Origin Mortgage Management Services
Lending Policy
(Version 3.6 – 22 July 2019)
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Origin MMS Lending Policy
Table of Contents
1. Introduction ...... 1 1.1 Purpose of the Lending Policy ...... 1 1.2 Responsibilities ...... 2 1.3 National Credit Code ...... 3 1.3.1 Introduction ...... 3 1.3.2 Responsible Lending Obligations ...... 4 1.3.2 Regulated and Unregulated Loans ...... 5 1.3.3 Financial Obligations ...... 7 1.3.4 Substantial Hardship ...... 7 1.4 Lenders Mortgage Insurance (LMI) ...... 8 1.4.1 Purpose of Lenders Mortgage Insurance ...... 8 1.4.2 Lenders Mortgage Insurance Approvals ...... 8 1.4.3 Lenders Mortgage Insurance Policy ...... 8
2.0 Products ...... 10 2.1 Product Summary ...... 10 2.2 Maximum Loan Size, LVR and Security Location Matrix ...... 10 2.2.1 Full Documentation ...... 10 2.2.2 Alternative Documentation ...... 11
3.0 Credit Policy ...... 11 3.1 Maximum Loan Amounts ...... 11 3.2 Maximum Loan, Interest Only and Fixed Rate Terms...... 11 3.3 Maximum Loan to Valuation Ratio’s (LVRs) ...... 12 3.4 Maximum Exposure ...... 13 3.5 Loan Purpose ...... 13 3.5.1 Acceptable Loan Purpose ...... 13 3.5.1.1 Purchase property ...... 14 3.5.1.2 Refinance ...... 14 3.5.1.3 Debt Consolidation ...... 15 3.5.1.4 Equity Release/Cash Out ...... 15 3.5.1.5 Business Purposes ...... 16 3.5.1.6 Off-The-Plan Purchases ...... 16 3.5.1.7 First Home Buyers ...... 17 3.5.1.8 Marital Property Settlement ...... 17 3.5.1.9 Construction Loans ...... 18 3.5.1.11 Home Renovations ...... 22 3.5.2 Unacceptable Loan Purpose ...... 22
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3.6 Borrowers/Guarantors ...... 23 3.6.1 Eligible Borrowers ...... 23 3.6.1.1 Expatriates...... 25 3.6.1.2 Companies ...... 25 3.6.1.3 Trusts ...... 26 3.6.1.4 Self-Managed Super Funds ...... 27 3.6.2 Excluded Borrowers ...... 27 3.6.2.1 Borrowers of Convenience ...... 27 3.6.3 Guarantors & Guarantees ...... 28 3.6.3.1 Unacceptable Guarantors ...... 29 3.6.4 Power of Attorney ...... 30 3.7 Employment ...... 31 3.7.1 Types ...... 31 3.7.1.1 PAYG ...... 31 3.7.1.2 Self Employed ...... 31 3.7.1.3 Breakdown of Employment Types ...... 31 3.8 Income ...... 32 3.9 Documentation and Verification...... 35 3.9.1 PAYG Documentation and Verification ...... 35 3.9.1.1 PAYG Documentation ...... 35 3.9.1.2 PAYG Verification ...... 36 3.9.2 Self Employed Documentation and Verification ...... 37 3.9.2.1 Self Employed Full Documentation ...... 37 3.9.2.2 Self Employed Alt Documentation ...... 38 3.9.2.3 Self Employed Verification ...... 38 3.9.3 Company Documentation and Verification ...... 38 3.9.3.1 Company Full Documentation ...... 38 3.9.3.2 Company Alt Documentation ...... 39 3.9.3.3 Company Verification ...... 39 3.9.4 Trust Documentation and Verification ...... 39 3.9.4.1 Trust Documentation ...... 39 3.9.4.2 Trust Verification ...... 40 3.9.5 Other Income ...... 40 3.9.5.1 Rental Income Documentation and Verification ...... 40 3.9.6.2 Other Income Documentation and Verification ...... 40 3.10 Serviceability ...... 41 3.10.1 Net Disposable Income ...... 41 3.10.2 Net Serviceability Ratio ...... 42 3.10.3 Joint Income/Joint Commitments ...... 42 3.10.4 Living Expenses ...... 42 3.10.4.1 Basic Living Expenses ...... 43 3.10.4.2 Discretionary Living Expenses ...... 43
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3.10.4.3 Specifically Excluded Expenses ...... 43 3.10.5 Allowable Add-backs ...... 44 3.10.6 Unacceptable Add-backs ...... 44 3.10.7 Rental Expenses ...... 44 3.10.8 Credit Card Limits ...... 44 3.10.9 Self-Managed Super Funds ...... 45 3.11 Credit Bureau Reports ...... 45 3.11.1 Credit Reports ...... 46 3.11.2 Acceptable Enquiries ...... 47 3.11.3 Unacceptable Enquiries ...... 47 3.11.4 ASIC Reports ...... 48 3.12 Savings/Equity ...... 48 3.12.1 Genuine Savings ...... 48 3.12.2 Non Genuine Savings ...... 49 3.12.3 Gift ...... 49 3.12.4 Repayable Gifts/Additional Borrowings ...... 50 3.13 Security Properties ...... 50 3.13.1 Acceptable Security Types ...... 50 3.13.1.2 Residential Vacant Land Security ...... 51 3.13.1.3 Leasehold Property (Crown Lease)...... 52 3.13.1.4 Warehouse Conversions ...... 52 3.13.1.5 House and Land Packages ...... 52 3.13.2 Unacceptable Security Types ...... 52 3.13.3 Security Location ...... 54 3.13.4 Minimum requirements for Security Properties ...... 54 3.13.5 Concentration Limits ...... 55 3.13.6 High Density Postcode Properties ...... 55 3.13.7 Inner-City Postcode Properties ...... 56 3.13.8 Regional Postcode Properties (Category 3)...... 56 3.13.9 Unclassified Postcode Properties ...... 56 3.13.10 Third Party Mortgages ...... 56 3.13.11 Non Arm’s Length Transactions ...... 58 3.13.11.1 Purchase without the intervention of an agent ...... 58 3.13.11.2 Favourable Purchase ...... 58 3.14 Security Valuations ...... 59 3.14.1 Approved Valuers ...... 59
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3.14.2 Currency of Valuation ...... 59 3.14.3 Valuation Report ...... 59 3.14.3.1 Checking, signing and certification ...... 60 3.14.3.2 Valuation Appeals ...... 61 3.14.3.3 Significant variation between Valuation and Purchase Price / Contract of Sale ...... 61 3.14.3.4 Valuers’ Standing Instructions ...... 61 3.14.3.5 Interested Parties ...... 62 3.14.3.6 Land Description ...... 62 3.14.3.7 Location Description ...... 63 3.14.3.8 Property Improvements Description ...... 63 3.14.3.9 Valuation Risk Rating ...... 64 3.14.3.10 Comparable Sales ...... 64 3.14.3.11 Marketability ...... 64 3.14.3.12 Photos ...... 64 3.14.3.13 Cancelling or Withdrawing Valuations ...... 64 3.14.3.14 Contract of sale...... 64
4.0 Postcode Matrix ...... 65
5.0 Loan Variations ...... 67 5.1 Overview ...... 67 5.1.1 Increase of existing loan ...... 67 5.1.2 Substitution of Security ...... 68 5.1.3 Additional Security with Increased Borrowings ...... 68 5.1.4 Partial Discharge ...... 68 5.1.5 Name Change ...... 68 5.1.6 Increase in loan term ...... 69 5.1.7 Property Subdivision, Easements & Redefinition of Boundaries ...... 69 5.1.8 Product Switch ...... 69 5.1.8.1 Variable Rate to Fixed Rate ...... 69 5.1.8.2 Fixed Rate to Variable ...... 69 5.1.8.3 Reduced Documentation Loan to Full Documentation Loan ...... 70 5.1.8.4 Interest Only to Principal and Interest ...... 70 5.1.8.5 Principal and Interest to Interest Only ...... 70 5.1.9 Consent to Second Mortgage ...... 70 5.1.10 Release of Borrower, Mortgagor or Guarantor...... 71
6.0 Approvals ...... 71 6.1 Life of Approval ...... 71
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Origin MMS Lending Policy
1. Introduction Origin Mortgage Management Services (Origin MMS) is a registered business name of Columbus Capital Pty Ltd (ABN 511 1953 1252, Australian Credit Licence 337303).
The Origin MMS Lending Policy has been developed to specify the responsibilities of the Originator / Mortgage Manager and to assist in writing mortgage loans with a risk profile consistent with that expected of AAA rated mortgage loan securities and industry best practice.
Origin MMS lending policies are governed by the Origin MMS Risk Committee. All loans submitted by Originators / Mortgage Mangers must comply with this Policy and all other guidelines and procedures as advised from time to time by Origin MMS.
Origin MMS reserves the right to accept and approve loan proposals in its absolute and sole discretion and decline any loan proposal notwithstanding the fact that the loan proposal may appear to comply with the Origin MMS Lending Policy.
This document should be read in conjunction with other Origin MMS updates, guidelines and operations manuals which together form the basis for providing residential loan funding under the Origin MMS program.
Origin MMS reserves the right to change the Lending Policy at any time, without prior or subsequent notice to any person.
No party may rely on the Lending Policy when considering applications for mortgage credit and if, and to the extent that any party does so rely, then Origin MMS bears no liability or responsibility to that third party whatsoever. To the maximum extent permitted by law, Origin MMS disclaims all liability for loss or damage whether foreseeable or not, suffered or incurred by you or any other person howsoever caused (including negligence on the part of Origin MMS) as a result of the use of, or any purported reliance, on the Origin MMS Lending Policy.
No part of the materials in the Lending Policy may be reproduced or transmitted in any form by any means without the express written consent of Origin MMS.
Originator / Mortgage Manager are requested to contact Origin MMS if they have any queries regarding their obligations.
1.1 Purpose of the Lending Policy
The Origin MMS Lending Policy contains residential lending guidelines for Originators / Mortgage Managers. It is intended as an easy reference manual to lending guidelines, acceptable credit standards and macro processes. These policies should not be interpreted as a set of inflexible rules, but as a set of guidelines, to be followed in association with prudent lending practices and common sense. Every application should be assessed on its own merit. Loans that are outside the guidelines presented in this policy may still be considered if there are inherent strengths to the transaction; credit risks can be mitigated with justification and sufficient supporting documentation which would enable the loans to be approved.
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1.2 Responsibilities
All parties have particular responsibilities to be fulfilled to ensure prudent lending practices are followed. Originators / Mortgage Managers and their Agents or Brokers must perform the following tasks; • Conduct loan interview, discuss loan options and determine the most suitable loan product for the customer • Advise the customer about the approval process • Assist customer with the preparation of the loan application if required • Sight all original verification documents required in support of the loan application, check their authenticity and obtain copies for the loan file noting on them that they have sighted the original documents and forward copies to Origin MMS • Complete the Customer Identification and Verification form after comparing the borrower and their signature with the photographic ID and taking a copy of the identification documents or any other identification procedures as advised and required by Origin MMS
In addition, the Originator / Mortgage Manager only must perform the following: • Using the White Pages or Yellow Pages Telephone Directory, independently verify the telephone number of the employer/accountant and contact the employer /accountant by telephone to confirm employment details. Create a file note noting the name of the caller; the number called; the date and time of the call and the name/position of the person providing the confirmation and full details of what was confirmed i.e. income, length of employment, position etc. A printout of the White / Yellow Pages listing must be printed and submitted with the loan application package and a copy kept on file. NOTE. Under no circumstances are mobile phone numbers or numbers supplied by borrowers or third parties to be used. • Obtain credit reports on all parties to the loan application together with associated companies; proprietorships; possible matches and cross-linked files • Obtain valuations of the security properties via Origin MMS accredited valuer panels • Prepare and submit Lender’s Mortgage Insurance application for approval (subject to prior approval from the LMI provider and Origin MMS) • Ensure that all loan applications comply with this Lending Policy unless submitting the loan applicable with identified exceptions for consideration by Origin MMS • Ensure that all loan applications comply with applicable legislation • Ensure that each loan application has a legitimate legal purpose, both within the word and the spirit of the law • Originator / Mortgage Manager Credit Staff are expected to assess all loan applications in a prudent manner and ensure that each Borrower has the requisite capacity to service all commitments and the requisite authority/capacity to grant supporting securities
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1.3 National Credit Code
1.3.1 Introduction In 2008, the Council of Australian Government agreed that the Commonwealth Government takes over responsibility for the regulation of consumer credit. Under these proposals, ASIC became the national regulator for consumer credit and finance broking.
Effective from 1 July 2010 the National Consumer Protection Act (NCCP) commenced and Uniform Consumer Credit Code (UCCC) was replaced with the National Credit Code (NCC). The NCC extends regulated loans to include loans to individuals in relation to residential investment properties.
All businesses conducting a credit activity must firstly be registered with ASIC under the NCC or be appointed a credit representative of a registered business in order to operate under the new legislation. Credit activities include finance broking, lending, leasing, servicing, and managing NCCP Act regulated loans.
The aim of the legislation is for credit licensees (banks and non-bank lenders) and credit assistance providers (Originators / Mortgage Managers and Brokers) to meet the responsible lending obligations. The key concept is that credit licensee must not enter into a credit contract with a borrower, suggest a credit contract with a borrower, or assist a borrower to apply for a credit contract if the credit contract is unsuitable for the borrower.
The NCC is found in Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth), and regulates the relationship between parties to consumer credit transactions. The Code:
• Provides for upfront disclosure of relevant information in documents.
• Regulates the ongoing conduct of the loan through to discharge (including interest and default interest charging; content and timing requirements for statements of account; notice requirements for variations of interest, fees/charges, terms and conditions, default notices and procedures).
• Requires plain language loan contracts and securities.
• Provides avenues of protection and legal redress for borrowers and security providers.
• Regulates other matters such as conduct of credit providers (including their employees and agents), advertising and linked credit provider relationships.
The Introducer Code of Conduct outlines the key principles that govern the ethical standards and professional behaviour expected of Originators / Mortgage Managers by Origin MMS. Each of these principles is consistent with the NCC, however the requirement that Originators / Mortgage Managers and their staff, Agents and Brokers will “Comply with the law and observe and abide by any duties and obligations imposed by a legislature” is particularly relevant.
The Originator / Mortgage Manager warrants and represents that each of their staff, Agents or Brokers processing a mortgage loan application which is assessed and submitted to Origin
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MMS has been trained on and understand their obligations under the Origin MMS Lending Policy and requirements and obligations under the NCCP including the responsible lending obligations. 1.3.2 Responsible Lending Obligations Set out below are the minimum standards that Origin MMS requires to comply with its responsible lending obligations for all loan applications (including loan variations and additional advances) submitted by Originators, Mortgage Manager, brokers and introducers.
The details below serve only as a guide that can be customised to ensure these satisfy the specific way Originators, Mortgage Manager and their Agents and Brokers choose to interact with customers.
