Oh the stupidity!

[rugrat]

Our home loan for our IP is once again going through LMI. We had to send it back there because timeframes have been pushed out (yet again) and we are at a junction where we may be settling in 2 weeks or in mid Feb (our builders shut down for 6 weeks over christmas). We are not sure which yet, but our current loan approval expires in the begining of feb, so we are covering our bases.

Anyway, As part of the loan package we have chosen with our lender (IMB) we automatically get a $5000 credit card. IMB sent this out to us as soon as our approval went through last time, we have never used it.

LMI are now saying that they will (re)approve our loan PROVIDED we get rid of our credit card. IMB have told us to close down the credit card and they will reopen a new one for us, once this approval goes through.

So I have no problem getting rid of a credit card I have never used, to get this loan over the line, particularly if the bank is just going to reissue another anyway - but I just find it completely redundant. On one hand we have the bank telling us "you are servicible, we will give you the loan AND we will give you a credit card you never asked for, on top of that" and then on the other hand we have the LMI saying "you will only be an acceptable risk to us if you forego the credit card" and failing tofactor in that the credit card in question is in fact a part of the home loan package.

Some would think that LMI might actually look into things a little closer then that - so that they have an idea of the risk of what they are actually insuring.

Oh well, in the end, all I care about is the homeloan.

 

[wylie]

I feel for you. We had something similar when we moved our loans several years ago. We reduced or closed our credit cards which had total limits of $2K on the new bank's request and then after the loan was approved, the new bank issued us a credit card with a $24K limit .

I don't get it??

 

[Rolf Latham]

LMI are the end decision maker so we need to play by their rules, dumb yeah but no choice

ta
rolf

 

[VIC Lender]

Our home loan for our IP is once again going through LMI. We had to send it back there because timeframes have been pushed out (yet again) and we are at a junction where we may be settling in 2 weeks or in mid Feb (our builders shut down for 6 weeks over christmas). We are not sure which yet, but our current loan approval expires in the begining of feb, so we are covering our bases.

Anyway, As part of the loan package we have chosen with our lender (IMB) we automatically get a $5000 credit card. IMB sent this out to us as soon as our approval went through last time, we have never used it.

LMI are now saying that they will (re)approve our loan PROVIDED we get rid of our credit card. IMB have told us to close down the credit card and they will reopen a new one for us, once this approval goes through.

So I have no problem getting rid of a credit card I have never used, to get this loan over the line, particularly if the bank is just going to reissue another anyway - but I just find it completely redundant. On one hand we have the bank telling us "you are servicible, we will give you the loan AND we will give you a credit card you never asked for, on top of that" and then on the other hand we have the LMI saying "you will only be an acceptable risk to us if you forego the credit card" and failing tofactor in that the credit card in question is in fact a part of the home loan package.

Some would think that LMI might actually look into things a little closer then that - so that they have an idea of the risk of what they are actually insuring.

Oh well, in the end, all I care about is the homeloan.

If interest rates moved up since you first approval this would have also reduced your borrowing capacity.

It is important to note that Unser NCCP it is illegal to for a lender to give you finance if you can not afford the loan. The best way a lender can demonstrate affordability is through their calculators.

Unfortunatly the stupidity does not lay on the shoulders of the lender or mortgage insurer here. It was the Ranga and her 4-eyed Monkey that rushes through the legislation that lenders must adhere to.

Moving forward automatic credit card approvals are gone to. If you want to increased your limit from 20k to 21k you will need to show your income.

Funny thing is the majors can work out your income from the account conduct - unfortunately non banks can't do this unless you also bank with them.

The Monkey seems to be unaware he is just supporting the major 4 with much of the legislation. I think the Ranga need to keep him on a shorter chain...

 

[Rolf Latham]

The best way a lender can demonstrate affordability is through their calculators.

Really ?

Brokers cant rely on that, fraught with compliance risk.

ta
rolf

 

[rugrat]

servicibility is a laugh. I go to one institution and I may be servicable for 700k, while I go to another and am lucky to be servicible for 200k. And it is all so variable depending on how they veiw certain aspects of our family income: like allowances, casual income, tax free income, salary package.

Personally I have no worries about our affording to service the loan, we are currently putting double our PPOR mortgage payments on our mortgage. Although this IP will be negatively geared to the tune of about 5k p/a (possibly less) - that really isn't an issue at all for us.

