Home Loan declined by CBA

hello everyone,
We are first home buyers been working with our broker since almost a year to have a good financial position before applying to a home loan. Reduced our debts by a considerable amount, never had defaults in our credit file (credit scoring is very good). We are both full time PAYG , i work to a government entity , my husband is in airline.
Our broker was pretty confident we are gonna get the loan with 5% deposit and through the FHLDS, she said we tick all the boxes in terms of loan serviceability.. etc
We paid $1000 a holding deposit for a new home and land that will expire 15/1 .. we are elligible for the HBG and FHOG.
we got the decision just before christmas that the system declined our application , from what I understand it is the credit risk scoring of CBA (being in our mid 40's , 5% deposit and that my husband is in airlines probably made them nervous).
Broker is appealing the decision, requested our rental ledger and a reference letter from the REA to confirm we are good tenants (P.S Rent per week is higher than the mortgage).

My question is, is it possible CBA will reconsider their decision? I lost my faith tbh with the broker (felt we have been mucked around a bit). Have anyone of experienced brokers here had a similar situation?

Should I ask for a refund of my holding deposit as it is a lost case or wait last minute?

Should I reapply with another lender or just move on in my life.

It came as a shock to be honest as broker was confident we will get it, also she said that our FHLDS has been expired but they still have a place.
She applied for a pre approval on 9/12, converted to a full loan approval on 21st .

P.S
We bank with CBA since 6 years, salaries, credit cards all with them.
Your advise will be highly appreciated.
Thanks
Heidi

 

Thanks Rolf for the advise.
Btw i may have used the wrong term, am just in a very emotional state due to an unexpected outcome. Not all brokers are experienced to sense that you may be get declined even if you tick all boxes on papers because of lenders credit scoring. I honeslty had no idea there was such a thing, we have been told there are no reasons to get declined, i guess it is always about setting the right expectation.

Anyways, you confirmed what was in my mind especially when it comes to NAB as my broker suggested we apply with them and i refused , preferred to better attempt with a second tier lender.

Thank you again . We will sleep on it and see if we should reattemp or just forget about it.. by the time to save 10 or 12% as you mentioned we will be more older and it will be more complicated.

 

Hi Heidi, depending on the property you wish to buy, saving up 20% deposit is normally preferred by banks. Mortgage brokers who are new to the industry might take you on a learning curve with them. Seek out an experienced one. S/He would be able to do a quick preliminary assessment and better guide you towards a higher success loan application rate with a wider pool of lenders.

 

Hi Axley
Thanks for your response. I agree 100%

 

Decline is never a good feeling, however it's not always the worst thing. There have been countless stories about CBA's "system decline" which indicates no assessor (person) has picked up your file to look at just yet, not even your broker's submission note has been sighted! Which is a bit unfair to blame it on them at this point.

You should have more options presented to you by your brokers with pros and cons of each. Was CBA the strongest option you have? Or was this merely loyalty to the biggest bank in the country noting that you've been their client for many years?

Loyalty is a good thing, however, not all banks would have suitable products and services that would suit your situation. They all have their own in-house policies. That's why you have your personal shopper that is your broker. However, if you insist on going with a particular lender after being presented with "better" options, your broker is obliged to go with your decision.

 

As per the broker, there is an assessor looked into our application and declined it (for system reasons which later on when i pushed for answers said combination of system factors )
I have nt been offered options , only been advised will apply with CBA because of the FHLDS, i just followed whatever been advised to do trusting the more experienced person who is suggesting to try NAB!

I think it is too late now on who to blame, I know it is a hail mary to overturn their decision. if we will give it another try will definitely change broker first.

 

Of the lenders with FHLDS positions available, I'd say the CBA is probably one of the most flexible. Most lenders are extremely conservative. The NAB might be worth trying, but there is a high probability of a similar result.

Realistically FHLDS loans are 95% LVR. Banks are very conservative on these. Combine it with being on your 40s and minimial savings, alongside employment in the airline industry (seen as incredibly unstable right now) and this is very much an uphill battle.

None of this is the fault of the broker. Perhaps they didn't communicate the potential risks well enough, but these are fairly subtile. I've submitted applications where all the metrics are very strong, but the bank gives a system decline because there's something they decide they don't have a risk appetite for. You won't find this info in any calculator or policy manual.