In addition to complying with all the current Origin MMS Lending Policy and underwriting requirements as amended from time to time, Origin MMS also requires that all Originators, Mortgage Manager, brokers and introducers make specific enquiries relating to the following:
• is customer aware of information relevant to his/her/their loan application that has not been provided and may have an adverse impact on his/her/their financial circumstances; • is customer aware of any future change in his/her/their employment which may adversely affect his/her/their ability to meet his/her/their current and future financial obligations; • does customer anticipate any increase to his/her/their expenses/liabilities over the next 12 months (e.g. ill health or disability, a possible claim requiring payment, end of interest free or honeymoon period on a loan); • does customer anticipate any decrease to his/her/their income during the next 12 months (e.g. extended leave, retirement, reduction in overtime); • does customer anticipate any reduction in profit/income/cash flow to his/her/their business activities during the next 12 months;
Originators / Mortgage Manager and their Agents and Brokers will also need to take into account and consider the following:
• ability of the customer to meet his or her financial obligations under the Proposed Contract or ability to meet obligations without substantial hardship; • take reasonable steps to verify the customer’s financial situation; • assess according to the information provided by the customer about their objectives and requirements; • with regard to the stated loan purpose, there is an obligation to determine whether or not a loan is “not unsuitable” and an important part of that is to identify in more detail about the stated purpose (if it is too general or is not clear e.g. ‘’future investment purposes’’) and what the funds are to be used for and ensure that the settlement proceeds are applied so far as we are able for that purpose;
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Assessment All Originators / Mortgage Managers and their Agents and Brokers must make the preliminary assessment within 90 days of when the credit assistance is provided. This will be when the Originator / Mortgage Manager or their Agents or Brokers assist the borrower to apply for a loan or an increase to a loan. Assisting a borrower arrange a settlement is not credit assistance, and so the assessment does not need to be within 90 days of loan settlement.
The assessment must state the period the assessment covers.
In order to demonstrate compliance with the law, Originators / Mortgage Managers and their Agents or Brokers must keep a record of the steps taken to make reasonable enquiries; to verify the consumers’ financial situation. The Originators / Mortgage Managers and their Agents or Brokers must retain a written (includes electronic) copy of the preliminary assessment and provide it to borrowers on request made up to seven years from the date of the credit assistance. Note that these procedures apply equally to principal increases as to new loans. The assessment can be wholly in electronic form (i.e. a suitable record on a system) but needs to contain a statement that a credit assessment has been made on a specified date and the period for which it applies. 1.3.2 Regulated and Unregulated Loans Regarding Origin MMS products, the NCC regulates credit provided to individuals or strata corporations where credit is to be used wholly or predominantly:
• for personal, domestic or household purposes; or
• to purchase, renovate or improve residential property for investment purposes; or
• to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes (together "NCC Purposes").
The NCC does not extend to loans that are provided predominately for business and/or investment purposes.
If credit is to a company, other than a strata corporation, then the credit is not regulated by the NCC.
Credit Wholly or Predominantly for Non-NCC Purposes If credit applied for by an individual or strata corporation is wholly or predominantly for non-NCC purposes, then the applicant will be required to indicate this by completing the purpose declaration on the application form to exclude any such loan from NCC regulation.
When the applicant completes the declaration, further inquiries need be made by the Originator / Mortgage Manager to verify whether the declaration is accurate.
The declaration cannot be relied on if the Originator / Mortgage Manager knew or had reason to believe, in the circumstances, that the declaration was not correct, or would have known or had reason to believe it was not correct if reasonable inquiries had been made. It also cannot
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be relied upon if the debtor is able to establish to the contrary in any proceedings ultimately initiated in relation to the loan.
A declaration is not required if the applicant is not an individual or strata corporation as the loan will be unregulated, or if the loan is regulated by NCC.
Determining the Purpose of Credit As set out above, credit is regulated under the NCC if it is provided wholly or predominantly for either:
• personal, domestic or household purposes; or
• to purchase, renovate or improve residential property for investment purposes or to refinance a loan given for these purposes.
Even though the NCC does not define what constitutes personal, domestic or household use, it is self-explanatory and generally there should be no difficulty in deciding whether or not a loan is wholly or predominantly for personal, domestic or household purposes.
For example, using credit:
• for a holiday or to purchase a car for personal use would be wholly for personal, domestic or household purposes; or
• to purchase a vehicle for business use or purchase a property for investment use would be wholly for investment or business purposes.
For split purpose dwellings (i.e. where the property is used partly for commercial purposes and partly for residential purposes), the loan will be regulated unless the aspects of the dwelling to be used for residential purposes are a small proportion of the dwelling.
Difficulties may also arise when credit is provided or intended to be provided for different purposes. It is then necessary to consider what the predominant purpose is for the credit application.
There are two basic methods by which the purpose may be tested - the Money Test and the Asset Test.
Money Test The Money Test is used when more than one asset or service is to be acquired with the credit, and looks at the purpose for which most of the credit is intended to be used
If the total value of the assets or services to be acquired exclusively for NCC Purposes (i.e. personal, domestic or household purposes or for investment in residential property or refinance of such a loan) exceeds one half of the credit, then the loan is regulated.
If the total value of the assets or services to be acquired exclusively for non-NCC purposes (i.e. business or investment purposes excluding investment in residential investment property) exceeds one half of the total credit, then the loan is unregulated.
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If there is no predominant purpose (i.e. when exactly half the loan will be used for both purposes, the guidelines state that the NCC will apply.
Asset Test This test looks at the purpose for which the assets or services to be acquired with the credit are to be most used.
If the assets or services are to be used mostly for NCC Purposes, then the loan is regulated by the NCC.
If the assets or services are to be used mostly for non-NCC Purposes then the loan is unregulated.
Note: In some situations both the Money Test and Asset Test will need to be applied to determine the predominant purpose. 1.3.3 Financial Obligations The consumer must be able to make their repayments and this will evident by using the Origin MMS servicing calculator. 1.3.4 Substantial Hardship The following factors must be taken into account when assessing if the credit contract will cause substantial hardship:
• The money the consumer is likely to have remaining after their living expenses have been deducted from their after tax income;
• How consistent and reliable the consumer’s income is (and the size of the loan relative to their income level);
• Whether the consumer’s expenses are likely to be significantly higher than average (e.g. because they live in a remote area);
• The consumer’s other debt repayment obligations and similar commitments (e.g. child support);
• How much of a buffer there is between the consumer’s disposable income and the repayments (e.g. how vulnerable they are to an increase in interest rates, or the impact once any ‘honeymoon’ rate ends); and
• Whether the consumer is likely to have to sell their assets, such as a car, to repay the loan.
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1.4 Lenders Mortgage Insurance (LMI)
1.4.1 Purpose of Lenders Mortgage Insurance Mortgage insurance is for the benefit of the lender only. It does not provide any protection to the borrowers; it does however, give applicants greater flexibility on their borrowing capacity.
Premiums for mortgage insurance are calculated upon the risk of LVR and loan amount, the higher the risk, higher the premium. Lender’s Mortgage Insurance covers the risk that the value of the security property upon mortgagee sale is less than the outstanding loan and the risk that for any reason the borrower is unable to meet their monthly payments.
All products carry a number of specific guidelines, which are separate to the Origin MMS Lending Policies and guidelines. Except where product guidelines are more restrictive than the Origin MMS Lending Policies, the latter holds overriding precedence.
Where Lenders Mortgage Insurance (LMI) policy overrides lending or product guidelines, then LMI policy holds precedence unless material adverse features are present e.g. shortfall in serviceability.
100% primary cover is required for all Lender’s mortgage insurance policies. 1.4.2 Lenders Mortgage Insurance Approvals Accredited Mortgage Managers are authorised to submit applications directly to the LMI providers on behalf of Origin MMS (subject to consent from the Mortgage Insurer). Pending accreditation, Mortgage Managers will forward applications, inclusive of the completed LMI proposal, to Origin MMS who will review and assess the application before submitting to the LMI providers.
The LMI providers require confirmation from Origin MMS that they have approved any exception to the Origin MMS Lending Policies. Where a policy exception has been approved, Origin MMS will notify Mortgage Managers that they must resubmit the application to the LMI provider and obtain an updated approval.
Any Lenders Mortgage Insurance Approval/Acceptance Advice must show the insured as the mortgagee e.g. Perpetual Corporate Trust Ltd. 1.4.3 Lenders Mortgage Insurance Policy Origin MMS requires accredited Mortgage Managers to obtain LMI approval for any applications that satisfy the following criteria;
• All loans > 80% LVR must be mortgage insured
• All loans > 70% LVR with any of the following criteria must be mortgage insured
o All Loans > $1,250,000
o All Construction loans
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Origin MMS reserves the right to request accredited Mortgage Managers to obtain LMI approval on applications that are not explicitly identified above. Origin MMS reserves the right to obtain LMI approval on any application.
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2.0 Products
2.1 Product Summary
Key Parameters Standard Documentation Alternative Documentation Maximum Loan Size $1,500,000 $1,250,000 Maximum Exposure $2,000,000 $2,000,000 Minimum Loan Size $50,000 $50,000 Maximum Loan Term 30 Years 30 Years Maximum number of loans 6 6 Maximum LVR (Owner Occupied) 95% (inclusive of fees) 80% (inclusive of fees) Maximum LVR (Investment) 90% (inclusive of fees) 80% (inclusive of fees) NDI 1.00 times cover (or LMI NDI 1.00 times cover (or LMI Serviceability (Exposure ≤ $1m) policy if loan insured) policy if loan insured) NDI 1.10 times cover (or LMI NDI 1.10 times cover (or LMI Serviceability (Exposure > $1m) policy if loan insured) policy if loan insured) Principal and Interest Principal and Interest Interest Only for maximum of Repayment Types Interest Only for maximum of 5 years with ability to extend 5 years for another 5 years Minimum 5% genuine savings Genuine Savings for loans where LVR is Not Required greater than 90% Employment Types PAYG and Self-Employed Self-Employed
2.2 Maximum Loan Size, LVR and Security Location Matrix
2.2.1 Full Documentation
Standard Documentation LVR (%) Inner-City Metro Non-Metro Regional 0 - 70.00¹ $1,500,000 $1,500,000 $750,000 $500,000 Existing 70.01 - 80.00² $1,500,000 $1,500,000 $750,000 N/A Dwelling 80.01 - 90.00 N/A $1,000,000 $600,000 N/A 90.01 - 95.00 N/A $800,000 $500,000 N/A 0 - 70.00¹ $750,000 $750,000 $500,000 $300,000 70.01 - 80.00² $750,000 $750,000 $500,000 N/A Construction³ 80.01 - 90.00 N/A $750,000 $500,000 N/A 90.01 - 95.00 N/A N/A N/A N/A
¹ Maximum LVR for Regional and Unclassified (refer 3.13.8 and 3.13.9) Postcode properties is 70%. ² Maximum LVR for Inner-City and High Density (refer 3.13.6 and 3.13.7) Postcode properties is 80%. ³ Maximum LVR for Construction Loans without LMI is 70%.
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2.2.2 Alternative Documentation
Alternative Documentation LVR (%) Inner-City Metro Non-Metro Regional 0 - 65.00¹ $1,250,000 $1,250,000 $750,000 $500,000 Existing 65.01 - 70.00² N/A $1,250,000 $750,000 N/A Dwelling 70.01 - 75.00 N/A $1,000,000 $600,000 N/A 75.01 - 80.00 N/A $800,000 $500,000 N/A
¹ Maximum LVR for Regional and Unclassified (refer 3.13.8 and 3.13.9) Postcode properties is 65%. ² Maximum LVR for Inner-City and High Density (refer 3.13.6 and 3.13.7) Postcode properties is 70%.
3.0 Credit Policy
3.1 Maximum Loan Amounts
• As a way of mitigating risk, Origin MMS has set maximum loan amounts for all products
• Loan amount limits apply on a “per security” basis
• Loan amount limits may vary by product, loan purpose or location of security. Refer to Product Parameters (Section 2) & Loan Purpose (Section 3.5) for full details
• Origin MMS may limit the loan amount to be approved based on the merit of individual applications and/or the actual loan amount
Standard Documentation Alternative Documentation Loan Amount P&I IO P&I IO Minimum individual loan $50,000 $50,000 $50,000 $50,000 Maximum individual loan $1,500.000 $1,250,000 $1,250,000 $1,000,000 Maximum aggregate loans per $2,000,000 $2,000,000 $2,000,000 $2,000,000 borrower Loans to Expatriates: Max LVR 80% $1,250,000 $1,000,000 $1,000,000 $1,000,000 Loans to SMSF: Max LVR 80% $750,000 $750,000 N/A N/A
3.2 Maximum Loan, Interest Only and Fixed Rate Terms
The maximum loan term is 30 years.
The maximum interest-only potion of any loan is 5 years. Interest Only extensions are available on request for between 1 and 5 years (maximum accumulated interest only term is 10 years). Approval is required and is at the sole discretion of Origin MMS.
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Standard Documentation Alternative Documentation Loan Terms P&I IO P&I IO Minimum loan term 5 years 5 years 5 years 5 years Maximum loan term 30 years 30 years 30 years 30 years Minimum interest only period N/A 1 year N/A 1 year Maximum interest only period N/A 10 years N/A 5 years Minimum fixed rate period 1 year 1 year 1 year 1 year Maximum fixed rate period 5 years 5 years 5 years 5 years
3.3 Maximum Loan to Valuation Ratio’s (LVRs)
The loan to value ratio (LVR) is calculated by dividing the mortgage loan amount by the lesser of the purchase price (in the case of a purchase) and the current value as indicated in the formal valuation.
• The maximum LVR’s in this policy reflect the maximum ratios set by Origin MMS
• LVR’s will vary by product, loan purpose and location of security.
• Where the application is a property purchase, the LVR is the amount as a percentage of the purchase price or valuation, whichever is the lesser of the two (refer policy regarding off the plan purchases regarding variance to this policy and also favourable purchases)
• Where the application is a refinance or equity release, the LVR is the loan amount as a percentage of the valuation only
• Please note that Origin MMS may choose to limit the LVR on any approval based on the merits of a loan application or loan product
If there are instances where a security property can be classified under more than one ‘Property Type’, the lower of the applicable LVR bands applies.
Standard Documentation Alternative Documentation Security Type P&I IO P&I IO Detached and semi-detached residential 95% 90% 80% 80% Residential vacant land to 1,500sqm* 90% 90% N/A N/A (*must be construction loan) Lifestyle block / Vacant land N/A N/A N/A N/A Warehouse conversions 90% 90% N/A N/A Heritage listed properties 90% 90% 80% 80% Company title N/A N/A N/A N/A High density developments 80% 80% 80% 80%
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3.4 Maximum Exposure
Origin MMS has set a limit to the total exposure they are prepared to consider to a borrower and any associated entities e.g.: borrowing in individual name and a separate borrowing in a company name which individual is a director of borrowing company would both form part of the maximum exposure amount.
The maximum aggregate borrowing for each borrower is $2.0 million, with a limit of $1.5 million for any individual loan. Lower limits may apply depending on particular loan attributes.
3.5 Loan Purpose
Before a loan is approved, it is important to understand how long the funds are required for and what they will be used for. This is to ensure that the loan will not be used for illegal purposes and to minimise the risk of default.
The applicant should and where possible provide evidence of purpose for which the funds are to be used (i.e. copies of invoices, financial plans, statements etc.) to be held on file.
If the loan purpose is stated as simply “investment” or “future investment”, then Origin MMS will seek more detail of the loan purpose and obtain evidence of the purpose being applied for. 3.5.1 Acceptable Loan Purpose Origin MMS will provide funds for any worthwhile purpose, provided all borrowers obtain a benefit from the transaction, and that the purpose is legal.
