lending

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How much should the government interfere in housing? Is it solely the job of councils to control land supply? Who, if anyone, should be responsible for building affordable housing? Are any of Labour’s housing policy ideas worth stealing? Should the government be selling-off State housing stock and should they be building new State houses? Should the government be a landlord or should we leave it to private landlords to house tenants?

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David Parker announces that Labour doesn’t want Auckland homeowner’s votes

David Parker has told us via his appearance on The Nation and as reported by NBR that Labour isn’t interested in Auckland homeowners votes.

In fact he has told us that Labour actually hates those voters and will punish them with more draconian lending criteria than the rest of the country.

Loan-to-value (LVR) loan limits aren’t working and Labour would rather limit them to just Auckland, Mr Parker said.

LVRs “certainly not necessary” in Dunedin, for example, the Labour deputy leader said: “Why should our economy be hobbled? Why should our young people be prevented from buying houses” because of Auckland house prices.”

Let’s see how that will work. ? Read more »

The end of low equity mortgages

The ASB Bank has announced the end of their low equity mortgages.

ASB Bank has cancelled all pre-approvals for home loans over the 80 per cent loan to value ratio with effect from October 4.

A spokesman for the bank said it had been telling customers and mortgages brokers about the change over the last few days.

The change comes ahead of the Reserve Bank’s crack down on low equity or low deposit lending. From October 1 banks must cap new lending above the 80 per cent threshold to 10 per cent or face losing their license.

Shaun Drylie, general manager, product and strategy at the ASB Bank said the change was being implemented to comply with the new lending restrictions.

“ASB, like all New Zealand banks, has to comply with these restrictions under our conditions of registration.”? Read more »

Cry Baby of the Week

Cry Baby:?Teresa Fesuiai and her husband

Photo: KENT BLECHYNDEN/Fairfax NZ

Photo: KENT BLECHYNDEN/Fairfax NZ

The incident: In 2003?Teresa Fesuiai and her husband borrowed $819 for pay for some new car tyres. They then went back to the lender and borrowed more money…six more times to pay for?for family events, gifts and other expenses.

They then consolidate their lending with a loan of $18,639 to settle the existing total and a $1000 cash advance.

The Fesuiais make regular payments until March 2007, and manage to pay off $23,000. And then they stop paying.

They are then pursued by debt collectors, lose a court case and have to pay costs associated with the collection efforts. They are now facing losing their house to settle the debts. ? Read more »

Kiwibank's dodgy lending practices

Labour has been,quite rightly, targeting dodgy loan sharks but I think they may have missed a bigger target. Carol Beaumont Charles Chauvel and latterly Stuart Nash have targeted loan sharks. Charles Chauvel had this to say about interest rates:

He cited a Samoan family in Favona with children aged 6, 5 and 6 months who had nothing left for food out of a benefit income of $551 a week after paying $180 in rent, $75 on power, petrol and insurance and $307 repaying loans at interest rates of between 19 per cent and 52 per cent.

As I said before Labour are right in going after loan sharks but they should also look at Kiwibank which has lending practices and processes that bear all the hallmarks of dodgy loan sharks.

It was announced in 2009 that Kiwibank and GE Money were ?going to collude in?the?loan market:

GE Money New Zealand has teamed up with Kiwibank in a new initiative to provide personal loans to New Zealand consumers.

The new strategic relationship was announced today but officially started on Tuesday.

It will see the country?s largest non-bank finance company provide Kiwibank branded loans through its Auckland sales centre, although New Zealanders will be able to take advantage of the new deal through Kiwibank?s nationwide network of branches, over the phone or online.

GE Money already provides personal loans, retail finance and insurance, but New Zealand managing director Greg White said the two organisations still brought unique core strengths to the deal.

Kwibank hides the details of this at the bottom of their personal loans page.

Kiwibank GE Money loan statement

Via the tipline I have received?details of Kiwibank’s lending policies and interest rates that suggest that perhaps they should be looked at very carefully for dodgy loan shark type behaviour.

My correspondent is a parent who’s son applied to Kiwibank for a personal loan to buy a car.?He is an existing customer of the bank and has been for a long time (they joined the children up when Kiwibank first opened).

They were astonished that the loan is actually through GE Money (via Kiwibank), and the annual interest rate for the loan is 34.95%.

Kiwibank Interest rates
When they looked at the documents and discovered the interest rate they refused?to accept the loan.

When Kiwibank was set up by Labour and Jim Anderton it was promoted by Anderton saying

the bank was about “New Zealanders owning New Zealand assets.”

“We should have some control over our own social and economic destiny.

“We should keep in New Zealand some of the profits that are made in New Zealand.”

One thing the loan documents show is that Kiwibank has outsourced its loan book to GE Money.

GE Money is a division of GE Capital, one of the four main businesses of General Electric (GE). GE is a diversified technology, media and financial services company focused on solving some of the world’s toughest problems and dedicated to creating products that make life better. Products and services range from aircraft engines, sustainable power generation, water processing and security technology to medical imaging, business and consumer financing, media content and advanced materials

Clearly Jim Anderton’s dream of keeping?profits?in New Zealand and having “control over our own social and economic destiny” has waned considerably. It appears to have ben outsourced to GE Money. Not only that, if Charles Chauvel thinks dodgy loan sharks are those that charge interest rates between?19 per cent and 52 per cent then Kiwibank’s interest rate as charged by their outsourcing loan provider of ?34.95% is?certainly?in loan shark?territory.

I acknowledge that risky lending attracts higher interest rates, however I fail to see why Kiwibank has to outsource its lending to GE Money. GE ?Money have an appalling record of predatory lending behaviour. Just ask anyone who has ever bought anything from Harvey Norman on tick and then suffered the bombardment of mail material from GE Money promising even more money at their extortionate rates of interest.

However the more important issue is not that these predatory companies exist but that the environment exists where people are desperate enough to go to them. There is a credit crisis in New Zealand for the poorest amongst us. They are shut out of mainstream banks, often for small and historic defaults and so they are left with the likes of Instant Finance and other pay day lenders because no one else will touch them. Baycorp and other credit reference agencies lock these people out of the mainstream and force them to go to dodgy loan sharks.

Something needs to be done, but I don’t think attacking the lenders is the whole answer. A comprehensive look at credit contracts, credit references, credit checking and the sub-residential lending market is long overdue.

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