8.3 Default Management

8.3.1 LMI Arrears Reporting

Under the Terms and Conditions of the Master Policy, any insured loan which is three (3) months or more in arrears must be reported to Genworth within 14 days of the end of each month.

Genworth has a standard Arrears Report that provides for Lenders to advise the current status of the loan and any recovery action taken or proposed.

Genworth will review any loan reported in arrears for the first time to identify the potential for Hardship Assistance.

8.3.2 Hardship Assistance

In cases where borrowers are undergoing genuine temporary hardship, Genworth will work with the Lender to identify whether there is an opportunity to offer Hardship Assistance in an effort to resolve short term difficulties.

Genworth is able to offer a range of hardship solutions designed to temporarily ease financial stress.

Lenders should contact the Hardship Solutions Team on 1300 135 759 to discuss any hardship issues.

8.3.3 Review and Investigations

Genworth has introduced a range of risk and fraud detection strategies which identify potentially high risk LMI applications.

Genworth's Review and Investigations Team constantly monitor and review new LMI proposals that are flagged as high risk, and conduct a thorough investigation of income, employment and financial history.

Similar investigations are carried out for early term delinquencies (repayment default within the first 12 months of the loan) as well as any irregularities identified in subsequent LMI claims.

8.3.4 Borrower Sale of Security

In some instances, borrowers may prefer to sell their home rather than face a mortgagee-in-possession (MIP) sale. Genworth will work with the Lender to try to achieve a better sale price than that expected through a MIP.

It will be necessary for the Lender to obtain a new valuation of the security prior to the sale and to discuss any further requirements with Genworth.

8.3.5 Taking Possession of Security

In cases where it is determined that borrower is not eligible for Hardship Assistance, or the Lender has been unable to contact the borrower, there may be no alternative for the Lender than to seek possession of the security property with a view to recovery of the mortgage debt from the proceeds of sale.

If a claim under the LMI policy is likely, the Lender will need to liaise closely with Genworth and the following requirements should be observed:

8.3.5.1 Valuation

The Lender will need to arrange a new or updated valuation of the security once possession has been obtained. In addition, a market appraisal from at least 2 local real estate agents must be obtained. Copies of the valuation and market appraisals must be sent to Genworth.

8.3.5.2 Maintenance and Protection of Property

Upon taking possession of the security, the Lender should ensure that the property is adequately secured and maintained in a neat and tidy order, although any expenditure should remain within the limit of Claimable Expenses issued by Genworth.

Any additional expense requirements must be approved by Genworth.

8.3.5.3 Repairs

In cases where the property has been damaged either by vandalism, neglect or general wear and tear, Lenders are required to consult with Genworth to discuss what, if any, action should be taken to restore the property to a presentable order.

8.3.5.4 Presentation

In preparation for sale, the Lender should ensure that the property is clean internally, and the yard (if any) is neat and tidy.

8.3.6 Sale of Security

8.3.6.1 Method of Sale

The best method of sale is usually determined by a number of factors, including the current state of the market, the location of the property, and the type of property. Genworth would normally seek the opinion of local valuers and real estate agents before advising a preferred method of sale.

8.3.6.2 Negotiation of Sale Price

Subject to the current property valuation and the advice of local agents, Genworth will liaise with the Lender to arrive at a realistic sale price or auction reserve price.

8.3.7 Recovery from:

8.3.7.1 Guarantor/s

In cases where a guarantee is taken in support of a mortgage loan, it is a standard requirement that upon default, repayment of the loan be sought from the guarantor prior to the sale of any security.

If unsuccessful and a loss occurs upon sale of the security, including that of the guarantor, Lenders may be requested by Genworth to further pursue recovery from the guarantor.

8.3.7.2 Pursuit of Guarantors (Self Managed Superannuation Funds)

Prior to taking possession of security Lenders must issue copies of the statutory notices to all guarantors plus serve a Notice of Demand on the guarantors calling up the residual balance after sale of the property (ie: Claim balance). Lenders will be required to provide the following documentation at claim to evidence this:

• Copy of the letter and statutory notice to the guarantor/s
• Copy of the Notice of Demands to all guarantors
• Copy of the signed Loan Agreement
• Copy of the Terms & Conditions relevant at the date of the loan.

8.3.7.3 Other Collateral Security

In the event of a loss from the sale of the principal security, Lenders are expected to attempt to recover the loss from the disposal of any other collateral security held prior to lodging a claim under the LMI policy.

8.3.8 Lodgement of Claim

8.3.8.1 Timing

The Genworth Master Policy requires that any claim for loss is lodged within 30 days from the loss date, ie within 30 days after the settlement of sale of the security.

8.3.8.2

A claim under the LMI policy should be in the form approved by Genworth, and must be accompanied by any receipts for amounts expended in relation to the recovery of the debt.

Genworth will also require a copy of your loan file, including notes on arrears management and recovery of the insured loan (if not already provided) as well as a copy of the settlement distribution statement.

8.3.8.3

Genworth has compiled a list of expenditure items in respect of debt management and recovery, and limits for each item that may be expended without our consent.

However, for amounts in excess of these limits, you will need to liaise with Genworth and obtain consent in writing.

The list of claimable expenses and limits is available in the Lender Resource Centre at genworth.com.au