Twelve months after issuing a critical report on lending practices in the interest-only segment of the mortgage market, the Australian Securities and Investments Commission has re-visited the sector and found some, but not enough, improvement.In last year's review ASIC found a number of practices "where lenders may be at risk of not complying with their responsible lending obligations."In 40 per cent of the files reviewed the affordability calculations assumed borrowers had longer to repay the principal on the loan than they actually did. Lenders used the full term of the loan to calculate principal repayments, rather than the residual term.In 20 per cent of files lenders had not considered the borrower's actual living expenses when approving the loan but relied instead on "expense benchmarks". Some ignored expenditure information provided by the borrower.And in more than 30 per cent of files reviewed there was no evidence that the lender had considered whether the interest-only home loan met the borrower's requirements.In the latest review ASIC found that just over 20 per cent did not include a statement explaining how an interest-only loan specifically met the client's requirements.ASIC has enforced a residual term method for assessing the borrower's capacity to pay. What this means is that repayments are calculated on a principal and interest basis on the term of the loan once the interest-only period has ended. This has resulted in lower loan amounts being offered.ASIC found that there were still a number of other compliance risks. Brokers provided only general information rather than tailored information on loan features that could impose increased financial obligations or restrict repayment flexibility.The concern here is that if borrowers only make contractually required payments and do not use an offset account they will pay more interest over the term of the loan.Overall, record keeping was still inconsistent, fragmented or incomplete.Since ASIC's last report the percentage of new interest-only mortgage approvals has fallen by 12 per cent.The latest review focused on brokers, while the earlier review looked at the practices of lenders and brokers. ASIC did this because it found that a greater proportion of interest-only mortgages were arranged through the broker channel than direct channels.