APRA's SMSF loan concerns dismissed by lawyers

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Last week APRA executive general manager Charles Littrell warned banks that limited recourse loans could pose a "potentially higher loss profile" if there was any problem with the loan being repaid.

Townsends Corporate and Business Lawyers principal Peter Townsend said the concerns were “curious” because there was no reason to think a personal guarantee on a SMSF loan was less likely to be enforced than a personal guarantee in any other loan.

“Banks know full well how to protect themselves in respect of such loans and the loans are not inherently more risky than normal housing loans,” he said in a statement.

"The average and median benefit levels of members in SMSFs show them to be persons of some means and the banks will have certainly confirmed that before agreeing to accept such guarantees."

SMSF Loans mortgage broker Craig Morgan also disagreed with APRA's concerns and said DIY loans with average LVRs of 65% were well secured. He said that although it was early days, if existing lending policies were maintained then APRA’s assessment of ‘potentially higher loss profile’ would not become a reality.

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