Assessing loan applications

Transcription

1 PI 6 Assessing loan applications Assessing loan applications Purpose... 2 Discussion... 3 Guidelines... 5 Procedure Update paper based file Check / change the loan status in QATS Select loan product in QATS Update information on QATS assessment tabs Customer tab Employment tab Household tab Equity / Deposit tab Point Score tab Income / Commitments tab Assets / Liabilities tab Application tab Affordability tab Security tab Solicitor tab Update Quote screen Assessment of credit history Employment confirmation Customer ID verification (AML / CTF compliance) Completion of QATS checklist Conduct eligibility assessment Progressing application in case of outstanding documents Loan eligibility criteria assessment Remote Indigenous Home Buyer Grant (RIHBG) Determine required loan amount Maximum loan amount in Application tab Required loan amount within standard policy parameters Assessing Loan Applications 1

2 7.3 Required loan amount outside standard policy parameters Obtaining an approval to proceed for applications outside standard policy parameters Notify applicant of outcome Approved to proceed to purchase Proceed to Purchase Incomplete Declined application Review progress of Proceed to Purchase Responsibility Further Reading Appendix: Purpose This instruction provides guidance on how to assess an applicant s eligibility for an IBA housing loan on receipt of a Housing Loan Application ( HLA ). Assessing Loan Applications 2

3 Update paper based file Change status in QATS and select loan product ALS 4 Update new information in QATS assessment tabs Update Quote screen Obtain credit history, tenancy records, confirm employment & complete QATS checklist ALS 6 Conduct eligibility assessment PI 6 Can application progress on information supplied? No Request crucial information from applicant, mail Letter and change status to incomplete application Incomplete Letter Yes Determine required loan amount Yes Is crucial information received within 30 days? No Application lapsed Letter Lapse application Is the required loan amount within policy? No Obtain approval to proceed outside policy parameters ALS 7 Decline Letter Proceed to Purchase Letter yes Advise to applicant of Proceed to Purchase yes Is Proceed to Purchase approved by delegate? No Decline application Review progress of Proceed to Purchase Review Proceed to Purchase Letter Received a contract within 4 months from invitation? No Lapse application Application lapsed Letter yes PI 7 Discussion Application time frames When the customer is invited to apply for a loan, it is important that their application progresses through the invitation cycle within approved timeframes. Assessing Loan Applications 3

4 The invitation cycle (the period from the date of invitation to Pending Approval status) is a maximum of 4 months. It is important that applications are progressed from Invitation to Proceed to Purchase stage as quickly as possible once a HLA is received. This allows applicants the maximum time possible to find a suitable home. In the event an applicant has not provided all requested information, the Manager Home Lending should consider if the information that has been provided is sufficient to determine a loan amount and advise the applicant to Proceed to Purchase. Privacy Act and Secrecy provisions of the ATSI Act Under the Privacy Act and the ATSI Act, a customer s consent must be obtained prior to IBA collecting, using and disclosing their personal information. In terms of assessment of a HLA, this means that without each customer s written consent, we are unable to obtain a customer s Centrelink information, credit reports, tenancy and employment reference checks. The signed IBA Privacy Consent form, obtained at the time of the EOI application, satisfies this requirement. IBA is recognised as a Credit Provider under the Privacy Act. The Act contains prescribed requirements for handling customers credit related information under Part IIIA of the Act and its associated code called the Credit Reporting Code. Following the procedures contained in Homes Procedural Instructions will ensure that IBA remains compliant with the legislation. Service expectations All IBA employees are expected to deliver quality, effective, and efficient service to our customers. They need to be familiar with IBA s Customer Service Charter so they can accurately inform a customer about how to: provide feedback on the level of service received, and / or lodge a complaint 1 if they are dissatisfied with the level or quality of service received and how it will be handled. Lending Officers need to also apply the following principles when assessing loan applications and when dealing with applicants: ensure loan applications are processed as quickly as possible and in compliance with policy guidelines determine the level of understanding that each applicant has as to the nature of the transaction and where appropriate, take action to ensure that a satisfactory level of understanding is achieved, and 1 Refer IBA Complaints Management Procedures Assessing Loan Applications 4

5 Guidelines when assessing each application, ensure the applicant has the capacity to meet loan repayments and understands that there are other commitments related to home ownership which must be managed (i.e. insurance, service charges, repairs and maintenance and local authority rates). Principles of loan assessment IBA s loan eligibility criteria ensures loan assessments are made on the basis of the primary principles of lending, known as the four Cs (Character, Capacity, Capital and Collateral). A description of these principles is at Appendix (1). Processing timeframe A HLA should be assessed and the applicant advised of a decision within 5 working days from receipt of the application. The outcome of an assessment of a HLA within the standard criteria parameters (whether it be Proceed to Purchase, Ineligible or Incomplete) is to be confirmed by a Manager Home Lending. Housing loan assessments outside the standard criteria parameters must be referred to the appropriate delegate. Where practicable, applicants should be interviewed in person. If this is not possible, the exchange of information that normally results from a face-to-face interview should be conducted by telephone, or by sending a letter or . Conflicts of interest Refer PI 10 Managing conflicts of interest for assessment guidelines for HLAs received from IBA employees, IBA employee s family or business associate and IBA Board Directors. Withdrawal of application by applicant An applicant is able to withdraw their HLA at any time. If a withdrawal is requested, action the following: change the status in QATS to Withdrawn application record the reasons of withdrawal in checklist comments send the Confirmation of withdrawal HLA Letter (L24). Place a copy of the letter on the file the applicant has 7 days to re-consider their decision. Upon expiration of the 7 day period with no contact from the applicant, de-identify applicant s credit report (if already obtained by shading out the applicant s personal identity information (i.e. name, address, drivers licence number, phone number and any other information that can be used to identify the person)) and close the file. Assessing Loan Applications 5

