While it has cited improvements in the rationalization of underwriting burdensome interest-only home mortgages, the Australian Securities and Investments Commission (ASIC) cited that financiers still have to address certain issues in complying with their duties as responsible lenders.
“Mortgage brokers are well placed to assist consumers find products that meet their requirements," ASIC said in its most recent report. “For these benefits to be realised, it is important that consumers have confidence in mortgage brokers, including their compliance with the National Credit Act.”
A general lapse it pointed out is that lenders provide general instead of tailored information on products and loan features that either result in greater financial obligations or restricted repayment flexibility.
The review also revealed gaps in record keeping, showing more than 20% of applications did not include a statement explaining how the interest-only loan met the client’s requirements and financial goals.
ASIC also noted that in most cases, it was unclear whether the consumer understood the potential risks and additional costs that would result in defaulting additional fund allocations for higher interest debt, such as those required by interest only home mortgages.
Among its recommendations, ASIC told lenders to exert more effort in understanding their clients’ financial requirements and objectives for requesting specific loan products and features.
Further, the government regulator said that it is important that mortgage brokers educated and inform their clients of the potential risks and benefits of availing of certain types of loan products and features to minimize future pressure on their finances.
Collections: Mortgage News