Lending laws easing from July 7
Changes to the CCCFA regulations are a good start, but advisers are still facing an uphill battle with lending restrictions, an Auckland broker says.
In June, updated regulations and a new Responsible Lending Code were approved by Commerce and Consumer Affairs Minister David Clark to take effect July 07.
The changes were aimed at removing the risk of lenders interpreting regulations too conservatively, removing the blanket requirement for lenders to go through borrowers’ spending habits with a fine-tooth comb and recognising borrowers’ spending habits may change once they take on debt.
“The changes aren’t perfect, but they are a step in the right direction,” said Wayne Henry Mortgages director Wayne Henry (pictured).
“The changes will benefit everyone when borrowers can provide a detailed breakdown of future living expenses. This means that we will no longer need to go through a client’s living expenses from recent bank transactions line by line.”
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Henry said another change that would benefit the industry was the removal of regular “savings” and “investments” as examples of outgoings that lenders need to enquire about.
“This had a negative effect on a client’s ability to lend the money required to purchase a property,” he said.
Henry said as a mortgage adviser, he wanted to see banks take more of a pragmatic approach to client’s expenses as the CCCFA regulations were implemented to make sure lenders were being more scrutinised.
“Banks are asking us to use a rolling average for client’s pre-property purchase,” he said. “However, post property purchase when there is a raft of other costs rolling in, a client’s expenses would change significantly as debt increases.”
Henry said there was still a huge level of scrutiny involving banks’ lending criteria, which impacted the finance industry.
“The CCCFA legislation was introduced at the end of last year when the market was still pumping and as a result, a lot of our good clients under the old regime were missing out on properties due to time delays and added layers of complex changes,” he said.
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Henry’s suggestion to other advisers who might be struggling with CCCFA lending requirements was to speak to banks, BDMs, or other advisers about the challenges they were experiencing.
“To be better and well regarded in this industry, we all need to be doing what is right for our clients at the end of the day,” he said. “This is no longer a role you can do by yourself.
“You need a good team around you who are running on every cylinder in order to get the pre-approval letter in your inbox. We must have the tough conversations with clients sometimes, so if you aren’t prepared to do so, then you are probably not cut out for this role.”