6 Procedure 1. Update paper based file Request paper based loan file from the originating office, where relevant. Secure all documentation in the file in order to avoid misplacement. Make copies of any original documents (other than Confirmation of Aboriginal or Torres Strait Islander Descent Form and HLA) and place them on the file before returning the original documents to the applicant. If you have taken a copy of a document, note on it that you Certify that it is a true copy of the original document. Folio the new pages and record the folio numbers on the Loan Application / Approval Checklist attached to inside front cover of the file. Remove all Tax File Numbers from copies of supporting documents by cutting them out or shading them Check / change the loan status in QATS Change the application status to Formal Application. 3. Select loan product in QATS In QATS, select the correct loan product from the available list. It is essential that the correct product is selected as some information in the Loan Criteria tab will be deleted and lost should an application commence to be assessed under an incorrect loan product, and the product selection is subsequently changed. The selection of the appropriate product will depend on either the applicant s circumstance (previous home owner, refinance etc.) or the nature of the project being undertaken (purchase of home, home improvements etc.). Generally, the applicant s circumstance will take precedence over the nature of the project. If there is any doubt, discuss with Manager Home Lending or Credit Assessment. 4. Update information on QATS assessment tabs 4.1 Customer tab Update the contact details. It is important that the details are correctly entered as they are used to generate customer correspondence from QATS including the Agreement for Loan. When entering contact details, the following format must be used: 2 This is required under s.8wb(1)(a) Taxation Administration Act 1953 (Cth). Note: This obligation is not subject to any other law therefore it takes precedence over the requirements under the Archives Act or the Privacy Act which requires Commonwealth records not to be destroyed. Assessing Loan Applications 6

7 Item Format Example Name Address (1) Routine street address (2) Flat or Unit Phone Mobile phone First letter in capital and the rest in lower case {Number} {Thoroughfare name} {Thoroughfare type in full} { Flat or Unit } / {Number} {Thoroughfare} {Thoroughfare type in full} {Area code} {XXXX} {XXXX} (i.e. one space in between) {XXXX} {XXX} {XXX} (i.e. one space in between) John James Smith 5 Neptune Street Unit 10/23 Jones Avenue Add or delete an applicant if there has been a change of circumstances. In order to ensure an accurate calculation of CGAI, the main income earner and the spouse must be designated as the primary and the secondary applicant respectively. The main income earner is generally the person who is in stable employment (i.e. more than 12 months) and has the higher income. Check that the previously selected primary applicant is still the main income earner. If changed, update QATS accordingly. 4.2 Employment tab Employment details Review the employment details recorded for all applicants. If an applicant s employment has not changed, verify the income calculated from the most recent supporting documents with the information disclosed on their HLA and update as necessary. Update the duration of their employment as appropriate. If an applicant s employment has changed, enter the new employment and income details. If the duration of their current employment is less than 12 months, previous employment details must be re-entered in the Previous Employer Income field so that a minimum of 12 months employment history is recorded. Gross Monthly Income Enter the applicant s Gross Monthly Income. It is the income amount before tax and salary sacrifice received in the form of wage and / or salary payments, expressed as a monthly figure. To convert weekly, fortnightly or annual income into a monthly figure, use the following formulas: Assessing Loan Applications 7

8 Weekly income x = Gross Monthly Income Fortnightly income x = Gross Monthly Income Annual income 12 = Gross Monthly Income If an applicant is in their employment probation period, judgement needs to be exercised whether it is reasonable to assume longevity of their employment and to include this income in the loan assessment. Where the applicant is in the same employment as when they lodged their last income tax return, compare the annual income calculated from the latest payslips / letter from the employer with the latest income tax assessment notice. If this shows a substantial variation, identify the reason from either documentation provided with the HLA or contact the applicant. If Centrelink payments are the applicant s main source of income, Gross Monthly Income includes all Centrelink payments paid directly to the applicant (e.g. Newstart allowance, pensions). If not the main source of income (e.g. Family Tax Benefits A & B (FTB A & B)), they should be included as Other Income. Considerable care needs to be exercised if casual income is to be considered as the applicant s Gross Monthly Income, it needs to be the applicant s main source of income and is regular and continual. If the casual income is not the main source of income and / or regular, treat it as Other Income. Treatment of other non-standard income such as overtime, regular shift allowances, permanent award allowances, FTB A & B, rent / board and other semi regular income are classified as Other Income and are entered in the Income / Commitments tab. Cash in the hand income cannot be used for IBA s loan assessment purposes. Self-employed applicants should be able to demonstrate the viability of their business for at least two years*. To calculate Gross Monthly Income of a self-employed applicant, use the average of the last two years income for tax purposes and add back any non-cash items such as depreciation or one-off capital purchases. If the last two years income shows a substantial variation, seek an explanation from the applicant and assess whether or not it is appropriate to use the average amount. Use a more appropriate amount if so assessed. Enter an appropriate comment to support your assessment. Where the applicant is a director of a company, the applicant is to supply their last two years: personal tax returns Assessing Loan Applications 8