Honest advice: Take some time to save a larger deposit. Wait until the pandemic is over and the airline industry has recovered and starts to employ people again.

 

Thanks for the advise Peter.
My husband is employed btw with steady paychecks.
By the time to save double the deposit we have, we would probably be in 50' and prices will be much higher.
So disheartening when you work hard, do your best, character is very good and still you are trapped on paying a rent higher than the mortgage itself.
Thank you anyways appreciate ypur advise.

 

Internal credit decline are almost impossible to override. To be fair to the broker, it wouldn't be possible to know your internal credit score with the lender without submitting the loan. Banks have long memories and things such as an overdrawn account a 5-10 years ago or late payments which both may not appear on your credit score can impact your internal credit score with the bank.

Have you withdrawn any super from your fund as I heard from a fellow broker that CBA will decline loans if they see these transactions.

 

Have you considered the option of rentvesting ? Your 5% deposit for one house could mean a 20% for another house at a less expensive but good suburb. This way, you can continue living in your desired neighbourhood , at the same time knowing that you own your property too and that your savings is put to good use. Take time to source for an affordable good investment. Capital growth, if done right, could potentially exceed savings rate by leaps and bounds.

 

Yes we did to pay off credit cards and reduce liabilities.
Broker been advised beforehand and still insisted to apply with CBA.
Am not blaming the broker for lender's decision, am just feel that it was not the wisest decision to apply with them, and maybe would have thought on other options before making a decision.
Damage is done anyways, am aware that she won't be able to over ride their decline.

 

Good option. But i think we will have to come up with stamp duty amount as we won't be living at the house.

 

Did you pay the holding deposit as "subject to finance" ?
If so then yes, you should ask for the holding deposit back.

 

Oh! Okay.. i have no idea. Worth exploring.

 

Yes it is refundable until mid Jan.

 

The problem is, of the lenders able to offer the FHLDS, I can't think of one that would be significantly more flexible than the CBA. Most are more conservative. The CBA is often seen as a bit of a 'safe harbour' and plenty of brokers would have made the same recommendation.

I've seen a few declines like this in my time. The most recent was last year with the CBA. Everything looked fine, I'd even written several successful loans for that client before. Their seriving is tight and the CBA appeared to be the best fit.

Initially things went well. Then it got to the final credit decision and was declined with no real explaination given. I've got a few good contacts at the CBA.

A day later my CBA business manager (a good contact whom I've worked with for 16 years) calls me and says the CBA has an internal file with this clients name on it and there's a red mark on their file. He didn' know why the red mark was there, but he said it means that the CBA probably won't ever lend money to this client regardless of the circumstances. He couldn't see any reason for this, no appeal, just don't bother going to the CBA for this person.

Talking to the client it appears his extended family business had some sort of dealings with the CBA about 15 years ago. He wasn't involved, but he was a part of the business. He didn't really know any details, just that something bad occured.

I had a similar situation with the NAB about 10 years ago. The NAB had a few late payments on a credit card. Nothing on the credit file and the client didn't mention it. Loan declined and I had to go digging for a reason. At the end of the day it's up to the bank if they want to lend to you. There's plenty of laws that tell coporations how they should do business with their customers, but there aren't really any laws saying they have to do business with anyone.

There's really no way to mitigate this before sending the application because the banks won't disclose their internal files or their risk algorithms. As brokers we may develop a 'gut feel' for some of these nuances, but there's no way of absolutely knowing the outcome until we send the application.

 

I agree it is all up to the lender of course. We have been in australia for 6 years only, no red marks or anything.. bills on time regardless how tight we were during settling down.

What I do not understand why would the assessor encourage the broker to appeal the decision if they were the one declining?

 

I missed that part.

Likely the assessor can see that there is merit in the deal. They probably see what the broker originally saw. The problem is their computer system says no. The assessor only has limited authority and they don't have the ability to override the system, so the decline is issued.

The broker can make further arguments and get the application reviewed by someone with more authority. Often this isn't actually something the assessor can do on their own. The assessor has a process they have to follow, they won't deviate from it.

The odds of success in an appeal aren't good, but they're not zero. I've also had plenty of declines that were later overturned. Also I've had deals where the assessor called me, told me the whole story and I agreed with their decision.