Document ID: chunk:federal_register_of_legislation:F2024L01073:front:0:p9
Version: federal_register_of_legislation:F2024L01073
Segment Type: other
Provision Reference: 
Character Range: 22366–25384

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 in the property's value; or
                 3.        modifications are made to the property or contractual tenancy arrangements, that unequivocally increase its value, and an updated valuation is obtained which confirms the increase in value;
         2.           where a loan is secured by multiple properties, an ADI must use the aggregate value of the mortgaged properties for the purpose of calculating LVR; however, where a residential property exposure is secured by both residential and commercial properties, an ADI must apply a 40 per cent haircut to the value of any commercial property included in calculating LVR; and
         3.           for a reverse mortgage, where a borrower has been guaranteed a minimum share in the future sale proceeds of a mortgaged property, the calculation of the LVR for regulatory purposes must be adjusted by reducing the value of the mortgaged property by the quarantined percentage share.
 2.          For exposures secured by commercial property that were originated prior to 1 January 2023, an ADI may use the current valuation, rather than the value of the property at origination, for the purpose of paragraph 11(a) of this Attachment.

Credit risk mitigation
 1.          An ADI may use eligible CRM techniques to reduce the exposure amount of a property exposure, but the LVR band and applicable risk weight must be determined before the application of the relevant CRM technique.

Residential property
 1.          A residential property exposure is an exposure where the predominant security is an immovable property that has the nature of a dwelling, and satisfies all applicable laws and regulations enabling the property to be occupied for housing purposes. Residential property includes the following exposure types:
         1.           'Owner-occupied' refers to a loan for the purpose of housing, where the funds are used for a residential property that is occupied, or to be occupied, by the borrower(s) as their principal place of residence. Where the loan is for a residential property that is different to the residential property against which the loan is secured, this definition refers to the occupation status of the residential property for which the loan has been obtained (not the occupation status of the residential property used as security). It includes:
                 1.             a dwelling or residential land that is vacant while under construction, but that the borrower intends to occupy as a principal place of residence; and
                 2.          a part-time residence that is the principal place of residence of the borrower(s).
       Where finance is to be used for more than one purpose (e.g. owner-occupied, investment