Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p8
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 19729–22660

on the cash flows generated by the property through rental income, an assessment of the tenancy profile relative to the maturity of the loan.
    Where an ADI's assessment does not result in a positive determination of the borrower's ability to meet their repayment obligations, an ADI must classify the loan as non-standard.
 1.              An ADI must appropriately value any property offered as security in accordance with paragraph 11 of this Attachment. With the exception of land acquisition, development and construction (ADC) exposures, the value of the property must not depend materially on the performance of the borrower.
 2.              All of the information required at loan origination and for monitoring purposes must be accurately documented and readily accessible to the ADI, including information on the ability of the borrower to repay and on the valuation of the property.
 3.              Property exposures that were originated prior to 1 January 2023, with no material change to loan terms and conditions subsequent to this date, do not need to satisfy the criteria set out in paragraph 5 of this Attachment to be classified as standard loans.

Loan-to-valuation ratio
 1.              The components of LVR must be prudently calculated in accordance with the requirements set out in paragraphs 10 and 11 of this Attachment.
 2.          The amount of the loan includes the outstanding loan amount (including accrued interest and fees) and any undrawn committed amount (as set out in Attachment C to this Prudential Standard), calculated gross of any provisions for defaulted exposures and other credit risk mitigants. If an ADI provides:
         1.           multiple loans secured by the same property and they are sequential in ranking order (i.e. there is no intermediate interest from another lender), the loan amounts must be aggregated and treated as a single exposure for the purpose of calculating the LVR; or
         2.           a loan that is secured by a second mortgage, the outstanding amount of the loan must be calculated as the sum of all claims on the borrower secured by both the first and second mortgages over the same property for the purpose of calculating the LVR.
When calculating LVR, the loan amount will reduce if the loan amortises.
 1.          The value of the property must be appraised independently using prudently conservative criteria, consistent with the requirements set out in APS 220.[4] If a market value can be determined, the valuation must not be higher than the market value.[5] For the purpose of calculating the property value:
         1.           the value of the property at origination must be maintained, unless:
                 1.             an updated valuation is obtained as part of a new loan application process in relation to the mortgaged property;
                 2.          an event occurs that results in a likely permanent reduction