CHANGES TO INTEREST ONLY LENDING

Transcription

1 FREQUENTLY ASKED QUESTIONS CHANGES TO INTEREST ONLY LENDING WHAT IS CHANGING? Effective Date Monday 29 th May Sunday 18 th June Key Changes Interest only availability for both owner-occupier & investment lending will be restricted to maximum 80% LVR for new and increased lending (including top-ups) and external refinances The maximum interest only period will be reduced to 5 years for investment lending to align to the maximum for owner occupier lending There will be a waiver of the renegotiation fee for customers who want to switch from interest only to principal and interest repayments You will need to include fee waiver instructions for renewal requests Interest only lending will no longer be available on new Simplicity PLUS loans (owner occupier and investment lending) A minimum rental/board expense of $375 per month will be applied to Residential Investment Loans for all borrowers not living in their own home Note: there is no change to requirements to collect customer stated rental/boarding expense for every customer Products All ANZ Home Loan and Residential Investment Loan products Note: Includes Equity Manager Account (EMA) All ANZ Home Loan and Residential Investment Loan products All ANZ Home Loan and Residential Investment Loan products ANZ Simplicity PLUS All ANZ Residential Investment Loan products and Equity Manager Accounts (EMA) WHY ARE WE INTRODUCING A MINIMUM RENTAL EXPENSE? We proactively review policies to ensure our lending practices are suitable for our customers. We are introducing a minimum rental expense to continue to enhance our ability to ensure customers can service their loan should their living arrangements change ARE WE STILL LENDING TO INTEREST ONLY CUSTOMERS? Yes. we will continue to support interest only lending to customers where interest only repayments meet their needs and the lending falls within our product and credit policy requirements

2 WILL WE MAKE FURTHER CHANGES TO INTEREST ONLY LENDING? We continuously review our policies and processes to ensure we meet our objectives of doing the right thing by our customers, meeting community expectations and ensuring we have a prudent and balanced home loan portfolio WHAT ARE OUR COMPETITORS DOING? APRA expects authorised deposit taking institutions (ADIs) to limit the flow of new interest-only lending to 30 per cent of new residential mortgage lending, and to limit interest-only lending at higher LVRs. All ADIs will need to ensure that they have a balanced volume of interest only and principal and interest lending. WHAT HAPPENS TO IN-FLIGHT APPLICATIONS? For new applications in the system that are submitted on or after Monday 29 th May 2017, the new policy/product parameters will apply Applications submitted to Credit Assessment prior to Monday 29 th May 2017 will be assessed under previous policy/product parameters If you need to request an application extension, you must do so by 1 st July 2017 to apply previous policy MY CUSTOMER WANTS TO SWITCH TO PRINCIPAL AND INTEREST REPAYMENTS, WILL THEY BE CHARGED A RENEGOTIATION FEE? Breakfree package customers can switch to principal & interest repayments at any time without paying the renegotiation fee while they remain a package holder To support all other customers (i.e. non Breakfree) you will need to include fee waiver instructions for renewal requests submitted to: Non Credit Critical and Streamlined Credit Critical: You will need to complete the NCC and SCC standard process and add a comment in the request form to waive the fee Assessment Team - Credit Critical: You will need to write a comment in the application form to request the fee waiver The renegotiation fee will not be waived when customers are requesting to switch their current loan from principal & interest repayments to interest only repayments Fee waivers only apply to renegotiation fees associated with switching repayment type to principal and interest and can be withdrawn or changed at any time. Switching repayment from interest only to principal and interest on Fixed Rate Loans may result in Early Repayment Cost (which may be very large and will not be waived) WILL CUSTOMER FACING COLLATERAL (DOCUMENTATION) BE UPDATED? Yes. ANZ.com will be updated from 29 th May A digital copy of the product matrix will be available via the Broker portal 2

