Missing passport pages, salaries being paid by obscure offshore companies and crudely translated supporting loan documents are some of the reasons why Australia and New Zealand Banking Group has announced its latest residential property lending tightening.
ANZ, a bank that has hitched its future to regional growth, was also noticing a sharp increase in the number of loan applications from foreign Australian residents sourcing income from overseas. “They were not what we would call traditional mortgage applications,” a senior ANZ official said.
Foreign payments for the loans are originating from across China, Hong Kong, Malaysia, Singapore and Indonesia. But in many cases the bank, which has an extensive network of retail and business banking contacts across the region, had no record of the companies claimed to be paying the salaries.
ANZ last week told mortgage brokers it will not accept mortgage applications where 100 per cent of income funding the mortgage application is foreign and has tightened lending criteria for other foreign residents.The bank said it had not found any instances of money laundering but conceded there might be a risk.
Under its new rules, an applicant must include their passport with all stamped pages, three months of pay slips, salary credits verified from bank statements, employment contracts with employer’s telephone number and website details.
Other major lenders claim they monitor applications without having a ban on any group, or category. Commonwealth Bank of Australia said it has “special requirements” for income earned in foreign currencies involving documentation about its source.
“Applications involving customers living overseas are verified and assessed in line with our lending policies, including specific requirements for income earned in foreign currencies,” a spokesman said. “We constantly review and monitor our loan portfolio to ensure we are maintaining our prudent lending standards and meeting our customers’ financial needs.”
National Australia Bank said applications are reviewed on a “case by case basis”. “We continually review these settings, considering a range of economic factors to monitor the risk.”
Westpac said it has tighter risk policies for foreign nationals. “This includes the need for the borrower to have at least a 30 per cent deposit and a requirement to provide evidence of FIRB for the property being considered,” a spokesman said.
The total amount of foreign money buying local property is unclear because much is purchased using offshore sourced funds, savings, or money borrowed from friends and family, according to bankers.
ANZ said the number of loan applications sourcing a high percentage of offshore repayments is less than 1 per cent of its total loan book but increasing quickly enough to attract attention of bankers at its Melbourne headquarters, a bank source says. Less than 1 per cent of its residential mortgage book is to offshore borrowers. Other major banks, such as Westpac, said its about 3 per cent.
The Foreign Investment Review Board, which enforces the nation’s foreign investment rules, said that foreigners generally need to apply for approval before purchasing residential property in Australia. Non-resident foreigners are generally prohibited from purchasing established dwellings.
Bankers claim it is difficult to assess capital inflows and foreign borrowings because they are only involved in a small slice of the overall business and do not monitor the remainder.