Borrowers will be required to provide evidence of the loan purpose for which the funds are to be used.
Standard Documentation Alternative Documentation Loan Purpose P&I IO P&I IO Purchase owner occupied property 95% 90% 80% 80% Refinance owner occupied property 90% 90% 80% 80% Purchase/Refinance investment property 90% 90% 80% 80% Purchase/Refi investment property (SMSF) 75% 65% N/A N/A Debt consolidation (max. 4 debts) 90% 90% 80% 80% Business use 85% 85% N/A N/A Construction – Owner Occupied 90% 90%* N/A N/A *(IO only for construction period) Construction – Investment 90% 90% N/A N/A Home improvement 90% 90% 80% 80% Equity Release 90% 90% 80% 80%
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3.5.1.1 Purchase property A loan that allows for the purchase, refinance or construction of residential real estate for owner occupation or investment purposes.
Declaration of purpose
A Declaration of Purpose is required for all loans in individual names that are predominantly (50% or more) for investment or business purposes.
• If a loan is unregulated a Declaration of Purpose must be executed by all applicants.
• Rules that must be followed when accepting a Declaration of Purpose are:
• A Declaration of Purpose must be taken at the time the loan application is made.
• A separate Declaration of Purpose must be taken for each loan
• The Declaration of Purpose will be ineffective if the person taking the declaration or involved in the transaction knows, or has reason to believe, that the loan is to be used predominantly for personal, domestic or household purposes.
• All borrowers must sign and date the Declaration of Purpose.
3.5.1.2 Refinance A refinance is where a borrower refinances an existing residentially secured loan/s only from another lender.
The following conditions must be met:
• Must be evident that there is financial benefit to the borrower for refinancing
• The full debt must be refinanced; part refinances are not acceptable.
• Repayment history must be clear of any arrears, default interest or dishonoured payments
• 6 months repayment history for home and personal loans
• 3 months repayment history for credit cards
The following documentation must be obtained for verification:
• Statements on all loan/s and credit cards to be refinanced showing good repayment history (i.e. no arrears, default interest charged, dishonoured payments).
• Most recent rates notice to confirm property ownership
• Where the loans being re-financed are less than 6 months old, statements from the previous financier may be required, or confirmation of the settlement date.
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• A written explanation must accompany the application if there are any arrears, default interest charged or dishonoured payments on the statements, and these will only be considered on a case by case basis.
Private Mortgage
Refinances of private mortgages (i.e. mortgage loans provided by non ADI lenders) may be considered at Origin’s discretion, and a on a case by case basis.
3.5.1.3 Debt Consolidation Debt consolidation allows for the refinance of an existing residentially secured loan/s plus a consolidation of up to four (4) other personal debts (e.g. personal loans, credit cards, car loans)
The following conditions must be met:
• Equity release/cash out is available to a maximum of 20% of the security value
• It must be evident that the customer’s monthly repayments will be significantly less than their existing repayments by combining multiple debts into one monthly repayment. Any application deemed to only satisfy the customer’s repayment issues in the short term will be declined.
• Any loan not being paid and/or partial payout of a loan must be reflected as an ongoing debt in serviceability for new loan requested. Current monthly payments must be noted unless evidence of a change in payments, limit are provided by the financier at time of assessment.
• 6 months repayment history for home and personal loans
• 3 months repayment history for credit cards that are being consolidated / paid out via loan proceeds
The following documentation must be obtained for verification:
• Statements on all loan/s and credit cards to be refinanced showing good repayment history, that is, no arrears, default interest charged, dishonoured payments.
• Most recent rates notice to confirm property ownership
• Where loans are less than 6 months old, statements from previous financier or solicitors letter confirming settlement date.
3.5.1.4 Equity Release/Cash Out Equity release/cash out is defined as funds derived from proceeds of an approved loan going directly to the borrower/s regardless of the purpose disclosed with the application.
The following restrictions are in place:
Owner Occupied Loans
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• ≤ 80% LVR - unlimited
• > 80% and ≤ 90% LVR - limited to 20% of security value
Investment Loans
• ≤ 80% LVR - limited to 60% of security value
• > 80% and ≤ 90% LVR - limited to 20% of security value
3.5.1.5 Business Purposes Acceptable loans for a Business Purposes include the following:
• Purchase of Plant and Equipment;
• Purchase an existing business
• Re-finance an existing business loan
The requirements of the borrower must be sought to ensure that the business purpose is warranted and not putting the borrower in a worse financial position (e.g. loan to pay salaries to try and keep the business afloat).
The maximum loan for business purposes is $500,000.
Unacceptable Business Purposes include (but are not limited to) the following:
• Any illegal activity
• Payment of taxation liabilities
• Gambling
• Re-finance private/directors loans, or part of another business loan
• Consolidation of business debts
• Property development activities
• Consolidation of more than four personal debts (including leases / hire purchase).
• Refinance of loans where there is evidence of arrears/overdue payments/direct debit: cheque returns.
• Provide working capital.
• Where servicing is reliant solely on rental income and/or sale of asset
3.5.1.6 Off-The-Plan Purchases This type of purchase occurs when a property (normally strata plan apartments or town houses) is placed on the market for sale at the initial stage of planning or under construction.
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Construction periods can take up to between 12-18 months depending on size of development and time actual purchase took place.
Applications should only be submitted for formal approval once a property is nearing settlement i.e.: less than 90 days and valuation report confirms 100% completion of subject apartment & common grounds. This will ensure any approval granted remains current, unlike an application at time of purchase which will not be accepted as applicants circumstances may have changed significantly since initial purchase was made. Settlement under the approval of the loan must occur within the 3 months from approval and no more than 4 months from the date of the valuation. If it is outside the required timeframe an updated valuation must be obtained and re- assessed by Origin MMS.
In some cases, if the value of the property has appreciated since the initial purchase, Origin MMS may consider lending against the current valuation figure subject to the following conditions:
• Signed contract of sale must be dated at least 6 months prior to date of application.
• Valuation from qualified valuers must be undertaken upon completion of construction, which must support the earlier value and purchase price and confirm that the property has been completed to the standard specified.
• Comparable sales must come from outside of the actual development. Additional sales from within the development must be resales only.
• Most of these purchases will fall under High Density policy and this policy should be adhered to when assessing these applications.
3.5.1.7 First Home Buyers First home buyers generally have no track record to indicate their previous loan repayment behaviour. Credit guidelines as well as First Home Owner’s Grant (FHOG) requirements are to be strictly adhered to for first home buyers.
3.5.1.8 Marital Property Settlement These applications will be considered on the following grounds-
• Family Court Order or solicitors letter must be held on file and must confirm the agreed property transfer and disclose any amount to be paid to the party being removed from title at settlement.
• The approved loan amount must be enough to cover payout of existing debts and proceeds to the party being removed from title. Approval must not be granted until this has been satisfied.
• Origin MMS must be provided with court order or solicitor’s letter and instructed to pay the party being removed from title at settlement agreed amount from settlement proceeds.
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3.5.1.9 Construction Loans A construction loan is a loan to build, renovate, or extend a property.
For all construction loans, the borrower’s equity contribution must first be utilised to meet progressive payments, prior to drawdown of funds from the approved loan facility.
If the property to be constructed is also being used as security (as it typically is) then the value of the property must be determined. There are two ways this can be done:
As-Is Valuation
With an as-is valuation, you assess the value of the security before any construction, renovations or extensions have started. Using this valuation, you may not need a progress valuation and the customer may request that all funds are advanced at initial drawdown, however it is preferable for progress payments to be made to ensure construction work is completed in a timely manner.
Where works represent major structural renovations, namely:
• where internal or external walls are removed / knocked down
• roof is being replaced or a 2nd storey extension is being built
• any renovations being undertaken that could threaten the property’s structure / stability then the “as is” value cannot be relied upon and a Tentative on Completion valuation must be completed with progress valuations as applicable.
On-Completion Valuation
An on completion valuation is an estimate of the value of the security at the end of the construction, renovations or extensions.
For this type of valuation:
• If the building contract is less than $250,000 a progress valuation must be obtained at concrete slab or timber footings stage and at practical completion.
• If the building contract is for $250,000 or more, a progress valuation must be obtained at each request for drawdown.
Unacceptable Construction Loan Scenarios
• Kit homes / demountable homes / display homes / transportable / mobile homes
• Non-fixed or cost-plus contracts
• Building contract that does not cover the complete construction (i.e. partial construction to be done by owner or another sub-group contractor, “Labour-only” and “Managed Labour-only” building contracts etc.)
• Non-approved construction
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• Refinance of partially completed construction
• Any property that is outside existing lending guidelines
• Owner Builder.
General Construction Loan Requirements:
• Loan serviceability to be assessed including a minimum of $250K construction costs.
• Loan covenant to commence construction within 6 months
• Available only for properties located in acceptable postcodes list
• Loan to be funded via the construction loan product
• As a minimum, the front and special conditions pages of the contract of sale are to be perused by the Credit Officer holder prior to final approval, for the existence of rebate clauses which may affect the valuation of the property.
An additional progress inspection is required prior to the release of each drawdown.
Building Contract
An executed building contract is required prior to Formal Approval and must satisfy all of the following criteria:
• It is a HIA/MBA approved contract
• It is in the name of the borrower
• The fixed price aligns with that on the application form
• Industry standard progress payment schedule (typically 5 draw downs, however consideration will be given where up to 6 are required)
• Address of the property where the dwelling is to be constructed is the same in all documentation
• Any variations not included in the final build contract and progress payment schedule will not be paid until the construction is complete. However, if an amended progress payment schedule incorporating the variations is supplied and verified by the Valuer, Origin will pay according to the revised progress payment schedule
• There is a fixed time limit clause (must not be greater than 12 months from date the loan is approved or from date the land loan is settled)
• A GST clause is included.
Note: Consideration must be given to how any additional costs possibly outside the building contract (e.g. drive way, turf, floor coverings, window furnishings and fencing) are to be funded to complete the property to a basic/marketable position.
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Origin MMS may request a building costing report where there are uncertainties/complexities with regard to any aspect of the contract price or payment schedule, if the contract price is over $200,000, the construction is of an unusual or uncommon nature or the contract between parties is not arm’s length.
Documentation Required For Assessment
For the purpose of credit assessment, all of the following are required supporting documents for construction loans:
• Builder’s quotation and/or tender document (to be held at initial assessment, in the absence of an executed fixed price contract)
• Evidence of borrower genuine savings and funds contribution must be verified in full at the time of assessment (savings plans are unacceptable)
• Draft plan/specification
Note: Prior to full approval, an executed binding fixed price building contract must be held.
Prior to the first progressive to the builder the following documents must be sighted:
• HIA/MBA approved executed building contract
• A copy of the builder’s current builder’s licence
Prior to the first progressive to the builder (excluding deposit) the following documents must be sighted.
• Council approved and stamped plan/specification
Insurance Requirements
• Public Liability Insurance is required for a minimum of $5million and,
• Appropriate building insurance based on the requirement for each state, which covers the loss or damage to materials and work during construction. The policy must include ‘Insurance Amount (equal to or not less than the Building Contract price)’, ‘Name of the owner’, ‘Name of the registered builder’ and ‘Australia wide or a region inclusive of the location of the property being constructed’
Progress Payment Requests
Progress payments are to be released on joint application of the borrower and the licensed builder. To ensure that the borrower is fully aware of the progress payment request from the builder, it is required that the builder forward the payment request to the borrower for approval. The borrower is required to sign and date the payment request and forward the signed request to Origin MMS for processing. Progress inspection reports are required.
Prior to the first progress payment the following must be completed.
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• A builder needs to complete a progress payment request which is to:
• Be in writing on the letterhead of the builder;
• Detail the builder’s bank account to be credited;
• Provide a break-up of the amount claimed highlighting any price variations; and
• Be signed and dated by the builder.
Before processing a progress payment request:
• All drawdowns must confirm the construction is progressing in line with the Building Contract, and additional funds of $x (not exceeding the scheduled drawdown amount contained in the building contract) are due for release to the builder.
• At all times, sufficient funds must be retained by Origin MMS to ensure completion under the Building Contract. Where an overrun is identified during the drawdown phase, the borrowers must contribute additional funds from other sources. Overruns must be paid immediately and prior to the release of any Origin MMS retained funds.
• Confirm we have been authorised by the borrower to process the progress payment request;
• Confirm that the request is within guidelines and is in order (e.g. the loan is not in arrears; loan covenants are complied with etc.);
• Valuer has recommended payment of the request;
• Payment is for completed work only that is fixed to the building; and
• Any variation is to be paid for by the borrower from his/her own funds.
Prior to the final progress payment, the following documentation is required:
• Builder’s progress payment report is confirmed and signed by the borrower;
• Council (or Private Certifier where applicable) certificate of compliance/occupancy or equivalent attached to the final progress report for final drawdown;
• Engineer’s certificate (if applicable);
• Survey report (if applicable);
• Pest control certificate (if applicable);
• Any other requirement(s) that may be set out by the valuer in their progress inspection reports;
• A copy of the insurance policy against fire and damages (cover note is not acceptable) and note the following:
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o Insured for the amount as recommended in the valuer’s last valuation report;
o It is for replacement and reinstatement of the dwelling built;
o It has not expired; and
o Origin MMS / Lender of Record interest is noted on the policy.
o Borrower should confirm in writing the product to which they wish the Construction Loan to convert, otherwise the loan will convert to a standard variable rate product over the remaining loan term.
The loan must be referred to the Origin MMS arrears team if and when any of the following occurs:
• Borrower fails to make interest payments on the loan for 2 months or 60 days;
• Borrower fails to have sufficient funds left to complete the construction;
• The builder has become insolvent or “walked off” the site;
• The construction has not commenced within 6 months from first drawdown/settlement of land loan component;
• Not able to complete the construction for any other reason (e.g. material variations in the plans).
3.5.1.11 Home Renovations Home Renovations are defined when funds are used, for example, for:
• Replacement or major refurbishment of bathroom or kitchen
• Swimming pool
• Garage
If a new valuation is required to facilitate the loan, a condition of the loan will be added to ensure the borrower uses the funds for the purpose stated. Origin MMS will have the right to complete a new valuation at the borrowers cost to ascertain the property value or use of funds, depending on the loan circumstances. 3.5.2 Unacceptable Loan Purpose The loan purposes that are not acceptable include:
• Development Finance
• Vacant Land
• Payment of tax liabilities
• Repayments of directors/partners/shareholders loans
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• Working capital for funding of stock
• Trade creditors
• Vendor Finance
• Bridging Loans
• Reverse mortgages
• Third Party mortgages
• Gambling
• Rent to buy schemes (wrap mortgages). A rent to buy scheme is an arrangement to on- sell a property, at a future date, on a rent to buy basis.
