Mortgage Lending Procedure - MyState Bank

Mortgage Lending Procedure

BROKER VERSION 5.6

(Effective date 4th October 2021)

MyState Bank

Mortgage Lending Procedure

Table of Contents

1. Principles.................................................................................................................................................................................................................................. 6 2. Related Regulation .................................................................................................................................................................................................................. 6 3. Loan Assessment ..................................................................................................................................................................................................................... 7

3.1 General Requirements ......................................................................................................................................................................................... 7 3.2 Responsibilities in Loan Assessment ..................................................................................................................................................................... 7 3.3 Source of Truth.................................................................................................................................................................................................... 8 4. Types of Mortgage Loans ........................................................................................................................................................................................................ 9 4.1 Loan Repayment Terms ....................................................................................................................................................................................... 9 4.2 Interest Only Loans .............................................................................................................................................................................................. 9 4.3 Approval period................................................................................................................................................................................................. 10 5. Documentary Requirement................................................................................................................................................................................................... 10 5.1 Checklists .......................................................................................................................................................................................................... 10 6. Funds to Complete................................................................................................................................................................................................................. 10 6.1 Genuine Savings ................................................................................................................................................................................................ 12 6.2 First Home Owners Grant (FHOG)....................................................................................................................................................................... 14 7. Employment and Income ...................................................................................................................................................................................................... 14 7.1 Unacceptable Employment and Income ............................................................................................................................................................. 14 7.2 Permanent Full Time and Part Time Employees (PAYG)....................................................................................................................................... 15 7.3 Fixed Term Contract Employees ......................................................................................................................................................................... 19 7.4 Casual Employees and/or Second Job ................................................................................................................................................................. 19 7.5 Applicants Employed by Family .......................................................................................................................................................................... 20 7.6 Self Employed.................................................................................................................................................................................................... 20

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MyState Bank

Mortgage Lending Procedure

7.7 Salary Packaging or Salary Sacrifice .................................................................................................................................................................... 24 7.8 Rental Income - Residential................................................................................................................................................................................ 24 7.9 Rental Income - Commercial .............................................................................................................................................................................. 26 7.10 Interest and Dividends ..................................................................................................................................................................................... 27 7.11 Pensions and Government Allowances ............................................................................................................................................................. 27 7.12 Family Allowance (Centrelink Benefits)............................................................................................................................................................. 28 7.13 Child Maintenance or Child Support ................................................................................................................................................................. 28 7.14 Maternity /Paternity leave............................................................................................................................................................................... 28 7.15 Other Income (Air BnB, Bed and Breakfast) ...................................................................................................................................................... 29 7.16 Deductible Interest (Negative Gearing)............................................................................................................................................................. 29 7.17 JobKeeper ....................................................................................................................................................................................................... 31 8. Living Expenses ...................................................................................................................................................................................................................... 31 8.1 Assessment of Dependents and households ....................................................................................................................................................... 31 8.2 Expense Verification .......................................................................................................................................................................................... 32 9. Loan Commitments ............................................................................................................................................................................................................... 34 9.1 Conduct of existing debt .................................................................................................................................................................................... 35 9.2 Credit Report..................................................................................................................................................................................................... 35 9.3 Refinance and Debt Consolidation documentation and conduct.......................................................................................................................... 36 9.4 Assets................................................................................................................................................................................................................ 37 10. Servicing Assessment ............................................................................................................................................................................................................ 37 10.1 Floor Rate........................................................................................................................................................................................................ 38 10.2 Interest Rate Buffer ......................................................................................................................................................................................... 38 10.3 Assessment Rate.............................................................................................................................................................................................. 38

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MyState Bank

Mortgage Lending Procedure

10.4 Exit Strategy .................................................................................................................................................................................................... 39 10.5 Additional Servicing Requirements................................................................................................................................................................... 39 11. Valuations and LVR's ............................................................................................................................................................................................................. 40 11.1 Valuation Types ............................................................................................................................................................................................... 40 11.2 Maximum LVR's ............................................................................................................................................................................................... 40 11.3 Validity of Valuations....................................................................................................................................................................................... 41 11.4 Ineligible Securities .......................................................................................................................................................................................... 42 11.5 Duplexes/ Multiple dwellings on one property ................................................................................................................................................. 43 11.6 High Risk Postcodes and LVR Restrictions ......................................................................................................................................................... 43 11.7 Residential Unit/Subdivision concentration limits............................................................................................................................................. 44 11.8 Luxury Property Threshold ............................................................................................................................................................................... 44 11.9 Parental Guarantee Threshold.......................................................................................................................................................................... 45 11.10 Non-arm's Length Transaction /Favourable Sales ............................................................................................................................................ 45 12. Cash Out Verification Requirements .................................................................................................................................................................................... 46 13. Guarantees and Co-Borrowers.............................................................................................................................................................................................. 47 13.2 Co-Borrowers/ Joint Borrowers ........................................................................................................................................................................ 48 13.3 Guarantors ...................................................................................................................................................................................................... 49 14. Parental Guarantee ............................................................................................................................................................................................................... 54 14.1 Parental Guarantee standards.......................................................................................................................................................................... 54 15. Construction Loans ................................................................................................................................................................................................................ 55 15.1 Fixed Price Contract ......................................................................................................................................................................................... 56 15.2 Progress Payments........................................................................................................................................................................................... 56 15.3 Borrower/ Builder Relationship........................................................................................................................................................................ 58

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MyState Bank

Mortgage Lending Procedure

16. Owner Builders ...................................................................................................................................................................................................................... 58 17. Foreign Income Loans............................................................................................................................................................................................................ 58 18. Loan Maintenance/ Variations ............................................................................................................................................................................................. 59 19. Appendix A ? LVR Requirements............................................................................................................................................................................................ 60 20. Appendix B ? High Risk Postcode Register ............................................................................................................................................................................. 64 21. Appendix C ? Identification Requirements ............................................................................................................................................................................ 65 22 Appendix D ? Covid-19 affected industries and Businesses restricted from opening. .......................................................................................................... 67 23. Appendix E ? First Home Loan Deposit Scheme .................................................................................................................................................................... 72

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