House of Assembly Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia House of Assembly published Ministerial Statement Ministerial Statement HomeStart Finance HOMESTART FINANCE The Hon. K.O. FOLEY House of Assembly Port Adelaide Deputy Premier Minister for Industry and Trade Minister for Federal/State Relations The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:00): I seek leave to make a ministerial statement. Leave granted. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Yesterday in the house the Leader of the Opposition asked a number of questions regarding HomeStart and its Nunga and Breakthrough Loans products. I now provide the following information, as I indicated to the house that I would. The Nunga Loans product was launched in April 2004. As at 31 August 2008, 381 loans with a total book value of $60.8 million have been written, with $45 million of loans currently on the books. I am advised that the total losses for the Nunga Loans product since its inception is $296,000. That is to say, of the $60.8 million in loans written since April 2004, only $296,000 has been written off; that is only 10 loans. That equates to 0.49 per cent of the total loans written and, as a percentage of loans currently on the books of HomeStart, is 0.65 per cent. In the last financial year of 2007-08, write-offs were only $33,708. I am advised that there is a debt consolidation facility available with the Nunga Loans to better enable mortgagees to manage their finances and repayments. This facility can only be used to enable a maximum lend of 105 per cent of the value of the property. Further, initial repayments are higher in order to repay the consolidated debt as quickly as possible and reduce the principal back to reflect the value of the property. More outstandingly—and this is a very important point in terms of the social policy objective of this particular product—the Nunga Loan that this government introduced has helped lift the Aboriginal home-ownership rate from 30 per cent in 1996 to 36 per cent in 2006 (according to 2006 census data)—the highest increase over the last 10 years of all the states in Australia. The leader also asked about the value of the Breakthrough Loans issued through HomeStart and the value of the debt write-off provisions in 2008-09 for these loans. Mr Speaker, the Breakthrough Loan product was launched in January 2007. I am advised that these loans aim to get more people into home ownership by allowing an applicant to share the equity of a house with HomeStart and only borrow funds for their equity share in the property. I am further advised that the HomeStart portion of the equity has an initial cap of 35 per cent, and will share the proportion of the home's equity and capital gain once the property is sold or paid out. I am further advised that, as at 31 August 2008, 283 Breakthrough Loans have been written worth $19.7 million, totalling $62.5 million in HomeStart settlements. I am advised that the debt write-off provisions for these loans are part of HomeStart's total collective impairment provision, which was $11.7 million as at 30 June 2008. I am further advised there have been no current defaults on this product. More generally, I am advised that the total value of HomeStart's loan book is $1.305 billion, and HomeStart has no direct exposure to the subprime crisis. Importantly, it should also be noted that HomeStart has never written low document home loans. HomeStart's current 30 day (one payment down) arrears rate is 1.72 per cent by number and 1.92 per cent by dollar value, which compares very well to the standard prime Australian residential mortgage lending arrears rate of 1.45 per cent. HomeStart established a risk transfer vehicle (RTV), which the leader inquired into yesterday, with an interpretation by me that he was suggesting that that somehow was a dodgy or questionable practice. I can advise the house that the risk transfer vehicle was, in fact, established under the previous Liberal government in the year 2000 to meet loan write-offs. You should do your homework, leader. After an injection of— Mr Hamilton-Smith interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Sorry? An honourable member interjecting: The Speaker House of Assembly The SPEAKER: Order! The Hon. M.J. Atkinson House of Assembly The Hon. M.J. Atkinson: He said you made the inferences. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: I made the inferences? Apparently, he has told the media today that I'm a dunce because I did not finish high school. Members interjecting: The Speaker House of Assembly The SPEAKER: Order! A point of order; the deputy leader. Ms CHAPMAN House of Assembly Ms CHAPMAN: On a point of order, Mr Speaker— The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Apparently, because I was not brought up in privilege and did not finish high school that somehow makes me— The Speaker House of Assembly The SPEAKER: Order! The Deputy Premier will take his seat. The Deputy Premier has been given leave to make a ministerial statement, and he should stick to that statement. Members interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: I did not do an MBA on taxpayers' money like he did. Members interjecting: The Speaker House of Assembly The SPEAKER: Order! The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: More generally, I am advised— Ms Chapman interjecting: The Speaker House of Assembly The SPEAKER: Order! The deputy leader will come to order. An honourable member interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: I just never did an MBA on taxpayers' money. After an injection of $20 million to establish the vehicle, on an ongoing basis, the vehicle receives loan provision charges— Ms Chapman interjecting: The Speaker House of Assembly The SPEAKER: Order! Members interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Anyone else making that point, it might have been a good point, Vickie, but not you. After an injection of $20 million to establish the vehicle, on an ongoing basis the vehicle receives loan provision charges levelled on new loans and returns on invested funds. These charges equate to around $900 per loan for someone borrowing 95 per cent of the property valuation. The RTV is an entity to provide loss-protection consistent with that delivered under commercial loan mortgage insurer (LMI) arrangements. As at 31 August 2008, the RTV had net assets (capital) of some $33 million. The RTV (risk transfer vehicle) had assets of $3 million, less unearned premiums, and income of $5 million and provisions of $5 million. Actual losses to date are $732,000. The latest long-term projections indicate sufficient capital in the RTV to cover projected settlement volumes to June 2018, with a return of the injected capital of $20 million. So, yesterday's foray by the leader was nothing more than an opposition trying to get a headline at the expense of the most socially disadvantaged people in our society.