October 2015's Property Gazette

Why is there so much paperwork in lending?

In June 2015 The Credit Contracts and Consumer Finance Amendment Act (commonly known as the Responsible Lending Act) and its code of practice came into force.

All lenders now have to meet the responsible lending obligations outlined in the Act and Responsible Lending Code. This puts New Zealand in line with international best practice but comes with a new set of challenges for lenders and ultimately some extra hoops to jump for borrowers.

So what are the key lender responsibilities?

  • Lenders must make reasonable enquiries before entering into a loan or taking a guarantee to ensure that:
    a) the credit provided meets the borrower’s needs
    b) the borrower can make payments or comply with the guarantee
  • Lenders must help borrowers and guarantors to make an informed decision 
  • Lenders must treat borrower and guarantors reasonable and ethically, including when breaches occur, when unforeseen hardship is suffered and during a repossession process.
  • Lenders must make sure that loans are not oppressive and that they don’t induce borrowers to enter into loans in an oppressive way
  • Lenders must make reasonable inquiries to be satisfied the credit-related insurance will meet the borrower’s requirements and the borrower will be able to make payments without undue hardship. 
  • Advanced Mortgage Solutions can explain all of these responsibilities and how they affect a borrower

Lenders must meet all other legal obligations – including under the Fair Trading Act and the Consumer Guarantees Act.

To ensure you put the best possible application forward when securing a home loan, always use a mortgage broker. This is what we are trained in, we know the pitfalls, what criteria the banks are using. We are in your corner and work hard to get your application approved.

Contact us today for a no obligation chat about your mortgage requirements.

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