By Munir Kulavoor | 15th Apr 2016 | Mumbai
Over the past decade and more, being in the home loan business the one thing that stands out in my view and experience is that every borrower application is unique. There are set of challenges in 90% of the cases. While every credit team of banks would love to have “clean” cases, more often than not, some or the other deviation/exception is required to be taken by the Bank/HFC. The word Deviation is self explanatory, banker has to deviate or depart from the accepted norm or policy of the bank. Following are the common deviations that Banks have to contend with:
- Employed in unorganised sector/proprietorship/partnership firm: To consider the salary certificate tallying with salary credits reflecting in bank statement
- Incomplete income documents: Form 16 not available for the entire 24 months (usually required); Form 16 Part A or Part B unavailable
- FOIR (Fixed Obligation to Income Ratio): Higher FOIR required to meet the customer requirement
- Rental Income: To consider additional rental income either without registered leave & license agreement OR to consider future rental income
- Pension Income: To consider additional repayment tenure in case of government employees expected to earn pension income post retirement date
- Perquisites: To include Car Hire Receipts provided agreement is executed and some Reimbursements to arrive at eligibility
- Vintage of Business: Shorter tenure in business to be accepted in exceptional cases depending on line of business & profile
- Interest Income from Unsecured Loans: In rare cases (profile based) interest income from unsecured loans may be considered
- Depreciation: Depreciation to be added back to income in some cases
- Provisional Income & Balance Sheet: To accommodate the loan requirement in some cases the provisional income & balance sheet (>6 months) is accepted to arrive at loan amount
- Son with Parents: To avoid any future trouble in ownership issues banks insists on declaration from borrowers on the ownership or exclusion of rights of other siblings.
- Two Brothers: Individual capacity to repay the entire loan may be ascertained for the reason mentioned above
- Daughter with Parents: To avoid any future trouble in ownership issues banks insists on declaration from borrowers on the ownership or exclusion of rights of other siblings.
- More than two DPD: Cases where existing loans have more than two instances of (dishonour of ECS/SI/PDC) Days Payment Due (DPD) in CIBIL OR DPD exceeded 30days in last 6 months with acceptable justification from borrower
- Overdues more than Rs.10000: Cases where the current overdues appearing in CIBIL exceed Rs.10000 with acceptable justification from borrower
- Asset classification as ‘SUB” (Substandard), “DBT (Doubtful), “LSS” (Loss), or “SMA” (Special Mention Account): In all such cases in rare exception with acceptable justification from borrower
- Suit filed (willful default) and/or written-off: In all such cases in rare exception with acceptable justification from borrower
- Occupation Certificate (OC): OC unavailable is the most common exception, provided the Approved Plan & Commencement Certificate is available and construction is as per the same. Age of the property may be a deciding factor.
- Unregistered Development Agreement: In such cases legal opinion from empanelled lawyer is crucial in making a decision
- Unregistered Sale Agreement (in Chain): In such cases legal opinion from empanelled lawyer is crucial in making a decision
- Nomenclature mismatch in CC/OC: Sometimes CC/OC contains the building number, wings etc as per the approved plan and later the same may have been changed by the builder or society, in such a case proper explanation & architect certificate supporting the same should be available.
- Old Property: Structural report from empanelled valuer to determine Residual age required. May be considered for lower repayment tenure
The above listed circumstances are not exhaustive but will give borrowers an idea of areas to watch out for and be prepared for delays in processing their application.
I’m sure there are many more situations that may require credit deviation, readers may want to post such interesting cases at the bottom of this post.