Westpac Group and ANZ, which combined account for nearly 40 per cent of the nation's mortgage lending, are tightening control over borrowers with confidential changes to assessment, approval and monitoring.
Major borrowers are tightening their lending criteria and monitoring in response to regulatory pressure and growing risk
ANZ, whose broker network accounts for about 56 per cent of mortgage flows, is clipping the discretion of frontline mortgage assessors that deal directly with mortgage brokers and customers in loan approvals.
Mortgage brokers claim banks appears to be showing less flexibility interpreting guidelines when assessing loan applications on issues such as some forms of irregular income, such as bonuses or part time work.
A bank spokesman said it is regularly reviewing lending practices "to make sure they are in line with community expectations and our own risk appetite".
"We recently added a higher level of approval for some discretions applied to our home loan police for serviceability assessments," he said.
It is not a change to credit policy or underwriting standards and applies to all home loans, not just those received through brokers, he said.
Lenders are toughening their lending criteria to new borrowers and cutting back on interest-only loans in response to pressure from regulators to reduce risk and lower demand in popular markets.
Westpac Group, which includes St George Bank, BankSA and Bank of Melbourne, relies on brokers for about 46 per cent of distribution and has about 45 per cent of higher risk interest-only loans in its mortgage book, the highest percentage of the big four.
The bank recently introduced stringent tests on residential property borrowers' existing and future capacity to meet their repayments.
It came amid pressure from prudential and consumer regulators to tighten lending criteria and an industry controversy that loans totalling $500 billion had been approved on the basis of applications that understate debt, or exaggerated income.
Called 'requirements and objectives', it is intended to identify possible scenarios that might impact on a borrowers' capacity to repay, including having dependents with special needs that might require long-term spending on care and treatment.
From Monday, February 26, brokers that make any changes to a submitted loan application, which might arise from further conversations with the borrower, need to alert the bank.
"We are implementing a new resubmissions process to ensure we have accurately captured all details of the loan application if it changes after it has already been
submitted," the bank is telling brokers.
Other lenders are also introducing alert systems to monitor struggling property borrowers in a bid to head-off problem loans amid growing concern about household debt.
Under new arrangements being planned by Adelaide Bank, subsidiaries and affiliates, loan repayments will be routinely compared with borrowers' income and monthly to ensure it falls within guidelines.
Debts that exceed guidelines will prompt a "diary note commentary" to inform the lender of possible mortgage stress.
SOURCE: www.afr.com