9 company s tax returns, and company s profit and loss statements. *Confirm with Credit Assessment, the income assessment for a self-employed applicant. 4.3 Household tab Dependants Ensure the correct details of dependants are recorded. QATS uses this data to calculate the applicant s Living Costs (food and clothing). Ensure that only the bona-fide dependants are entered as dependants in this field. See guidelines as follows: Not all people living with the applicant may be their dependants. Bona-fide dependants are those who live with and depend upon the applicant for their financial welfare (i.e. in the permanent care of the applicant who is paying for their living expenses). Children who do not live with the applicant should not be included as dependants in this field as living expenses are not incurred for those dependants (however any child maintenance paid by the applicant should be entered as a commitment in the Income / Commitments tab. Number of people housed Enter the correct number of people to be housed in the appropriate category. This is important as the information entered in the category of Number of Indigenous people housed is used for internal and external reporting purposes. 4.4 Equity / Deposit tab Check that all funds disclosed in the HLA as Savings, Gift, FHOG and Equity are recorded correctly. This information will automatically populate to the Invitation screen. For loans in Remote Indigenous Locations, record the Remote Indigenous Home Buyer Grant (RIHBG), subject to eligibility. In the event that any money is being received as a gift, a Statutory Declaration detailing any terms of repayment and satisfactory proof that the funds are readily available should also be obtained from the gift giver. 4.5 Point Score tab Update Point Score tab if there has been any change. 4.6 Income / Commitments tab Entering other income Record any non-standard income received by the applicant. Assessing Loan Applications 9

10 The full amount of the other income should be entered regardless of whether some or all of it will be used in the loan affordability assessment. Verify the income amounts disclosed in the HLA with supporting documentary evidence. In the Description field for each item, enter the percentage to be used to obtain the Other Assessable Income which will be entered in the Application tab. Refer Section. Note: Other Assessable Income amount is the amount entered in the Application tab which is used for the purpose of the affordability assessment. When determining whether to include an income item in the income assessment and the percentage used for its assessment (e.g. child maintenance), a Lending Officer needs to use their judgement on the income item s reliability and continuity. Overtime / regular shift allowances / permanent award allowances If the applicant s income includes regular overtime and shift penalties, (e.g. miner or police office) the additional income can be treated as Other Income, (i.e. the difference between the applicant s average total taxable income, taken over a 2-year period, and the base annual income). Example: An applicant, John Smith earned a base gross annual income of $40,000. John worked overtime on a regular basis. As a result, he had a total taxable income of $52,000 last year and $56,000 the year before. The amount of John s average total taxable income, Gross Monthly Income and Other Income are calculated as follows: Base annual income: $40,000 Gross Monthly Income: $40, = $3,333 Taxable income year 1: $52,000 Taxable income year 2: $56,000 Average taxable income: $108,000 2 years = $54,000 Monthly average overtime income: ($54,000 - $40,000) 12 = $1,167 Family Tax Benefits A & B (FTB) / foster children allowance Calculate the percentage of FTB to use based on the age of a child as follows: less than 5 years, use 100% 5 to 9 years, use 75% 10 to 12 years, use 50%, and Assessing Loan Applications 10

11 over 12 years, inclusion of a percentage is at the discretion of the delegate. Note: These allowance percentages are the minimum. A different percentage may be used at the discretion of the delegate, if it is reasonably justified. Record supporting comments. Where FTB is received for a number of children of varying ages, calculate the average allowance based on the number of children and the percentages referred to above relevant to the child s age. Example: For a family with 5 children aged 3, 5, 7, 9 & 16 (where 0% of the 16 year old child s FTB is to be used), the average percentage of FTB would be calculated as follows: (100% + 75% + 75% + 75% + 0%) 5 children = 65% 65% of FTB income would be considered as Other Assessable Income. If the applicant receives foster children allowance, establish if the payments are likely to be regular and continual (it may be necessary to ask the applicant whether they intend to apply to become the permanent guardian of the foster children). Confirm with Credit Assessment if foster children allowance is to be included in the applicant s Other Income and the percentage to be used for its calculation. Rent / board Where there are other adults living in the house who are contributing to household expenses by way of rent / board, a judgement needs to be made about the reliability and continuity of this income for the purpose of income assessment (including examining if it is a long term existing arrangement or a proposed arrangement). Commitments For consumer debts, calculate the monthly repayment for credit cards as 3% of the credit card limit. (Do not enter the card s current minimum payment or 3% of the balance owing). Record such expenses as car running costs, power and private health insurance as Other Expenses. Enter an amount of at least $200 per month (where a specific figure is not provided by the applicant) as the estimated cost of home ownership (i.e. rates, body corporate fees and building insurance). Record salary sacrifice items as Other Loans or Other Expenses as appropriate (e.g. for a car lease, the lease payments are entered as Other Loans and the running expenses are entered as Other Expenses). For loans in Remote Indigenous Locations and / or where the house is expected to require high maintenance, record an amount of at least $150 per month for repairs and maintenance. Living costs (food and clothing) should not be entered in this tab as it will automatically be calculated in the Affordability tab. However, if the amount disclosed on the HLA for food and clothing is higher than the default amount in the Affordability tab enter the difference as other expenditure. Assessing Loan Applications 11

