LIXI is calling on the lending and mortgage industry to provide feedback on its new living expense category changes, which will be included in its new data standards.
The Lending Industry XML Initiative (LIXI), a member-based not-for-profit company that develops and promotes efficiency improvements and data message transaction standards for the Australian lending industry, has released for consultation its proposed changes to standard living expense categories.
While the financial services is currently reviewing and updating its responsible lending guidance (RG 209), which will seek to update the role of expense benchmarks in the process for verifying a consumer’s financial situation and clarify the types of information that are available to verify different aspects of a consumer’s financial situation, LIXI is also seeking to update its living expenses categories in its new data standards, LIXI2.
The company first proposed changing and updating its data standards – used by many lenders for their verification and/or serviceability processes – “to better support credit licensees’ efforts to fulfil their responsible lending requirements” last year. This was triggered by the interim report of the banking royal commission (which questioned the Household Expenditure Measure and how lenders verify expenses), updates to HEM, better capture of transactional data and lender changes to living expense categories.
Following feedback from LIXI members and contributors, the company has now released its proposed changes to its 2016 data standards to form the basis of the LIXI2 data standards.
While the company has acknowledged that the new data standards are being consulted on ahead of the finalisation of the regulator’s guidance around how expenses are used in mortgage applications (and ahead of ASIC’s public hearings on the matter later this month), it added that industry needed a common path forward sooner rather than later.
It is hoped that the LIXI2 standards would be finalised by the company’s annual forum on 18 September. However, the adoption of the new standards by lenders would likely be a longer-term process.
With almost 500 elements and more than 2,000 attributes, the LIXI2 standards cover a range of application data for applicant types including individuals, trusts and companies.
Among the key changes is a proposal to expand the expenses categories from 12 living expenses and three commitments, to 19 living expenses categories and three commitments.
The new categories proposed would be:
LIXI commented: “There were previously 15 categories because three (Rent, Board and Maintenance) were collected as part of ‘other commitments’.”
“There is still a net increase of seven, but these are largely because of changes to HEM that require some items separated, for example, private school expenses.
“Of course we could aggregate more all the excluded items – for example, private schooling, land tax, life insurance, etc. – but they are quite unrelated and do not make a logical category,” it stated.
Writing in a post on LinkedIn, LIXI CEO Shane Rigby commented: “After further industry feedback, the proposed set of standard living expense categories has been refined. The 12 categories that were published in 2016 would expand to 19 categories under this proposal.
“LIXI members are encouraged to review the proposal and provide any feedback before these are included in the LIXI2 data standards.”
Mr Rigby added that any non-LIXI members may also submit feedback to the new expense proposals to him by the end of August.
According to LIXI, while the LIXI2 standards are expected to be finalised in the next month so that lenders have an agreed method for expenses moving forward, should any changes arise from the new responsible lending update from ASIC, these will likely be included, too.
[Related: ASIC to host new set of public hearings]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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