Property 101: APRA’s residential mortgage lending reporting requirements

Residential mortgage lending constitutes the largest credit exposure in the Australian banking system and, for many ADIs, well over half their total credit exposures.

This concentration of exposure necessitates APRA’s close scrutiny of ADIs’ lending practices.

In November 2014, APRA released Prudential Practice Guide APG 223 Residential Mortgage Lending (APG 223) to provide guidance to ADIs on sound risk management practices for residential mortgage lending.

APG 223 outlines prudent practices in areas, such as sound loan origination criteria, appropriate security valuation methods, the management of problem loans, and monitoring relevant risk data. APRA is currently consulting on updates to APG 223, as outlined on the APRA website.

ADIs currently report residential mortgage lending data to APRA on reporting forms under the Financial Sector (Collection of Data) Act 2001 (FSCOD Act), and in response to ad hoc information requests pursuant to APRA’s general powers under the APRA Act.

One key source of information is Reporting Standard ARS 320.8 Housing Loan Reconciliation (ARS 320.8), made under the FSCOD Act.

This reporting standard requires ADIs with more than $1 billion in residential term loans to report 99 data items each quarter on Reporting Form ARF 320.8 Housing Loan Reconciliation (ARF 320.8), using the Direct-to-APRA (D2A) reporting software each quarter.

ADIs must report information on ARF 320.8 on their housing lending activity, including information on loan purpose (either owner-occupied or investment loans), balances of existing loans, new

loan approvals and features of loans. ARF 320.8 collects this information on loans on the domestic books for banks and licensed books for non-bank ADIs.

ARF 320.8 was introduced in 2008 and has not been updated since then. There is now a significant gap in APRA’s ability to monitor the credit risk and lending practices of ADIs. Only 31 of the 109 locally incorporated ADIs are required to submit ARF 320.8.