New mum shocked by 90-day mortgage condition

Otago Daily Times,
Publish Date
Wed, 19 Jan 2022, 7:56am
(Photo / File)
(Photo / File)

New mum shocked by 90-day mortgage condition

Otago Daily Times,
Publish Date
Wed, 19 Jan 2022, 7:56am

A Dunedin mother says she was told by a bank it would only consider giving her a mortgage if she returned to work within 90 days of giving birth. 

She is one of many people to speak to the Otago Daily Times following the Government's changes to the Credit Contracts and Consumer Finance Act (CCCFA). 

The rule changes were intended to protect borrowers from loan sharks but have caused banks to more closely vet mortgage applicants' spending habits and personal finances. 

The woman, whom the ODT has agreed not to name, said she felt "totally shocked and completely discriminated against" after ANZ informed her, through her mortgage broker, that it had changed its policy on maternity leave for borrowers. 

A spokeswoman for the bank acknowledged that as a result of the CCCFA it was enforcing tougher criteria for customers taking parental leave for more than 90 days, but said there had been no change in policy. 

In early December, when the woman was in the later stages of pregnancy, she and her partner were looking to refinance their home. 

A family member, who died recently, had financed them into the home but after their death they were looking to get a mortgage through a bank. 

The couple, who now have a 3-week-old baby, were working with a mortgage broker to help them secure a loan. 

The woman finished work in early December and planned to take 12 months off, nine months of which would be paid — three months by her employer and six months to be covered by the Government's paid parental leave scheme. 

After her last pregnancy, she took seven months off but wanted to take a full year this time to be able to spend more time with her newborn, the woman said. 

"It is a really special time and I wanted to be there for it." 

The couple applied to ANZ, which came back with questions such as about their financial position but also asked whether she intended to return to work after maternity leave. 

She expected to face questions about their financial position — "which I totally understood" — but asking about her plans after the 12-month period was "deeply personal", she said. 

"The decisions I choose to make after that time should be mine and not dependent on the bank," she said. 

On January 7, the mortgage broker forwarded them an email from ANZ saying the bank had changed its maternity leave policy. 

The bank said it was now not going to give mortgages to people who chose to take more than three months off work. 

The woman said she believed they could afford the mortgage with or without her income. 

"I mean, we knew we could afford it — and if we didn't, we wouldn't have applied," she said. 

While she was confident she would be returning to work, she did not believe it was the bank's place to be telling new mothers when they should be going back. 

"It's completely discriminatory and just not needed," she said. 

The couple were now looking at borrowing through other banks. 

When contacted for a response, an ANZ spokeswoman said the bank had not changed its policy relating to parental leave. 

But under the new CCCFA rules, a lender must take any likely income changes into account when assessing affordability, she said. 

"Our policy reflects this requirement," she said. 

If a customer applying for a home loan was taking parental leave and confirmed they were returning to employment within 90 days from the date of approval, the bank would include their likely verified income on return in its affordability assessment. 

But if the customer was going to return to work after more than 90 days, the bank would need an extra confirmation from the customer's employer they intended to return to employment and confirmation of their likely income on return, she said. 

Lending laws intruding on people's personal affairs: Seymour 

Act New Zealand leader David Seymour says a woman being denied a mortgage because of her 12-month maternity leave is yet another example of the Government's lending laws not working. 

Seymour wrote to Commerce and Consumer Affairs Minister David Clark and Parliament's finance and expenditure committee earlier this month outlining his concerns about the effects the rules were having. 

The Dunedin woman's case was an example of how the Credit Contracts and Consumer Finance Act rules were affecting personal lives. 

"The rules are intruding on people's personal affairs to a level that serves no real purpose at all," he said. 

Seymour believed the banks were only reacting to poorly written legislation, especially now that senior managers and directors were personally liable. 

"If they get it wrong, they are liable for a fine of $200,000,." 

After several days of public pressure last week, Dr Clark ordered an inquiry into whether banks have overreacted to new lending rules. 

It was possible banks trimming back on lending was due to global economic conditions, he said. 

"I have asked the Council of Financial Regulators (Reserve Bank, the Treasury, Financial Markets Authority, Ministry of Business, Innovation and Employment and Commerce Commission) to bring forward their investigation into whether banks and lenders are implementing the CCCFA as intended," Clark said last week. 

Seymour welcomed the inquiry, but said it needed to look at the real impacts it was having. 

"It needs to talk to real people about the very real problems they are having," he said. 

Seymour thought a select committee inquiry, undertaken by Parliament, would be more transparent. 

Clark declined a request for an interview. 

- By Riley Kennedy, ODT