• Money laundering
• Any illegal activity
3.6 Borrowers/Guarantors
3.6.1 Eligible Borrowers • Natural Person over 18 years of age (including sole traders and partnerships) who is an Australian Citizen and resides in Australia
• Natural Person over 18 years of age (including sole traders and partnerships) who is an Australian Citizen and does not reside in Australia (Expatriate Borrower)
• Natural Person over 18 years of age (including sole traders and partnerships) who is a Permanent Resident of Australia with an Acceptable Visa and resides in Australia
• Natural Person over 18 years of age (including sole traders and partnerships) who is a Permanent Resident of Australia with an Acceptable Visa and does not reside in Australia (Expatriate Borrower)
• Natural Person over 18 years of age (including sole traders and partnerships) who is a Temporary Resident of Australia with an Acceptable Visa and resides in Australia
• Natural Person over 18 years of age (including sole traders and partnerships) who is a New Zealand Citizen and resides in Australia or New Zealand
• Natural Person over 18 years of age (including sole traders and partnerships) who is a New Zealand Citizen and does not reside in Australia or New Zealand (Expatriate Borrower)
• Company incorporated in Australia
• Trustee of a Trust
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• Trustee of a Self-Managed Super Fund (SMSF)
• Any combination of the above
When assessing a consumer credit application by an individual borrower, consider the following:
• Ensure that the borrowers and any guarantors are not declared bankrupts nor have judgements pending in a bankruptcy case.
• Past loan defaults are checked via a credit-reporting agency (e.g. Equifax Australia Group Pty Limited). A credit report is unsatisfactory if there is any default above $200 in the past 3 years.
• All joint borrowers to a credit facility must obtain a direct benefit from the loan proceeds and are jointly and severally liable meaning that any joint borrower to a credit facility may become liable for the full amount of the debt.
• For non-English speaking borrowers, ensure a qualified translator (independent of the borrower) is available to interpret the documentation and provide an appropriate certificate.
• Applications for applicants that are greater than 55 years of age must be submitted with an appropriate exit strategy signed by the applicants.
Acceptable Visa List
Visa No. Visa Type Visa No. Visa Type Visa No. Visa Type 100 Permanent 173 Temporary 801 Permanent 103 Permanent 175 Permanent 804 Permanent 111 Permanent 176 Permanent 820 Temporary 114 Permanent 186 Permanent 835 Permanent 115 Permanent 187 Permanent 836 Permanent 116 Permanent 188 Temporary 838 Permanent 119 Permanent 189 Permanent 855 Permanent 120 Permanent 190 Permanent 856 Permanent 121 Permanent 200 Permanent 857 Permanent 124 Permanent 201 Permanent 858 Permanent 132 Permanent 203 Permanent 864 Permanent 134 Permanent 204 Permanent 866 Permanent 136 Permanent 300 Temporary 884 Temporary 137 Permanent 309 Temporary 885 Permanent 138 Permanent 310 Temporary 886 Permanent 139 Permanent 401 Temporary 887 Permanent 143 Permanent 403 Temporary 888 Permanent 151 Permanent 405 Temporary 890 Permanent
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155 Permanent 416 Temporary 891 Permanent 157 Permanent 420 Temporary 892 Permanent 160 Temporary 423 Temporary 893 Permanent 161 Temporary 428 Temporary 162 Temporary 457 Temporary 163 Temporary 461 Temporary 164 Temporary 475 Temporary 165 Temporary 489 Temporary
3.6.1.1 Expatriates Expatriate borrowers are defined as one of the following;
• An Australian Citizen or a Permanent Resident of Australia with an Acceptable Visa that does not reside in Australia or a New Zealand Citizen that does not reside in Australia or New Zealand
The following criteria is applicable to all expatriate borrowers:
• Maximum LVR is 80%
• PAYG and Self Employed borrowers are acceptable
• Companies, business borrowers and Trusts are excluded
• The applicant(s) must provide their passport as identification to satisfy Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF) requirements
• Acceptable income evidence must be translated into English via an authorised/ approved translator and converted into Australian dollars using the average daily exchange rate over the past 30 days
• The visa of an Australian permanent resident visa holder must have a minimum of 12 months validity
• The residential address of expatriates are limited to the following “Acceptable Countries” list;
List of Acceptable Countries: Australia, Brunei, Canada, China, France, Germany, Hong Kong, India, Indonesia, Japan, Macau, Malaysia, New Zealand, Philippines, Saudi Arabia, Singapore, South Africa, Switzerland, United Kingdom (England, Scotland, Wales, Northern Ireland), United Arab Emirates and United States of America (this list is subject to change)
3.6.1.2 Companies All companies must be registered in Australia.
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For company loans, all directors and shareholders (excluding Notional Directors) must be co- borrowers. Requests to waive this requirement are not permitted by Origin MMS.
3.6.1.3 Trusts The trustee for a trust can be either a natural person or a company and must always be a borrower in its own right and as trustee of the trust.
This requirement applies to both family/discretionary and unit trusts.
Where the trustee is a company, all directors and shareholders (excluding Notional Directors) must provide unconditional joint and several personal guarantees.
The two types of usually encountered in lending are:
• Unit Trust - Beneficiaries hold units which identify their entitlement in the trust; and
• Discretionary Trust - Trustee in its discretion can select the beneficiaries; potential beneficiaries have no property and hold no units.
Origin MMS enters into an agreement with the trustee of the trust, not the trust itself. A trustee has a right of indemnity out of the trust assets. The following guidelines can be used to assist Origin MMS in ensuring that parties to a loan or security transaction are correctly identified where Origin MMS advances monies or takes security or a guarantee from entity acting in a capacity as a trustee of a trust as well as in its own capacity:
• Where Origin MMS advances monies to a Borrower in its own capacity and as trustee of a trust, the loan offer letters should refer to the Borrower in both capacities (e.g. ABC Pty Ltd in its own capacity and as trustee for the ABC Trust)
• Where Origin MMS takes security from a mortgagor, whether in its own capacity or in a capacity as trustee of a trust, the security section of the loan offer letter should simply refer to the mortgagor as: “ABC Pty Ltd”.
• Where a loan is regulated under the NCCP, Origin MMS can only take a mortgage from a mortgagor if the mortgagor is also a Borrower or a guarantor of the loan.
The Loan Contract must state “The Borrower(s) is liable in its own rights and as trustee of the Trust” and/or “The Guarantor(s) gives this guarantee in its own rights and as trustee of the Trust”.
The following guidelines are also applicable to trustees:
• Ensure that the trustee has the ability to service the loan;
• Obtain a copy of the Trust Deed and refer documents to a panel solicitor to identify if trustee can borrow and/or guarantee on behalf of trust and beneficiaries in accordance with the trust deed;
• Obtain Equifax Australia Group Pty Limited reports on the trustee and adult beneficiary(s) who are to act as guarantors;
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• The Trust should have been established for at least 1 year, otherwise evidence must be provided that trustee has the experience and skill to promote the trust in its proposed business activities in the best interests of the beneficiaries;
• All beneficiaries must sign a letter of acknowledgment of the loan.
3.6.1.4 Self-Managed Super Funds The SMSF Trustee must hold a beneficial interest in the security property and must have a right to acquire the property from the Property Trustee and is permitted to borrow in accordance with all of the relevant legislative requirements and any associated regulations.
The Property Trustee, which holds the legal interest in the security property on trust for the SMSF, must meet all of the relevant legislative requirements and any associated regulations.
All beneficiaries of the SMSF must be personal guarantors on the loan and must meet all the relevant legislative requirements and any associated regulations.
Copies of all Trust Deeds must be submitted with the loan application. 3.6.2 Excluded Borrowers • Limited liability companies
• Associations
• Churches
• Clubs
• Non Residents (except where the Non Resident is a spouse or defacto partner of an Australian or New Zealand Citizen or a Permanent Resident of Australia with an Acceptable Visa and resides in Australia)
• Minors under the age of 18
• Borrowers of Convenience
• Diplomats
3.6.2.1 Borrowers of Convenience A Borrower of Convenience is defined as a borrower who is added to a loan application to provide serviceability support and/or security but receives no financial benefit from the transaction
All borrowers must receive a benefit from the transaction either by way of joint ownership of the security and/or dependence on the mortgagor in a marital or de-facto relationship
Any loan where a person is added to a loan for the sole purpose of providing income for a loan to service or providing additional security for another party to purchase a property will be declined.
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3.6.3 Guarantors & Guarantees A guarantee is a contractual promise given by a third party that makes the person liable in the event of default by the debtor. A guarantor will be required on an application when the company is a borrower, and/or if the security property is in a different name to the borrower.
The guarantee must incorporate the following provisions:
• Guarantee obligation - an obligation on the guarantor to pay the money owing on demand if not paid by the debtor.
• Indemnity - if for any reason the debt is not recoverable against the debtor or the guarantor, the guarantor must indemnify the financier for any loss.
If a security property is in a different name to the borrower
• Guarantors must complete a full application form including personal details, assets & liabilities, income & employment details and sign an Origin MMS Privacy Act declaration. Standard employment & income policies in this document must be adhered to including verification of such employment & income.
Legal Advice
If the guarantor is a company or trust owned by all the borrowers, legal advice can be waived.
Examples of where parties not sufficiently the same
Borrower A, guarantor X Pty Limited, the shareholders and directors of which are A and B. Advice is required by B because B is not a borrower.
Borrower X Pty Limited (A sole director and shareholder) and A and B guarantor. Advice is required by B because B is not benefiting through the company.
Examples where advice can be waived, the parties are common
A and B borrower, X Pty Limited guarantor of which A and B are all the directors and shareholders. Advice could not be waived if there was an additional shareholder and director C who was not a borrower as there would then not be sufficient commonality.
Borrower X Pty Limited (sole director and shareholder A), guarantor A.
The guarantee should state that the liability of the Guarantor would not be affected by;
• Any variations of the transaction or the documents between financier and debtor;
• Failure by the financier to enforce any security held by the debtor or any other person;
• The release of any security held by the financier for the guaranteed money;
• The insolvency of any party to the transaction;
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• An increase in the amount guaranteed (in such instances the written consent of the guarantor to the increase must be obtained);
• The money or any part of it not being recoverable from the debtor or any co-guarantor;
• A clause prohibiting the guarantor from exercising any right of set-off, or any right of subrogation, or claiming the benefit of any security held by Origin MMS, or proving in liquidation or bankruptcy of the debtor before Origin MMS has been paid; and
• A clause under which the guarantor must pay all costs in relation to enforcement of the guarantee and requiring interest to be paid if the guaranteed money is not paid when due.
SMSF Trustee borrowers and guarantors must obtain independent legal and financial advice and proof of such advice must be submitted to Origin MMS with the loan application.
Considerations when guarantees are taken from companies include:
• Guarantees are to be obtained from owners or directors;
• Directors’ conflicts – are any directors of the company under a conflict of interest in relation to the execution of the guarantee? If so, do the Articles or Constitution allow the company to enter into a transaction where a director has an interest and permit this director to vote?
• ‘Uncommercial’ transaction - will the giving of the guarantee constitute an uncommercial’ transaction under the Corporations Law?; and
• Trustee company - is the company a trustee? If so, does the trust deed allow the trustee to give guarantees and indemnities?
• Where the Borrower are the shareholders and directors of the company, as a general rule, we do not require a guarantee from the company when there is little scope of recovering guaranteed debts from retained profits, as they are drawn as directors’ salaries or paid out as dividends. On the other hand, if it can be demonstrated that considerable reliance is placed on retained profits, then a guarantee from the company should be taken.
3.6.3.1 Unacceptable Guarantors Guarantees are not to be accepted from the following or in the following circumstances:
• Where there is reason to suspect that the proposed guarantor is suffering mental illness or physical illness affecting their mental functioning.
• Where there is reason to suspect that the proposed guarantor has intellectual disabilities that would make it difficult for them to understand a guarantor’s obligation.
• Individuals or companies acting under a Power of Attorney for the guarantor (who is an individual).
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• Where there is reason to suspect that the proposed guarantor is incapacitated at the time of executing the guarantee (e.g. under the influence of alcohol or drugs).
• Where there is reason to suspect that the guarantor did not understand the effect of the guarantee at the time it was executed.
• Where (it is suspected that) the proposed guarantor is under duress from the customer or another guarantor or is under the influence of the customer or another guarantor.
• From individuals that are independent to the customer group and:
• Do not have the financial resources to repay or service the guarantee obligations and/or
• Would encounter undue hardship (such as, for example, the loss of their home) if required to pay under the guarantee.
• Minors 3.6.4 Power of Attorney A Power of Attorney (POA) is a document that appoints one person (the attorney) to act on behalf of another person (Donor). Any lawful action taken by the attorney under the POA is binding on the Donor.
There are currently two types of POA in Australia:
• A standard POA which can be used to cover a variety of transactions including dealing in property and loan applications. This can be revoked at any time and also ceases when the Donor loses his or her faculties and.
• An enduring POA (EPOA) which continues even after the Donor loses his or her faculties.
POA's need to be registered in accordance with the laws of the State of residence of the person giving the POA.
It is not Origin MMS Policy to approve borrowings where the request comes from an attorney acting under a POA. This policy applies to new and existing loans where the loan was approved on a first party basis, but Origin is asked to approve further borrowings under a POA executed by the Borrower at a later date.
Whilst an attorney can legally apply for finance on behalf of a Donor, Origin MMS does not wish to expose itself to any reputational risk in the event that the attorney is not acting in the best interests of the Donor.
Where Origin MMS is asked to carry out normal administration tasks (e.g. account balances, rollover of fixed rate loans etc.) for a Borrower under a POA given by the Borrower to a third party, Origin MMS must sight the POA and verify that it is registered as required under the various State laws.
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The POA must be produced on each occasion a request is made to deal with a Borrower’s account together with a Statutory Declaration from the attorney stating that the POA has not been revoked (withdrawn/cancelled/expired).
3.7 Employment
3.7.1 Types
3.7.1.1 PAYG PAYG stands for pay as you go and defines those borrowers that are employed by another party and can be employed as:
• Permanent Full Time
• Permanent Part Time
• Casual
• Contract
3.7.1.2 Self Employed Self Employed is the term used for any borrower that works for themselves and is not employed by another party or if they receive more than 50% of their income (including wages) from a business in which they are the sole trader, a partner, director or shareholder and where they have management control of the company.
This includes applicants who are:
• sub-contractors
• professional consultants
3.7.1.3 Breakdown of Employment Types The table details the breakdown of acceptable types of employment:
Type Requirements
Permanent full time • Minimum of 6 months in current employment
• If in current employment < 6 months, must have been in continuous employment in the same industry for at least 12 months
• If applicant is on probation, will be considered on a case by case basis
Permanent Part Time • Minimum of 6 months in current employment
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• If in current employment < 6 months, must have been in continuous employment in the same industry for at least 12 months
• If applicant is on probation, will be considered on a case by case basis
Casual • Minimum of 12 months in current employment
• Exercise caution if casual employment is the sole source of income, such as, enquiring with employer on prospects for continuity of employment
Second Job • Minimum of 12 months in current employment
Contract • Minimum of 6 months in current employment
• If in current employment < 6 months, must have been in continuous employment in the same industry for at least 12 months
• Minimum 3 months remaining on contract term
Self Employed • Minimum 2 years trading in the current business
3.8 Income
The table details the acceptable types of Australian Income:
Type Requirements
Salary and Wage • 100% if employment requirements are met
Overtime • 100% if regular or a condition of employment
• Must be evidenced over a 6month period
Shift Allowance • 100% if regular or a condition of employment and is an industry standard
• Must be evidenced over a 6month period
Bonus/Commissions • 100% if confirmed by current employer for past 2 years
• If in current employment < 12 months, must have been in previous employment for at least 2 years in the same industry
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Salary Sacrifice • Where an employee voluntarily sacrifices a portion of their salary, 100% of the sacrifice may be taken into account and added to the gross income
Self Employed • Minimum 2 years trading in the current business
• Income levels must be consistent over the 2 years
• If net profit increased by > 20% in year 2, 120% of the previous years figures must be used, in all other circumstances year 2 income is used
Company Income • Minimum 2 years trading in the current business
• Income levels must be consistent over the 2 years
• If net profit increased by > 20% in year 2, 120% of the previous years figures must be used, in all other circumstances year 2 income is used
Car Allowance • 100% against corresponding car loan repayments or added to gross taxable income
Fully maintained • Up to $5,000 can be added to gross income or $3,500 to net income company car
Rental Income • 80% of gross rental income • 65% of gross rental income for NRAS properties
Investment Income • 80% of investment income (e.g. shares, dividends etc.)
