Clik here to view.
Makes you wonder why banks need practice guides! Why nobody was ever given valuation copies was ‘the issue’
at the impaired loans inquiry! The FBAA is not on the ball......the Valuations were lower than the Purchase Price
and we now know the Purchase Price was inflated by average $130,000 per property! BUT YES all consumers
must receive a copy of the VALUATION.
FBAA calls for APRA to investigate property valuations
https://www.fbaa.com.au/fbaa-calls-for-apra-to-investigate-property-valuations/
The Finance Brokers Association of Australia (FBAA) will ask APRA to investigate how mortgage valuations are calculated, as it believes buyers are being disadvantaged by valuations that are too low.
FBAA chief executive officer Peter White said brokers across the country have reported huge variations in valuations for the same property, sometimes by hundreds of thousands of dollars.
“This is not good enough. Valuations should reflect the true value of a property and incorrect valuations can in some cases prevent buyers from being able to purchase the home they want.”
Mr White said increasingly, lenders were using valuations based on computer-generated market averages, yet this doesn’t take into consideration the individual property.
“In the majority of cases, no one is physically visiting the property anymore, so valuations are being provided sight-unseen,” he explained.
“Every property is different in so many ways, which is why individual assessment will always be more accurate than a formula.”
A recent Queensland property purchased through an FBAA broker was given a valuation range of $350-$460K by a bank, however when the same property was assessed by three other online valuation companies, the valuations were $533-$643K, $537-$605K and $617-$695K.
“How can a property of this price range receive valuations that differ $345K between the lowest and highest?” Mr White asked.
He said it was time for the banking regulator to step in, and that the FBAA would be requesting that directly.
“APRA needs to investigate the Valuation Exchange (ValEx), as well as the arrangements between valuers and banks and how the data is calculated.”
ValEx has previously told brokers not to bother disputing low valuations as “only one or two per cent of valuers actually (change) the figure based on a dispute”.
“It’s time to review the model used for valuation assessments and allow a more effective dispute procedure.”
Draft Prudential Practice Guide
APG 223 – Residential Mortgage Lending
May 2014
http://www.apra.gov.au/adi/Documents/Draft-PPG-APG223.pdf
Prudential practice guides (PPGs) provide guidance on APRA’s view of sound practice in particular areas. PPGs frequently discuss legal requirements from legislation, regulations or APRA’s prudential standards, but do not themselves create enforceable requirements. This PPG aims to outline prudent practices in the management of risks arising from lending secured by mortgages over residential properties, including owner-occupied and investment properties. It applies to authorised deposit-taking institutions (ADIs) as well as to other APRA-regulated institutions that may have exposures to residential mortgages. It should be read in conjunction with prudential standards for ADIs, including:
• Prudential Standard APS 220 Credit Quality (APS 220);
• Prudential Standard CPS 220 Risk Management (CPS 220), which commences on 1 January 2015;
• Prudential Practice Guide CPG 220 Risk Management (CPG 220, currently in draft form); and
• Prudential Standard CPS 510 Governance (CPS 510).
Subject to meeting APRA’s prudential requirements, and legislative and regulatory requirements governing consumer lending by ADIs and third parties acting on their behalf, an APRA-regulated institution has the flexibility to manage residential mortgage lending in a manner that is best suited to achieving its business objectives. Not all of the practices outlined in this PPG will be relevant for every institution and some aspects may vary depending upon the size, complexity and risk profile of the institution.
Page 7
Risk management framework
Page 11
Loan origination
Page 15
Specific loan types
Page 16
Security Valuation
Page 18
Loan to Value ratios
Page 19
Guarantors
Hardship loans and collections
Page 21
Stress Testing
Page 22
LMI