,000
$200,000
< = 85%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
$200,000















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$400,000
$300,000 (AVM N/A)
< = 80%
$400,000
$300,000
< = 85%
$350,000
$200,000
< = 90%
$300,000
$200,000
< = 95%
$300,000
$200,000
Other Locations
Other Locations
AVM
$1.5 Million
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$250,000
$200,000 (AVM N/A)
< = 75%
$250,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$300,000
$200,000 (AVM N/A)
< = 75%
$300,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A
16-53
NT
QLD
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
$1.0 Million
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
Metro Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Metro Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$500,000
$350,000 (AVM N/A)
< = 80%
$500,000
$350,000
< = 85%
$400,000
$300,000
< = 90%
$300,000
$300,000
< = 95%
$300,000
$300,000















Regional Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Contract of Sale
Council Rate or Valuer
Generals Estimate















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$600,000 (AVM $560,000)
$300,000 (AVM N/A)
< = 80%
$600,000
$300,000
< = 85%
$500,000
$250,000
< = 90%
$400,000
$250,000
< = 95%
$400,000
$250,000
Regional Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$350,000
$300,000 (AVM N/A)
< = 80%
$350,000
$300,000
< = 85%
$300,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
$200,000















Other Locations
AVM
$1.0 Million
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$400,000
$250,000 (AVM N/A)
< = 80%
$400,000
$250,000
< = 85%
$350,000
$200,000
< = 90%
$300,000
$200,000
< = 95%
$300,000
$200,000
Other Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$300,000
$200,000 (AVM N/A)
< = 75%
$300,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$300,000
$200,000 (AVM N/A)
< = 75%
$300,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A
16-54
SA
WA
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
$1.0 Million
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
Metro Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Metro Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$400,000
$300,000 (AVM N/A)
< = 80%
$400,000
$300,000
< = 85%
$350,000
$250,000
< = 90%
$300,000
$250,000
< = 95%
$300,000
$250,000















Regional Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Contract of Sale
Council Rate or Valuer
Generals Estimate















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$500,000
$300,000 (AVM N/A)
< = 80%
$500,000
$300,000
< = 85%
$400,000
$250,000
< = 90%
$350,000
$250,000
< = 95%
$350,000
$250,000
Regional Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$350,000
$250,000 (AVM N/A)
< = 80%
$350,000
$250,000
< = 85%
$300,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
$200,000















Other Locations
AVM
$1.0 Million
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$350,000
$250,000 (AVM N/A)
< = 80%
$350,000
$250,000
< = 85%
$300,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
$200,000
Other Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$300,000
$200,000 (AVM N/A)
< = 75%
$300,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$300,000
$200,000 (AVM N/A)
< = 75%
$300,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A
16-55
VIC
TAS
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
$1.2 Million
The maximum borrrowing / total exposure ( the sum of all loans secured by the property or properties) allowed across all borrowers to allow security properties to
qualify for valuation via any of the below methods is
Metro Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Metro Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$600,000 (AVM $560,000)
$300,000 (AVM N/A)
< = 80%
$600,000
$300,000
< = 85%
$500,000
$250,000
< = 90%
$400,000
$250,000
< = 95%
$400,000
$250,000















Regional Locations
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate















Contract of Sale
Council Rate or Valuer
Generals Estimate















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$350,000
$200,000 (AVM N/A)
< = 80%
$350,000
$200,000
< = 85%
$350,000
$200,000
< = 90%
$300,000
$200,000
< = 95%
$300,000
$200,000
Regional Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$350,000
$250,000 (AVM N/A)
< = 80%
$350,000
$250,000
< = 85%
$300,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
$200,000















Other Locations
AVM
$1.0 Million
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$300,000
$200,000 (AVM N/A)
< = 80%
$300,000
$200,000
< = 85%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
$200,000
Other Locations
Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
AVM
Contract of Sale
Council Rate or Valuer
Generals Estimate
< = 70%
$300,000
$200,000 (AVM N/A)
< = 75%
$300,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A