12 In remote locations, it may be reasonable to include an additional commitment for remote living costs. In case of Split Loans, repayment expenses of the other lender s loan should not be entered here. Verify the expense amounts disclosed in the HLA with the supporting documentary evidence. Use your judgement to assess whether the amounts disclosed in the HLA are reasonable and appropriate. If questionable, contact and discuss with the applicant and amend as necessary with an appropriate file note. 4.7 Assets / Liabilities tab Assets Enter the assets disclosed in the HLA. Liabilities Enter the liability items as appropriate. Note: Enter any balance of consumer debts disclosed in the HLA. Also enter balance of any salary sacrifice items which have been recorded as Other Loans in the Income / Commitment tab. Enter comments as appropriate. 4.8 Application tab Other Assessable Income Enter Other Assessable Income as per percentages and calculations determined when completing the Other Income in the Income / Commitment tab. Deposit In the Deposit field, enter the amount to be provided as deposit from the applicant s savings, gifts and or Matched Savings Grant. The applicant is expected to provide the maximum amount of deposit they can reasonably afford after allowing for costs such as legal expenses, stamp duty and valuation fees. Note: FHOG and Remote Indigenous Home Buyer Grant (RIHBG) will automatically populate into the Equity Contribution field from the Deposit / Equity tab. External Funding Details If the applicant is required to obtain part of the loan funds from another lender, enter in the Proposed Amount field (under External Funding Details) the amount shown as the Minimum Amount. This is the minimum loan amount that the applicant needs to obtain from another lender based on their income tier. Assessing Loan Applications 12

13 The term is to be set at 30 years and the interest rate is to be set at the IBA Split Loan External Funding Interest Rate. Refer Schedule of Interest rates and fees. The term and the interest rate are not to be changed throughout the loan assessment process. 4.9 Affordability tab Tax Enter the amount of tax paid by the applicant from the supporting documentary evidence. Cross reference the amount with tax payable on the applicant s income by using the ATO Individual tax withholding calculator. If there is any salary sacrifice item, enter the tax payable on the applicant s gross income before salary sacrifice. Super Enter any employee superannuation contributions paid by the applicant. In the event where there is a component of voluntary superannuation contribution, which adversely impacts on their affordability (surplus), it is prudent to discuss with the applicant. Living Costs QATS will automatically calculate the Living Costs (food and clothing) taking into account the number of dependants entered at the Household tab. Refer Section 4.3. Surplus There is no prescribed minimum or maximum surplus amount. However, each applicant s surplus should be assessed for its adequacy and appropriateness (e.g. sufficient funds for repairs and maintenance relevant to the age and location of a house). Extended loan terms will only be considered to assist serviceability under the responsible lending principles and acceptable circumstances to IBA Security tab Enter the security property details (if known). Enter the estimated purchase price as indicated by the applicant either on their HLA or from discussions with the applicant. Record that this is an estimate in the Comments field. If it is a Split Loan, enter the minimum loan amount the applicant needs to obtain from another lender in the Encumbrance screen (i.e. the amount shown as the Minimum Amount (External Funding)). It is necessary to ensure the estimated purchase price and the other lender s loan amount are entered as they will be transferred to the Quote screen and used in the calculation of the Required IBA loan amount. Assessing Loan Applications 13

