Following Tuesday’s victory over ASIC, the court rejected regulators’ irresponsible loan allegations, and Westpac announced a series of reforms to its home loan policy.
The updated guidelines are scheduled to take effect on August 20, not only primarily, but also related brands: St George, Bank of Melbourne and Bank SA.
Perhaps most notably, Westpac will update its household spending metrics and add new spending categories, “industry guidelines that reflect our HEM value as a benchmark for customer spending” – totaling 13 to 18 categories.
In addition, the bank will apply income-based HEM tax bands based on unretained gross income (including total rental income).
Of particular relevance, in view of the recently rejected court case, if the total recoverability is seven times or more of the total income, the loan application will be reviewed by the credit evaluation officer rather than through the automated system.
ASIC’s lawsuit against the bank is based on Westpac’s allegations of a violation of the National Consumer Credit Protection Act of 2009, which evaluates loans through its automated system, which considers only the benchmark HEM, not the cost of living declared by the customer.
Westpac also resolved the change in taxation of debt by changing the way margin loans were made. They will now be assessed based on the higher of 1% of the balance or the customer’s monthly commitment.
In addition, Westpac will require a more comprehensive understanding of the company’s payment plan with ATO and will refuse to provide loans to customers who have not made a formal payment plan and paid ATO a one-year tax overdue amount.
Policy changes will affect all new and resubmitted applications from Tuesday, requiring brokers to take advantage of the expanded 18 categories of fees and take care of the new 7x debt-to-income ratio.
Westpac also announced that it will reform commercial, SME and private wealth brokerage channels later this year.
The degree of specific impact is still unknown, but it should be tightened. According to other brokers, CBA has also adjusted HEM. Other banks have not changed for the time being.
https://m.brokernews.com.au/news/breaking-news/westpac-revamps-loan-policies-265466.aspx