Genworth Underwriting LMI Policy Guide
Lenders Mortgage InsuranceUnderwriting GuidelinesAustraliaEffective as at 5 February 2018Genworth LMI Underwriting Guidelines – Australia – 5 February 20181
At Genworth we pride ourselves on our commitment to our lender and broker customers, ensuring each interaction is apositive experience.Our Originations Scenario Centre can assist with all of your enquiries regarding an LMI proposal. If you would like todiscuss a new proposal, a variation to an existing policy, or if you have an enquiry about a premium credit, please contactthe Originations Scenario Centre.Phone: 1300 661 118Email: underwritingsupport@genworth.comHours: 8.30am to 6.00pm, Monday to Friday (AEST)Genworth LMI Underwriting Guidelines – Australia – 5 February 20182
ContentsContents .31Introduction .42Maximum LVR and Loan Amount Matrix .53Security Location Guide .64Product Summary Matrix .85Products .95.1Standard LMI .95.2HomeBuyer Plus .95.3Business Select.105.4Family Pledge .106Borrowers and guarantors . 126.1Acceptable borrowers.126.2Additional underwriting requirements .126.3Unacceptable borrowers .146.4Packages.157Loan purpose . 167.1Acceptable loan purposes .167.2Additional underwriting requirements .167.3Unacceptable loan purposes.208Employment and income . 218.1Acceptable employment .218.2Acceptable income .218.3Unacceptable income types .228.4Income and employment verification .239Serviceability . 2510Savings and equity . 2610.1 Genuine savings .2610.2 Non-genuine savings .2610.3 Genuine savings verification .2711Security . 2811.1 Acceptable security .2811.2 Minimum requirements.2911.3 Additional underwriting requirements .2911.4 Unacceptable securities .3312Security valuation . 3512.1 Valuation verification .3513Loan features . 3613.1 Acceptable loan features .3613.2 Additional underwriting requirements .3614Credit reporting. 3814.1 Ban period .3815Documentation . 3915.1 Documentation required for LMI proposals (short form) .3916Genworth decision . 4017Top Ups . 4218LMI policy variations . 4318.1 Substitution of security .4318.2 Partial release of security .4318.3 Variation refund .4518.4 Loan discharges - cancellations.4519Glossary . 46Genworth LMI Underwriting Guidelines – Australia – 5 February 20183
1 IntroductionWho is Genworth?Genworth Financial Mortgage Insurance Pty Limited (Genworth) is a leading provider of Lenders Mortgage Insurance (LMI)in Australia. LMI has been an important part of the Australian residential mortgage lending market since it was introducedby the Australian Government in 1965.LMI is one way of getting into homeownership without having the 20% deposit which is typically required by most banksand financial institutions. LMI facilitates residential mortgage lending by transferring risk from Lenders to LMI providers,predominantly for high loan-to-value ratio residential mortgage loans.Purpose of these LMI Underwriting GuidelinesThese LMI Underwriting Guidelines (Guidelines) are designed for those involved in the mortgage lending industry to assistin completing LMI proposals. These Guidelines represent the minimum acceptable requirements for submission of an LMIproposal to Genworth and cover some of the common scenarios we receive.The examples given in these Guidelines are not comprehensive. Genworth will consider any LMI proposal that does notmeet these Guidelines based on individual merit if the Lender fully supports the LMI proposal. Genworth reserves the rightto accept and approve LMI proposals in its absolute and sole discretion and decline any LMI proposal notwithstanding theLMI proposal may comply or appear to comply with these Guidelines.Genworth reserves the right to change these Guidelines at any time without prior or subsequent notice.Lenders responsibilityGenworth relies on the Lender to conduct a complete and thorough credit assessment for all loan proposals in accordancewith the principles of responsible lending and the Lender’s own lending guidelines.Lenders must also comply with their duty of disclosure and these Guidelines in connection with Genworth providing LMIunder the Master Policy between Genworth and the Lender.Genworth is not liable for any direct or indirect loss for any reliance or purported reliance on these Guidelines regardlessof how that loss is caused (including negligence).Genworth websiteVisit genworth.com.au for the following resources: LMI Premium Estimator Online Serviceability Calculator Online Security Location Guide FormsOriginations Scenario CentreIf you would like to discuss an LMI proposal before submitting to Genworth, please call our Originations Scenario Centreon 1300 661 118.Genworth LMI Underwriting Guidelines – Australia – 5 February 20184