3 WHO CAN I CONTACT FOR ADDITIONAL INFORMATION? Your BDM should be your first point of contact for any questions relating to these changes NO LONGER ACCEPTING INTEREST ONLY SIMPLICITY PLUS LOANS CAN EXISTING CUSTOMERS WITH AN INTEREST ONLY SIMPLICITY PLUS LOAN REQUEST NON CREDIT CRITICAL CHANGE (NCC) AND STREAMLINE CREDIT CRITICAL CHANGE (SCC) RENEWALS? Yes. Customers with an interest only Simplicity PLUS loan can request NCC/SCC renewals post 29 th May 2017 provided all other requirements are met including LVR thresholds and maximum interest only term DOES THIS AFFECT EXISTING SIMPLICITY PLUS CUSTOMERS TAKING OUT ADDITIONAL FUNDS? No. Existing customers with an interest only Simplicity PLUS loan will not be affected if they take out additional funds for the purpose of utilising funds from their existing property, provided all other requirements are met including LVR thresholds and maximum interest only term Note: New policy/product parameters will apply to supplementary loans submitted after the effective date. ARE THE SIMPLICITY PLUS SPECIAL OFFERS STILL AVAILABLE FOR CUSTOMERS WHO MEET THE ELIGIBILITY CRITERIA? Yes. Special offers still apply to eligible customers. Given Simplicity PLUS interest only is no longer available for new applications from 29 th May 2017, the special offer will only be applicable for principal and interest repayments across Simplicity PLUS Home and Residential Investment Loans HOW WILL THIS CHANGE BE MONITORED FOR COMPLIANCE PURPOSES? Additional monitoring will take place to ensure customer lending is set up appropriately in systems. New interest only Simplicity PLUS applications submitted from 29 th May 2017 will not be approved by Credit Assessment IS THIS A PERMANENT CHANGE OR WILL INTEREST ONLY SIMPLICITY PLUS LOANS BE AVAILABLE FOR SALE AGAIN? This change is effective 29 th May 2017 until further notice. DOES THE REMOVAL OF INTEREST ONLY FROM SIMPLICITY PLUS APPLY TO CONSTRUCTION LOANS? No. Construction loans will not be impacted as this policy applies to fully drawn loans. The construction loan will be on interest only during the construction period, however once the loan is fully drawn the Simplicity PLUS loan will switch to principal and interest repayments. WHAT OTHER INTEREST ONLY OPTIONS ARE AVAILABLE FOR CUSTOMERS? Interest only repayment option is available on ANZ Standard Variable and ANZ Fixed Home and Residential Investment Loans. 3

4 CHANGES TO INTEREST ONLY LENDING POLICY (LVR and Interest Only Term) DO THESE CHANGES APPLY TO ALL NEW LENDING? Yes. Any new lending for new and existing customers (including top-ups), external refinances will need to meet these criteria. ARE MEDICOS EXEMPT FROM THESE CHANGES? No. Medicos are not exempt from these changes. ARE THE LVR LIMITS INCLUSIVE OR EXCLUSIVE OF THE LMI PREMIUM? The LVR limit is inclusive of the LMI premium. For $0 renewals where an existing LMI premium applies, the new threshold will not be retroactively applied. WILL THE SYSTEM ALLOW ME TO SUBMIT AN APPLICATION FOR INTEREST ONLY OUTSIDE THE NEW POLICY? Yes. To manage customer expectations appropriately, please refer to ANZ s Mortgage Credit Requirements (available on the Broker Portal) in applying these restrictions. Enhancement to ANZ s systems to support the automation of these changes is currently being investigated. WHAT HAPPENS TO EXISTING CUSTOMERS (OWNER OCCUPIER AND INVESTOR) WHO HAVE LENDING >90% LVR AND WANT TO EXTEND THEIR CURRENT INTEREST ONLY PERIOD WITHIN THE 5 YEAR LIMIT? You will need to advise the customer that it breaches the maximum 90% LVR limit and offer the customer one of the following options: Proceed with a principal & interest repayment arrangement (note: if the customer s circumstances have changed and they are experiencing financial stress then referral to Customer Care is appropriate) Undertake a new valuation of the security property to determine if an increase in fair market value (FMV) would bring the LVR below the 90% limit (then extend interest only within 5 year period) Pay down the loan to a level below the 90% LVR limit (then extend interest only within 5 year period) WHAT LVR SHOULD BE APPLIED TO A CUSTOMER WHO HAS SPLIT LOANS OVER PRINCIPAL AND INTEREST AND INTEREST ONLY WHERE THERE IS A DIFFERENCE IN LVR POLICY? Refer to LVR Lending Scenarios provided below. 4

5 LVR LENDING SCENARIOS Scenario 1 Single security property supporting one or more loans. New Lending (includes external refinance and increased existing loans). Example 1 $500,000 1 $400,000 IO 80% Within maximum allowable LVR 1 $100,000 IO 20% Example 2 $500,000 2 $250,000 P&I 50% 3 $50,000 P&I 10% $500,000 $450,000 80% Within maximum allowable LVR Key Message: If the repayment type of any loan is Interest Only (IO), the maximum allowable total LVR is 80%, irrespective of individual loan amounts. Example 3 $500,000 1 $400,000 IO 80% 2 $50,000 P&I 10% $500,000 $450,000 90% Exceeds maximum allowable LVR Key Message: Split IO loan arrangements are not allowed if combined LVR exceeds 80%. If >80% funding is sought, all loans must be P&I. Scenario 2 Existing 80% LVR. Customer wants to increase lending to 90% LVR. New Lending (includes external refinance and increased existing loans). Example 1 $500,000 Existing Loan $400,000 P&I 80% New Loan $50,000 IO 10% $500,000 $450,000 90% Exceeds maximum allowable LVR Key Message: If the repayment type of any loan is Interest Only (IO), the maximum allowable total LVR is 80%, irrespective of individual loan amounts. Scenario 3 Individual Security properties supporting individual loans (not Cross-collateralised). New Lending (includes external refinance and increased existing loans). Example 1 $500,000 Existing Loan $400,000 IO 80% $500,000 New Loan $450,000 P&I 90% Within maximum allowable LVR $1,000,000 $850,000 - Key Message: If loan repayment type is Interest Only (IO), the maximum allowable LVR is 80% 5

