Lending options: am I SOL?

[cletus]

Ok, I'll try and keep this as brief as possible.

2 years ago I bought an old house on a large block of land for almost $400k with a 20% deposit.

Last month I put in an offer (subject to finance) to buy another house for almost $430k. My plan was to use the increased equity in my existing property to buy the new one at 80%, possibly chipping in money myself. Unfortunately I also changed jobs in May (same industry, no probation, higher pay).

I'm a long-time CBA customer and had previously gotten a preapproval for them for a much higher amount (almost $600k) so I thought this new loan was well with my servicing capacity and reasonably conservative.

So I apply for the loan and several things come up:

1. I discovered there was an unpaid summons on my credit file. Basically the council (for my first house) mistakenly issued a summons for rates payment. They admitted they'd stuffed up and I thought it had been dealt with. The council has since filed papers such that the summons has been withdrawn and its no longer on my record after I filed a request with Veda Advantage;

2. Virgin were still sending me credit card statements in May for an accunt I closed in January thanks for an 18 cent balance; and

3. My employer isn't in the White Pages (mobile office, VoIP, etc).

Now CBA were happy when I explained all this. Then the valuatin on my house came back at a staggering $410k.

Now I know bank valuatins are conservative so was expecting $450k, maybe $435k but not $410k. To put it in perspective: my house is a 70s 3x1 (double brick and tile) on an >800sqm block. Last year, 450sqm blocks with no house were selling for $330k two blcks away on the same street. Granted we've had a correction of sorts but I'd put the land value alone of my place in the high 400s.

Thus the only way I could buy the new place was with a greater than 80% LVR (or come up with $100k some ther way) and it went to the mortgage insurer. They saw my summons and my explanation but ultimately declined me LMI on the grounds that:

- I had a summons; and
- My employer isn't in the White Pages (it's actually hard to get in the White Pages unless you have a Telstra landline).

Now I also think that CBA went around this the wrong way: they wanted to effective combine my lans such that the mortgage insurer (Genworth) were insuring the bank on loans of almost $700k.

So at this stage I went to a mortgage broker who has taken my application to BankWest. I've taken out a line of credit with CBA on the small amount of equity I can use in my first house (to save doing another valuation on it), which was approved so instead of a 90% LVR on $700k I'd be looking at a 95% LVR on $400k for LMI purposes.

On Friday the new bank (BankWest) came back with a decline on the grounds of time in new job and number of credit applications in the last 6 months. The credit applications thing is the part that irks me since I have a copy of my credit file (after sorting out the summons nonsense) and they are:

- Credit card in Feb for balance transfer that I didn't take up and the account was closed;
- Preapproval with CBA in April;
- CBA twice in June for home loan;
- Genworth in June.

So, excluding the home loan, theres been only one thing in the last 6 months. Last year there was a credit card and my margin loan and that's it.

Now the broker has kicked this upstairs to a credit manager to look at but I'm really getting the feeling this is going to fall apart because even if the bank accepts it, I'm not sure the mortgage insurer will accept it (this bank goes to both PMI and Genworth). Also the LMI quote is over $8000.

So CBA were happy to lend me the money but their insurer wasn't and I'm already having trouble getting across the line with the new bank.

To give you an idea of the serviceability of these loans, my existing loan is fixed at 7.6% interest only until 2011. With current interest rates, could borrow the entire amount and service both loans (including $300pw rental on the other place minus expenses) and have over $4000 left over each month.

Are there any other options?

 

[Rob Williams]

I have a friend in a similar situation to you (exculding the low valuation part of the story). After a few knock backs, I got her hooked up with a good mortgage broker who was able to sterr her toward a bank that was able to accomodate her.
They all have different criteria and ways of assesssing applications. A good broker can help steer you in the right direction as they know where the traps and gotchas are.
Funny thing with my friend is that she initally wanted an extension on an existing loan with one of the big 3. They refused the application. They made an error some time ago and there was a $150 fee showing as outstanding. It was an error and didn't have to be paid but they refused the loan on that basis. She tried to pay the $150 but they had closed the account into which it had to be paid so she couldn't even pay it out.
She refinanced with another major bank. The other bank would rather have lost a good long term customer over THEIR $150 error.
Go figure!

 

[Spectre]

With the existing cba stuff... cba have delegation up to $1m with mortgage insured products generally in house. So most of this from the sounds of it could have been approved in house or theres more to the story because cba do have a semi-flexible cra history policy. If they wouldnt have lent you for the 700 they wouldnt have lent you for the new loan as they'd both be insured and if one is knocked the other would be as well.

