All Topics / Finance / Banks Self-insuring Loans

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  • Profile photo of Joseph12Joseph12
    Member
    @joseph12
    Join Date: 2008
    Post Count: 57

    Hi,

    What does it mean when the bank self-insure ?

    Are they using the mortgage insurers Genworth & PMI to insure deals when LVR is above 80% ?

    or

    Are they balance sheet lending up to say 95% ? This sound very risky.

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    Usually they are either balance sheet lending and charge a higher interest rate to compensate for the higher risk.
    Sometimes they get their money from the money market at a higher interest rate and this has put them under pressure when the credit squeeze occurred and the cost of the funds increased.
    See
    http://www.bankrate.com/brm/news/DrDon/20011130a.asp
    http://www.clearprogress.com/home/010.030.090
    for a second opinion
    It is risky but if you charge 100000 people extra interest the extra profit covers the defaults that occur.

    Profile photo of Joseph12Joseph12
    Member
    @joseph12
    Join Date: 2008
    Post Count: 57

    Thank you for your response.

    So banks are more likely to approve a loan where it is out of policy with the mortgage insurers ?

    Profile photo of Mr MortgageMr Mortgage
    Member
    @mr-mortgage
    Join Date: 2006
    Post Count: 7

    Hi there,

    There are currently 3 lenders self insuring – St George Bank, ANZ and RAMS. CBA have dispensation to approve their own insurance however it is Genworth who is allowing them to do this.

    None ofthe above lenders charge more in fact St Georgeis cheaper than everyone in the market

    Happy borrowing

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    In addition to Davids list Westpac also self insure some of their loan with Gemworth also insuring the balance. 

    Anz actually charge a higher premium where the loan is Interest only than they do for a Principal & Interest loan so are more expensive depending on the loan size.

    Richard Taylor | Australia's leading private lender

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