• Interest on deposits, that are being used as funds to complete, are not acceptable
• Must be consistent over the 2 years
Family Tax Benefit (as • 100% where paid via the Family Assistance Office or the Australian supporting income Tax Office only) • Payment must be a Family Assistance payment (Part A and Part B only) made by the Federal Government
• The dependent child/children must be under the age of 11
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Child Maintenance (as • 100% if child support agreement is registered with the Child Support supporting income Agency only) • Three months bank statements confirming regular receipt of payments
• Must have at least 5 years to expiry
Employer Maternity • 50% of Employer Maternity Leave Payment and government Paid Leave Payment / Paid Parental Leave Payment (Working Parent Payment) is acceptable on Parental Leave the basis that this income is currently being paid and will continue to Payment be paid until the applicant returns to work
Social Security Benefits • 100% accepted where Origin considers the benefit to be a stable & Government income source Pensions
Unemployment & • Unacceptable Sickness Benefits
Workers Compensation • Unacceptable
Income from Boarders • Unacceptable
Income Protection & • Unacceptable TPD Income
The table details the acceptable types of Foreign Income:
Type Requirements
Salary or Wage • 70% of nett foreign income, converted to Australian dollars (using the average daily exchange rate over the past 30 days) if employment requirements are met
Overtime • 60% of nett foreign income, converted to Australian dollars (using the average daily exchange rate over the past 30 days) if regular or a condition of employment
• Must be evidenced over a 6month period
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Shift Allowance • 60% of nett foreign income, converted to Australian dollars (using the average daily exchange rate over the past 30 days) if regular or a condition of employment
• Must be evidenced over a 6month period
Bonus/Commissions • 60% of nett foreign income, converted to Australian dollars (using the average daily exchange rate over the past 30 days) if confirmed by current employer for past 2 years
• If in current employment < 12 months, must have been in previous employment for at least 2 years in the same industry
Self Employed • Minimum 2 years trading in the current business
• Income levels must be consistent over the 2 years
• 70% of nett foreign income, converted to Australian dollars (using the average daily exchange rate over the past 30 days). If net profit increased by > 20% in year 2, then 120% of previous year’s figures must be used, in all other circumstances year 2 income is used
Rental Income • 70% of nett foreign income, converted to Australian dollars (using the average daily exchange rate over the past 30 days)
• Copy of Tenant Agreement or Rental Statement will be required if rental income is required for serviceability
Investment Income • 60% of nett foreign income, converted to Australian dollars (using the average daily exchange rate over the past 30 days)
• Must be consistent over the 2 years
3.9 Documentation and Verification
3.9.1 PAYG Documentation and Verification
3.9.1.1 PAYG Documentation PAYG borrowers must provide:
• 2 of 3 most recent consecutive payslips
• Latest 3month bank statements from a financial institution in the name of the employee showing regular salary credits from the employer
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Where the applicants’ income includes casual employment, regular overtime, shift allowances, bonuses or commissions then the current and previous years PAYG payment summaries will be required to substantiate the applicant’s income.
Payslips should be computer generated (handwritten are not acceptable) and include as a minimum the following information:
• Employers name and ABN number
• Employee (borrowers) name
• Income particulars i.e. hourly rate or base salary
• YTD earnings
• Date
• Overtime/allowances (where applicable)
• Superannuation
Where the applicant is only able to provide payslips or bank statements (i.e. one of the two required forms of salary evidence) Origin MMS will consider the application if a legitimate explanation is provided plus one of the following alternative documents is provided;
• An employment contract; or
• A letter from the employer on company letterhead detailing:
o Gross annual income (if package, breakdown of package)
o Role or position
o Length of employment
o Basis of employment (full time etc.)
o Role of the signatory
o Should not be > 1 month old
Where the borrower is employed by a family member, payslips or employment letters must be accompanied by last 2 years tax returns and ATO assessment notices. If employment has only been in current financial year, last 3 months bank statements in the applicant’s name must be provided along with payslips or employment letter.
3.9.1.2 PAYG Verification Computer generated payslips and evidence of salary credits to an account in the borrower’s name are sufficient to verify the income.
To validate the employment and income documentation if computer generated payslips are not available, the following verification must be completed:
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• Obtain employer’s contact details through an independent source
• Check employers company existence via an ABN or ASIC search. If further enquiry is required an ASIC check on the company can be completed.
• Verbal confirmation of role, income, length of employment with the employer may be required by Origin MMS depending on individual loan circumstances
• Check income with documentation provided
Origin MMS reserves the right to complete verbal employment checks as outlined above on any application. 3.9.2 Self Employed Documentation and Verification
3.9.2.1 Self Employed Full Documentation Self Employed borrowers must provide:
• Latest 2 years financial statements
• Latest 2 years business and personal tax returns
• Latest 2 years tax assessment notices
The business must have been trading for a minimum of two years.
Interim financials are not acceptable, although Origin MMS will reserve the right to request extra documentation if required.
Income levels must be consistent and the current income figure can be used for servicing in most cases. An explanation should be provided where the income levels are not consistent.
When assessing self-employed borrowers, it is important to separate business income and expenses from personal income and expenses. The key objective is to determine the borrower’s base gross income, base net income and other income.
If the business financial statements show a net loss for either of the last two years, a variance in the net profit of more than 20%, aged or missing financials, or self-employed with less than 2 years’ financials, you should obtain the following documents to assist further assessment.
• Previous year’s tax return (if available)
• Interim financials prepared by a qualified accountant.
When assessing the financial position of a company, partnership or trust, the focus is on the activities of the business. The finances of the people involved are also included in this assessment because the income of related parties is usually reported via the business.
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3.9.2.2 Self Employed Alt Documentation Borrowers must complete a signed declaration of their financial position and confirmation that they can service all commitments without any hardship. The business must have been trading for a minimum of two years and the income must be consistent with the stated occupation.
In addition, borrowers must provide two of the following:
• Accountants letter
• 6 months BAS
• 6 months Business bank statements
3.9.2.3 Self Employed Verification To validate the employment and income documentation the following verification must be completed:
• Accountants details are clearly stated in all documentation including tax agent/accountants reference number, name and address and disclaimer
• Contact the accountant to confirm documentation provided
• The business has been registered for a minimum of 2 years via www.abr.gov.au
• The business has been registered for GST for a minimum of 12 months where income exceeds $75,000. 3.9.3 Company Documentation and Verification
3.9.3.1 Company Full Documentation Companies and all Directors must provide:
• Latest 2 years financial statements
• Latest 2 years business and personal tax returns
• Latest 2 years tax assessment notices
The business must have been trading for a minimum of two years.
Interim financials are not acceptable, although Origin MMS will reserve the right to request extra documentation if required.
Income levels must be consistent and the current income figure can be used for servicing in most cases. An explanation should be provided where the income levels are not consistent.
When assessing company borrowers, it is important to separate business income and expenses from personal income and expenses. The key objective is to determine the true net income position of the company and each of the Directors (co-borrowers).
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If the business financial statements show a net loss for either of the last two years, a variance in the net profit of more than 20%, aged or missing financials, or self-employed with less than 2 years’ financials, you should obtain the following documents to assist further assessment.
• Previous year’s tax return (if available)
• Interim financials prepared by a qualified accountant.
3.9.3.2 Company Alt Documentation All borrowers must complete a signed declaration of their financial position and confirmation that they can service all commitments without any hardship. The business must have been trading for a minimum of two years and the income must be consistent with the stated occupation.
In addition, all borrowers must provide two of the following:
• Accountants letter
• 6 months BAS
• 6 months Business bank statements
3.9.3.3 Company Verification To validate the income documentation the following verification must be completed:
• Accountants details are clearly stated in all documentation including tax agent/accountants reference number, name and address and disclaimer
• Contact the accountant to confirm documentation provided
• The business has been registered for a minimum of 2 years via www.abr.gov.au
• The business has been registered for GST for a minimum of 12 months where income exceeds $75,000. 3.9.4 Trust Documentation and Verification
3.9.4.1 Trust Documentation Trust borrowers must provide:
• Latest 2 years financial statements
• Latest 2 years business and personal tax returns
• Latest 2 years tax assessment notices
The trust must have been trading for a minimum of two years.
Newly established SMSF Trusts are an acceptable exception.
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Interim financials are not acceptable, although Origin MMS will reserve the right to request extra documentation if required.
Income levels must be consistent and the current income figure can be used for servicing in most cases. An explanation should be provided where the income levels are not consistent.
If the trustee financial statements show a net loss for either of the last two years, a variance in the net profit of more than 20%, aged or missing financials, or the trust is less than 2 years old, you should obtain the following documents to assist further assessment.
• Previous year’s tax return (if available)
• Interim financials prepared by a qualified accountant.
3.9.4.2 Trust Verification To validate the income documentation the following verification must be completed:
• Accountants details are clearly stated in all documentation including tax agent/accountants reference number, name and address and disclaimer
• Contact the accountant to confirm tax returns
• The trust has been registered for a minimum of 2 years via www.abr.gov.au
• The trust has been registered for GST for a minimum of 12 months where income exceeds $75,000. 3.9.5 Other Income
3.9.5.1 Rental Income Documentation and Verification To evidence and verify Rental Income the following documents are acceptable:
• Rental Statements
• Valuation Report
• Real Estate Agent appraisal
• Tax Returns
• Bank Statements
If multiple documents are provided, the lower amount must be used for servicing.
If other income is to be relied upon, the principle of confirming sources is the same as for employment income. Only rely on authenticated documents such as copies of leases, bank statements, and tax returns.
3.9.6.2 Other Income Documentation and Verification To evidence and verify other income the following documents are acceptable:
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• Pension advices or updates
• Tax returns;
• Dividend Notices;
• Official documentation proofing income source
3.10 Serviceability
A servicing test must be completed for all applications. A borrower must demonstrate that they have the ability to service the loan or that the business/incorporated Borrower (if applicable) is a viable entity with an ongoing ability to service their loan commitments.
Origin MMS must not lend solely on the security LVR coverage for a loan, especially if there is material doubt about the loan servicing capability with an application. Sale of a security should be the last option for a debt to be cleared, either by the borrower or by Origin MMS when assessing a loan application.
Loan serviceability calculations are based on post tax income, and to pass serviceability assessment, borrowers must meet two criteria being income surplus and debt serviceability ratio:
• Net Disposable Income = Post Tax Income – Total Commitments (including living expenses)
• Net Serviceability Ratio = Post Tax Income / Total Financial Commitments (excluding living expenses)
Minimum Serviceability Assessment Rate
New Loans
A minimum serviceability assessment rate of a) Actual Borrower Rate plus 2.50% or b) 5.75%, whichever is higher, is to be used in the serviceability calculations for the new loan.
Existing Loans
Existing loans include any loans that are either already settled, formally approved or have finance applications in progress with either Origin MMS or another Lender. Each existing loans must have its minimum monthly repayment recalculated using the facility limit (including available redraw) on a P&I basis over a 30year term using a serviceability assessment rate of 5.75% p.a.
A recent copy of all existing loan statements must be provided with the loan submission to confirm the facility limit. Statements must be less than 7 months old. 3.10.1 Net Disposable Income Origin MMS uses a Net Disposable Income (NDI) calculation to assess the borrower’s ability to meet regular fixed repayments including the new loan being applied for.
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It also covers monthly living expenses that are separate from any loan repayments. These are generally known as the cost of living and include such items as groceries, clothing, utility bills, petrol/car running expenses, school fees etc. A single applicant with nil dependents is assumed to have lower monthly expenses than a couple with two (2) dependents hence the living expense will be less for a single applicant. Income tax is also taken into account as net income is used.
To meet servicing requirements, the NDI ratio must at least 1.00:1. This means that a borrower/s net disposable (after tax and assessed living costs) must be at least 100% of total fixed commitments which includes the proposed loan. A higher ratio maybe required for different products and/or loan amounts. Please refer to Product Parameters to confirm the NDI ratio required. 3.10.2 Net Serviceability Ratio The minimum Net Serviceability Ratio (NSR) requirement is 1.00:1times.
When completing the servicing calculator, the proposed new repayments must have the assessment rate at 2.50% above the actual borrower rate at the time of application. This is applicable for both variable and fixed rate loans with less than 5year tenure. This provides Origin MMS a level of comfort that the borrower can still service their loan without financial duress in the event of interest rate rises & unforeseen expenses. For fixed rates with 5year term the 5year fixed rate can be used as the assessment rate.
Understanding an applicant’s true debt servicing capacity is vital to assessing their ability to repay. It is in neither the applicant’s, Mortgage Manager’s nor Origin MMS’s best interest for borrowers to take on more debt than they can manage based on the borrower’s environment.
You must only offer loans to borrowers who can demonstrate ability to repay with sufficient comfort over the life of the loan. 3.10.3 Joint Income/Joint Commitments Where the borrowers have joint commitments with parties other than the loan application, 100% of the existing commitment is to be used in calculating serviceability for the proposed borrowing
If a borrower receives an income source with parties not included in the loan application e.g.: rental property income, evidence must be provided to confirm the percentage of ownership. The borrower’s tax return or title search on the property will confirm the level of ownership. The confirmed percentage will be used to determine how much of the gross income is used in the servicing calculation for the proposed loan. 3.10.4 Living Expenses Living expenses must be accounted for in the serviceability assessment and are determined based on the number of applicants and dependants in a household. Origin MMS requires a comprehensive review and assessment of the applicants declared living expenses.
The following living expense categories must be included in loan applications;
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3.10.4.1 Basic Living Expenses • Food and Groceries
• Clothing / Footwear / Cosmetics etc.
• Transport – public, cars, fuel
• Owner Occupied property expenses (rent, strata, utilities, wear and tear)
• Spouse / Child maintenance
• Education
• Other Expenses
3.10.4.2 Discretionary Living Expenses • Childcare / Nannies
• Education – outside school hours care, private school fees, books
• Insurances – health, car, life, income
• Medical costs – repeat prescriptions, aid and care
• Investment property expenses (strata, utilities, wear and tear)
• Recreation – dining out, entertainment and holidays
• Communications – internet, telephone, Pay TV
• Other Expenses
Origin MMS will assess serviceability based on the higher of the following;
• Borrowers declared living expenses; or
• Housing Expenditure Measure (HEM) plus Specifically Excluded Expenses
3.10.4.3 Specifically Excluded Expenses The following declared living expenses are specifically excluded from HEM and therefore the living expense assessment needs to take these into account.;
• Private school fees
• Childcare / Nanny expenses
• Life insurance
• Sickness and personal accident insurance
• HECS repayments
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3.10.5 Allowable Add-backs For all applicants, negative gearing on investment properties may be taken into account by adding back the interest expense of investment properties if the loan is negatively geared.