2 Maximum LVR and Loan Amount MatrixAs a means of regulating the level of acceptable LMI risk, Genworth has maximum LVRs and loan amounts as set out below. Maximum LVRs and loan amounts may varyby product, loan purpose, security type and location and apply on a ‘per security’ basis.For a purchase or construction, the LVR is calculated by dividing the Base Loan Amount by the lesser of the purchase price or the security valuation amount. ForRefinances and Equity Release, the LVR is based on the valuation amount only. The maximum LVR including premium capitalisation must not exceed 100%.Note: Genworth may choose to limit the loan amount or the LVR based on the individual merit of the LMI proposal or the specific loan product.ProductProperty typeLVRCategory 1Category 2Category 3All other0 - 70% 2,000,000 750,000 500,000 500,00070.01 – 80% 2,000,000 750,000 500,000 500,00080.01 - 90% 1,500,000 600,000 450,000 400,00090.01 - 95% 1,150,000 500,000 350,000 300,0000 - 70% 2,000,000 750,000 500,000On application70.01 – 80% 1,500,000 600,000 450,000On application80.01 - 90% 1,300,000 600,000 450,000On application90.01 - 95% 1,000,000 500,000 350,000On application0 – 90% 700,000 400,000 200,000On application90.01 – 95% 600,000---90.01 - 95% 700,000 500,000 350,000-Vacant Land0%----House/unit0 - 80% 1,000,000 750,000 500,000-Vacant Land0 - 80% 600,000 400,000--House/unit0 - 85% 750,000 500,000 400,000-Vacant Land0%----House/unit(owner-occupied)Standard LMIHouse/unit(investment)Vacant LandHomeBuyer PlusBusiness SelectFamily PledgeHouse/unit(owner-occupied)Genworth LMI Underwriting Guidelines – Australia – 5 February 20185
3 Security Location GuideThis Security Location Guide provides details of property locations by postcode. The postcodes are broken up into groupsbased on population figures obtained from the most recent census data, as well as other factors including the geographicspread of the postcode, sales activity, and home prices.The Security Location Guide is to be used in conjunction with the Maximum LVR and Loan Amount Matrix to determine themaximum LVR and loan amount available for a specific security property location. Limits may vary depending on product,property type and loan purpose.NT/TasWASAQldVicNSW/ACTCategory 1Category 223402444245024522477 - 24892500 - 25342555 - 25792600 - 26182619 - 26212640 - 26412650 - 26512745 - 27742776 - 2785279528302900 - 29142324 - 232623302333 - 233523502428 - 243024433000 - 32073211 - 32163218 - 32283232 - 32343335 - 334134293690375037523754 - 37553765 - 37673781 - 37963802 - 381038123910 - 39193926 - 39443975 - 397832173500 - 350132303550 - 35563280356433503630 – 36313355 - 335636913437 - 3438 3756 - 37573460 - 3461375937613770377537773840384238444000 - 4022 4500 - 45124030 - 4179 4516 - 45204205 - 4221 4550 - 45674223 - 4229 4572 – 4573428045754300 - 4306 4700 - 4701435047115000 - 51745231 – 52345240 - 525147404750 - 47514810 - 48154817 - 481848654868 - 48704878 - 48794270 - 42724352437045144521456845705211 - 521452905355465546704680470347104720475356005608 - 5609571948024819487748814883629064506725 - 67260835 - 08360870702571737307731073156000 - 62146229 - 62306232 - 6233080008040810 - 08200828 - 08327000 - 70196280 – 62826284 - 6285633070217050 – 70557170 - 71727248 - 7250653072587277729073002445 - 244624562460246424902535Category 32000 - 20112015 - 22342250 - 2265226722782280 - 23082315 - 232323272538 - 25412580268027312738 - 273928002360238024002427243124402447 - 24482454 - 2455246332313249 - 854343440546104650473724662642 – 2643247026472536 - 25372710254627202548 - 255127902582 - 653814 - 3816358538183616382036203823 - 80 - 398137303995 - 399648004825480548504807 - 48084860481648804820 - 482148235201 - 52045252 - 455351 - 535454535501643064326713 – 671473167320Genworth LMI Underwriting Guidelines – Australia – 5 February 201855405554555655585606 - 560757006721 - 672273256
