“Our standards are continually reviewed with marker developments to ensure we remain a prudent and responsible lender,” AMP said in a statement. “Our criteria for overseas borrowers has recently been reviewed in line with this objective.”
AMP’s move follows complaints from other major banks about fraudulent applications from foreign borrowers and fears of money laundering. Several mortgage applications were revealed to have used forged income, employment, and asset statements on forged Bank of China letterheads.
“Some of the documentation being used by foreign investor and local residents using foreign documentation to support a loan application now appears to be suspect,” said Martin North, principal of consultancy firm Digital Finance Analytics. “The real risk is that it could be part of more organised money laundering operations where overseas players use local real estate agents, brokers, and lawyers to make purchases with dodgy funds.”
According to AMP’s new policy, foreign currencies are divided into Tier 1 and Tier 2. Those in Tier 1 include Canadian dollars, euros, British sterling, Hong Kong dollars, New Zealand dollars, Singapore dollars, US dollars, and Japanese yen. Chinese yuan is in Tier 2.
80 per cent of income and expenses from the Tier 1 category is acceptable, while only 50 per cent is acceptable for currencies in the Tier 2 category.
Fortunately, the percentage of major banks’ portfolios dedicated to overseas investors are only between two and four per cent, so the possibility of systemic risk is considered small. However, foreign exchange movements and exchange controls might also make it harder for lenders to repay the loans.
Collections: Mortgage News