Notwithstanding... consider maybe to have skipped the line of credit with cba at a 90% lend and gone to a 95% lend with a variable rate product with an offset so you could access that extra 5% in equity (you could go interest only with the variable and it would work very similar to the line of credit using the redraw)

With the new lender... off the top of my head... have a look at NAB (homeside) as we passed a $1700 default at a 95% lend with them. Their variable rates currently are pretty sharp...i.e. maybe a Homeplus at 8.79% (IO) with the 100% offset - currently. Yeah its not a bankwest 1% off for 2 year deal but if you can get over that...

Also NAB dont have issues with probation & employment as much. We've done applications where they guys been in his job for 2 weeks with a 6 month probation and in same line of work previously for a few years. Auto delegation with PMI up to $1m per property.

 

[cletus]

With the existing cba stuff... cba have delegation up to $1m with mortgage insured products generally in house. So most of this from the sounds of it could have been approved in house or theres more to the story because cba do have a semi-flexible cra history policy. If they wouldnt have lent you for the 700 they wouldnt have lent you for the new loan as they'd both be insured and if one is knocked the other would be as well.

The line of credit on the existing property still have the LVR at 80%. Basically the house cost $390k when I bought it and I put up 20% + costs in deposit (almost $100k). The new valuation at $410k means I can borrow 80% of the difference without LMI so thats why that got approved.

What does auto delegation mean?

Genworth certainly came into the picture and as I understand it, theres only two mortgage insurers: Genworth and PMI. Bankwest at least go to both.

Notwithstanding... consider maybe to have skipped the line of credit with cba at a 90% lend and gone to a 95% lend with a variable rate product with an offset so you could access that extra 5% in equity (you could go interest only with the variable and it would work very similar to the line of credit using the redraw)

The Bankwest product has free extra payments and redraws (online) and its currently at 8.44% (average of the Big 4's SVR minus 1%) for 2 years although it had the choice of a $900 application fee or no application fee on their professional product ($395/year including a credit card) although to further complicate the comparison you have to have $20k on their Lite Plus product (8.77% iirc).

The LOC is simply there to fund the 5% + costs deposit on the new place (I'll kick in the rest from selling shares or cash advances if I have to).

With the new lender... off the top of my head... have a look at NAB (homeside) as we passed a $1700 default at a 95% lend with them. Their variable rates currently are pretty sharp...i.e. maybe a Homeplus at 8.79% (IO) with the 100% offset - currently. Yeah its not a bankwest 1% off for 2 year deal but if you can get over that...

I could try NAB because they have 0.8% off their SVR so could be competitive too. Maybe I'll have a conversation with them tomorrow.

I can certainly get over paying 0.3% more. Thats $1200/year but I'd much rather get the place than not.

Also NAB dont have issues with probation & employment as much. We've done applications where they guys been in his job for 2 weeks with a 6 month probation and in same line of work previously for a few years. Auto delegation with PMI up to $1m per property.

Can you give me a bit more on what auto delegation means because its something I can possibly take back to CBA and try with NAB?

 

[Nth Brisbanite]

Why not try one of the brokers on this forum to help you out? They are investors, have got a wealth of up to date knowledge, and have good relationships with a lot of the lenders.

 

[cletus]

Why not try one of the brokers on this forum to help you out? They are investors, have got a wealth of up to date knowledge, and have good relationships with a lot of the lenders.

I'm open to that. If someone wants to PM me or if anyone has any recommendations, please let me know. I live in Perth and the properties in question are there also.

 

[Spectre]

Cletus

'Autodelegation' means that the mortgage insurer gives the bank an authority to approve mortgage insured loans without having to then onsubmit them to the mortgage insurer for a 2nd approval. Technical terms for banks might be something like a delegated underwriting authority or DUA.

During my pennance in CBA if the computer said 'conditionally eligible' in the branch and the lend was >80% up to 95% with LMI on top then it was good to go. We could even override a few of the decisions if the system wasnt up to date.

Even if it went to their credit cell in Perth (or wherever perth sends their loans to they cant approve in the branch) those credit managers have an underwriting approval by the mortgage insurer to sign off on that what cant be done in the branch. So CBA actually sending loans to GE directly must mean something was out of scope. Now that it is fixed up and if all is repaired on your enquiry then all should be workable under their DUA I would think.

Bankwest wont touch probation w/mortgage insurance if its pretty new you might pull it off it you had a few weeks to go (noting you arent on probation). Note the product looks attractive but I find their service just crap most of the time.

Even had westpac approve loans that went to 3 banks before them. All you do is advise them that the prior preapprovals werent proceeded with and off you go.

GE and PMI are yes the two big insurers but other banks have their own mortgage insurers - st. george, westpac, anz... (per se).

If its a thing where you (not YOU but figuratively) knew about the problem and didnt feel like paying it and this is what happened as a result then end of the day you dont have anyone to blame but yourself.

In this case it would appear you have a legitimate case to argue things out though, and I'd look at Nab Homeside or Westpac. I just think you'll have a better shot with NAB. But that being said westpac has surprised me as of late on a few loans too.