High DensityThe postcodes below are subject to special conditions where the security is located in a unit development comprisingmore than 10 units/apartments. Refer to High Density section for requirements.NSW2000200620082017201920772112 - 211421382141 - NTTas30003004 - 3008303030673141318132054000 - 40064009 - 4010410141694215 - 42184870487950006000 - 600560186107621008007000Genworth will consider any LMI proposal under Standard LMI product, up to 95% LVR, where the security property islocated in any postcode in Australia that is not included in the Genworth Security Location Guide. LVR and loan amountrestrictions may apply.Visit the Genworth website to access the online Security Location Guide.Genworth LMI Underwriting Guidelines – Australia – 5 February 20187
4 Product Summary MatrixStandard LMIMaximum LVR and loan amount(owner-occupied)Maximum LVR and loan amount(investment)95% 1,150,00090% 1,500,00080% 2,000,00095% 1,000,00090% 1,300,00080% 1,500,000HomeBuyer PlusBusiness SelectFamily Pledge95% 700,00080% 1,000,00085% 750,000--80% 1,000,00085% 750,000Owner-occupiedYesYesYesYesInvestmentYesNot availableYes - excludes refinanceYesMinimum genuine savings/equity –owner-occupied5% for loans with LVR inexcess of 90%Nil20%NilMinimum genuine savings/equity –investment5% for loans with LVR inexcess of 90%Not available20%NilYesYesYesYesYes - maximum LVR 90%NoYesNot availableYesYesYesYesMaximum loan term40 years40 years30 years30 yearsFull documentationYesYesN/AYesLMI Premium CapitalisationYesYesYesYes1.00 : 11.10 : 11.00 : 11.00 : 1 3,000,000 3,000,000 3,000,000 3,000,000First Homebuyer (Firsthome)premium discountYesYesNoYesGraduate PackageYesYesNoNoPrincipal and Interest (P&I)Interest-Only not converting to P&Iwithin 10 yearsInterest-Only converting toP&I within 10 yearsNDIMaximum total exposure (to any oneborrower)Genworth LMI Underwriting Guidelines – Australia – 5 February 20188
5 ProductsThis section provides an overview of: Genworth’s current LMI product range additional underwriting requirements, including verification, that apply to specific LMI products.If you would like to discuss an LMI proposal before submitting to Genworth, please call our Originations ScenarioCentre.5.1 Standard LMIAvailable for a wide range of borrowers, including First Homebuyers and investors wishing to access residentialmortgage finance.5.2 HomeBuyer PlusNote: All loans with an LVR of 90% or less do not require genuine savings and can now be written using StandardLMI product and pricing.Available for borrowers, including First Homebuyers, wishing to purchase an owner-occupied property with limited orno savings, or those wishing to use money not sourced from their own savings as a deposit.Additional underwriting requirementsLoan purpose Owner-occupied onlyExcludes: Purchase or construction of investment property Purchase vacant residential land Home Improvements Refinance existing mortgage Debt Consolidation Equity Release (cash out)Security Excludes: Vacant Land Properties exceeding 2.2 hectaresDeposit/equity Source of deposit must be disclosed Can include family gift or FHOGExcludes borrowed funds such as personal loans, credit cards, loans from familymembers Borrowers Excludes ExpatriatesServiceability Must have an NDI of at least 1.10 : 1All HomeBuyer Plus proposals must be submitted with a copy of the GenworthServiceability CalculatorRepayment type Excludes Interest-Only (unless converting to P&I)Loan features Excludes line of credit (except where taken as part of a Combination Loan)Genworth LMI Underwriting Guidelines – Australia – 5 February 20189
5.3 Business SelectAvailable for Self-Employed borrowers who are unable to produce current financial information or documentation.Additional underwriting requirementsLoan purpose Excludes: Refinance of investment property loans Debt Consolidation Equity Release (cash out)Security Size of property not to exceed 2.2 hectaresDeposit/equity Must have existing equity in real estate; orGenuine personal savings of at least 20% equity of the property purchase; orIf borrowers have recently sold property and are in the process of purchasing another,this requirement can be waivedBorrowers Excludes ExpatriatesEmployment andincome At least one borrower must be Self-EmployedAll Self-Employed borrowers must hold: an active ABN for at least two years; and GST registration for at least 12 monthsDeclared income must be consistent with the borrower’s stated occupation and assetsand liabilities position Loan term Maximum 30 yearsLoan features Excludes Parenting Repayment BreakAdditionalverificationrequirements Signed and dated income declarationPast 12 months’ BAS statements lodged with