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One of Australia’s largest aggregators has launched a new living expense assessments e-book to assist brokers to deliver best practice outcomes for their clients in an environment of heightened scrutiny.
Available to all mortgage brokers irrespective of their aggregator, the digital resource has been created in response to the growing focus on borrower living expenses by lenders and regulators.
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The resource is being launched in conjunction with Connective’s Best Practice Interview Questions for Quality Consumer Outcomes e-book, which aims to assist brokers in better understanding their client’s needs and justify the solutions offered.
Connective group legal counsel Daniel Oh highlighted that living expense assessments have been under the spotlight over the past year and that the royal commission has only amplified the level of scrutiny.
“Many lenders have updated their loan application forms and now require detail of the borrower’s living expenses at a far more granular level. In light of this, we felt it was timely and important to provide this resource to help guide brokers in the discovery, verification and documentation process," he said.
“Brokers have a responsibility to both their customers and the lender to ensure every application is true and correct, and getting this right, particularly in relation to living expenses, is now more important than ever.”
Making reasonable enquiries about the borrower’s living expenses and taking the necessary steps to verify and document the information is an important step in placing the borrower in the best position to comfortably repay their loan", Mr Oh said.
“Our Living Expense Assessments eBook will help brokers to effectively and efficiently assess a borrower’s living expenses and ensure they remain compliant with their responsible lending obligations.”
Connective’s resource is called The Smart Mortgage Broker’s Guide to Household Living Expense Assessments e-book and can be downloaded from the Connective website.
Expenses and justification of expenses on home loan applications have been a key area of focus for regulators and industry recently, with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry noting at the first day of hearings in March that the use of benchmarks for expenses “requires careful consideration”.
Ms Rowena Orr QC, senior counsel assisting the commission, highlighted ASIC’s case against Westpac regarding its use of benchmarks in assessing a potential borrower’s expenditure as part of a suitability assessment in a home loan application.
“This proceeding is important to the commission’s work because it will consider whether the use of a benchmark, called the Household Expenditure Measure, instead of the actual living expenses declared by the potential borrower, is permissible under the National Credit Act,” Ms Orr said.
“Use of this benchmark will be examined in some of the case studies in these hearings and requires careful consideration.”
Earlier this year, a broker was banned from engaging in credit activities for three years after the regulator found that they had “deliberately” filed loans with “false or misleading” information relating to the borrower’s savings.
[Related: 'Overkill': Top broker questions living expenses crackdown]
