ME amends mortgage serviceability policy

In a note to brokers, ME Bank has announced a number of changes to its mortgage lending policy, effective immediately.

The first of the bank’s changes is the introduction of a Customer Transaction Verification (CTV) process for home loan applications that trigger its living expense business rule, which is triggered if a borrower’s estimated living expenses are lower than the Household Expenditure Measure (HEM) and their surplus income is less than $250 per month.

For applications that require CTV, brokers will need to provide the bank with further supporting documentation, which may include:

• four months of customer transaction history from personal credit card, transaction and savings accounts, covering a minimum of three months, with the latest transaction to be no older than 30 days at submission date; 
• a “high-level review” and discussion of the customer’s living expenses as shown on the statements, with detailed notes to explain the discussion.

Update to living expense categories

ME also announced that it has updated its living expense categories in its home loan application form to reflect changes made to the HEM values in line with requirements from the Australian Prudential Regulation Authority (APRA).

The “other” section of the application form will not need to include the following expenses:

• risk insurances;
• body corporate fees at the applicant’s residence;
• private school fees; and
• any other expenses that are not currently in the ME living expense categories.

Contracts of sale changes

The bank is also increasing the maximum value for the use of contracts of sale (COS), automated valuation model (AVM) and desktop valuations from $1.25 million to $1.5 million.

The bank said the increase is designed to help deliver “a better experience for more brokers and their clients by “reducing the need for time-consuming full valuations and reducing the time to approval”.

[Related: ME appoints new COO]