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RESIMAC changes policy and pricing for its high LVR business; requires its brokers to deliver 'quality' loans

RESIMAC changes policy and pricing for its high LVR business; requires its brokers to deliver 'quality' loans

Non-bank lender RESIMAC Home Loans has announced a range of changes to its lending rules and fees "to ensure high LVR loans remain viable for the long term".

RESIMAC, which as a non-bank isn't covered by the Reserve Bank's October 1 introduction of "speed limits" on high LVR loans, has seen a considerable upsurge in borrowing interest from would-be home buyers subsequent to the RBNZ moves.

The changes that RESIMAC has announced include introducing an upper limit for lending of 90% LVR.

They are also introducing new low equity margins, and rationing the high LVR lending to selected broker channels who meet new criteria.

"These changes are necessary to ensure we are able to continue to support our selected business partners write high LVR business. This shows RESIMAC Home Loans is committed to continuing to be a real alternative to New Zealand’s major banks,” said Adrienne Church, General Manager of RESIMAC Home Loans.

The changes become effective at the close of businesses on Friday, October 11, 2013.

The specific changes announced are:

- Restrict >80% lending to selected relationships, these relationships have been based on a relationship and quality driven strategy. This strategy rewards specific brokers/advisors for continued loyalty, meeting RESIMAC Home Loans quality expectations for deal packaging and portfolio balancing i.e. LVR spreads, product diversification and conversion rates, this is subject to a monthly review to ensure RESIMAC Home Loans portfolio remains balanced. Existing pipeline deals will be honoured for everyone.

- Introduce a hard LVR cap of 90%.

- Increase low equity margins to 0.50% for 80.01%-85% LVR’s and to 0.90% for 85.01-90% LVR’s.

- Borrowers’ will now be charged the interest rate applicable to the final LVR (loan amount inclusive of fees), for example, if the loan amount inclusive of fees exceeds 85% LVR then the 90% interest rate will be applied.

To add to these changes and in order to reward brokers for submission quality and to improve turnaround times, RESIMAC Home Loans will also introduce a ‘packaging bonus’ and a ‘priority channel’ for fully packaged deals (excluding valuation) regardless of the LVR. Brokers that submit a fully packaged deal will be rewarded with a packaging bonus of $250 payable when the loan settles. This bonus is designed to incentivise brokers to submit applications that meet all of RESIMAC’s requirements and to improve turnaround times, this will be available until 31st January 2014.

In making these changes RESIMAC appears to be aiming for better quality loans by rewarding brokers who deliver them with access to their high LVR loan capacity.

It has this opportunity to make these moves because market conditions are changing as the RBNZ enforces its new high LVR restrictions on the New Zealand banks, rules that don't apply to non-bank lenders like RESIMAC.

The company, a subsidiary of its Australian-based parent, periodically packages home loans into RMBS (residential mortgage backed securities) for investors. It has been operating in New Zealand since December 2011.

It offers standard loans, loans to non-resident New Zealanders and Australian's for their New Zealand property, and lo-doc loans.

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