APRA recently released guidance on the reporting of housing loan data, in particular where the loan purpose is incorrectly reported in the D2A.

Inaccurate reporting can often be attributed to insufficiently robust internal controls and processes, and the guidance again focuses on the importance of data integrity.

To improve APRA reporting processes and reduce errors, consider the following:

  • What controls do you have in place to ensure that any changes to the loan purpose are appropriately recorded and authorised?
  • Who is able to change the loan purpose in the system? Are access levels appropriate?
  • Do your policies clearly differentiate and different loan types? Are they commercial, investment or owner-occupied? Are the policies being applied in practice?
  • Are there clear guidelines in place to ensure changes to the loan purpose are applied consistently and are in line with business policy?
  • Is there an exception report that identifies changes to purpose codes?
  • Do your processes and procedures support the consistent application of loan purpose categories? For example, a loan to a sole trader business secured by a residential property mortgage would be reported as a ‘Loan to non-financial corporation’. Examine internal guidelines and communication to avoid confusion or inconsistency.
  • Can the system used to record loan categories be verified as the source of D2A reports? For example, if loan schemes are used rather than purpose codes, are the reports sourced correctly?
  • Does the lending team take responsibility for the accuracy of loan reports provided to the finance team? It is important that they are across the data and own its integrity.

Reporting data on housing loans can be complex, so measures to streamline the process are beneficial. We suggest that ADIs consider APRA’s guidance together with the above considerations to help ensure internal reporting processes are watertight.