APRA draft prudential practice guide on residential mortgage lending

The Australian Prudential Regulation Authority (APRA) is consulting on a draft Prudential Practice Guide 223 Residential Mortgage Lending that provides guidance to authorised deposit-taking institutions (ADIs) on sound risk management practices for residential mortgage lending, including owner-occupied and investment properties.

The PPG applies to authorised deposit-taking institutions (ADIs) as well as to other APRA-regulated institutions that may have exposures to residential mortgages.

The PPG discusses:

  • sound loan origination criteria
  • appropriate security valuation methods
  • Specific loan types including Interest-only loans, foreign currency loan, loans with non-standard/alternative documentation, reverse mortgages and Home equity lines-of-credit
  • the management of hardship loans
  • establishing a robust stress-testing framework and
  • lenders’ mortgage insurance (LMI).
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