Abstract

This research attempts to evaluate how responsibly consumer mortgage lending in New Zealand is being carried out through an exploratory investigation of lending institutions’ and mortgage brokers’ lending processes and disclosures. The research assesses whether changes towards more socially responsible lending practices and related disclosures were made since the global financial crisis began in 2007 and aims to inform the question of just how socially responsible Australasian financial institutions are? The paper commences with a review of relevant literature on the global financial crisis, environmental social governance, and its role within the financial sector and develops a theoretical framework in which to view responsible mortgage lending for consumers. Data for the study were collected by means of a questionnaire sent to a sample of nine lending institutions and 300 mortgage brokers operating within New Zealand. Corporate disclosure analysis was subsequently undertaken. Documents reviewed included the institutions’ Corporate Social Responsibility reports, independent assurance statements, annual reports, media releases, and websites through the period 2006–2010. The key characteristics established in the theoretical framework, namely, “transparency,” “fairness,” and “adequacy” were used to interpret the responses to the questionnaires and the corporate disclosure information to allow an assessment as to how responsibly consumer mortgage lending is being carried out in New Zealand. The findings indicate that consumer mortgage lending in New Zealand is, overall, being carried out in a socially responsible manner, with an emphasis being placed on prudent lending practices by lending institution respondents. This has been further strengthened by a number of changes that have been made as a result of the global financial crisis. However, the results have also illustrated concerns regarding three aspects of the responsible mortgage lending framework, namely, the prevailing upfront payment of commissions, the lack of adequate insurance protection requirements and the continuing availability of subprime lending through “third-tier” lenders. The paper adds to the limited literature of environmental social governance reporting in the financial sector. The study is important from a public policy perspective because of its disclosure of lending institutions’ practices and contributes to a global dialogue about environmental social governance in the financial sector.