NEWS
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Parent equity loans put credit ratings at risk ■ A credit rating repairer has predicted an
imminent escalation in the number of well-meaning parents of first homebuyers with worse credit ratings as they approach pre-retirement. With first homebuyers’ grants in some states having been pulled back, MyCRA Credit Repairs CEO Graham Doessel says a possible rise in parent equity loans is a ‘dangerous trend’ that could see parents’ credit ratings impacted. Doessel says if the loans fall into arrears, parents would be liable, forcing them to work much longer than anticipated to pay off the debts. “Many people go guarantor for their children without assessing the risks to their own finances. If the child falls into arrears with payments, the parent is liable for any debt, and they are also blacklisted from credit accordingly,” Doessel said. Doessel said if the child fails to make repayments, the parents are liable for this debt, and if this extends past 60 days, the creditor can place a default on both credit files. “In some cases, parents are not aware repayments have stopped, and it’s not until they attempt to take out credit themselves and are refused that they realise there is a problem,” Doessel said. A default on someone’s credit file can severely hinder chances of obtaining credit, and remain on file for five years. “Worst case scenario is the bank begins to use the property the guarantor put forward as collateral to recover lost debts,” Doessel said. “There is a danger the guarantor can lose their home. Those people who were so close to financial freedom are now facing debt, and a shaky retirement.”
Broker low-doc fears unwarranted ■ Confusion and misconceptions over low-doc loans have led brokers to become unnecessarily cautious, according to non-bank lender Resimac. Chief operating officer Allan Savins said brokers were initially scared off low-doc lending due to having limited knowledge and confidence around NCCP when it was first introduced. He said that with the continued and rapid rate of legislative change in the industry, it is difficult for some brokers to know where they stand with low-doc lending. “NCCP wasn’t created to provide a prejudicial or narrow based solution for all borrowers, it is fundamentally there to promote responsible lending,” Savins ALLAN SAVINS said.
Resimac believes it is having a detrimental effect on brokers’ ability to write more business. “Many brokers believe NCCP has made servicing low-doc borrowers impossible,” Savins said. “Nowhere does the NCCP state that a specific interest rate makes a loan ‘unsuitable’ and this overall misconception has caused some brokers to needlessly stay away from servicing a legitimate segment of the market.” Savins said brokers need only make reasonable enquiries as to the borrowers’ needs and financial position, as well as acting with honesty and integrity. “It’s about making reasonable enquiries around a borrower’s circumstances and declared income levels and keeping a record of that,” Savins said.
Brokers lacking service to get ‘trampled’ ■ A leading mortgage broker
has claimed those brokers who do not capitalise on their core customer service proposition are likely to get “trampled” by bigger players. Ian Jordan of The Selector Group has said brokers need to ensure they go beyond technical ability such as structuring a deal and focus more on their customer service process. “I think that is where brokers might be missing a little bit, and this is their competitive advantage against the really big boys in town – their one-on-one ability to provide phenomenal service. “That is really their unique proposition and if they are not
doing that then they really are competing with the big boys and I think they are going to get trampled,” Jordan said. This goes beyond service such as asking a client “how are you feeling, and what are we going to do that is specifically different for you?” according to Jordan. Instead, Jordan said top brokers aim to make sure the customer has a great experience all the way through. Jordan added that this includes post-settlement service, not just during the loan application and approval process. Commenting on the current market, Jordan said despite improved sentiment figures he “didn’t realise the GFC was over”.