Neither am I concerned about our ability to remain servicable for a credit card after we get the home loan, if we should so want one.

I just think it laughable and rediculous that the banks, financial institutions and LMI don't get their act together and standardise some measurements for working these things out - surely it would make their jobs easier (and alot of other peoples, like brokers for instance), and means that situations like mine shouldn't occur.

In the end, it is no skin off my nose, just annoying that it means more mucking around and a couple more days delay on getting things finalised.

 

[peaches]

LMI have their own calculators and for most smaller lenders the LMI calculator takes precedence - always has.

 

[jonmardell]

you have to look at it this way. LMI have their own credit criteria, so to get the loan approved you need to cancel the card. Once the loan is approved then IMB can apply their own credit criteria which is saying to can have a credit card.

 

[Token Funder]

Our home loan for our IP is once again going through LMI. We had to send it back there because timeframes have been pushed out (yet again) and we are at a junction where we may be settling in 2 weeks or in mid Feb (our builders shut down for 6 weeks over christmas). We are not sure which yet, but our current loan approval expires in the begining of feb, so we are covering our bases.

Anyway, As part of the loan package we have chosen with our lender (IMB) we automatically get a $5000 credit card. IMB sent this out to us as soon as our approval went through last time, we have never used it.

LMI are now saying that they will (re)approve our loan PROVIDED we get rid of our credit card. IMB have told us to close down the credit card and they will reopen a new one for us, once this approval goes through.

So I have no problem getting rid of a credit card I have never used, to get this loan over the line, particularly if the bank is just going to reissue another anyway - but I just find it completely redundant. On one hand we have the bank telling us "you are servicible, we will give you the loan AND we will give you a credit card you never asked for, on top of that" and then on the other hand we have the LMI saying "you will only be an acceptable risk to us if you forego the credit card" and failing tofactor in that the credit card in question is in fact a part of the home loan package.

Some would think that LMI might actually look into things a little closer then that - so that they have an idea of the risk of what they are actually insuring.

Oh well, in the end, all I care about is the homeloan.

He/she who bears the risk gets to set the rules.

Once you're in LMI territory, their rules apply.

 

[Token Funder]

If interest rates moved up since you first approval this would have also reduced your borrowing capacity.

It is important to note that Unser NCCP it is illegal to for a lender to give you finance if you can not afford the loan. The best way a lender can demonstrate affordability is through their calculators.

Unfortunatly the stupidity does not lay on the shoulders of the lender or mortgage insurer here. It was the Ranga and her 4-eyed Monkey that rushes through the legislation that lenders must adhere to.

Moving forward automatic credit card approvals are gone to. If you want to increased your limit from 20k to 21k you will need to show your income.

Funny thing is the majors can work out your income from the account conduct - unfortunately non banks can't do this unless you also bank with them.

The Monkey seems to be unaware he is just supporting the major 4 with much of the legislation. I think the Ranga need to keep him on a shorter chain...

Under the banking code of practice it has always been the case that a bank can't lend you that which you cannot afford to repay. The key difference under the nccp, which arguably is no higher a standard, is that a breach could mean asic taking your credit license away.

Same rules. Bigger stick.

As I have pointed on on this forum for the last couple of years, people who think lending 2000-2007 style is "normal" and will come back any time soon are in for a shock.

 

[VIC Lender]

Under the banking code of practice it has always been the case that a bank can't lend you that which you cannot afford to repay. The key difference under the nccp, which arguably is no higher a standard, is that a breach could mean asic taking your credit license away.

Same rules. Bigger stick.

As I have pointed on on this forum for the last couple of years, people who think lending 2000-2007 style is "normal" and will come back any time soon are in for a shock.

I agree to an extent. The code was a step in the right direction however worlds apart from NCCP.

The code of banking practice is self regulation (it was written by the banks).

There is a big difference between the banks agreeing to a code that they wrote and was voluntery... Versus an act introuced by the government and punishable under criminal law...

Also - the code of banking practice did not include non bank lenders...

There are also many parts of the Consumer Credit Code that were not included in the Code of Banking Practice - those areas covered in the NCCP that were previously UCCC now apply to investment loans where previously they did not.

Much bigger stick...