For self-employed applicants, there are some expense items that can be added back to net income for inclusion in debt servicing calculation. These are
• Directors income/salaries where not already included in servicing calculations
• Interest paid on debt being refinanced with proposed application (care to be exercised that interest relates only to debts being refinanced)
• Business depreciation (not exceeding 20% of business taxable income)
• Non- recurring expenses (Confirmation from borrower’s accountant required). 3.10.6 Unacceptable Add-backs Any expense outside the allowable add-backs noted above, are considered unacceptable 3.10.7 Rental Expenses If a borrower is purchasing an investment property and the application advises the borrower/s live with family or friends “rent free”, a minimal rental expense of $150 per week ($650 per month) must be included as a commitment in the loan servicing calculation per applicant.
If the borrower is purchasing an investment property and continues to rent themselves, the “actual” rental expense noted on the application must be included in the loan servicing calculation with the minimum being $150 per week included in servicing if a single applicant or higher if more than 1 applicant as per above. 3.10.8 Credit Card Limits Credit Card, Store Card and Line of Credit limits are required to be included in the loan servicing calculation even if the statements (at time of application) show the full balance from the previous months has been paid. A minimum of 3.8% of the limit will be included in the servicing calculation even if there is nil activity.
Interest free/payment free loans normally provided by department stores for household appliances must be included in servicing for new loan as customer will eventually need to make repayments at the end of the offer period.
Origin MMS requires a comprehensive review of all declared Credit Cards, Store Cards and Lines of Credit limits to ensure that all potential commitments have been included for serviceability. All related Equifax enquiries must be satisfactorily explained. Equifax enquiries (within the past 24 months) for existing Credit Cards, Store Cards and Lines of Credit would indicate potential limit changes and therefore a copy of the last statement must be provided to validate the declared limit.
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3.10.9 Self-Managed Super Funds Serviceability for SMSF loan applications will be assessed on the following basis;
• Rental Income in accordance with standard applications
• Income from interest/dividend earnings to be assessed using the lower of actual return or at a rate equivalent to the 15year Australian Government Bond yield
• Income from any other assets to be excluded
• Only mandatory superannuation contributions to be included (see below)
• Superannuation taxation rules apply
• Standard stress testing of loan repayments applies
• Must allow for all ongoing expenses associated with running the SMSF. Running costs associated with the property (e.g. building insurance, tenant insurance, capital works expenditure and depreciation expenses) are not costs associated with running the SMSF. A newly established SMSF must provide accountants advice providing an estimate of running costs. Origin MMS will use the higher of actual running costs, accountants estimate or a minimum of $3,000 (GST inclusive)
Please note the following exceptions that will be considered on a case-by-case basis:
• Additional superannuation contributions will be considered (up to the allowed ATO limits) where regular additional contributions have been made for a minimum of 6 months.
• Exclusion of discretionary life insurance premiums from running costs where the loan purpose is refinance and the application is supported by 2 years clean loan repayment history and evidence that the discretionary life insurance premiums have been paid over the past 2 years.
3.11 Credit Bureau Reports
Equifax Australia Group Pty Limited (formerly known as Veda Advantage, CRAA and Baycorp Advantage) provides credit bureau services - listing all loan and credit enquiries, defaults, legal judgments and credit disputes for individuals, small businesses and companies operating in Australia. Information includes company structure, directorships, and major shareholdings. The service includes links to the Australian Securities and Investment Commission (ASIC), Business Name Extracts, Telstra Electronic White Pages and Investigative Reports.
Equifax is required to ensure that all personal credit information is maintained on their data file for 5 years after the lodgement date.
Credit check reports are one of the important items used to assess the credit worthiness of a borrower. It is therefore mandatory to obtain a report on all borrowers and/or guarantors. This covers both individuals and company borrowers along with related business names associated to the borrowing parties.
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Credit reports must be obtained on all individual borrowers and guarantors, and any related companies. The reports should be clear of any defaults, writs, judgements or bankruptcy listings. Any adverse findings on the credit reports must be supported by a written explanation by the borrowers. 3.11.1 Credit Reports A credit report is obtained to help assess the credit worthiness of a consumer or business customer seeking credit. Request the report from a credit reporting agency to:
• minimise credit risk by alerting Origin MMS to borrowers and guarantors with an unsatisfactory credit history
• cross reference information provided in financial statements relating to loans with other credit providers
• provide other warning signs.
A credit report is to be obtained for all new or increase in credit applications.
The following guidelines should be used when undertaking & assessing credit reports
• A signed and dated Privacy Consent Form must be held by the Originator / Mortgage Manager for all borrowers prior to requesting any credit reports.
• Credit reports must be less than 1 month at time of receipt of loan application. Reports must be rerun in all cases if they are > 1 month old at time of receipt of loan application by Origin MMS.
• Care should be exercised where a borrower has changed their name (e.g. marriage where female assumes husband’s surname) then a credit report must be obtained under all the borrower names. In this example reports must be obtained on the married name and the maiden name
• Is it possible for borrowers to have more than one credit file, and in each and every case the presence of cross reference files and possible matched files must be checked in accordance with this policy. The credit reports normally show if a possible match/cross reference is found.
• Spelling of surnames, date of birth, residential address must be reviewed against the application form to ensure they match. If there are any discrepancies, credit report must be rerun to obtain correct report on an applicant. Only applicants who have recently turned 18 or over the age of 60 are the most likely applicants to genuinely have a new credit file created.
A large number of recent credit enquiries prior to receipt of application, in particular unsecured credit applications should be treated with caution as this might indicate that the borrowers are active ‘credit seekers’ and potentially under financial duress. All credit enquiries within the past 12 months must be investigated and noted against the purpose and outcome.
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All credit reports showing applicants as directors of a company/s must provide full 2 years tax returns(personal & company) & financial statements to ensure no losses are being sustained which must be included in servicing calculations if applicable.
The tax returns are mandatory even if borrowers are employed on a PAYG basis.
The tax returns are not required where the following instances occur
▪ the company was only established in the current financial year (confirmed via credit reports); or
▪ applicant’s accountant confirms in writing the company has never traded and has nil liabilities.
Directorships such as local sporting clubs, school associations where there will be multiple directors, tax returns or accountant letters are not required to be obtained. 3.11.2 Acceptable Enquiries Applicants must have a clear credit history.
A small default paid more than 12 months ago may be considered on a case by case basis but will depend upon the merit of the loan application and the explanation provided. 3.11.3 Unacceptable Enquiries Applicants should have a clear credit history and the following are not acceptable:
• Defaults, paid or unpaid (either borrowers or guarantors)
• Any court judgements &court writs regardless of amount, paid or unpaid
• ATO defaults/judgements regardless of amount, paid or unpaid
• Mortgage default/s regardless of amount, paid or unpaid
• Discharged bankrupts
• Receiver/manager appointed
• Liquidator appointed
• Clear outs
• Wind up petitions
• Part X(10)or scheme of arrangement
• More than 6 separate finance enquiries within 12 months (the borrower is to provide an explanation of the excessive number of enquiries if the proposal is to be considered).
Note: Enquiries within a month, to a variety of lenders, for a similar amount, may be treated as one.
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3.11.4 ASIC Reports ASIC searches are required in the following circumstances to evidence a business’s registration, including name and ABN number.
• Where the company is a borrower or guarantor
• Where a company is the appointed trustee of a discretionary or unit trust that is a borrower or guarantor
• Where the applicant(s) are using the retained income to service the loan commitment
• Where the standard Credit Report does not reveal all the shareholders and office bearers of the company
3.12 Savings/Equity
Borrowers who have saved a deposit are more likely to be prepared for difficult circumstances i.e.; interest rate rises, unforeseen expenses.
With most loans, the borrower must contribute some of their own money towards the purchase price. This is known as the borrower’s contribution. It is important to understand where these funds are coming from and to verify that the declared sources of funds are genuine.
If the loan is subject to Lenders Mortgage Insurance (LMI), borrower’s contribution requirements will depend on the mortgage insurer’s policies and procedures. 3.12.1 Genuine Savings Genuine savings includes the following:
Type Requirement Documentation
Equity in property Must be held for at least 6 months Rates notice and loan statement (if in the borrower’s name applicable)
Sale of real estate Property must have been in the Contract of sale and evidence of name of at least one of the net sale proceeds in savings applicants account
Accumulated savings Must be held or accumulated over 3 Bank statements months in a savings account or term deposit in the applicant’s name
Term deposit Must be held in the applicant’s Bank statements name for a minimum of three months
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Shares Must be held over 3 months Share Certificate (publicly listed companies only)
Where the Savings has not been held for the minimum 3month period:
• The Borrower may qualify provided the capacity to save the minimum 5% is evidenced over the preceding 6month period by making additional loan payments in excess of the contracted repayment amount or;
• Alternatively, the minimum 3month period can be waived if the Borrower can provide evidence of on time rental payments over the preceding 6 months;
Apart from confirming genuine savings, evidence of funds to complete the property purchase plus costs must also be satisfied (allow 5% for legal costs etc. in all cases above purchase price).
Note: Barter money/funds or trade dollars are not acceptable sources of equity/genuine savings. 3.12.2 Non Genuine Savings The following do not contribute towards the 5% genuine savings requirement:
• Gifts or inheritance
• Proposed savings plans or Rental Purchase Plans of any kind
• Sale of assets other than real estate e.g.: motor vehicle
• First Home Owners Grant (FHOG)
• Funds held in company/business accounts. A sole trader will be considered on a case by case basis for genuine savings where regular deposits are made and savings are accumulated.
• Proceeds of a personal loan
• Trade dollars
• Builders or vendors rebate/incentive. 3.12.3 Gift Any gift that provides Borrower(s) as all or part of their deposit (equity) must be supported by a Statutory Declaration from the gift provider, stating the amount of the gift and that the monies are a non-refundable, non-repayable gift. This condition is mandatory. Gifts must be from immediate family members.
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If the gift is from overseas sources where it is difficult to obtain the Statutory Declaration, the Borrower is to provide a Statutory Declaration plus evidence of Origin MMS payment into a bank account in the applicant’s name (bank statement to be provided confirming this). A certified translation must be provided where applicable.
Origin MMS may require documentary evidence of the availability of the proposed gifted funds. 3.12.4 Repayable Gifts/Additional Borrowings Repayable gifts must come in the form of Statutory Declaration from the gift provider, stating the amount of the gift and specify the terms for repayment i.e. the monthly repayment amount must be disclosed.
Additional borrowings are acceptable provided it is fully disclosed by evidence from the financial institution noting loan amount & monthly repayments and loan term.
The monthly repayment must be included as additional commitments in the servicing calculation for both of the above instances.
The maximum LVR on this loan cannot exceed 85%.
3.13 Security Properties
All loans are to be secured by a registered first mortgage and all security properties should be in good condition, free of defects, readily saleable and zoned for residential use.
The sale of the loan security is an alternative method of clearing the loan debt if the borrower/s does not fulfil their repayment obligations. 3.13.1 Acceptable Security Types Standard Residential Property is property that is primarily used for the purpose of private housing. This includes home industry or home office (as defined by the local government authority, for example hairdresser or accountant). This also includes both owner occupier and tenanted properties.
The acceptable security types include:
• Houses
• Units
• Flats
• Apartments
• Villas
• Duplexes/Dual Occupancy
• Townhouses
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• Rural Residential
• Vacant Land (Construction Loans only)
• Warehouse Conversions
• House and Land Packages
3.13.1.2 Residential Vacant Land Security Vacant residential land is unacceptable as stand-alone security except where:
• the application is for a construction loan; and
• the borrowers intend to commence construction immediately.
In these circumstances it is subject to the following guidelines:
• Vacant land must be zoned residential or rural residential
• Vacant land is a form of security where the land is devoid of any improvements
• Security with improvements valued at < 10% of total value of security are to classed as vacant land
• Zoning must be residential or rural residential. Where the actual Zoning is not residential or rural residential, but the Current Use is residential and the valuation confirms residential use Origin will consider these applications on a case-by-case basis
• Must have 3 comparable sales within policy and free of any adverse features and not subject to an extended selling period.
• Please refer to Product Parameters for applicable products available and loan amount restrictions.
• The vacant land must have sealed road access and connected utilities (i.e. power, water phone & sewerage)
• No commercial vacant land will be accepted as security
• The land must not be used to derive farm income – it must be solely for private residential purposes
• Valuation is mandatory and must confirm that the land is a suitable building block and meets the requirements for residential construction as advised by the relevant local authority
• Registered first mortgage security only
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3.13.1.3 Leasehold Property (Crown Lease) This is only applicable to property located in the ACT or other known leasehold properties. Lease term remaining must exceed term of the loan by at least 5 years.
The LVR applicable will be dependent on the Security LVR (type of security, size of the unit etc.) and Postcode LVR whichever is lower.
3.13.1.4 Warehouse Conversions Where a loan is secured by typically higher risk property type Origin MMS will consider such an application based on the merits and strength of the borrower’s overall position.
Complex must be completed at time of application in a strong location with no adverse comments in the valuation report.
Maximum LVR is 80%
3.13.1.5 House and Land Packages Origin MMS will consider such properties subject to the following conditions:
• Property must be completed
• Valuation report must note that property is part of house and land package and note any rebates and/or any incentives
• The value of the rebates and/or incentives must be discounted from the purchase price 3.13.2 Unacceptable Security Types Origin MMS does not accept property for security that is commercial in nature, specialised or has a very limited market.
The unacceptable security types include:
• Properties with a minimum living area of less than 40m2 (excluding balconies, storage space and parking)
• NRAS properties with a minimum living area of less than 50m2 (excluding balconies, storage space and parking)
• Properties with five (5) or more risk ratings equal to or greater than four (4) on the valuation report
• Properties with three (3) or more risk ratings equal to five (5) on the valuation report
• “Time-share” arrangement properties
• Properties to be constructed by an owner builder. Refer to Construction Loans
• Company Title & Company Share Title (VIC).
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• Crown Land (except ACT)
• Leasehold properties (other than Crown Land in ACT if at least 40 years remaining)
• Purple Title (WA) or Moiety Title (SA)
• Land subject to licence to occupy
• Limited Title (any defects)
• Properties with “Lease of Life” covenants on title
• Properties subject to the Western Lands Act
• Properties subject to “mines subsidence”
• Security properties subject to resumption orders by State or Commonwealth authorities
• Properties located outside Australia
• Flood impacted
• Properties affected by land slip
• Income-producing properties
• Backpacker hostels or boarding-houses
• Brothels
• Properties with an area in excess of 10 hectares
• Properties with restrictive usage
• Retirement Complex Units
• Exhibition/Display Homes
• Transportable Homes
• Relocated Homes
• Properties designed, zoned or used for commercial purposes (excludes residential home units in a commercially zoned development)
• Rural zoned properties (unless current use is residential on the valuation report)
• Mobile or temporary homes
• Serviced apartments
• Dual key apartments
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• Studio apartments/Bedsitters
• Bachelor Units
• Properties affected by contamination
• Vacant land where the borrower has no intention to construct a dwelling within 12 months from settlement of the loan 3.13.3 Security Location Real properties offered as loan securities vary in market value and ease of sale. As a result, the risk to Origin MMS differs. One way of managing this risk and the quality of the loan portfolio is to classify these properties by geographic locations.
