Mortgage insurance provider Genworth welcomes wider customer know-how
Lenders mortgage insurance provider Genworth has come out in support of a mandatory fact sheet educating home buyers about the insurance cover.
Genworth along with QBE LMI (formerly PMI) are the two biggest providers of this type of insurance, which is required where home buyers borrow more than 80% of the value of the property.
LMI, a once-off premium paid for by the home buyer, covers the lender for any shortfall between the value of the mortgage owed and value of the house in the event that the home buyer defaults and the lender is forced to sell the house.
It is often confused with mortgage protection insurance, which covers borrowers for the payment of their mortgage instalments in the event of unforeseen circumstances such as unemployment, illness or death.
The one-page fact sheet, aimed at helping consumers “understand the costs and benefits of lenders' mortgage insurance when they take out a home loan” was announced by federal treasurer Wayne Swan over the weekend.
“The aim is to allow consumers to compare quotes side-by-side, including the difference in premiums and rebate schedules, helping them get the deal that's right for them,” Swan says.
“This will help home buyers compare apples with apples when it comes to shopping for lenders' mortgage insurance.”
The Treasury advised against the introduction of a scheme to allow the transfer of lenders' mortgage insurance between lenders because it would be “expensive, extremely complex to implement and administer, and would likely benefit less than 1% of all borrowers”.
This is also supported by Genworth.
Genworth expects the mandatory fact sheet could be similar to the Government’s Key Fact Sheet for home loans, and could be handed out by lenders just prior to borrowers signing their home loan contract.
“Genworth believes it is important that homebuyers know how Lenders Mortgage Insurance works and the benefits it offers, plus their potential rights in relation to existing refund schedules if they switch home loans,” says Genworth CEO Ellie Comerford.
According to Genworth, about 90% of loans to first home buyers are supported by LMI.
The one-page LMI fact sheet was announced on the back of recommendations contained in former RBA governor Bernie Fraser’s report ‘Banking Services: Cost-Effective Switching Arrangements’ and is due to be implemented in July 2012
The report recommends a new "tick and flick" service making it easier for consumers to switch to another bank, building society or credit union if their existing institution isn't providing good value and service.
From July next year customers will sign just one form that authorises their new financial institution to do “all the heavy lifting for them” including arranging the transfer of all automatic transactions linked to the customer's account and inform associated creditors and debtors about the new account details
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