The regional bank has clarified that its changes to serviceability calculations will only apply to new loan applications, not existing loans.
Last week, the Australian Financial Review ran a story in which it suggested that in “new arrangements being planned by Adelaide Bank, subsidiaries and affiliates, loan repayments will be routinely compared with borrowers’ income and monthly repayments to ensure they fall within guidelines”.
The story reads: “Debts that exceed guidelines will prompt a ‘diary note commentary’ to inform the lender of possible mortgage stress.
“This will automatically happen where the loan-to-income ratio exceeds five times or monthly loan repayments exceed 35 per cent of income.”
The AFR outlined that the bank was telling third parties the data “is only required for internal purposes”.
Speaking to The Adviser following the release of the story, Darren Kasehagen, head of business development & strategy at Adelaide Bank, clarified to brokers: “There is currently no change to our monitoring of existing loans.
“As part of our ongoing commitment to responsible lending, we are introducing the visibility of metrics relating to loan-to-income and monthly mortgage repayment to income ratios into our serviceability calculator for new loan applications (at the application stage only).
“This will require additional commentary from the broker when these internal guides are exceeded.”
Many lenders have been tightening up on income verification and expenses in recent months, with Steve Kane, general manager at NAB, telling The Adviser recently that he believes a large part of the industry’, and regulators’, focus will be on “actual expenses” this year, and that more banks will bring out guides to help brokers highlight and explain unusual expenditure behaviours.
Mr Kane said: “[Brokers] should really detail all the expenses of that customer and explain how they are going to service that [loan]. That is very important and that is where the regulator is focusing as well. [So], we are going to see that not only from the adherence under NCCP and responsible lending via ASIC, but also [with] APRA focusing on what banks are doing and what lenders are doing… to ensure that they have evidence that a customer can repay their debt.”
He therefore recommended that brokers “ascertain, to the best of their ability, what the real expenses of the borrower or customer are” by ensuring that bank statements “match up” to what a customer has said.