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Low-doc lending not 'responsible'

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Australian Broker | 04 Aug 2011, 05:00 AM Agree 0
Low-doc lending may face severe difficulty meeting NCCP definitions of responsible lending, an industry analyst has said
  • mortgageandlease | 04 Aug 2011, 11:01 AM Agree 0
    This was probably one of the first questions that we asked when the Labor Government first blew it own horn about the NCCP.

    By definition, No broker should be offering Lo-doc as a lending choice. Unless we can substantiate income beyond doubt, we cannot technically offer that product.

    There is no way I will ever do a lo-doc again. It is not worth the risk.
  • Lender | 04 Aug 2011, 01:54 PM Agree 0
    Steve is a knowledgeable guy but sweeping generalisations don't help anyone. There is more than ne way to verify a self-employed borrower's income. Reference to bank statements, GST statements, letters from accountants etc are suitable ways for a lender to verify whether a borrower has the capacity to service a loan. ANd what about the needs of genuine self-employed borrowers who do not have finalised financial statements? WHere do they go to get a loan?
  • Garry | 04 Aug 2011, 01:59 PM Agree 0
    Self employed borrowers know better than anyone if they have the capacity to service a loan. The Govt under these absurd NCCP rules have no right to determine if a cient has the right to finance. If Low Docs are to continue they should be removed from the protection under the NCCP rules and let the client bear the risk. They should sign away any right to persue the lender and broker through the courts if something goes wrong. The lenders are well compensated for these facilities via higher rates. The lenders have always been aware of the higher risks involved and its only the lender who should determine if the client is worth the risk. The govt should stay out if it unless its their money thats being lent. Everytime the govt gets involved in business they screw it up.
    I say leave it to the lenders to determine policy - its their money.
  • Jim Tsolakis | 04 Aug 2011, 02:02 PM Agree 0
    The industry shot itself in the foot allowing the Government to pass the NCCC legislation in the current format. Lo Doc is an essential product that allows people who have not completed tax returns for one of hundreds of reasons to borrow to buy a home or invest in business or property. This is what wealth creation is all about .. people taking risks. We are fast becoming a country where everyone else is to blame and no one will tak risks.
  • gmashe | 04 Aug 2011, 02:02 PM Agree 0
    Agree with Steve's comments, not the headline. You've got to understand the comments and the product for what they really are.

    There is nothing wrong with lo-doc per se, depending on what that exactly means. Lending to a consumer (or assisting with that) on the basis of LVR or borrower declaration and no tangible verification of income will never be right and never be legal under NCCP and nor should it be.

    As long as the broker is performing their own enquiries about the borrower's ability to repay and collecting what could be considered reasonable verification of this capacity, that's their obligation fulfilled. If the lo-doc lender doesn't require this information then that's their problem.

    Lo-doc, full-doc, whatever sort of loan imaginable, the broker's responsible lending obligations are the same - enquire and verify.
  • Countrybroker | 04 Aug 2011, 02:09 PM Agree 0
    This is a difficult area for brokers and lenders alike, If we follow the MFAA lead about what to do and follow the guide lines and make inquiries like and obtain Bank Statements and BAS statements, those deals will be able to be written all be it on a restricted basis, The Lo Doc deal that cannot be done will be the old type NO DOC deals , they are finished for ever. Borrowers who want to be involved in the cash economy will need to resolve them selves to the fact that being unable to borrow will be a price to pay for being involved in that type of business any broker who want to help a "cash" client is plainly not wanting to be involved in the industry for much longer. Caution and care are the way to go forward.
  • Daniel son | 04 Aug 2011, 02:51 PM Agree 0
    Bring back ANZ's old style of Low Doc income verification I say - sign hear and we're done. Those were the days.
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