There are 4 distinct locality zones used by Origin MMS:
• Metro
• Non-Metro
• Regional
• Unclassified
Please refer to Section 4.0 Postcode Matrix.
A reduced Loan-to-Value Ratio (LVR) may apply where Origin MMS considers an area to be of higher risk or a reduced maximum lend may be imposed.
Consideration may still be given on properties subject to the availability of Lender’s Mortgage Insurance and Credit approval. 3.13.4 Minimum requirements for Security Properties • Must be zoned for residential or rural residential use only. Where the actual Zoning is not residential or rural residential, but the Current Use is residential and the valuation report confirms residential use Origin will consider these applications on a case-by-case basis
• Must be one or a combination of a house, villa, home unit/apartment, townhouse, duplex
• Power & water must be connected
• Must be 100% complete and confirmed by valuation report (construction loans are the only exception to this requirement)
• Direct vehicular access is available (e.g. an island with a bridge that links it with the mainland is an acceptable location).
• No adverse features such as the need for essential repairs, poorly maintained or environmental issues
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• A minimum of 40m2 of actual living space excluding balconies, storage space and car spaces on property title
Acceptable forms of land tenure include:
• Freehold (Torrens Title, Strata Title, Group and Community Titles)
• Crown Leasehold (subject to the lease not expiring until a date at least 5 years past maturity date of loan) 3.13.5 Concentration Limits Concentration limit is a form of control mechanism for the management of identified risk exposures. Concentration limit will be monitored and adjusted in line with market forces and business objectives to control Origin MMS’s exposure to different portfolio risk dimensions, which may include:
• Security type (e.g. vertical/horizontal development)
• Industry
• Geography
• Product
• Borrower
• Risk rating
Security concentration limits are restricted to a maximum 20% of the total dwellings in any one development. For High Density Postcode Properties (any development with more than 30 apartments) the maximum concentration limit is 10%.
Borrowers are restricted to a maximum of 3 properties in any one development regardless of the above concentration limits.
Origin MMS can alter its concentration limits at any time based on changes in market conditions that occur from time to time. 3.13.6 High Density Postcode Properties A high density postcode property is a strata titled apartment which forms part of a development comprising more than 30 apartments in high density postcodes (see 4.0 Postcode Matrix):
A development can comprise more than one (1) tower to reach the 30 apartments.
The following restrictions & conditions apply to this type of security:
• Maximum LVR is 80%
• Maximum exposure is limited to 10% of the development.
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• At least 2 of the comparable sales in the valuation report must be from similar apartments outside the actual development. Only resales within the complex should form part of the additional comparable sales
• General commentary from the valuer to be noted for such items as oversupply & two tier marketing if applicable.
• Minimum floor size 40m2 excluding balcony & car spaces with at least one bedroom separate from the living areas 3.13.7 Inner-City Postcode Properties The following restrictions & conditions apply to this type of security location:
• Maximum LVR is 80% 3.13.8 Regional Postcode Properties (Category 3) The following restrictions & conditions apply to this type of security location:
• Maximum LVR is 70%
• Minimum town size population 5,000 or the property is within 25k radius of a major regional town with a population of 25,000 3.13.9 Unclassified Postcode Properties The following restrictions & conditions apply to this type of security location:
• Maximum LVR is 70%
• Minimum town size population 5,000 or the property is within 25k radius of a major regional town with a population of 25,000 3.13.10 Third Party Mortgages Origin MMS will consider on a case by case basis a proposal that includes security from a third party. The security/s offered can be offered in the names of-:
• The Borrower and a third-party; or
• A third-party only.
The borrower must meet Origin MMS’s servicing requirements (i.e. the third-party's income cannot be included to service the loan under any circumstances).
The third-party must be a guarantor to the borrowing and must obtain independent legal and financial advice. This can be waived under the following circumstances
• if borrower is a company and the third party is an active director of that company; or
• the borrower is a director of a company and the company is the third party.
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The guarantor must be a common law spouse or company of the borrower which there are no additional directors apart from the borrowers (an ASIC search must be undertaken to confirm this).
The assets and liabilities of the third party mortgagor must evidence that the mortgagor will not suffer any financial hardship if the security is called upon in the event of default.
A signed privacy act must be held for all third parties and credit reports obtained which must be clear of ANY adverse history
The security must not be an owner occupied residence and the third party security provider must not reside in the property. In addition, the third party security provider must not rely on the income from this property as their primary source of income.
An example of an acceptable third party mortgage is-
Mr. and Mrs. Jones are borrowers and meet Origin MMS servicing requirements. The security is a mortgage over property owned by Mr. and Mrs. Jones and another property owned by their family company, X Pty Limited. X Pty Limited must be a guarantor.
The table below sets out those instances where Origin MMS will consider third party mortgages / guarantees:
Borrower Mortgagor/Guarantor Acceptability
A & B Jones A Jones or B Jones Y
A Jones or B Jones A & B Jones Y
A Jones B Jones Only if mortgagor is common law spouse of the borrower
A& B & C Jones A& B Jones Y
A & B Jones Pty Ltd A& B Jones Only if both guarantors are the only directors of the borrower company
A& B Jones A & B Jones Pty Ltd Only if borrowers are the only directors of the guarantor company
A Jones D Smith Only if mortgagor is common law spouse of the borrower
B Jones B Jones & D Smith Only if mortgagors are common law spouses
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3.13.11 Non Arm’s Length Transactions Origin MMS considers a Non Arm’s Length Transaction to be one of the following transactions:
• Sale of a property where there is no licensed real estate agent acting for the vendor (the contract will usually say” without the intervention of an agent”). Sales directly from developers should also be considered as Non Arm’s Length transactions
3.13.11.1 Purchase without the intervention of an agent Normal lending criteria to apply in all cases
Genuine savings to be confirmed if LVR > 90% to be considered
The LVR will be based on the lower of the purchase price or valuation amounts
3.13.11.2 Favourable Purchase Advantageous/favourable purchase to a family member at a discounted (below market value) price. Immediate family members include:
• Spouse/defacto
• Parents/children
• Siblings and
• Grandparents/grandchildren
In these circumstances a valuation is required and must refer to both the nature of the sale and the sale price. The LVR is determined using the valuation amount.
Example:
Parents agree to sell a property valued at $300,000 to their daughter for a reduced price of $270,000. Origin MMS recognises the value of the security as $300,000.
For favourable purchases:
• Borrowers must provide at least 5% of the purchase price from genuine savings. (e.g. Advantageous purchase is not a substitute for genuine savings).
• Maximum LVR 90%
• LVR will be based on the valuation amount.
• If purchase price is substantially lower than the valuation amount, borrowers are required to provide a Statutory Declaration from the vendor stating that the equity in the property is being gifted and is not subject to being repaid at any time in the future. The Statutory Declaration must state the relationship between the parties.
• Origin MMS will consider favourable purchases from immediate family only
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• All credit policy requirements must be satisfied without any exceptions
• Borrowers must provide full verification documents as per Origin MMS policy. No reduced certification products are available for favourable purchases
• The asset and liability position of the Borrower is to be commensurate with the age and personal circumstances of the Borrower.
• The valuer instructed to undertake the valuation must be notified at time of instruction that the transaction is of a non arm’s length nature.
• The valuation report must have commentary to reflect this and must note the purchase price in all instances
3.14 Security Valuations
A valuation report completed by a qualified valuer is required for all properties to be offered to Origin MMS as security. 3.14.1 Approved Valuers All Valuers must be suitably qualified and licensed and must conform to API or equivalent professional industry body standards and requirements.
Origin MMS using CoreLogic’s Valex solution for the purpose of obtaining valuations and managing the Origin MMS Valuer Panel. Authorised Mortgage Managers will be provided access to Origin MMS Valex site to order valuations on behalf of Origin MMS (Subject to prior consent from Origin MMS). 3.14.2 Currency of Valuation A valuation must be less than four (4) months old at the date of settlement. The date on the valuation report is deemed as the first day in the 4month period.
A new report must be undertaken if this period has expired. A letter from the valuer confirming the Origin MMS report may be relied upon is unacceptable. 3.14.3 Valuation Report The valuation report must adhere to the following requirements:
• Any component of GST cost must be excluded from any valuation amount
• The report must confirm the property is suitable for first mortgage lending purposes
• Value must be based on current or ”as-is” condition or on an on-completion basis for construction loans
• Separate values must be provided for land and improvements of a property (except for strata title units)
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• All reports must be signed by the actual valuer who undertook the valuation and co- signed by an AAPI or equivalent (if the actual valuer is not an AAPI or equivalent).
The valuation report must:
• Be carried out by a registered licensed valuer who carries adequate Professional Indemnity insurance
• Be addressed to Origin MMS Mortgage Management Services and other Interested Parties
• Provide details as outlined in the API Property Pro Pro-Forma Report
• Be signed and dated by a qualified valuer.
• Be less than 90 days old at the date of the application
Make specific comment where any of the following apply:
• Favourable purchase
• Off-the-plan purchase
• Without the intervention of an agent
• Two-tier marketing
• Builder or seller incentives
3.14.3.1 Checking, signing and certification All valuation reports must be prepared by valuers who are:
• Current financial members of the Australian Property Institute (API)
• Registered or licensed in the state or territory in which the relevant property is located and be one of the following classifications of API members (or such equivalent classifications in any other recognised valuation industry body, and hold Certified Practicing Valuer (CPV) status:
o Technical Associate (TAAPI)
o Associate (AAPI)
o Fellow (FAPI)
o Life Fellow (LFAPI)
Where valuation reports signed by GAPI (Graduate), TAAPI (Technical) and PAAPI (Provisional Associate) API members with less than 2 years full time post graduate valuation experience are only acceptable when countersigned by a valuer holding one of the above classifications (or equivalents).
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Residential property valuations undertaken by a SAPI (Student) member of the API (or equivalent) are not acceptable.
Valuations must be checked and approved for accuracy and compliance with this agreement by an authorised officer of the Valuer having regard to the requirements specified in this agreement and any instructions from Origin MMS, the Mortgagee or the funder.
3.14.3.2 Valuation Appeals Valuation appeals are not normally accepted; however, in certain circumstances it is permissible to request a review of a valuation report.
These will be assessed on a case by case basis and will also need to be referred for review by the LMI provider.
3.14.3.3 Significant variation between Valuation and Purchase Price / Contract of Sale If the formal valuation amount is less than the purchase price of the subject property by 10% or more, the borrower needs to be promptly informed of the situation once identified and given the option to either proceed or withdraw the loan application and given the opportunity to seek independent advice before accepting Origin MMS loan offer.
Variations of this nature could be the result of “two tier marketing”, which is the practice of having two prices or tiers in a real estate market, one for locals who know the market values in the area, and one price for other buyers, often from interstate or overseas, who are not aware of local market prices. Where a Valuation indicates two tier marketing techniques may be in use, additional care is to be taken to ensure the current market value is used in calculating the applicable LVR.
Two tier marketing typically involves people unfamiliar with the local market purchasing property in excess of the actual value. Origin MMS does not willingly participate in any two tier marketing arrangements as the practice is considered unethical and potentially exposes Origin MMS and the borrower to a security shortfall.
There are to be no exceptions to this requirement.
3.14.3.4 Valuers’ Standing Instructions Valuations are ordered via CoreLogic’s Valex system. The minimum standards are:
▪ The valuer will only accept Valuation instructions via the Valex system
▪ The valuer must have local knowledge and competence in the geographical area of the property being valued
▪ All valuations must be prepared in a fixed format as agreed (i.e. API Property Pro-forma Report)
▪ The purpose of each valuation is to determine the current market value and the suitability of the property for mortgage security purpose.
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▪ The valuation is made on a simple in possession and unencumbered basis (unless otherwise stated) subject to any existing or agreed tenancies.
▪ The valuation must be for first mortgage purposes and suitable security
▪ Any other matters not mentioned below that may affect the value, leasing or sale of the property, or affect its value as security, must be brought to the attention of Origin MMS.
▪ The valuation report must be signed and dated by the valuer who undertook the inspection / valuation. This valuer must be authorised by Origin MMS and must be a registered valuer. The valuer acknowledges that it will be responsible for ensuring all agreed standards are maintained by its employees, agents and subcontractors conducting valuations on behalf of the principal. It also acknowledges that its professional indemnity extends to all activities performed by its employees, agents and subcontractors.
▪ The valuer acknowledges that the valuation report will be relied upon in deciding to approve a loan facility for which the valuation was sought.
3.14.3.5 Interested Parties The valuation must note that it can be relied upon by:
▪ Origin Mortgage Management Services
▪ Columbus Capital Pty Ltd
▪ Genworth Financial Mortgage Insurance Pty Ltd
▪ QBE Lenders Mortgage Insurance Limited
▪ Respective related companies of LMI providers, as advised
▪ Perpetual Corporate Trust Limited
▪ Permanent Custodians Limited
▪ Any other parties as directed by Origin MMS
3.14.3.6 Land Description The description must include the following:
▪ Identify and report on title encumbrances such as easements, covenants, rights of carriageway and (where applicable) their effect on value of the property. Registered interest on the title must be noted;
▪ Physical characteristics of the land should also be reported;
▪ Full address and title reference of the property, with comments on the size, shape and dimensions of the land concerned;
▪ Registered proprietor;
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▪ Any details as per the planning approvals or outstanding orders on the property.
▪ Comments on adequacy of drainage, if susceptible to high flood risk or land slip, etc.;
3.14.3.7 Location Description The description must include the following:
▪ Comments on any general trends within the surrounding area such as traffic flows, transport availability, population trends etc.
▪ Description of the property’s proximity to local facilities, amenities and services.
▪ Comments on the zoning of the property, and whether existing or potential usage complies with zoning.
▪ Description of age and quality of surrounding properties and the status of the locality;
▪ Comments on location of the property, its appropriateness for the proposed use etc.;
3.14.3.8 Property Improvements Description The description must include the following:
▪ Comments on the layout of the building; and vehicular access etc.;
▪ Comments on any adverse features of the property and its value impact;
▪ Comments on any special features that the property may have which could inhibit any alternative use, or alternatively restrict its appeal to any subsequent purchaser;
▪ Comments on potential impacts by pest, rail, road, air, high voltage power lines etc.;
▪ Comments on the adequacy of services connected or available to the property;
▪ Comments on the suitability of the existing or proposed usage, i.e. is the property specialised in nature etc.;
▪ Comments on any additional improvements that have been carried out, note the age, quality of work and if there is any obvious non-compliance to local Council regulations. Otherwise note if there is any deterioration etc.;
▪ Description of the improvements such as size (gross area and net let able floor dimension), shape of the buildings, the architectural style, quality of finish, floor plan, age, condition and the general state of repair etc.;
▪ Make all necessary enquiries from statutory bodies to establish the existence of any outstanding orders in relation to fire; and
▪ Comments on the existence of rental guarantees provided by the vendor. These are to be excluded from the valuation.
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3.14.3.9 Valuation Risk Rating Any valuation report that contains adverse comments on marketability, major defects, environmental impacts, government planning scheme impacts, property resumptions or has more than 3 risk ratings of 3 or any risk ratings of 4 or greater must have appropriate commentary in the report commenting on these.
3.14.3.10 Comparable Sales The valuation report must contain a minimum of 3 acceptable comparable sales within the last 6 months. If the security is a unit or apartment, at least 2 comparable sales outside of the subject development are required.
