Non-major ME last week became the latest lender to announce that it will no longer allow for the use of foreign income in mortgage servicing calculations
In a statement provided to Your Investment Property, ME general manager credit risk Michael Hendricks said the lender was simply keeping in line with the rest of the industry.
“Last year we formally restricted mortgage borrowing to Australian citizens/PRs and NZ citizens living and working in Australia, although this has never been a major segment for us,” Hendricks said.
“Recently, in line with industry moves, we also formalised our restrictions on the use of foreign income used to service mortgages, including Australian citizens/PRs working or employed overseas,” he said.
Hendricks said the fact that a number of Australia’s biggest financial institutions had expressed concern about the validity of foreign claims meant it made sense for smaller lenders to be similarly cautious.
“The primary driver for the latter is the ability to verify the foreign income. For a bank our size, it difficult for us to put in place processes at suitable costs to manage this segment,” he said.
“These are prudential measures designed to ensure our flow of new business in line with our target market. This is particularly important in light of changes by the majors which can increase demand for smaller banks who haven’t also applied the same policy.”
A number of lenders, both non-major and major have announced they will no longer accept foreign currency or income in servicing calculations, with ANZ and Westpac announcing they were investigating whether they had written loans to foreign borrowers on the back of fraudulent foreign income declarations.
Following that announcement it was also claimed that foreign borrowers were buying falsified bank statements for as little as $200.