The right insurance - Jenny Boddington

You have to create a team that can work out the answers themselves. People want empowerment, but they want it without accountability. I don’t want that. I want to run a team that is full of people who are happy to challenge themselves.

WHAT DOES THE FUTURE HOLD FOR THE HOUSING MARKET?

It is a low growth market at the moment. People are trying to find a break where they can, but the media is constantly saying the economy is not in great shape, which ultimately pushes borrowers back onto the sidelines.

It is always hard to predict the future, but right now it is harder than ever. At the end of the day, the one thing I can say with certainty is that the property market is a slow burn. You can’t buy property hoping to make a quick buck.

Right now, the economy is not as bad as everyone makes out. The economy is going through ‘normal’ oscillations.

There are plenty of people out there who believe there is going to be a crash.  That is not something we expect to see – there is absolutely no reason to think there will be that type of outcome.  

While property prices have fallen dramatically in other areas around the globe, we don’t expect that to happen here. We have good population growth, and strong demand for properties, so there is no reason to suggest we are on the verge of a property price collapse.

WHAT ARE SOME OF THE LESSONS THE MORTGAGE INSURANCE MARKET HAS LEARNED FROM THE GFC?

Prior to the global financial crisis (GFC), I don’t think anybody would have thought you could lose money on a mortgage.  

Defaults were basically zero. But, when the merry-go-round came to a halt, and people started to default on their homes, things started to change.

Lenders became more adverse to risk and changed the way they lent to borrowers.

What we have to understand is that the credit policies weren’t bad; the procedures that went along with the credit policies were bad.

That is why NCCP is such a good initiative. Banks are trusting brokers to complete the right checks and balances today. NCCP forced brokers and lenders to do their due diligence. It was no longer enough to collect three pay slips; today they have to collect them and really look at them. You have to make sure a person can truly service a loan.

Because of NCCP everyone is now clear about what is required – they may not always like it, but at least they are clear on the rules.

HAS THE GFC CHANGED THE WAY INSURERS SEE RISK?

No it has simply changed what is required to obtain finance.  

I believe Australia’s lenders find it really valuable to have a second pair of eyes – in the form of mortgage insurers – looking at their loan books.

We get the opportunity to look at risk in a high level way – something not even the banks can do.

We have specific high-risk surveillance.

We can look at the lender’s risk portfolio, which is really handy for them. We can tell what opportunities and pitfalls they face.

DO YOU FIND THERE ARE STILL SOME BORROWERS WHO DO NOT UNDERSTAND WHAT MORTGAGE INSURANCE IS?

Absolutely. That said, I think we are starting to see a trend of enhanced understanding. More people are coming to terms with what mortgage insurance is and, as such, there isn’t as much fear surrounding this product.

The fact sheet that is being developed for consumers is going to be really helpful. People need to go in with their eyes open, we are not trying to pull the wool over anyone’s eyes.  

We need borrowers to know what they are paying and why they are paying it, otherwise they can distrust what it is we are trying to do – which is ultimately to get them into their new home sooner.

In other countries – where there is no mortgage protection insurance – the GFC stopped the lenders from offering home loans above 80 per cent. As such, borrowers suffered.

In Australia, mortgage insurance enables clients to borrow at much higher LVRs.

In addition to the fact sheet, we are spending more time talking to our clients in a bid to educate the market.

We are working extensively with lenders and brokers – anybody on the front line – to ensure that when they have a discussion with their clients around mortgage insurance, they know what they are talking about.

WILL WE SEE A RETURN TO 100 PER CENT HOME LOANS?

No. Today, it is essential to have skin in  the game.

Borrowers who have skin in the game can easily prove that they are reliable and committed to their investment.

They are serious about their future in the housing market and that is one thing that lenders really want to see. The GFC has definitely
made a few lenders risk adverse, so they want to know they are dealing with trustworthy borrowers – borrowers who will not default on their mortgages.