6 Scenario 4 Existing 55% LVR. Customer wants to use equity to acquire second property. New Lending (includes external refinance and increased existing loans). Example 1 $600,000 Existing Loan $330,000 P&I - $500,000 New Loan $550,000 IO - Within maximum allowable LVR $1,100,000 $880,000 80% Key Message: If loan repayment type is Interest Only (IO), the maximum allowable LVR is 80% Scenario 5 Existing 90% LVR. Customer wants to switch from P&I to IO OR Extend IO term. $0 Renewal. Example 1 $500,000 Existing Loan $450,000 P&I 90% New Loan $450,000 IO 90% Existing LVR with no increase. $500,000 $450,000 90% Key Message: Loan Repayment Type for existing lending <=90% LVR may be renewed as Interest Only. Scenario 6 Existing 90% LVR. Customer wants to switch from P&I to IO OR Extend IO term. $0 Renewal. Example 1 $500,000 Existing Loan $475,000 P&I 95% New Loan $475,000 IO 95% Exceeds maximum allowable LVR $500,000 $475,000 95% Key Message: Loan Repayment Type for existing lending <=90% LVR may be renewed as Interest Only. 6

7 Exception Cross-collateralised lending that could be approved on a standalone basis within the maximum allowable LVRs. Multiple Security properties supporting Multiple loans (Cross-collateralised). New Lending (includes external refinance and increased existing loans). Security Value Loan # Loan Amount Type LVR Decision Decision rationale $600,000 1 $880,000 IO 80% $500,000 $400,000 2 $360,000 P&I 90% $1,500,000 $1,240,000 83% This structure is acceptable as each loan can be secured individually by the security property. Loan 1 can be secured by property 1 and 2 and loan 2 can be secured by property 3. Security Value Loan # Loan Amount Type LVR Decision Decision rationale $600,000 1 $600,000 IO 100% $500,000 2 $640,000 P&I 71% $400,000 $1,500,000 $1,240,000 83% This structure is not acceptable as each loan cannot be secured individually by the security property. Loan 1 cannot be secured individually by any combination of properties and leave individual property security to secure loan 2 Key Message: Examples 1-3 demonstrate acceptable exceptions where lending could be structured within the maximum allowable LVRs on a standalone basis. How to Process: 1. Lender to complete safety assessment prior to submission to confirm standalone structure would be acceptable 2. Lender to force refer application for RLO to confirm that the lending complies with this exception logic 3. RLO to confirm via safety assessment that acceptable structure including maximum 80% LVR for IO loan component Loan Structuring: All of the below should be considered prior to considering whether this exception should be utilised a) Customer loan requirements and preferred structure b) Applicable LMI Premiums that may apply c) ANZ security position MINIMUM RENTAL/BOARD EXPENSE WHAT IS CHANGING? A minimum rental/board expense of $375 per month will be applied to Residential Investment loans for all borrowers not living in their own home. The minimum rental/board expense will be applied to each applicable statement of position * and compared to customer declared rental/board expense. The higher will be used in the serviceability calculation. *For applications requiring two separate statement of positions (for example two siblings or non-spousal), an expense of $375 per month will apply to each separate statement of position. Note: there is no change to requirements to collect customer stated rental/board expense for every customer WHEN IS THE MINIMUM RENTAL EXPENSE CHANGE EFFECTIVE? Changes are effective Sunday 18 th June

8 ARE THERE ARE EXEMPTIONS FROM THIS CHANGE? No. There are no exemptions from this change DOES THIS POLICY APPLY TO OWNER OCCUPIER LOANS? No. This only applies to residential investment loans DOES THIS CHANGE APPLY TO ALL NEW LENDING? Yes. It will apply to new lending and credit critical renewals (including SCCR) DOES THIS CHANGE APPLY TO ALL RENEWALS & INTERNAL REFINANCE? The changes do not impact Non-Credit Critical (NCC) renewals ARE THERE ANY PLANS TO MAKE CHANGES TO THE LENDING SYSTEMS? Yes. Enhancement to our systems to support the automation of these changes is currently being investigated 8