the ATO including evidence of lodgementfor each trading entity (if the borrower declares income from those trading entities inthe LMI proposal)Past six months’ personal transaction account statements (primary account only) 5.4 Family PledgeAvailable for borrowers, especially First Homebuyers with no deposit, who have an immediate family member that iswilling and able to offer security.Provides access to finance for full purchase price, plus an additional 10% to cover other costs such as stamp duty,renovations or setting up their home.Additional underwriting requirementsLoan purpose Security May include small Debt Consolidation of up to 10% of purchase price (at time of originalloan application only)Excludes: Purchase Vacant Land Home Improvements Refinance existing mortgage Equity Release (cash out) Maximum of two security properties for each LMI proposal (property being purchasedplus pledge security)Excludes: Vacant Land Properties exceeding 2.2 hectaresDeposit/equity No deposit or genuine savings/equity requiredBorrowers All borrowers must be titleholders for the property being purchasedMust be a natural personLoan term Maximum 30 yearsRepayment type Excludes Interest-Only (unless converting to P&I)Lender responsibility Lender needs to have satisfactory systems and/or processes in place that link borrowerand guarantor securities and loansGenworth LMI Underwriting Guidelines – Australia – 5 February 201810
Guarantor/pledge Required to have parameters and documentation to manage risks involved with thirdparty guarantee securities. (Genworth does not cover losses eventuating from thepledge guarantee being invalid or unenforceable) Borrowers maximum LVR before the pledge is 110% (ie total loan amount purchaseproperty security value or purchase price)Guarantors maximum LVR is 50% for the pledge component only (ie total pledgeamount guarantor security property value)Guarantors maximum LVR is 70% including all pledge amounts and any outstandingdebt secured by the guarantors property (ie total guarantor debts secured by thissecurity property pledge amount guarantors security property value) Loan features The pledge is a ‘limited’ personal guarantee that limits the guarantors’ liability to aspecific amountThe guarantee must be supported by either a first or Second Mortgage over residentialreal estateEligible guarantors must be an immediate family member to the borrower (parent, childor sibling)All registered proprietors of the pledge security property must be guarantorsNo company or trustee guarantorsA maximum of one pledge per LMI proposal. However, guarantors are able to provideup to a maximum of two pledges, provided each pledge applies to an individual loanproposal for separate borrowersIn the event of borrower default, Genworth would exercise its rights under the MasterPolicy to require the Lender to exercise its own rights under the pledge prior to thesubmission of an LMI claimThe guarantors must provide a full application form with supporting financialinformation including details of the security property and any outstanding debt againstthe security propertyWhere there is finance outstanding against the guarantors security property, six monthsloan statements evidencing satisfactory conduct are requiredServiceability will be tested on guarantors to determine whether they can service theguaranteed loan in the event the borrowers cannot meet their commitment. In caseswhere serviceability is not evident by guarantors, consideration will be given to othersources of equity to clear the debt outside of selling the guarantor’s owner-occupiedpropertyExcludes: Line of credit Parenting Repayment BreakGenworth LMI Underwriting Guidelines – Australia – 5 February 201811
6 Borrowers and guarantorsThis section provides an overview of: types of borrowers that are acceptable to Genworth for the purposes of LMI additional underwriting requirements, including verification, for specific borrower types and guarantors unacceptable borrower types.Genworth will consider LMI for any other borrower type not listed below, other than Unacceptable borrowers. If youwould like to discuss an LMI proposal before submitting to Genworth, please call our Originations Scenario Centre.6.1 Acceptable borrowers Natural person (over the age of 18) who is a citizen or permanent resident of Australia New Zealand citizens living and working in New Zealand or permanent residents of New Zealand