Vow Voice 27th July 2017

Last week some of Vow's best commercial loan writers gathered in Hobart. Experienced broker, Ian Fraser, was one of the presenters. Here, he shares his tips on building a diverse revenue stream.

Q. How was the conference?

A. It was awesome! Vow always puts on a good event, where you get to talk to lenders and fellow brokers. You can network, catch up and even workshop deals with them.

Q. How did you get into commercial finance?

A. We actually had a bit of a reverse model, starting in finance for cars and trucks. Then we started doing mortgages, because our clients were asking us for them, and then we got into commercial property.

Q. What's the common theme - how do you build out a new area?

A. It's about your relationship with the client. Once you've built that trust, you're their go-to person for all their financing needs, the person that helps them. Then it's a matter of expanding the relationship - we talk about their dreams and plans and I get to know how I can help them.

Sometimes you can plant a seed, like 'gee you've been renting this place for a bit, have you thought about what buying it would cost?'. Our role is to suggest, not just be a 'yes' person or a one-product broker.

Q. What advice do you have for brokers who want to diversify their revenue?

A. Use the Vow network! They have the products and the people in place for referrals, and that's who you can learn from. Everybody has to start somewhere, and you won't get the knowledge all in one go. So, work with people who can help you learn over time.

The other thing is to ask questions and use that information. As a home loan broker, you get so much information in the fact find process that you can use to broaden the conversation with your client.

Always look for the opportunity and never be afraid to ask for the order.

Changes to home loan credit policy and upfront valuation service

We've made some changes to our home loan credit policy and upfront valuation service. We know these types of updates can be long and detailed, so we've provided a quick summary below.

(For more detail, see the new lending guidelines, here Empower Lending Guidelines July 2017.pdf)

Valuations and contract of sale - we've expanded our valuation policy to allow greater use of contract of sale when determining the security value, up to a maximum LVR of 80%. This is subject to a number of factors including loan size limits and the property valuation.

Removing rates notices - these will no longer be required for loan refinances.

Self-employed - where the applicant is a self-employed professional, evidence of income can be assessed based on the most recent year's financials in isolation. Conditions apply.

Gifts - we're introducing a new gift form for a borrower to use when they receive a financial contribution from a family member or friend to assist with a property purchase. This form is designed to ensure all relevant information relating to the gift is taken into account as part of the loan assessment. insert link Empower Gift & Loan Declaration Form July 2017.pdf

Repayment history when refinancing - for refinances of interest capitalising loans or other facilities where a regular repayment may not be required, we're now requesting further information to show that the applicant is able to make the regular repayment.

Credit card servicing - credit card debts will be assessed at 36% or 3% per month, of the total credit card limit.

SMSF lending - we've reduced our maximum LVR for SMSF home loans to 70%. The minimum net asset position has been increased to $250,000. One or more of the members of the SMSF must already own property in their own name outside of the fund.

Minimum loan amount - the minimum loan amount for all loans, including construction loans, has been increased to $150,000.

HEM update - we've updated our HEM values with the latest data which has been incorporated into our serviceability calculators. (add link Empower Service Ability Calculator 24 July 2017.xlsm

The above changes will be effective Monday 24 July 2017. Any pipeline applications submitted before this date and formally approved prior to Tuesday 8 August 2017 will be assessed in accordance with existing policy.

Changes to our upfront valuation service

We've made some changes to how upfront valuations are ordered, effective Monday 31st July 2017. These include:

A $49 fee will apply for each property valuation that doesn't receive an application within 60 days.

The fee will be debited from your nominated credit card which you will need to provide at the time of ordering each valuation.

We will continue to regularly review the process and monitor ongoing individual usage to ensure we're able to continue offering this service.

Clients can sometimes be less than honest in their dealings with brokers and funders. And unfortunately, this can end up reflecting on you, the broker.

In our recent compliance workshops, we covered some of the ways you can cover yourself when it comes to verification. Here are some of the tips we shared.

1. Run a Veda check

Remember that a broker enquiry does not appear on their file, however, a funder application will. This provides a warning to the broker of a shopped deal.

It's a useful way to see defaults and credit score before lodgement, and to catch undisclosed liabilities. This avoids hassle and headaches later down the track.

It's also another activity to satisfy the 'reasonable enquiry' requirement of the regulations.

2. Verify income two ways

Rules implemented from Nov 2016 require income documentation, and a salary credit check comparing payslips to bank statement credits over 2 pay cycles.

It also requires a second verification, by means of a PAYG summary, notice of assessment, employment letter, or employer phone call.

However, other ways to double check the validity of these are to:

-Run an ABN check of the employer, to ensure they exist (and it's not simply a friend of the applicant)

-Ensure that the payslips matches up with the ABN.

-Review payslip basics - super and annual leave displayed and be wary of rounded numbers

These are just some of the tips shared in our compliance workshops. If you'd like to attend one in the future, check with your State Manager to see when the next one is scheduled.

Will wages growth affect interest rates?

In a much-anticipated speech this Wednesday, the Reserve Bank Governor looked at why stronger labour markets are not generating more upward pressure on wages; and the related question of what this means for the inflation and monetary policy outlook.

Click to find out more