Comparable sales must be within an acceptable tolerance level (i.e. 10% of the security property value) and within a 5km radius of the security. If not, sufficient commentary by the Valuer must be provided in the commentary of the report.
3.14.3.11 Marketability Comments on market absorption, supply and demand trends (willing buyer/seller), competitive situation, and their impact upon the property are critical to its valuation;
Analysis (detailed if necessary) of the current and future market trends and supplementary market study (if appropriate); and
Advice on the length of time required to either sell or let the property.
3.14.3.12 Photos All Full On-Premise valuation reports must have at least two (2) photos provided.
The photos must be of the front & rear aspects of the property for free standing dwellings. Units/apartments must have an internal & streetscape showing the building where the security is located.
Additional photos must be provided where it is deemed an adverse feature exists to the property e.g. high tension transmission power lines, essential repairs/faults with property.
3.14.3.13 Cancelling or Withdrawing Valuations Valuations can only be cancelled/withdrawn if the borrower is not proceeding with their application or a purchase is not proceeding
Under no circumstances should a valuation request be withdrawn from a valuer purely on the basis that the valuer does not concur with the expectation of an introducer/Origin MMS.
3.14.3.14 Contract of sale A contract of sale or sale and purchase agreement must be completed and signed by the vendor and purchaser, or their representative.
A contract of sale or sale and purchase agreement is insufficient to confirm a property’s value. A valuation is required in all instances.
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4.0 Postcode Matrix The following tables provide the Origin MMS property postcode categorisation. Any postcodes that are not specified below are Unclassified. Origin MMS will assess applications for loans that provide a property as security in an unclassified location on a case-by-case basis.
Acceptable Security Location Postcodes
State Metro (Category 1) Non-Metro (Category 2) Regional (Category 3) 2000 thru 2011, 2324 thru 2326, 2360, 2380, 2400, 2427, 2015 thru 2234, 2330, 2431, 2440, 2447, 2448, 2250 thru 2265, 2333 thru 2335, 2454, 2455, 2463, 2466, 2267, 2278, 2350 2470, 2536, 2537, 2546, 2280 thru 2308, 2428 thru 2430, 2548, 2549, 2550, 2551, 2315 thru 2323, 2443, 2582, 2583, 2594, 2628, 2327, 2340, 2444, 2445 thru 2446, 2630, 2642, 2643, 2647, NSW 2450 thru 2452, 2456, 2460, 2464, 2710, 2720, 2790, 2794, 2477 thru 2489, 2490, 2535, 2850, 2870, 2880 2500 thru 2534, 2538 thru 2541, 2555 thru 2579, 2580, 2680, 2731, 2619 thru 2621, 2738 thru 2739, 2640, 2641, 2650, 2651, 2800 2745 thru 2774, 2776 thru 2785, 2795, 2830 2600 thru 2618, ACT 2900 thru 2914 3000 thru 3207, 3217, 3230, 3280, 3350, 3231, 3249, 3250, 3300, 3211 thru 3216, 3355 thru 3356, 3305, 3331, 3352, 3357, 3218 thru 3228, 3437 thru 3438, 3363, 3377, 3400, 3431, 3232 thru 3234, 3460 thru 3461, 3440, 3442, 3444, 3450, 3335 thru 3341, 3500 thru 3501, 3465, 3585, 3616, 3620, 3429, 3690, 3750, 3752, 3550 thru 3556, 3629, 3636, 3647, 3660, VIC 3754 thru 3755, 3564, 3630, 3631, 3691, 3672, 3677, 3730, 3758, 3765 thru 3767, 3756, 3757, 3759, 3761, 3764, 3814, 3815, 3816, 3781 thru 3796, 3770, 3775, 3777, 3840, 3818, 3820, 3823, 3824, 3802 thru 3810, 3842, 3844 3825, 3850, 3875, 3880, 3812, 3909, 3922, 3980, 3981, 3910 thru 3920, 3995, 3996 3926 thru 3944, 3975 thru 3978 4000 thru 4022, 4270, 4271, 4272, 4352, 4285, 4343, 4405, 4610, 4030 thru 4179, 4370, 4514, 4521, 4568, 4650, 4737, 4800, 4805, 4205 thru 4221, 4570, 4655, 4670, 4680, 4807, 4808, 4816, 4820, 4223 thru 4229, 4703, 4710, 4720, 4753, 4821, 4823, 4825, 4850, QLD 4280, 4802, 4819, 4877, 4881, 4860, 4880 4300 thru 4306, 4883 4350, 4500 thru 4512, 4516 thru 4520,
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4550 thru 4567, 4572, 4573, 4575, 4700, 4701, 4711, 4740, 4750, 4751, 4810 thru 4815, 4817, 4818, 4865, 4868, 4869, 4870, 4878, 4879 5000 thru 5174, 5211, 5212, 5213, 5214, 5201, 5202, 5203, 5204, 5231 thru 5234, 5290, 5355, 5600, 5608, 5252, 5253, 5255, 5280, 5240 thru 5251 5609, 5719 5291, 5333, 5341, 5343, SA 5345, 5351, 5352, 5353, 5354, 5453, 5501, 5540, 5554, 5556, 5558, 5606, 5607, 5700 6000 thru 6214, 6290, 6450, 6725, 6726 6225, 6333, 6401, 6430, WA 6229, 6230, 6232, 6233, 6432, 6713, 6714, 6721, 6280, 6281, 6282, 6284, 6722 6285, 6330, 6530 7000 thru 7019, 7025, 7173, 7307, 7310, 7030, 7316, 7320, 7325 7021, 7315 TAS 7050 thru 7055, 7170, 7171, 7172, 7248, 7249, 7250, 7258, 7277, 7290, 7300 NT 0800 thru 0820, 0835, 0836, 0870 0850 0828 thru 0832
High Density Postcodes
State NSW VIC QLD SA/WA/NT/TAS 2000, 2006, 2008, 3000, 3004, 3005, 4000, 4001, 5000, 2017, 2019, 2077, 3006, 3007, 3008, 4002,4003, 4004, 6000, 6001, 6002, 2112, 2113, 2114, 3030, 3067, 3141, 4005, 4006, 4009, 6003, 6004, 6005, 2138, 2141, 2142, 3181, 3205 4010, 4101, 4169, 6018, 6107, 6210, 2144, 2148, 2150, 4215, 4216, 4217, 0800, 2154, 2170, 2193, 4218, 4870, 4879 7000 2200, 2205, 2216
Inner-City Postcodes
State NSW VIC QLD SA/WA/NT/TAS 2000 thru 2005 3000 thru 3010, 4000 thru 4004, 5000 thru 5005, 8000 thru 8399 9000 thru 9299 6000 thru 6004, 7000 thru 7003
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Origin MMS Lending Policy
5.0 Loan Variations
5.1 Overview
From time to time a borrower will approach the Originator / Mortgage Manager for a variation on their existing borrowings. Origin MMS will consider such requests in line with current lending policy guidelines at the time of application being received.
Variations will include but not be limited to:
▪ Increases on existing loan
▪ Substitution of security
▪ Additional security with increase in borrowings
▪ Partial discharge
▪ Name change (e.g.: removal of 1 borrower from joint application and/or adding a new borrower)
▪ Increase in loan term
▪ Property subdivision, Easements and Redefinition of Boundaries
▪ Product switch
▪ Consent to Second Mortgage
All variation requests will be considered on a case by case basis and if there is a change in the risk profile of the loan, a new assessment is required and must obtain approval from LMI. 5.1.1 Increase of existing loan An increase to an existing loan requires all the documentation of a new loan and is to be assessed as per the policy for a new loan.
The requirements of a loan increase are:
▪ Complete loan application pack
▪ The loan term can not be extended beyond the remaining Origin MMS loan term
▪ Serviceability is completed on the Origin MMS loan term
▪ Should only be considered for loans settled more than 6 months
▪ Satisfactory conduct of the existing loan
▪ LMI approval is required
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The increase is documented by way of a variation of loan agreement prepared by the panel solicitor. 5.1.2 Substitution of Security Substitution of security involves the release of the current security property and the substitution of a new security property simultaneously.
The requirements of a substitution of security are:
▪ Written request from all parties to the loan
▪ Valuation Report by a panel valuer for the incoming security property
▪ The proposed substitute property must be of a comparable standard and value or better to the property being released and also comply in respects of acceptable security and LVR limit
▪ Must meet product, security and LVR parameters
▪ The new security must meet LMI guidelines and LMI approval will be required
Security Substitution is not allowed on SMSF loans. 5.1.3 Additional Security with Increased Borrowings This is to be treated like a new loan application 5.1.4 Partial Discharge A partial discharge occurs when a borrower is selling one of the security properties of a loan which has multiple security properties.
The requirements of a partial discharge are:
▪ Written request from all parties to the loans
▪ Valuation Report by a panel valuer for the remaining security property
▪ The proposed LVR can not exceed that of the Origin MMS LVR
▪ To ensure LVR parameters, need to determine if additional funds are required
▪ Must meet product parameters
▪ The loan must meet LMI guidelines and be submitted to LMI for approval 5.1.5 Name Change A name change will occur in the following circumstances:
▪ Marriage
▪ Change by deed poll
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Origin MMS Lending Policy
The requirements of a name change are:
▪ Marriage Certificate or Change of Name Certificate form State Registry of Births, Deaths and Marriages
▪ Celebrant provided certificate or deed poll declaration is not acceptable
The must meet LMI guidelines and be submitted to LMI for approval 5.1.6 Increase in loan term An increase in loan term is generally not accepted and will usually only be considered on a case by case basis with the explanation for extension of the loan term.
A new loan application pack may be required for assessment. 5.1.7 Property Subdivision, Easements & Redefinition of Boundaries The requirements of these variations are:
▪ Written request from all parties to the loan
▪ Certified copy of all approved council plans
▪ Copy of prepared documents by borrower’s solicitor
▪ Valuation report by a panel valuer
▪ The loan must meet LMI guidelines and be submitted to LMI for approval
A Panel Solicitor must review all documents for acceptance prior to approval of the variation by Origin MMS
The variation will be documented via a Variation to a Loan Agreement. 5.1.8 Product Switch
5.1.8.1 Variable Rate to Fixed Rate The requirements of changing a product from variable to fixed are:
▪ Written request from all parties to the loan
▪ Approval provided if repayments are within borrowers servicing capabilities
5.1.8.2 Fixed Rate to Variable The requirements of changing a product from fixed to variable are:
▪ Written request from all parties to the loan
▪ Acceptance from borrower of applicable fees e.g. break costs etc
▪ Approval provided if repayments are within borrowers servicing capabilities
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5.1.8.3 Reduced Documentation Loan to Full Documentation Loan The requirements of changing a product from reduced documentation to full documentation are:
▪ Obtain Full employment and income documentation
▪ Employment and income verification to be completed
▪ Approval will be provided via a letter to the borrower.
▪ The loan must meet LMI guidelines and be submitted to LMI for approval
5.1.8.4 Interest Only to Principal and Interest The requirements of changing a product from interest only to principal and interest are:
▪ Written request from all parties to the loan
▪ Approval will be provided via a Variation to a Loan Agreement
▪ The loan must meet LMI guidelines and be submitted to LMI for approval
5.1.8.5 Principal and Interest to Interest Only The requirements of changing a product from principal and interest and interest only are:
▪ Written request from all parties to the loan
▪ Loan is assessed taking into account
▪ Reason for variation
▪ Loan Conduct
▪ Details of the loan e.g. LVR, Loan Amount
▪ The loan must meet LMI guidelines and be submitted to LMI for approval
Approval will be provided via a Variation to a Loan Agreement 5.1.9 Consent to Second Mortgage Consent to a second mortgage will be requested by when a borrower obtains another mortgage on their security property held by Origin MMS.
Approval will be considered conditional upon the trustee retaining priority for the full amount of the approved loan facility, including interest, fees and charges that may accrue under the mortgage
The requirements of consent to second mortgage are:
▪ Written request from all parties to the loan
▪ Second Mortgagee must provide loan amount, interest rate, term and purpose of the advance
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Origin MMS Lending Policy
▪ The loan must meet LMI guidelines and be submitted to LMI for approval
Consent will be subject to the execution of a Letter of Priority. Second Mortgage consent is not allowed on SMSF loans. 5.1.10 Release of Borrower, Mortgagor or Guarantor The release of a Borrower, Mortgagor or Guarantor will occur in some of the following circumstances but not limited to:
▪ Death of a person party to the loan
▪ Divorce
▪ Separation
▪ One party buying the other party out.
The requirements of a release of a party to the loan are:
▪ Written request from all parties to the loan
▪ If death of a party, a copy of the death certificate
▪ A new application and supporting documentation from the remaining party
▪ The remaining party/s to the loan will be assessed and verified as per normal credit criteria
▪ The loan variation must meet LMI guidelines and be submitted to LMI for approval 6.0 Approvals
6.1 Life of Approval
An approval issued by Origin MMS is current for ninety (90) days from the date of issuance by an authorised Origin MMS credit officer (refer to DLA matrix for confirmation of authorised signatories). Origin MMS will, at its sole discretion may grant an extension for imminent settlements.
Any approval that has not settled within 90 days, and not granted an extension, must be treated as a new application and full assessment criteria are to apply. As a minimum the following updated documentation will be required for reassessment;
• Updated Credit Report
• Statutory Declaration from all applicants confirming that there has been no changes in circumstances
• Updated employment and income verification
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Origin MMS Lending Policy
• Updated valuation report
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Origin MMS Lending Policy
Document Revision History
Document Section, Page/s & Text Version Date Author Revised Number
Version 1.0 July 2014 Kris Andrakovic Initial Version
p43 & p44 – start of construction Version 2.8 4 December 2014 Karl Sick period changed to commence within 6 months from initial settlement.
Family Pledge, Constructions Loans, Karl Sick Non Resident Lending, Cash Out Version 2.9 19 October 2015 limits, Serviceability Calculations, LVR Andrew Herring tables and maximum loan size amendments
Investment & Interest Only Maximum LVR capped to 90%. Include Brunei in Non-Resident Version 3.0 31 December 2015 Andrew Herring acceptable countries list. Remove Non-Residents from generic POA policy.
Include specific SMSF policies Remove Non-Resident borrowers
Version 3.1 31 January 2017 Andrew Herring Tighten lending policies for expatriate borrowers Minor amendments to reflect LMI changes
Version 3.2 1 July 2017 Andrew Herring Revised LMI policy
Revised LMI policy for construction loans and regional properties Version 3.3 1 October 2017 Andrew Herring SMSF serviceability amendment for refinance applications
Set maximum LVR for High Density to 80% with LMI required above 70%. Version 3.4 22 January 2018 Andrew Herring Removed loan size distinction between 70% and 80% LVR for Expatriate loans.
Include Self Employed Alternative Documentation requirements. Version 3.5 15 October 2018 Andrew Herring Set Alt Doc max loan size to $1.25m and max LVR to 80%.
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Origin MMS Lending Policy
Introduce Acceptable Visa List. Introduce changes to Living Expense requirements.
Minor amendments following Version 3.5a 23 October 2018 Andrew Herring feedback.
Standardisation of No LMI Policies. Align minimum employment conditions with LMI providers. Version 3.6 22 July 2019 Andrew Herring Adjustments to Minimum Monthly Repayment Stress Testing in-line with APRA’s Prudential Practice Guide (APG 223) July 2019
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