Mortgage brokers help avoid blacklist finance knockbacks: Industry
The expert knowledge of mortgage brokers has been highlighted after it has emerged that one of Australia’s big four banks will not provide funding on more than 300 residential projects.
The bank, which has not been named, circulated a blacklist of apartment projects to mortgage brokers in late 2010, including 146 projects in Victoria, 100 in New South Wales and the ACT and a 127 in Queensland.
Reasons for not providing mortgages include the type of building, the quality of construction or because of investors turning over units in the building too quickly.
Mortgage Choice and the Mortgage and Finance Association of Australia have highlighted the value of the market knowledge of mortgage brokers, including being aware of lending restrictions and other pitfalls.
“One key reason why over 40% of all new home loans in Australia are sourced through mortgage brokers is that they provide a service one lender cannot – a broad knowledge of our ever-changing market across a wide range of lenders,” says Mortgage Choice spokeswoman Kristy Sheppard.
Phil Naylor, chief executive of the MFAA says an MFAA-approved broker “can save you time and money, provide you with greater choices and help you avoid pitfalls”.
“Our brokers are also backed by industry education and an accreditation process, so you know you’re getting expert guidance,” he says.
While she is unaware of the blacklist, Sheppard tells Property Observer she is aware of mortgage insurers refusing to insure home loans for units within buildings that they already have exposure to, once that exposure reaches a certain point.
Mortgage brokers told The Age banks have an “exposure limit” and would stop financing loans in apartment complexes when between 15% and 25% of the total number of apartments had been financed by one lender.
The CBA says it keeps a ''watch list'' of developments that required extra care for credit and valuations, while NAB says it does not keep a blacklist and judges each application on its merits. Westpac and ANZ have not commented on whether they keep a “blacklist”.
The blacklist includes a development in Forster tagged with “No lending. Refer to credit hotline,” and one in Pymble, on Sydney’s North Shore, due to the developer having difficulty obtaining an occupation certificate.
Blacklisted buildings in Melbourne include an office conversion into one-bedroom units on Flinders Street because its bedrooms had no windows and one on King Street, barred because its “poor location” made it ineligible for residential loans.
Buyers’ agent Catherine Cashmore from JPP Buyer Advocates says anyone buying a blacklisted apartment without a “subject to finance” clause in the contract faces the risk on defaulting on the sale and losing their deposit.
According to Michael Chan from Shape Home Loans the big four banks are growing more reluctant to finance apartments of less than 50 square metres due to the flood of smaller apartments coming onto the market in Melbourne.