Mortgage broker advertising guidelines

Mortgage Industry Association of Australia (MIAA) has issued advertising guidelines for its members.

ASIC has welcomed the guidelines. Mr Greg Tanzer, ASIC's Executive Director of Consumer Protection and International Relations said "The guidelines give a useful explanation of the key legal requirements for advertising and address a number of issues of concern to ASIC."

MIAA has reminded its members that they should seek their own legal advice on their own specific circumstances or advertising.

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Low-doc loans reviewed by APRA

The Australian Prudential Regulation Authority (APRA) has released revised criteria for authorised deposit?taking institutions (ADIs) to qualify for the concessional risk?weighting of residential mortgage lending for capital adequacy purposes.

The revised criteria ensure that the 50 per cent risk-weight applies only to residential mortgage lending by ADIs which have adequate procedures to gauge the ability of the borrower to meet repayment obligations and to assess independently critical information in respect of the borrower. This new element is targeted at low-doc loans.

To be eligible for the concessional risk?weighting, ADIs must also implement:

policies for determining the marketability of residential properties offered as security;

documented procedures regarding the valuation of properties; and

processes for outsourcing any part of the credit assessment process to third parties.

The revised prudential standard covering changes to the risk-weighting of residential mortgage lending comes into effect from 1 October 2004, and will need to be reflected in reporting to APRA for the quarter ending on 31 December 2004.

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Infochoice Loan Calculators Misleading

ASIC has acted to close down loan calculators on more than 100 websites of Australian financial institutions, including banks, credit unions, other lenders and finance brokers. The calculators suggested that using a line of credit will result in the consumer paying off their home loan more quickly.

'Most lines of credit charge higher interest rates than standard home loans, so when you stop to think about it, it was extraordinary to suggest that paying higher interest could pay off a loan sooner', said Mr Greg Tanzer, ASIC's Executive Director of Consumer Protection and International Relations.The loan calculators produced a graph, comparing the time taken to pay off a standard loan with the time taken using a line of credit.

However, the way the calculator was designed meant that:

extra repayments were credited to the line of credit but not to the standard loan:

the line of credit was at the same interest rate as the home loan;

and

these assumptions were not made clear to the consumer, so that the calculator showed that the line of credit was paid off more quickly than the home loan but it was not clearly stated that this was due to higher repayments by the borrower.

'The calculator software was produced by infochoice.com.au in line with industry specifications, and was used by over 100 lenders and broker groups.''infochoice.com.au acted quickly to take down the calculators from over 100 websites once ASIC raised these concerns with it,' Mr Tanzer said. 'ASIC acknowledges the company took a co-operative and responsible approach that will benefit consumers.'

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New Online Features

You can now instruct us online for upstampings, discharges, valuations, company searches and title searches.

If you have any questions about our services or suggestions for further site improvements, contact your local Network Law member.

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Site Upgrade Information

This site will not be available from 4pm to 6pm AEST on Wednesday 15 September while we implement an upgrade.

This upgrade includes:

total site cosmetic redesign (including news stories on the home page)

addition of forms (upstamping, discharge, valuation, company search, title search requests)

improvements to new mortgage instruction form (allowing insertion of amount of insurance required, purpose of loan, proposed settlement date, phone numbers of borrowers as requested by clients)

improvements to discharges view matter page and initial auto-emails for discharges and upstamps.

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