Small Proprietary Company incorporated in Australia Trustee of a trust Trustee of a Self Managed Superannuation Fund (SMSF).Genworth also offers packages for Graduates and First Homebuyers. Details can be found in Packages section below.6.2 Additional underwriting requirementsAdditional underwriting requirements apply to the following borrower types.6.2.1 Company incorporated in AustraliaAdditional underwriting requirements All directors and shareholders must provide unconditional joint and several personal guarantees6.2.2 Trustee of a trustAdditional underwriting requirements Where the trustee is a company, directors and shareholders are required to provide unconditional joint andseveral guaranteesThe trustee of the trust must always be the borrower in its own right and as trustee for the trustThis requirement applies to both family/discretionary and unit trusts6.2.3 Trustee of a Self Managed Super FundGenworth will insure loans to SMSFs where the Lender has been pre-approved by Genworth to offer this product.Additional underwriting requirementsMaximum LVR 80% including LMI Premium CapitalisationMaximum loanamount 500,000Product availability Standard LMI onlyLoan type Limited recourse loan which complies with the relevant legislative requirements (andany associated regulations)Loan term Maximum 30 yearsRepayment type P&IInterest-Only not converting to P&I within 10 yearsInterest-Only converting to P&I within 10 yearsBorrowers SMSF Trustee, which hold the beneficial interest in the security property, has the rightto acquire the property from the Property Trustee, and is permitted to borrow inaccordance with the relevant legislative requirements (and any associated regulations)Mortgagors Property Trustee, which meet the requirements of the relevant legislation (and anyassociated regulations). Holds the legal interest in the security property on trust for theSMSFGenworth LMI Underwriting Guidelines – Australia – 5 February 201812
Security Guarantors Must be secured by one single occupancy dwelling on one title and the loan must notcover any additional assets purchased at the time of property purchase. This includesfurnishings or other items which are not fixturesExcludes: All New Properties, including NRAS properties that have been completed for lessthan 12 months Vacant Land Off-the-Plan Strata Purchases More than one property or occupancy on a single title Residential apartments that have a car space or storage area on a separate titlethat can be sold individuallyLoan must be supported by personal guarantees from all beneficiaries of the SMSF forthe full amount of the loanThe Lender must verify the guarantors financial position as being able to meet theobligations under the guarantee (please note that full income serviceability and assetand liabilities details are required to be submitted for all guarantors)Non-Resident guarantors are unacceptableLoan purpose Purchase of an investment property plus costsPurchase of an existing NRAS property (must be a resale)Dollar for dollar Refinance of an existing NRAS propertyRefinance of an existing SMSF loan plus costsExcludes: Construction Loan Equity Release (cash out) or Debt Consolidation Purchase or Refinance of properties occupied by SMSF beneficiaries or relatedparties Non-Arm’s Length Transactions Purchases from a related party of the SMSF Trustee Purchase or Refinance of owner-occupied property Home Improvements Off-the-Plan Strata Purchases Bridging LoanServiceability Serviceability must be calculated using the Genworth SMSF Serviceability Calculator,allowing for the following: 80% of rental income from investment properties held by the SMSF 65% of market rent as per the Valuation Report for NRAS properties Rental yield for all investment/rental properties (including those not held assecurity) will be limited to 6% of the value of the properties Income from interest/dividend earning investments to be assessed using adeeming rate of 3% per annum (in some circumstances higher rates may be usedin calculating serviceability) Income derived from other assets is to be excluded Only mandatory superannuation contributions (currently 9.50%) to be inclu
Genworth will consider any LMI proposal under Standard LMI product, up to 95% LVR, where the security property is located in any postcode in Australia that is not included in the Genworth Security Lo
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