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Mortgage insurer imposes LMI ‘embargo’

A major insurance provider has announced that it would restrict its offering of lender’s mortgage insurance in light of emerging risks associated with the coronavirus outbreak.

QBE Australia has informed lenders that it has imposed a temporary embargo on the provision of lender’s mortgage insurance (LMI) to borrowers employed in industries most affected by the COVID-19 pandemic.

This comes as several lenders, particularly non-banks, reduce their risk appetite for borrowers working in hard-hit industries, which include the retail, tourism, aviation and internment sectors.

Analysts are expecting credit quality to deteriorate in the coming months off the back of weakening economic conditions.  

In a statement to Mortgage Business, QBE said it had already expected responsible lending obligations to “put a stop” to most lending to such borrowers.  

However, QBE said that in imposing the embargo, it aims to provide lender partners with clear guidelines regarding its risk appetite, adding that individual lenders would be free to request an exception.  

“The embargo provides clarity and consistency,” a spokesperson said.  

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“We recognise the need to look at individual borrower’s circumstances and therefore all of our lenders have the ability to seek an exception to this embargo.”

QBE noted that for existing borrowers, it has extended its hardship program to enable lenders to provide COVID-19 assistance, which includes loan repayment holidays if it is “in the consumer’s best interests”.

The QBE spokesperson concluded: “As this situation evolves, we will continue to work with our lenders to do what we think is in the best interests of our people, our customers and the communities in which we operate.”

Mortgage Business also reached out to Genworth Mortgage Insurance for clarity regarding its LMI policy.

A Genworth spokesperson confirmed that their policy remains unchanged and that it would allow lenders to apply their discretion in compliance with responsible lending guidelines.

“Genworth has not changed our underwriting standards and guidelines at this time.

“We support our lenders who must apply responsible lending standards and assess applications on their merits,” a spokesperson said.

“We note the standards require lenders to consider borrower’s current circumstances at the time of lending.”

Genworth also confirmed that it has expanded its hardship policy to allow lenders to provide relief to borrowers affected by the outbreak.

[Related: COVID-19 will have ‘dramatic effect’ on mortgage process]

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