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@canefan said in Coronavirus - New Zealand:
@jc the current lending approval process seems so invasive it would be a miracle for most people to get the OK to borrow money from banks at all
hugely OT but i assume by current you mean "since the GFC"
I bought my first house in 2007, with 5% deposit, some of which was my First Home Buyers grant. Application was a piece of piss, we had good jobs and could afford it
Now? Fucking 25 year old bankers are looking at yur bank statements and questioning why you buy breakfast every day. Want a mortgage Delete your betting apps for 5 months prior. It's over the top invasive bullshit.In business, getting money used to be a reasonably straight forward process, and your price was built on your risk profile?
Now? If it's seen as a risk, they don't want it. Price be damned. We are long standing customers with strong profitability history, and yet for everything i do i spend time with the banks risk department (the most tedious people in the world). We've basically reached a point where banks will only lend to you if you don't really need it.Some in Aus is as a result of the Royal Commission, where, in order to stop thieves in Sydney stealing money from poor and dead people with straight up fraud, they instead made it more difficult to borrow.
Yes, Australian banks are rock solid, but it comes at the price of a fully functioning economy in my very uneducated view. Property values are good though...
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@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
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@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
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@mariner4life said in Coronavirus - New Zealand:
@canefan said in Coronavirus - New Zealand:
@jc the current lending approval process seems so invasive it would be a miracle for most people to get the OK to borrow money from banks at all
hugely OT but i assume by current you mean "since the GFC"
No, I'm assuming he means since the CCCFA act came into being in November.
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@crucial said in Coronavirus - New Zealand:
@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
Someone should tell them to dial it the fuck down. It loads the deck to people who are cashed up
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@crucial said in Coronavirus - New Zealand:
@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
I reckon the later.
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@mariner4life said in Coronavirus - New Zealand:
@crucial said in Coronavirus - New Zealand:
@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
I reckon the later.
Banks are fluffybunnies. That is all
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@mariner4life well yes but the level people need to borrow now is insane.
2005 - If you are borrowing 250k on 80k salar(ies) it’s a no brainer. At 25 tax snd 5% rate u are paying 12.5k interest on 60k earnings. Which leaves 4000 a month snd real growth opportunities for cap gains on global indexes. Hell, may as well pay off the debt too with that surplus!
2022 - same situation is borrow 900k on 120k salary. Tax now 30% Rates at 4% - you pay 36k per year interest on 84k earnings. Not as pretty but still 4000 per month cash! Well yes, but inflation means that’s a lot less than it was … rates is 10% if that already. Growth opportunities all looking awful vs global indexes …. As for paying iff the debt …. HA!
Any lending in NZ now is a bet on continual property growth. It doesn’t add up at all and the potential for default is ridiculously high.
I’d be looking at your breakfast too.
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@canefan said in Coronavirus - New Zealand:
@crucial said in Coronavirus - New Zealand:
@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
Someone should tell them to dial it the fuck down. It loads the deck to people who are cashed up
Not quite. It takes all others out of the game.
It’s cashed up or you aren’t in the game.
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@majorrage fair point,
depressing, but fair point
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@crucial said in Bank Lending/CCCFA:
@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
The government was warned by two different groups what the impact of their legislation would be and chose to ignore it. Fault lays squarely with the government, who once again failed to predict unintended consequences to their ideas.
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The loan process for our current place wasn't as bad as I thought it might be given the bank already had all our spending history. What was eye opening was the amount they were prepared to saddle us with. We LOL'd and said we'll take less than a quarter of that thanks.
I see younger people in newer, flashier houses with new cars and I wonder how that's possible and what the situation will look like once interest rates go north. Following the excitement of 2007-08 the government introduced "responsible lending practices" which have been around for a decade now. So either these people bought before that period and have had the opportunity to pay down debt, or simply lived off the (unrealised) capital gain from market reappraisals. Or they earn more than we do, or have a greater appetite for risk. I guess when the tide goes out we'll see who has been swimming naked.
