Genworth tightens up on SMSF property

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From the LMI sector today:

Being a prudent Lenders Mortgage Insurance provider, we are always assessing the market and emerging trends to ensure our policy is aligned to market conditions.

As a result we have made the following changes to our Underwriting Policy in relation to Lenders Mortgage Insurance for Self Managed Super Funds:

  • The Self Managed Super Fund must:
  • hold minimum net tangible assets of $150,000 or more prior to the loan transaction; and
  • have a minimum liquid asset (interest/dividend earning assets) balance of 10% of the total debts of the Self Managed Super Fund (including the loan amount) after the loan transaction is complete.
  • Off-the-plan purchases and new properties that have been completed for less than 12 months are no longer acceptable. A “new property” is defined as being any property (including any house, unit, villa or townhouse) that has been fully completed for less than 12 months and/or has not been previously sold since construction (i.e. the vendor is a developer/builder or a related party of the developer/builder).

None of these restrictions applied before. Banking Day reckons:

The insurer’s decision also highlights that the chief determinant of credit supply in Australia is the risk appetite of the mortgage insurance companies. Genworth is the dominant provider in the sector.

Genworth may also be looking ahead to the more intense scrutiny it can expect when (and if) its sells a 40 per cent stake and lists on the ASX some time next year.

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Voluntarily? Maybe it’s the invisible hand of APRA doing macroprudential.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.