Competent Assessment of Loan Files
Credit Guide and Privacy:
Completed, signed and dated copy of the MLB Credit Guide and Privacy Disclosure Statement document. The Credit Guide must be provided before you provide any credit assistance; the date of generation must not postdate any other forms.
Credit Guide must include the following:
• Details of the Licensee including name, ACL number and contact information
• Details of internal and external dispute resolution (IDR and EDR) schemes
• Commissions, fees and charges that may be payable
• Top six lenders used by ACL holder
• Whether commissions to third-party referrers will be paid
• Statement on any volume bonus arrangements in place
• If the Credit Guide is provided by a Credit Representative on behalf of the ACL holder, it must also include the following:
o Details of the Credit Representative including name, CRN and contacts details
o Fees and charges payable directly from the consumer to the Credit Rep
o Information about the CR's IDR scheme
A Privacy Consent is included with the Credit Guide and this must be acknowledged by the clients for the purposes of data retention, data storage and management of the client’s personal information.
You MUST NOT perform a credit check without the customer having signed the Privacy Consent.
Preliminary Assessment and Credit Proposal: (PCA)
Completed, signed and dated copy of the MLB Preliminary Assessment and Credit Proposal document. Document date must precede lodgement with the lender by no greater than ninety (90) days.
The PCA must demonstrate that reasonable investigation and verification has occurred in making the assessment that the loan applied for is “not unsuitable” for the client(s), and that the loan meets their requirements and objectives.
Commission disclosure and any other applicable remuneration must be disclosed in the Credit proposal and must be expressed as a maximum dollar value. Fees and commissions payable to the lender, the broker and other parties must be disclosed as well as the circumstances in which they are payable.
Material Changes Before Settlement
If you become aware of a material change before the settlement of the loan you must advise the lender and issue a replacement Credit Proposal including the PCA to the consumer.
You must also keep adequate records of any material change and you should save these records in Chief
A material change will generally include:
• an increase in the loan amount;
• different product or lender;
• adding or removing an applicant;
• additional liabilities or dependents (previously undisclosed);
• income changes (including any expected future change).
Credit Quote:
Completed, signed and dated copy of the MLB Credit Quote document. Only required where the broker has elected to charge the client(s) a fee, either:
· Any upfront fees for the provision of credit services
Note: The Credit Guide should contain details on fees and charges payable and should make reference to the Credit Quote. The Credit Quote must provide information amount maximum fees payable as a dollar value and must detail the services and situations that will incur the fee. The Credit Quote should be provided at the same time as the Credit Guide.
Manual Fact Find or Electronic Fact Find
Completed copy of the manual fact find document where one has been done.
Electronic Fact Find will automatically populate with the Credit proposal if using Chief
Other Disclosures
Within the disclosure documentation, you must also make declarations and provide assurances with regards to management of Conflicts of Interests and Insurances (confirmation that a conversation around insurances has taken place and that they are comfortable with their current level of cover, or, that they will take steps to investigate appropriate options).
Material Changes After Settlement
A Credit Proposal (with the lender, product, amount, interest rate, payment on it), needs to be given to the customer when you provide credit assistance, before you lodge the loan application.
You also need to issue a new CP document when:
· there is a change of chosen product
· there is a change of Lender
· you submit the application for the loan, the Lender says that product won’t work for this customer due to a change in their policy, so you try for a different loan with that Lender. As this is a different loan product, a new CPDD is to be given to your customer.
You don’t have to issue new NCCP docs when:
· the loan amount is changed, the lender changes the loan amount or repayments, based on their own assessment
· the rate has changed but it’s still the same loan product
· you have to extend an approval after 90 days have passed
· you have identified significant changes to the customer’s financial position, such as change in employment, income and liabilities (But, you should inform the lender about this – your reputation matters too!)
In cases where there are significant changes to the client’s servicing, or servicing was particularly tight, as a matter of best practice it is advisable to quickly review your serviceability calculations to ensure that they are still appropriate for the client.
Product Switches
New Disclosure Documents will need to be issued and a full responsible lending assessment to be made in situations where the switch involves a new contract being issued. The legislation requires that all requirements need to be met when engaging in a credit activity and any loan that involves a new contract (even though it is with the same lender) will trigger all the legislative requirements for a new loan.
Confirm with your BDM to see if a switch form will trigger a new loan contract to be issued.
Competence Assessments of Loan Files
MLB has engaged an independent third party to conduct file audits for brokers. These audits assess up to 5 files for each mortgage broker. The file audit criteria is set by MLB in combination with the third party (QED Risk) and ensures that each loan is assessed against an acceptable standard.