14 4.11 Solicitor tab Enter details of applicant s legal representative if known. Select the appropriate AGS office if known. 5. Update Quote screen In the Fees Financed field, individually enter the estimated costs for: Valuation Report Building Inspection Report Pest Inspection Report AGS disbursements* stamp duty**, and applicant s legal expenses. *IBA pays AGS professional fees. **Check your local Office of State Revenue website for guidance to estimate stamp duty on the property transfer and mortgage and the availability of any first home buyer concessions. If the applicant does not have sufficient savings to meet these costs, check the Financed field provided they meet the minimum deposit / equity criteria. To allow a small buffer for unexpected costs, the amount of Fees Financed should be rounded up to the nearest $500 or $1,000. Example: If the Fees Financed total $2,250, round it up to $2,500 by adding the increase of $250 in the Legal Cost field. Ticks the Up Front field if the applicant has sufficient savings or receives Loan Establishment Cost assistance for a Remote Indigenous Loan. Obtain credit report, confirm credit history / tenancy / employment and identification 5.1 Assessment of credit history Credit reports - access and examination Obtain a Consumer & Commercial credit report. When obtaining a credit report, follow the instructions contained in the VedaCheck Internet Training Guide. Obtain a Veda Advantage VeriCheck AML Credit report through Know Your Customer section of Veda database, which is required as part of the customer identity verification procedure. Load the enquiry for the proposed loan amount as indicated as the required loan amount from the Quote screen. Refer Veda Advantage website. Examine the credit report for any adverse credit notations including defaults, undeclared loans or bankruptcy. Tactfully discuss any unusual entries and / or recent loan applications with the applicant whose credit file it appears on. Assessing Loan Applications 14

15 If an applicant has had a default listing on their credit file, tactfully ask the applicant (i.e. the owner of the credit file) what the circumstances were and the history to date (e.g. whether they have entered a payment arrangement and, if so, the repayment history). Default amounts may still be outstanding. However, any judgement by a court must be either paid in full or subject to a repayment plan with a history of timely payments. Credit reports Care should be taken not to discuss aspects of one applicant s credit report in front of the other applicant without first obtaining permission from the applicant. Once a credit report has been used in the loan assessment and a loan decision has been made, mark the credit report with the following words: Loan assessment completed on (insert the loan decision date), Credit report no longer current. Bankruptcy / Part IX Debt Agreement If an applicant has disclosed on their HLA or it has been identified on their credit file that they have been bankrupt or entered into a scheme of arrangement with creditors (Part IX Debt Agreement), their loan application may need to be treated as being outside standard policy guidelines. Information to consider should include: i. the circumstances that contributed to the bankruptcy or Part IX Debt Agreement ii. iii. iv. whether and how recently the applicant has been discharged from bankruptcy whether and how recently the applicant completed their Part IX Debt Agreement if an applicant is still completing their Part IX Debt Agreement, their repayment history, and v. whether the circumstances that contributed to the bankruptcy or Part IX Debt Agreement are unlikely to be repeated. If the applicant was discharged from bankruptcy more than 4 years ago, or satisfied Part IX arrangement more than 2 years ago, the Manager Home Lending is the appropriate delegate. Otherwise, forward your submission to the relevant National Office delegate. Financial statements on consumer loans / credit cards Review financial statements on the applicant s consumer loans / credit cards, to confirm balances owing and credit limits. Also review the statements to determine how the applicant has conducted the accounts (e.g. check if regular loan repayments have been made, the credit card stayed within the credit limit, or any late fees have been charged). If there are any anomalies, tactfully seek explanation from the applicant whose name the credit is in. Assessing Loan Applications 15

16 Verbal credit reference Obtain verbal references from the applicant s credit providers who are Australian Finance Conference members (contact details can be found on AFC Company Code Numbers list). Record the references on a Credit History Reference form (generated from QATS). This form sets out the information required to complete verifications of credit history. Refer PI 1 Managing customer information. Confirmation of tenancy record Obtain verbal references from the applicant s current landlord where applicable. Record these references on a Confirmation of Tenancy Record form (generated from QATS). This form sets out the information required to complete verifications of tenancy history. 5.2 Employment confirmation Telephone the applicant s employer and confirm employment status and income. Some employers may request a copy of the signed Consent to use your personal information (IBA Privacy Consent form) prior to disclosing the personal details of their employee. In such a case, send a copy of the relevant applicant s IBA Privacy Consent form. Complete an Employment Confirmation form (generated from QATS). This form sets out the information required to complete a verification of employment. 5.3 Customer ID verification (AML / CTF compliance) The Anti-Money Laundering and Counter-Terrorism Financing Act 2006, prohibits a lender from approving a loan unless it has verified the identity of the applicant (i.e. the lender is reasonably satisfied that the applicant is who they claim to be). Under IBA AML / CTF Compliance Program, IBA is required to verify the identity of its applicants. Identity checking procedure In order to be satisfied with the identity of the applicant, the following requirements need to be met: i. the applicant has satisfactory provided a Statutory Declaration attesting to Aboriginal or Torres Strait Islander descent ii. iii. a certified copy of a photo ID document (e.g. passport, driver s licence, proof of age card) has been provided, and a certified copy of a secondary ID documentation (e.g. birth certificate, marriage certificate, Centrelink issued pension / health card) has been provided. If an ID document listed above at iii. is not available, one or more other forms of documentation confirming the identity of the customer should be provided (e.g. Medicare card, bank account statements, utility accounts, taxation assessments or employment documents). Assessing Loan Applications 16

