CBA streamlines serviceability for self-employed borrowers

In May of this year, the major bank became the first of the big four to change its assessment process so that self-employed borrowers who could prove they had paid themselves a regular wage for the past six months, could use that income for serviceability for their home loan if they also supplied an accountant’s letter.

By enabling self-employed clients and their brokers to provide six months of payslips and an accountant’s letter (to confirm that the wage could continue to be paid and that the business could meet its own commitments), the self-employed borrower could be serviced as PAYG customer when applying for a residential mortgage.

This negated the need for them to provide full business financials.

The bank has now updated its serviceability process for how it captures income for self-employed and business customers when it comes to home loans.

While the bank previously would have taken income from the business (less all of the servicing etc.) to apply to an individual, it has announced that it is now able to automatically verify and calculate the self-employed income (where the customer relies on business income) for use in servicing. It can reportedly also now automatically calculate business income based on percentage of ownership.

CBA confirmed that it is changing how it verifies and calculates investment income, including expanding the definition to include trust distributions to a beneficiary, and the ability to verify average investment income over two years.  

The move forms part of CBA’s renewed strategy to “become Australia’s leading bank to business” and follow its “refreshed” broker strategy.

Speaking to The Adviser about the changes, Chris Moldrich, general manager, business home lending, said: “We made the changes listening to feedback from our customers and the broker community around making it easier for self-employed customers to gain access to finance.

“One of the things I think that we heard a lot [was around] the challenges they face when it comes to applying for a home loan, given the nature of their business and the information that the bank asks for. So, we are now asking for less information from the customer and their broker, by not asking them for all of the business financials and the accounts that we ordinarily would have done.”

Mr Moldrich suggested that some self-employed mortgagors would have previously had to provide CBA with “10 sets of financials” in order for the bank to assess the file, but the payslips from the self-paid wage could now be applied for serviceability instead.

“The intention is to make it easier for our business customers, our self-employed customers and our brokers when applying for a CBA loan,” he said.

The GM for business home lending added that the bank had also recently “bolstered” its staff and resources on its deal desk for broker inquiries involving self-employed transactions, as well as the case management and pre-qualification teams for relationship-managed customers.

“On top of that, we’re also adding in more coaches and trainers specifically for brokers to help support them with some of the changes that we’ve made, and also more broadly on the self employed, so hopefully that will also help with the ability to be able to help more business customers and self employed customers,” he concluded. 

“I think, in the broker space, there are significant opportunities to help self employed borrowers and, I think we’ve probably seen one now more than ever, the importance of small business customers and self employed customers.”

Last week, CBA chief executive Matt Comyn flagged that SMEs were under “enormous pressure at the moment”.

“I think there is enormous pressure at the moment... Even though I would say that the request for financial assistance has been fairly modest/at the smaller end, probably about 60 per cent of those customers don’t have a loan. They’ve seen equity in their businesses – often their life’s work – reduce, they’re under tremendous stress and frustration. They don’t necessarily have the resources, that a large company does, to draw upon,” he said.

While Mr Comyn acknowledged that there was significant government and financial support in place for businesses, he added that it had “clearly been a very challenging few months”, particularly for small businesses in the central business districts of Sydney and Melbourne, many of whom “had not recovered from last year’s lockdowns”.

He flagged that CBA had this week announced that it would be offering merchant customers accepting card payments a flat rate of 1.1 per cent for all in-store card transactions, and 1.5 per cent for online transactions, to help support them.

[Related: Major bank CEOs flag SME ‘pressure’]