The results of the audit are made known to MLB and the broker. Any corrective actions that are required from the audit are handled by MLB in liaison with the mortgage broker.
Licensees will be expected to enrol in the MLB CompliFast ACL program and have their Credit Representatives participate in the audits as part of that program.
MLB have mandated that all authorised Credit Representatives will have mandatory audits conducted periodically and no less than annually.
What Type of Questions Will Be Asked?
The audit criteria and subsequent questions will change periodically based on legislative changes and industry expectations. A sample of questions that have been in previous audits may include the following:
Credit Guide & Privacy Statement + Privacy Consent
Has a Credit Guide been given to the client?
Has the Privacy Statement been given to the client?
Data Collection & File Notes
· Is there a signed, fully completed source document on file showing needs analysis, fact find or record of interview?
· Are Requirements & Objectives adequately explained and detailed?
· Are loan features adequately detailed?
· Is there sufficient evidence about the clients’ current income and expenses?
· Is there sufficient evidence on file about the clients’ current assets and liabilities?
· Have living expenses been itemised?
· Has a lump sum been used?
· Has the area of Financial Security been addressed within the CNA? i.e. Does the client already have adequate insurance in place or does the client require assistance in this area? If insurance is in place, a statement as to arrangement should be detailed.
· If file evidence indicates that a First HomeOwners Grant is involved, is a copy of the FHOG on file?
· Are there sufficient emails and/or notes recorded in file to support the data collected?
· Have tax file numbers been removed from all documents
Audit Preparation
Each participant will receive notification that they are being audited. It is the broker’s responsibility to load the required documentation into the software in preparation for the audit.
Each broker must follow the appropriate processes in loading the information into Chief software.
Ensure your loan files are loaded into the documents section of the deal.
Chief process: Open the deal > click on the upload files tab Option 1 Drag & Drop files, Option 2 click to Browse files on your computer, select files and click open.
Audit Process
The audits will generally be conducted over the course of one week.
Each question is ranked according to a set of available static responses. The responses to each question are based on a risk weighting. There are generally 4 responses to select for each question. The responses reflect the evidence that has been reviewed based on the information provided.
Where no information is available or where evidence is not available, the risk weighed response indicates that no evidence was found to support the question being raised.
At the conclusion of the audit an algorithm is run to determine the overall risk weighting of the loan. Critical components in the criteria have a higher impact on the overall risk weighting.
Corrective Actions
The results of the audit are made known to MLB and the broker. Any corrective actions that are required from the audit are handled by MLB liaising with the mortgage broker. MLB staff will follow up the broker with corrective actions to ensure they are remedied, rectified or explained.
Brokers will also receive an email that details the file audit results and the corrective actions that need to be addressed for each file. The corrective actions can be loaded into MLBCompliFast using the login and password that is generated when invited for the initial audit through MLBCompliFast.
MLB responsibilities
ACTION
Where files are reviewed and there is evidence of misadventure, misrepresentation or possible fraud, MLB will run a wider investigation to assess the brokers conduct. In a situation where a broker is found to be non-compliant with MLB’s expectations and has failed to address the corrective actions appropriately, MLB will exercise their right in applying sanctions, suspension and terminations.
The MLB response will be determined by the severity of the non-compliance but will result in termination where deliberate fraud and misadventure has been determined.
Loading Supporting Documentation
MLB expects that all supporting evidence is loaded into the Chief for the purposes of future audits and for the purposes of maintaining a complete and accurate record of the verification that was required in meeting the responsible lending obligations.
All loan supporting documentation must be loaded into Chief within 30 days of settlement. The supporting information requirements include:
Disclosure Documentation and consents such as:
· Credit Guide
· Privacy Consent/Statement
· Preliminary Credit Assessment (this should include Client Needs analysis / Requirements and objectives / living expenses)
· Credit Proposal
· Insurance Disclosure
· Credit Quote (if you charge a fee for service or have a claw-back policy)
Identification information such as:
· Verified photographic ID
· Secondary ID sources
Lender documentation / application information such as:
· Lenders Application form / Lenders consents
· Lenders checklist
· Serviceability Calculator
· Verification of Identity disclosures
Income Sources such as:
· Payslips
· Company tax returns
· Individual tax returns
· Notice of Assessment
· Payment Summary
· Accountants declaration
· Any other employment evidence or income evidence
Bank Statements / Accounts such as:
· Saving statements
· Loan statements (where applicable)
· Credit Card statements
· Superannuation statements (if they were required as part of submission)
