The Commonwealth Bank of Australia (CBA) has adjusted its policy for lending to companies and trusts, with changes effective from Saturday (22 November).
Property investors often use company or trust structures to improve serviceability and access larger loans, but concerns have been raised about the rise of unlicensed advice promoting these structures as a way to circumvent loan servicing limits.
In an email to brokers on Friday (21 November), seen by The Adviser, CBA confirmed the adjustment for applications for non-individual borrowers, such as companies or trusts.
Under the changes, the applicant and/or their servicing guarantor must have held an established lending facility with the major for a minimum period of six months.
CBA told brokers the changes apply to all applications submitted after Friday, with those submitted before subject to the lender’s current policy.
Speaking to The Adviser, CBA general manager, third-party banking, Baber Zaka, confirmed the adjustments to the lender’s policy.
“At CBA, we regularly review and refine our processes and policies in line with market conditions to ensure they continue to meet the needs of our customers and brokers, while maintaining responsible and prudent lending standards,” he said.
“From Saturday 22 November, adjustments will be made to our home lending policy for non-individual borrowers, using company and trust structures. When submitting an application, brokers will need to ensure these applicants and/or the servicing guarantor have an established lending facility with CBA for at least six months.
“We deeply value the role that brokers play in helping Australians achieve their home ownership goals. The third-party channel is an integral part of our business, and we remain committed to supporting brokers, including through trust and company lending for existing CBA customers, so they can continue to deliver great outcomes for their clients.”
Increasing scrutiny
CBA’s policy adjustment follows Macquarie Bank’s decision to pause all new lending to trusts and companies at the end of October.
As reported by Broker Daily, The Adviser sister brand, Macquarie told brokers that it will not accept new home loan applications where the borrower is a trust or company.
At the time, the lender told brokers the decision was driven by a range of factors.
“With application volumes increasing, we’re adjusting our approach to ensure we continue delivering market-leading turnaround times and high service standards for brokers and customers,” the bank said in an email sent to brokers.
It also listed “emergence of strategies on social media aimed at maximising lending through trusts and companies” as a reason for the change.
Earlier this month, PICA urged lenders to reassess their exposure to trust, company, and self-managed super fund (SMSF) lending in residential property.
Speaking to The Adviser, PICA chair Ben Kingsley highlighted concerns about investors receiving unlicensed advice aimed at rapidly building property portfolios, while sidestepping regulatory requirements.
“I don’t know about you, but if I was a lender operating in this space, I wouldn’t want to be involved with anyone spruiking access to unlimited borrowings to buy multiple properties fast, as part of a ‘get rich quick’ agenda,” he said.
“It has all the hallmarks of a genuine problem where lots of consumers are going to get burnt and look out lenders if ASIC steps in.”
Kingsley said trust and company structures have a legitimate role for experienced investors, but warned that promoting them widely to inexperienced buyers is increasingly problematic.
“The current level of unfettered promotion offering cookie-cutter advice, combined with relaxed credit assessment rules giving access to unlimited borrowings, is a recipe for the mischievous behaviour we are currently seeing by some operators,” Kingsley added.
“While off a low base, the sharp growth in lending volumes via these entities validates the increasing risks and supports PICA view of concerns re: current shortsighted self interest and potentially the credit assessment oversight going on this space, which – if it continues – introduces real risks for the clients they are meant to be helping and increased financial system integrity risks.”
[Related: Warning issued over rise in unlicensed advice]
