APRA latest - 20% of all approved loans audited AFTER formal approval

Discussion in 'Loans & Mortgage Brokers' started by Marty McDonald, 20th Dec, 2018.

Join Australia's most dynamic and respected property investment community
  1. Marty McDonald

    Marty McDonald Mortgage broker Business Member

    Joined:
    22nd Jun, 2015
    Posts:
    734
    Location:
    Sydney North Shore and Norther beaches
    Latest hair-brain idea from APRA.

    Majors banks are being directed by APRA to do post approval audits on 20% of all loans. This is AFTER the borrowers have been notified of their approval. I've heard from another broker today that has had their clients loan approval pulled the day before settlement!

    Only a matter of time before lots of people lose their deposits. Madness.

    Mr Byre's needs his wings clipped.
     
    MC1, Morgs and larrylarry like this.
  2. paulF

    paulF Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    1,408
    Location:
    Melbourne
    Why? Nothing to worry about if Loan application is ok and not dodge.
    This is the stuff that should have been done years ago.
     
    ndpjai, Marg4000 and AlexV_Sydney like this.
  3. Speede

    Speede Well-Known Member

    Joined:
    26th Sep, 2015
    Posts:
    758
    Location:
    A wannabe Mexican
    Bunch of idiots...
     
    Illusivedreams likes this.
  4. larrylarry

    larrylarry Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,355
    Location:
    Sydney
    I think the concern here is that goalposts keep changing and some, even though could get the loan under assessment, any change may cause issues down the track, before settlement. I have resigned to the fact that they will scrutinise my daily coffee intake and they may well go another step further, the number of train trips I take or paracetamol I consume. :)
     
    d_walsh, Eric Wu and Peter_Tersteeg like this.
  5. AlexV_Sydney

    AlexV_Sydney Well-Known Member

    Joined:
    12th Mar, 2017
    Posts:
    517
    Location:
    Sydney
    Considering 70% of audited tax returns contains many errors, when everyone knows they can be audited, I can imagine what would be audit results for loan approvals when many brokers/applicants try to get as much as possible from the bank.

    Similarly to ATO audits, if a loan application contains minor errors only (not affecting final decision much), nothing to worry about.
     
    larrylarry likes this.
  6. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    9,226
    Location:
    It's All About Me.
    I'm not impacted by these matters but it's almost become comedic. One of mine is fretting slightly about the banks including the HELP debt if they want to refinance. They read it somewhere apparently.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    35,871
    Location:
    Australia wide
    Not necessarily. Sometimes an assessor might have interpreted something wrong and approved a loan that shouldn't have been approved. Someone could exchange and then have their loan pulled without any non-disclosure.

    but I think a bank would probably have to allow the loan to go through if their mistake (but would they!)
     
  8. larrylarry

    larrylarry Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,355
    Location:
    Sydney
    unjust enrichment they would say.
     
  9. Illusivedreams

    Illusivedreams Well-Known Member

    Joined:
    3rd Oct, 2017
    Posts:
    2,301
    Location:
    Sydney
    Absolute rubbish.
    The bank should do its diligence as much as they want prior to issuing approval.
     
    Jess Peletier, Lindsay_W and HiEquity like this.
  10. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    7,293
    Location:
    03 9877 3000
    Lending policy is constantly changing. I was recently chatting to someone who works on bank software. A day doesn't go by when they don't get a directive to tweak the living expense metrics. Often they've been given new metrics before the previous ones went live on the systems.

    At least one of the majors has released no fewer that 6 updates to their serviceability calculator this calendar year. Each more conservative than the previous.

    It's very conceivable that a tight application today won't be approved if put up against next month's metrics. The banks say they use the metrics at the time of original application, but I've got hundreds of examples where that's just not true.
     
    MC1 likes this.
  11. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    7,293
    Location:
    03 9877 3000
    There's also a perception of customer service. Your loan is approved, congratulations!

    Then 2 weeks before settlement, the application is reviewed and a new document is required. Even if it's not a problem, consider the position of the broker or loan manager having to call the client and ask for that information.

    What the people making all these rules never have to deal with is the position of the person directly providing the service to the customer. That person now looks like a fool, the whole financial institution looks incompetent.

    Saying it's APRA's fault sounds kind of lame.
     
    Dean Collins likes this.
  12. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    7,293
    Location:
    03 9877 3000
    What about the legal issues this arises?

    Your loan is approved, it's in writing and a formal contract offer has been issued and accepted. Based on all this advice, the contract becomes unconditional.

    Then the loan is reviewed, found lacking due to a bank error and isn't funded. The borrower looses a $70,000 deposit. Who's liable?

    Banks do make mistakes in their assessments. Some of them even work in the borrower's favour.
     
    Dean Collins likes this.
  13. Harry30

    Harry30 Well-Known Member

    Joined:
    4th Aug, 2017
    Posts:
    792
    Location:
    Melbourne
    If the bank does an audit, they need to define what they are audited against. Surely it must be the information at the time of the application. In other words, was the applicant truthful based on his circumstances at the time. With the passage of time, every single number you supplied to the bank will change in some way.
     
    Lindsay_W likes this.
  14. Marty McDonald

    Marty McDonald Mortgage broker Business Member

    Joined:
    22nd Jun, 2015
    Posts:
    734
    Location:
    Sydney North Shore and Norther beaches
    It just shouldn't be allowed for quite obvious reasons.

    So much legislation around consumer protection yet this is possible. It is the people who employ APRA to make the rules. Clearly they need their mandate stripped back a touch.
     
    Dean Collins likes this.
  15. Marty McDonald

    Marty McDonald Mortgage broker Business Member

    Joined:
    22nd Jun, 2015
    Posts:
    734
    Location:
    Sydney North Shore and Norther beaches
    We are not talking about fraud here we are talking about credit policy interpretations. I don't mind them doing audits but I do mind that they do them after the borrower has been issued and accepted a loan offer.

    They could do the audit before the approval is communicated to the borrower but NO APRA thinks they should be done AFTER why??
     
    paulF and Lindsay_W like this.
  16. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    3,627
    Location:
    QLD/Australia Wide
    Because they are clueless :)
     
  17. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    2,605
    Location:
    Darwin
    That scenario would destroy most first home buyers....
     
  18. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    2,701
    Location:
    Melbourne
    Absolutely ridiculous! So in a nutshell, their is no longer unconditional approval.

    Imagine making an offer subject to finance to have it unconditionally approved and the later revoked for one of potentially hundreds of plausible reasons.

    Good luck to brokers who cant even now say with confidence "Congratulations your loan has been unconditionally approved".

    Your new email will read:
    Congratulations your loan has been unconditionally approved! *

    * Please note that at anytime your approval can be withdrawn by the banks. So technically this is not an unconditional approval at all, its really a conditional approval.
     
    doubletoplei likes this.
  19. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    8,296
    Location:
    Gold Coast
    20per cent re work

    That will make for lower rate costs and improved consumer outcomes because we will have better compliance ;)


    Ta
     
    Eric Wu, Peter_Tersteeg and Lindsay_W like this.
  20. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,372
    Location:
    Perth WA
    I agree Marty- it's the most ridiculous ting I've ever heard. People sign unconditional contracts based on the banks approval of finance. If audits need to be done, it HAS to be before an approval letter is issued.

    Good customer outcomes 101.
     
    Dean Collins likes this.