C.08 Compliance - Living Expenses
Fact Find - Living Expenses
Premium Brokers need to be very vigilant with regards to LIVING EXPENSES. As a licensee, Premium Broker has some specific policies and tools to assist in assessing client's Living Expenses.
Post Settlement It is a Premium Broker policy to assess LIVING EXPENSES in a post settlement environment. This means the client needs to assess what their living expenses will be once the loan has settled. For example a young couple living at home will probably not have any council and or strata fees payable. However if they were to purchase a new owner occupied unit they will have to pay council & strata fees.
Expenses Categories Brokers are asked to complete all 32 Categories to assist in calculating total living expenses. These living expenses are itemised within VowNet and should be completed as accurately as possible.
COLLATE - Client Assessment The client should be asked to complete their own living expenses in a post settlement environment. This assessment can be either with the use of detailed spreadsheet, online survey, interview with the client or via the FactFind software.
ANALYSE - Broker Assessment Once the client has completed there assessment the broker should review the living expenses and check to see if they are reasonable. Brokers should look for obvious low figures and use common sense to question the reality of some of them. If the client has provided bank statements they should be checked for accuracy. Software used to scrap a clients expenses can also be referred to. If a broker amends the client's assessment it should be noted in a file note or within VowNet.
DOCUMENT - Broker's Notes & VowNet It is recommended that a broker always make detailed comments about a clients declared living expense in as detailed as possible. Comments can be entered in the Compliance section of VowNet:
1. Living Expenses Description
2. Living Expenses Comments
3. Living Expenses Verification
Living Expenses Declaration
Whilst not required, broker's have the ability to provide clients with a copy of their living expenses by creating a document called "0.PB Living Expenses"
HINT - Lenders and Aggregators continuously monitor your loans and specific the amount/percentage of loans that are below HEM levels.
Premium Broker will look at the actual Living Expenses an include this figure in the Compliance Checklist. We will then compare this with the Premium Living Index.
When the Actual Living Expense is less than the Premium Living Expense we will recommend the broker make a file note comment about the difference. Brokers who consistently experience shortfalls can then expect additional scrutiny
Investment Property Expenses
Expenses relating to an Investment property such as council rates, strata, commission, etc should not be included - provided the client has also declared the rental income to lender and the lender has discounted it by 20% or more. ie outgoings are already deducted from the clients income. We recommend noting this as file note.