17 Note: If differences are found in the spelling or use of applicant names or in the addresses in the documents provided, additional information should be sought from the applicants. (This should be done even if it is only a minor difference). In such circumstances, a statutory declaration should be obtained from the applicant that they are the one and the same person stating the full name they are known as. Using the VeriCheck AML Credit report obtained from Veda, verify the applicant s identification. Place a copy of the report on the file. Certified copy of documents For AML / CTF compliance purposes, an identification document needs to be certified as a true copy of an original document by one of the persons listed in Appendix (2). The Lending Officer must not tick the Satisfactory AML / CTF ID box unless they are satisfied with the documentation provided by the applicant to confirm their identity. If any documentation provided by the applicant is deemed insufficient, request the applicant to provide the required documents. 5.4 Completion of QATS checklist All tasks must be marked as Completed on the QATS application checklist (not just those that are flagged as mandatory tasks). Comments should be entered where necessary against tasks which should be specific and address any inconsistencies in the task / document that have been satisfactorily clarified. Use language that is easily understood and do not use vague abbreviations and acronyms. Short comments such as folio 5 or letter sent today are not acceptable. A more appropriate comment may be Payslip not supplied, income confirmed by phone employment check and tax return documents. 6. Conduct eligibility assessment 6.1 Progressing application in case of outstanding documents If the applicant has not provided all the requested documents (as listed on the HLA form), use your judgement to decide if the application can be progressed with the information obtained to date. Seek guidance from your supervisor if necessary. Applications should be progressed as quickly as possible to allow the applicant the maximum time available to find their home. However, if the missing information / document is crucial to the loan assessment (e.g. significantly incomplete HLA or insufficient ID documentation), refer to Section 8.2. Assessing Loan Applications 17

18 6.2 Loan eligibility criteria assessment All criteria applicable to the selected loan product need to be assessed to determine if the application is eligible for a pre-approval. Select the Loan Criteria tab and assess the applicant s eligibility. In the Comments field, provide a detailed explanation addressing the applicant s eligibility against the relevant criteria. Comments should be detailed and cover the specific requirement of the criterion. Your comments need to reflect how you came to your decision that the applicant satisfies the criteria. Example 1: When addressing eligibility criteria (c), to show how you calculated the percentage the applicant s income is of the IIA, enter the following comment: Mr. Smith earns $4,000 per month from fortnightly employment Mrs. Smith earns $3,000 per month from fortnightly employment Mrs. Smith also receives $800 per month FTB. IBA use: 100% of income 1; 50% of income 2 and 75% of benefit 3 = $6,100 per month CGMI (equates to 124% of IIA = Tier 2). Example 2: An applicant s eligibility against the standard criteria (k) which refers to a satisfactory credit history may be explained with a comment such as: Credit history satisfactory to IBA as evidenced by: credit reports have been examined and show no defaults or undisclosed debts have been identified references obtained from Esanda and GE, show excellent repayment history, and financial statements reviewed for Westpac credit card show regular payments and no late fees charged. 6.3 Remote Indigenous Home Buyer Grant (RIHBG) Enter the details of the RIHBG in QATS within the corresponding Loan Application. (Use the Grant button on the Quote screen.) The amount entered will automatically be included as Grant Funding in the Quote screen. 7. Determine required loan amount 7.1 Maximum loan amount in Application tab The Maximum Amount in the Application tab represents the maximum theoretical amount that the applicant could borrow within policy parameters. Compare the Maximum Amount to the estimated purchase price the applicant has indicated, as entered in the Security tab (from what was indicated on the HLA or from discussions with the applicant). Note: For Split Loans, compare the combined total of Maximum Amount (IBA loan amount) and Minimum Amount (other lender s loan amount) to the estimated purchase price the applicant has indicated. Assessing Loan Applications 18

19 7.2 Required loan amount within standard policy parameters If the estimated purchase price indicated by the applicant is equal to or less than the Maximum Amount shown in the Application tab, consider the adequacy of the loan amount in regards to the applicant s household composition and residential location. If considered adequate (and the eligibility criteria have been satisfactorily addressed), the application may be authorised by the delegate to Proceed to Purchase. Go to Section Required loan amount outside standard policy parameters If the estimated purchase price indicated by the applicant is greater than the Maximum Amount shown in the Application tab, go to Quote screen. Enter in the Amount to be Financed field the same amount that appears in the Amount Required field. The amount required should be in whole dollars (i.e. rounded up to the nearest $1). To achieve this, make an appropriate adjustment to the savings or equity in the Deposit / Equity tab and again in the Application tab. Once you click on the Calculate button, the message Outside Guidelines will be displayed which will indicate the proposed terms that are outside of the IHO program policy guidelines. Note: Check that the outside guidelines are not due to incorrect information entered in QATS. For Split Loans, ensure the minimum amount the applicant is required to obtain from another lender has been entered in the External funding field in the Application tab. Amend the Amount to be Financed field in the Quote screen and recalculate. 7.4 Obtaining an approval to proceed for applications outside standard policy parameters General In some instances, loan assessments may indicate that the amount required is in excess of the applicant s serviceability, therefore IBA will not be able to meet the applicant s request. Alternatively, the applicant may be able to demonstrate to IBA s satisfaction that although the required amount is outside standard policy parameters, the loan is still affordable. Where Lending Officers have assessed that the required loan amount is affordable, notwithstanding that it is outside of standard policy parameters, they should discuss the proposed loan terms with Manager Home Lending or Credit Assessment before referring to appropriate delegate for their consideration. Identify the appropriate delegate By right clicking on the Outside Guidelines QATS will show which policy parameters have been exceeded by the proposed loan terms. Assessing Loan Applications 19

