A big four bank has updated its credit policy to require brokers to provide supporting commentary, which explains living expenses imputations in a home loan application.
NAB has informed brokers that it has made several changes to its credit policy, effective for all new loan applications submitted on or after 10 December.
The bank claimed that the changes were designed to ensure it “continues to lend responsibly” and make the application process “clearer and simpler” for brokers to help them deliver a “great customer experience”.
Among the changes is an update to NAB’s credit card assessment criteria, which will require brokers to assume a credit card holder is repaying debt within a three-year period, regardless of contractual terms, with NAB also changing its Credit Card Affordability Rate from 3 per cent to 3.8 per cent.
The major bank noted that its decision to update its credit card assessment policy was in line with the Australian Securities and Investments Commission’s (ASIC) approval of regulatory provisions proposed following its Credit card lending in Australia report.
NAB also announced that it has made changes to its Living Expenses Worksheet (LEW), which includes new expense reporting requirements.
The bank has noted that as part of the revisions, expense commentary provided by brokers will need to include an explanation to support the amount inputted.
NAB stated that:
- An expense category with a “$0” value will require a mandatory comment to provide an explanation as to why an expense is zero.
- All commentary must include a reason related to expenses.
- Where the LEW is incomplete or does not provide sufficient commentary, the credit assessment team will contact brokers and request a completed LEW. If a broker is asked to provide further commentary, he or she will need to access the original serviceability calculator, provide the requested information, and regenerate and send an updated PDF.
“We are introducing this process to ensure that we continue to do the right thing by our customers and that we have the ability to make an assessment as to whether the credit contract is ‘not unsuitable’ for their needs, including capacity to service the requested loan,” NAB said.
NAB’s latest announcement follows its introduction of the Broker Interview Guide (BIG), which took effect for loan applications submitted after Wednesday, 21 November.
NAB said that the BIG is an upfront document that “must be completed, signed and submitted with all new NCCP regulated home loan applications”, where the purpose of funds is for personal, personal household and residential investment home loans.
However, the bank noted that the BIG is not required for non-NCCP loan applications, which may include the purchasing of shares and lending in a company’s name, and for variations that do not require a credit assessment.
The BIG, which was developed alongside other major lenders, details key elements of a broker’s conversations with customers that can be referred to in order to understand the customer’s situation and provide reasoning for the solutions that have been offered.