I do have some sympathy for banks who can't be expected to know when people aren't telling them about obligations they have with other credit providers, or what actually constitutes discretionary income. What's clear is the higher standard has not assisted in letting younger, poorer people into the market. But I fear banking practises are the least of the issues there.
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@kirwan said in Bank Lending/CCCFA:
@crucial said in Bank Lending/CCCFA:
@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
The government was warned by two different groups what the impact of their legislation would be and chose to ignore it. Fault lays squarely with the government, who once again failed to predict unintended consequences to their ideas.
I honestly don't know how it went down or if the banks are playing games because they didn't want to be included and are trying to prove a point. I agree though that the govt decided to call their bluff despite warnings.
The aim of the CCFA was around high interest 'loan shark' type lending and those buy on credit trucks mainly. If you read the legislation there is nothing to say that banks need to do any more than they were actually already doing except put a bit more room for increases into their calcs of affordability.
The risk to the banks is only if a borrower can prove they didn't check affordability or were too optimistic.
I think the big problems come in when mortgages are linked to revolving credit which is how I think banks make lots and borrowers are able to both spend money and afford a mortgage.
My guess is that unless you can show a way of living without extra borrowing then you become high risk for the bank if things fall over.
For more traditional mortgage set ups I don't know if they follow the same strictness of assessment. Mrs C spoke to the bank the other day to see how we would go if we moved down south. As we were looking to end up with a very small mortgage after trading properties they were virtually throwing money at her.
I think in part this is because they now have percentage limits on the low deposit loans on their books. If they can get you business as a high equity borrower that means effectively it releases 10% of your loan amount to be available to low equity loans. -
@crucial said in Bank Lending/CCCFA:
@canefan said in Coronavirus - New Zealand:
@mariner4life my sister lives in Melbourne. Borrowing is a piece of piss if you can simply demonstrate means to service the loan. Here they basically want to weigh your organs just in case they have to harvest them. It's OTT BS
I know that the govt put the onus on banks to check affordability but did anyone actually direct them to be quite so draconian or did they come up with that part themselves?
No. It's a pretence that governments like to keep up that regulators control things. In practice you can never get a regulator to tell you how to do things, they just check afterwards and tell you whether you've got it wrong. And then the risk and legal people point to the actual wording of the regulations and say "we're compliant" and the officials back down, because they know they can't win that argument in court.
The point is the banks are being pricks, but you have to put it in context. The CCCFA amendment was put in place because the banks were accused of lending to people who didn't have the means to repay without encountering hardship if rates increased or the borrower's circumstances changed. In some cases people shouldn't have been given loans or credit at all because they overstated their ability to pay and understated their liabilities. That wasn't all the banks' fault though. The "scorecards" they used to calculate the risks had a major blindspot: non-financial credit like Afterpay. People could have $1000s in debt to those creditors without it appearing on credit agencies' reporting, because they opted out of sharing the info.
Anyway, it's been apparent for several years that th government was going to wield the big stick and appear to be reining the banks in. The way they chose to do that was to make loans unenforceable unless there was clear due diligence checks that demonstrated an ability to repay without hardship. That meant that banks had to consider any lending to people with marginal credit scores or insufficient disposal income as, effectively a potential contingent liability. Banks record loans as assets with offsetting reserve requirements. Riskier loans require higher reserves, which is bad business, because reserves are non-earning. In addition the scorecards usually have tiered rating built in, so it may recommend that you don't get offered a loan unless the rate is higher than usual. The banks could theoretically offer loans at rates well into double digits and so offset the risk somewhat, but we all know that someone is going to print a story at some point saying "Disgusting: Bank A lending at 35%pa". Once again that's bad business. So it's better to screen out anyone that might prove difficult.
The result has been that if person B lied on a loan application and was given a loan on that basis, she could argue that the bank didn't do its due diligence and she's not to blame for that and shouldn't have to repay the loan. She can also make a complaint to the Commerce Commission, regulators, supervisors and the disputes resolution schemes. And why wouldn't she, she could possibly get awarded damages because the bank put her through pain and suffering, and in fact could have what payments she did make refunded.
