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Regulator releases new guidance on mortgage reporting

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Reporter 4 minute read

Following industry consultation, APRA has issued updated guidance on how banks should report their residential mortgage lending activities, including several other changes.

In 2016, the Australian Prudential Regulation Authority (APRA) released proposed revisions to the residential mortgage lending reporting requirements for authorised deposit-taking institutions (ADIs), which APRA uses to inform its prudential supervision. The data is also sometimes used by the Reserve Bank of Australia.

The data, which includes credit limits for outstanding loans, details of new loans funded (and secured by residential property) and loans to private unincorporated businesses (secured by residential mortgages) must be sent to APRA every quarter ending 30 September, 31 December, 31 March and 30 June.

After receiving industry feedback in May 2017, APRA released additional data items for feedback, and the body has now implemented several of the proposed changes and clarifications.

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The changes to reporting requirements include:

- An amendment of the definition of gross income for loan-to-income (LTI) and debt-to-income (DTI) ratios to exclude compulsory superannuation contributions.

- An update of the additional increases in lending section to include self-managed superannuation funds (SMSFs) and loans to non-residents.

- An update to the definition of private unincorporated businesses to include all family trusts (not just family trusts with a controlling interest in business).

APRA revealed that several submissions outlined clarifications or changes that have not been taken up. For example, some responses called for a move away from gross income reporting, over concerns that the ADIs that apply “more conservative discounts” to income will report higher LTI and DTI measures, limiting comparability.

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The regulator responded: “In APRA’s view, using gross income for reporting purposes is necessary to allow comparison between all ADIs, acknowledging that it does have limitations.”

Two submissions also suggested expanding the private unincorporated businesses section to cover loans to all trading companies to provide a more complete picture of ADIs’ lending activity, but APRA has said that it does not propose to expand reporting beyond private unincorporated businesses, as it is intended to capture household (and similar) lending only.

[Related: APRA calls for renewed focus on ‘realistic living expenses’]

Regulator releases new guidance on mortgage reporting
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