Calls for LMI to be portable gain momentum
Calls for LMI to be portable gain momentum
Posted on Tuesday, September 25 2012 at 12:57 PM
There have been renewed calls from the finance brokerage industry for lenders mortgage insurance (LMI) to be portable in some circumstances.
Borrowers who refinance
a mortgage and switch lenders should be able to effectively transfer the LMI,
it’s argued.
Such a move would make
it easier to change between home loan providers and getting a better deal.
According to a news
report today, the Finance Brokers Association of Australia (FBAA) has called on
the government to consider the idea of portable LMI.
In a letter to the
Senate Economics Reference Committee quoted by The Adviser, FBAA president Peter White says LMI should be
portable if the debt size, security property and repayments are unchanged.
It’s a sentiment echoed
by a number of brokerage firms, consumer advocates and other finance industry
associations.
At the very least, the
FBAA argues there should be an appropriate refund or rebate if the LMI policy
is terminated at any time and not just in the first couple of years of the
loan.
Joe Sirianni is the
executive director of Smartline Personal Mortgage Advisers and says the basic
concept of portability sounds good in theory.
“I don’t know how
practical it would be, though. I doubt it’s as simple as it has been made to
sound. Circumstances change. When a client wants to switch between lenders, the
variables of the loan are no doubt different to when it was first established
and a review would be required.
“The loan balance would
be different, for one. The client’s personal and financial circumstances
might’ve changed, the property value might’ve changed (and) the loan term
would’ve certainly changed.”
While it would make it
easier for people to switch lenders and get a better deal, it would be “pretty
difficult to execute”, he says.
There are two main
providers of LMI in Australia – QBE and Genworth. When the portability debate
has emerged in the past, Genworth warned that such a move would see premiums
increase.
The idea gained
momentum after Treasurer Wayne Swan raised it as a possibility and a way of
reducing the “double-handling” of LMI.
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