But the worst thing the CCCFA amendment did was make senior managers and directors personally responsible for any enforcement action. So in the situation above Person B makes a complaint, which is upheld. The GM Lending at Bank A possibly gets censured and fined. The fine can be up to $200,000 per incident. The directors and senior managers are jointly and severally liable alongside the bank for statutory penalties and exemplary damages. Crucially (sorry, no pun intended) the directors and senior managers can insure themselves against statutory penalties but the Act specifically prohibits them from insuring themselves against any damages.
So it'll be no surprise that the directors and senior managers have instructed their staff to be very careful. So there we have the unintended consequence. There are penalties for doing the right thing wrongly (lending money incorrectly) but none for doing the wrong thing rightly (not lending at all). And the outcome of trying to protect vulnerable borrowers is that they can't become borrowers in the first place.
The scorecard algorithms are actually fascinating in themselves, but that's for another time.
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@jc thanks for all of that.
Are you sure though that if a borrower lies on application they can point the finger at the bank? That seems to be first line of defence as you can't protect yourself entirely from a lie.
Edit: due diligence on the veracity of information is a different thing in my eyes
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@crucial said in Bank Lending/CCCFA:
@jc thanks for all of that.
Are you sure though that if a borrower lies on application they can point the finger at the bank? That seems to be first line of defence as you can't protect yourself entirely from a lie.
Edit: due diligence on the veracity of information is a different thing in my eyes
Yes. The principle is that retail borrowers and banks have asymmetric resources. The bank should (in the mind of the people who wrote the law) be able to ferret out any gaps or anomalies. Whereas borrowers are forgetful and sometimes disorganised and can overlook things. In practice banks can't easily argue after the fact that Person B wilfully deceived them (which is of course fraud).
If you say you earn $1000 per week the banks should be able to see the income into a bank account. If you have a 500$ per week pokie habit, once again the bank should be able to see that from your accounts.
By doing the investigative thing, they're effectively cutting the possibility of lying out of the equation, and that's the bit that people find invasive. I think people feel bad when they aren't trusted, but the Act has made it so that trusting someone is out of the question.
Edit: remember when you were a student and the banks chased your business and the branch managers would give you a wink and give you an overdraft extension? Yeah, that's pretty much impossible now. Sad though. I'm glad I was never a retail manager.
Other edit: BTW, people lie. All.The.Time. Sometimes they don't even care that they get caught out. If you worked as a collections person in a bank you'd lose any remaining faith in humanity before your first lunchtime.
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Its when Govt involves themselves in these types without proper consultation with people doing the job, similar happened last year with new compliance for the Insurance and Finance Industry, Govt gives a one size fits all piece of legislation for banks, stock brokers/agent, Finance Advisors, Health, Life Brokers, Fire & General Insurance Brokers, which doesnt, fit, all.
Was talking to my bank manager the other day and it is almost like banks are pushing the envelope to the edge, when they dont need to.
A lady at work, is going through it as they are building a house, her husband owns a very successful business, they have another smaller new, but also successful business, they are borrowing circa 50% of the value of a home that will be worth near 2m upon completion (even accounting for batshit prices up here, it will be a quality pad) yet they are pointing to coffees, dinners etc...
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@taniwharugby said in Bank Lending/CCCFA:
Its when Govt involves themselves in these types without proper consultation with people doing the job, similar happened last year with new compliance for the Insurance and Finance Industry, Govt gives a one size fits all piece of legislation for banks, stock brokers/agent, Finance Advisors, Health, Life Brokers, Fire & General Insurance Brokers, which doesnt, fit, all.
Was talking to my bank manager the other day and it is almost like banks are pushing the envelope to the edge, when they dont need to.
A lady at work, is going through it as they are building a house, her husband owns a very successful business, they have another smaller new, but also successful business, they are borrowing circa 50% of the value of a home that will be worth near 2m upon completion (even accounting for batshit prices up here, it will be a quality pad) yet they are pointing to coffees, dinners etc...
Same happened with me. They want to know everything, it's like the farken Gestapo
Bank Lending/CCCFA