20 Determine the extent to which the proposed terms are outside of standard policy parameters by calculating the variation percentage. To calculate the variation percentage, use the following formula: Actual value - policy value = percentage of variation Example: If the repayment represented 31.19% of an applicant s TGI which means it exceeds the standard policy parameter of proposed loan repayment exceeds 30% of TGI. To determine which delegate may approve this constraint, calculate the variation as follows: = 1.19% To identify the appropriate delegate to approve the variation to the policy parameters refer to the IBA s Delegation Schedule. For Spilt Loans, in order to identify which delegate can approve the proposed loan amount, use only the IBA loan amount (i.e. not the total proposed loan amount of both IBA and the external lender). Example: IBA proposed loan: $400,000 External lenders proposed loan: +$ 50,000 Total proposed customer loan =$450,000 This equates to delegate who has delegation to approve a loan up to $400,000. Seeking Delegate s approval Where it has been confirmed that the constraints are outside of standard policy parameters, enter appropriate comments. Write a submission for approval to proceed, to the appropriate delegate. The delegate s approval to Proceed to Purchase must be obtained prior to the proposed terms being discussed with the applicant. It is prudent practice for submissions requiring a National Office delegate approval to have initial discussions with Credit Assessment to ensure all the issues have been addressed. 8. Notify applicant of outcome Approved to proceed to purchase 8.1 Proceed to Purchase If the loan application has been approved to Proceed to Purchase change the application status in QATS from Loan application to Proceeding to Purchase (PTP). Send the appropriate PTP letter (Purchase L16, Construction L17) to the applicant to confirm that they can purchase a home up to the advised maximum purchase price. Enclose a copy of First Home Owner Grant application form if applicable. Put a note on the Grant application for the customer not to complete or sign it until they have entered into a purchase contract. Assessing Loan Applications 20

21 If the loan application has been approved to Proceed to Purchase conditional to IBA s receipt of some outstanding documents, ensure the PTP Letter lists those documents. Place a copy of the Letter on the file. Telephone the applicant and advise them that they can proceed to purchase a home. Your discussions should cover the content of the Letter. Also discuss the following: the interest rate, term, estimated loan repayment and its affordability for the applicant costs associated with home ownership such as insurance, water rates, council rates and home maintenance where FHOG is applicable, (1) IBA will act as the FHOG application agent, and (2) the full amount of FHOG is expected to be applied towards the property purchase / construction unless otherwise approved by the delegate, and if applicable, all requested documents need to be provided before IBA can make a final decision on the loan application. Split Loans Edit the PTP Letter to include the Split Loan specific information. Send the PTP Letter and the IBA FAQ Split Loan for Customers to the applicant. Place a copy of the Letter on the file. In addition to the discussion points above, advise the applicant they need to approach another lender or a mortgage broker to obtain a loan for the minimum amount specified in the Letter. The applicant may provide a copy of their PTP Letter to the other lender if required. Request the applicant to contact IBA once another lender is identified so that IBA may assist the process by liaising with the lender. At this time, the Split Loans Lenders FAQs should be provided to the other lender. Note: Where FHOG is applicable, (1) IBA (i.e. not the other lender) should be the FHOG application agent, and (2) the full amount of FHOG is still expected to be applied towards the property purchase / construction unless otherwise approved by the delegate. IBA s security position would normally be as second mortgagee. Construction Loans / Purchase and Upgrade Loans In addition to the discussion points above advise the applicant to engage a builder on the following basis: the builder must be currently licensed and registered the contract must contain a fixed price clause Assessing Loan Applications 21

22 the contract must specify the date for commencement and completion of the building work and the stages of progress payments, and the applicant should make sure that they fully understand the contract and have it checked by their solicitor prior to signing the contract. Home Improvements Loans In addition to the discussion points above, advise the applicant that: the builder must be currently licensed and registered, and the contract must contain a fixed price clause. Note: For home improvements and upgrades under $10,000 where it may not be practical for a registered licensed builder under a fixed price contract to carry out the work, a risk management approach may be used. Refer IHOp policy Section (Ensure to check relevant state / territory legislation as it may require work above a certain amount to be completed by a licensed builder). Ensure that the full extent of the costs are identified and that the work will be completed in appropriate timeframes - a comprehensive quote or quotes from a qualified tradesperson for all of the proposed work are to be obtained. Remote Indigenous Location Construction Loans / Purchase and Upgrade Loans Send the Remote Indigenous Location PTP Letter (L16a) which includes the Appointment of Project Manager form and its attachments to the applicant. Place a copy of the letter on the file. When contacting the applicant, discuss the points covered in the PTP letter. Refinance / Property Settlement Loans Once preliminarily approved, a HLA for Refinance or Property Settlement should be progressed to the Pending Approval status. Refer PI 7 Approving or declining a loan. 8.2 Incomplete If the missing information / document are crucial to the loan assessment (e.g. significantly incomplete HLA or insufficient ID documentation), change the application status in QATS to Incomplete application. Contact the applicant by telephone and send the Incomplete HLA Letter (L13). This letter requests the applicant provide the missing information to IBA within 30 days. Place a copy of the letter on the file. Assessing Loan Applications 22