Maximum Loan Amount
Maximum LVR
Dwellings
Vacant Land
< = 70%
$250,000
$200,000 (AVM N/A)
< = 75%
$250,000
$200,000
< = 80%
$250,000
$200,000
< = 90%
$250,000
$200,000
< = 95%
$250,000
N/A
16-56
17 Appendix B – Control Sheet
Version and Review History
Version
Date
Nature of Updates
Author of Changes
Approver
2014.1
March 2014
New document
Credit Risk – Policy & Controls
2014.2
April 2014
Update following feedback – See Credit Bulletin April 2014.
Non material changes
Changed High Density Housing LVR uninsured from 60% to
80%
- Changes to insured lending outlining that referral to
Mortgage Insurer required for exception sign off.
- Added to Ineligible Security “Properties larger than 40
hectares”
- Loan term for ACT leasehold security
- Genuine Savings – gifts & inheritance
- Self Employed depreciation add-back
Credit Risk – Policy & Controls
CRC – Dec 2013 &
Feb 2014
NA
Credit Risk – Policy & Controls
CRC – Mar 2014
Credit Risk – Policy & Controls
CRC – Apr 2014
Credit Risk – Policy & Controls
CRC – May 2014
-
Credit Risk – Policy & Controls
CRC – Jun 2014
Credit Risk – Policy & Controls
NA
Credit Risk – Policy & Controls
Credit Risk – Policy & Controls
CRC – Aug 2014
NA (Corrections)
Credit Risk – Policy & Controls
NA (Clarifications)
April 2014
2014.3
May 2014
2014.4
June 2014
2014.5
August 2014
2014.6
August 2014
2014.7
October 2014
-
Letter of Offer
Superannuation requiring only 3 months statements
Update as advised by Mortgage Insurer to Mortgage
Insurer Referral Postcodes (if LVR >90%)
Letter of Offer (Expired Accepted LoO’s)
Standard rental
Maximum LVR Table
FHB added to the abbreviation table
POA for guarantor/s reference moved from 4.4 to 4.3
Re-write of 5.1 Maximum LVR based on loan purpose
Paragraph added to 5.3 Maximum LVR based on Security
Type for multiple securities
Base loan / Capitalised loan references added to 16.3
and 16.4
High Density Postcodes updated to align with mortgage
insurer
Unauthorised structure/s add to the DUA exception list
17-57
Version
Date
Nature of Updates
Author of Changes
Approver
2015.1
February 2015
-
Added a Credit Check requirement for borrowers who are
a director of a company 7.1
Notional rent expense alteration 11.4
Rent expense table for construction loans removed 11.6
Credit Risk – Policy & Controls
CRC – Jan 2015
DCA and mortgage insurer referral requirements clarified
5.0
References to the redundant form ‘change application
form’ have been removed 6.2
Validity requirements added for AVM’s 12.3
Credit Risk – Policy & Controls
NA (Clarifications)
Annual Review / Policy Name Change
Credit Risk – Policy & Controls
CRC – October 2014
CRC Circular – Feb
2015
CRC – Mar 2015
2015.1
February 2015
-
2015.2
March 2015
-
Expand Responsible Lending 2.1
Added non-citizen and non-permanent residents as
unacceptable borrowers 4.1, 4.2, 4.5
Addition of Interest Only (owner occupied purpose)
requirements 5.1
Requirements for when Genuine Savings cannot be met 9.0
Addition of Interest Only (owner occupied purpose)
requirements 11.6
Addition of Interest Only (owner occupied purpose) for post
origination 15.2
Clarification of wording for NIS and reference to Pega added
11.0
Wording clarification for DCA level 3 referral 5.1, 5.2
Reworded “Other ME Home Loan Contracts” requirements in
line with Guidance Notes 11.3
Rewording of Top Ups 15.1
Renamed Verification process as Verification requirements 10.3
17-58