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For many people who have experienced insolvency, being able to rebuild a path to homeownership is an emotional journey as well as a financial one, says Xavier Quenon. MPA spoke with the Go Mortgage principal about the importance of helping borrowers with credit issues move forward – a pertinent issue as we traverse the unchartered waters of a pandemic.
When life happens
Aside from the proportion of insolvent individuals who have managed their finances irresponsibly, there are many who have become this way through no fault of their own. The pandemic is a perfect example of the way life can sometimes throw a curve ball and knock you out financially, says Quenon.
“We’ve got a few referrers in the insolvency areas.”
“Having gone through the GFC and seen a lot of things I understand that those mechanisms are not there because you’re a failure in financial management, it’s just that life happens sometimes.”
For those who have become insolvent, being able to draw a line in the sand and start fresh is important, however, there is often a sense of stigma attached that can make the process an emotional one, he says.
“It’s trying to help them rebuild a path to home ownership and feeling good about themselves.”
Mapping the best way forward
It is also an area that not many people learn about until it happens, making education a key part of the process.
“Firstly, understand what’s possible,” he says.
This involves examining what the industry looks at and why, as well as any alternatives and costs that may be incurred.
“There’s all sorts of ways you can help them, whether it’s to write a deal now or prepare them for when they can purchase as normal in the future.”
He adds that about 50% of enquiries they get in the space end up waiting for a couple of years before applying for a home loan.
Hidden credit hits
Since the introduction of CCR, many borrowers who are simply tardy with their finances have been faced with surprise credit shock when applying for a loan, says Quenon.
“We’ve had banks say your client missed a payment 19 months ago on this account, what was it?”
“If you missed your credit card payment in January, that’s going to appear for two years and that’s a misdemeanour.”
The government recently announced it would simplify the current credit rules in order to make it easier to get a loan; putting more onus on the borrower to provide accurate information and removing the “one-size fits all approach.”
“It will be interesting to see which areas actually get simpler – and I believe this will be around the scrutiny of living expenses and the umpteen amount of income checks banks have to make at present to reassure themselves a loan wont ‘go bad’,” says Quenon.
“But with APRA remaining in full force, things like CCR issues, DTI and ratios imposed on banks in regards to high LVR loans, interest only loans and investment weightings, it is yet to be seen that a common sense approach and ‘easy’ lending rules will actually translate to the trenches.”
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