ME Bank is reviewing loan approvals given to borrowers in flood-affected regions of Victoria to determine whether properties they are about to acquire have suffered damage.
The bank advised mortgage brokers this week that it would require borrowers with unconditional approval including those awaiting settlements to make statutory declarations that their soon-to-be mortgaged homes were not affected by the floods that swept through Gippsland earlier this month.
Traralgon and other parts of Gippsland were smashed by heavy rains and damaging winds in the second week of June causing the Insurance Council of Australia to declare an insurance catastrophe for the region.
The ICA estimates that the extreme weather event triggered more than 20,000 insurance claims worth A$182 million.
ME’s move could have major implications for borrowers trying to settle purchases, with some potentially facing the prospect of additional costs such as lender’s mortgage insurance if there is significant damage to their newly acquired properties.
The bank warned brokers that borrowers unwilling to give statutory declarations about the condition of their properties would be forced to commission new valuations.
“Any application currently in WIP (including those at unconditional approval and awaiting settlement) with security located in flood effected postcodes, will require a Statutory Declaration from the applicant/s advising that there is no damage to the security property,” ME told brokers.
“If the applicants are unwilling or unable to supply the Statutory Declaration, a new full valuation will need to be undertaken to understand the current value and condition of the security property.”
The bank has identified 19 postcodes that will be subject to the special requirements.