23 If the information is not received within 21 days from the date of the letter, contact the applicant and send the Incomplete HLA Pending Lapse Letter (L14) which reminds them to supply the missing information by the specified date. Place a copy of the letter on the file. Change the status in QATS to Application being lapsed. If the information is still not received, contact the applicant and send the Incomplete HLA Lapsed Letter (L15). Change the status in QATS to Lapsed application. Place a copy of the letter on the file. Close the file. If a credit report has been obtained for the applicant, de-identify the credit report by shading out the applicant s personal identity information (i.e. name, address, drivers licence number, phone number and any other information that can be used to identify the person). 9. Declined application If the application is declined by the delegate, proceed to PI 7 Approving or declining a loan to process the application accordingly. 10. Review progress of Proceed to Purchase Responsibility Maintain regular contact with applicants during the Proceed to Purchase stage. If the applicant has not returned a purchase contract within 3 months from the invitation date, send a PTP Pending Lapse Letter (L19). This Letter will notify the applicant that the Pre-Approval will expire unless they provide IBA with a purchase contract by the lapse date. Place a copy of the Letter on the file and change the application status in QATS from Proceeding to Purchase to Application being lapsed. If they do not provide a contract by the lapse date, change the application status in QATS from Application being lapsed to Lapsed and send a PTP Lapsed Letter (L20). De-identify the applicant s credit report by shading out the applicant s personal identity information (i.e. name, address, drivers licence number, phone number and any other information that can be used to identify the person). Place a copy of the Letter on the file and close the file. SDUs are responsible for assessing Housing Loan Applications in accord with standard policy and procedures. Delegates are responsible for approving Housing Loan Applications to Proceed to Purchase within policy, procedures and delegations. Assessing Loan Applications 23

24 Further Reading Appendix: ALS 4 ALS 5 ALS 6 ALS 7 PI 1 PI 7 PI 10 Recording Application Details Recording Purchase and Security Details Assessing the Loan Customer Service Charter Recording the Loan Decision Managing customer information Approving or declining a loan Managing conflicts of interest Centrelink Confirmation eservice User Guide IBA Privacy Policy IBA Credit Information Policy (1) Four Cs primary lending principles Character Refers to considering the applicant s character. Character consists of how an applicant has conducted previous and current financial commitments. Character also consists of an applicant s stability in employment. Character further consists of considering an applicant s commitment and desire to buying their own home. Signs that an applicant is committed to home ownership are their enthusiasm to the application process (e.g. how helpful have the applicants been and are they quick to respond to requests for additional information). Capacity Refers to whether the applicant has sufficient regular income to meet their current commitments as well as the new proposed loan repayment and associated costs of home ownership. Capital Capital is the amount of equity or deposit an applicant is offering towards the purchase. In addition applicants need to have enough money to pay for fees and charges associated in order to complete purchase. Collateral Collateral refers to the security that an applicant is offering to secure the amount of money borrowed. Securities must be valued and found acceptable under IBA policy parameters. Assessing Loan Applications 24

25 (2) AML / CTF compliance an identity document is to be certified as a true copy of an original document by one of the following persons: 1. a person who, under a law in force in a state or territory, is currently licensed or registered to practise in an occupation listed in Part 1 of the Schedule below 2. a person who is enrolled on the roll of the Supreme Court of a state or territory, or the High Court of Australia, as a legal practitioner (however described) 3. a person listed in Part 2 of the Schedule below: an officer with, or authorised representative of, a holder of an Australian financial services licence, having 2 or more years of continuous service with one or more licensees; or an officer with, or a credit representative of, a holder of an Australian credit licence, having 2 or more years of continuous service with one or more licensees. Schedule Part 1 Part 2 Chiropractor Dentist Legal practitioner Medical practitioner Nurse Optometrist Patent attorney Pharmacist Physiotherapist Psychologist Trade marks attorney Veterinary surgeon Agent of the Australian Postal Corporation who is in charge of an office supplying postal services to the public Australian Consular Officer or Australian Diplomatic Officer (within the meaning of the Consular Fees Act 1955 ) Bailiff Bank officer with 2 or more continuous years of service Building society officer with 2 or more years of continuous service Chief executive officer of a Commonwealth court Clerk of a court Commissioner for Affidavits Commissioner for Declarations Credit union officer with 2 or more years of continuous service Employee of the Australian Trade Commission who is: (a) in a country or place outside Australia; and (b) authorised under paragraph 3 (d) of the Consular Fees Act 1955 ; and (c) exercising his or her function in that place Assessing Loan Applications 25