ASIC's first verdict: Low doc brokers found wanting

by Adam Smith18 Nov 2011

ASIC's first verdict into brokers' adherence to responsible lending has found some of the industry wanting, particularly in cases of low-doc lending.

The regulator undertook a review examining the procedures of 16 mortgage brokers. ASIC said while brokers proved to be "generally aware" of and took steps to comply with responsible lending obligations, "there is room for improvement".

"We undertook the review to assess how the home loan industry was complying with new responsible lending obligations in the early days of the regime," ASIC commissioner Peter Kell said. "Loans promoted as low doc were a particular focus given the role these products played in the lead up to the US sub-prime crisis."

The watchdog's review identified a number of instances of brokers not recording a consumer's requirements and objectives beyond the immediate purpose of the home loan, not taking steps to verify a borrower's income, not making proper inquiries into borrowers' actual living expenses or not recording an assessment of a borrower's ability to make repayments.

"ASIC considers that the inquiries and verifications a credit licensee must make to satisfy their responsible lending obligations are scalable depending on the circumstances of the consumer. In some circumstances, fewer inquiries may be needed. This does not mean, however, that inquiries and verifications may be scaled down simply because of the label applied to a product, such as low doc," Kell said.

Kell indicated ASIC would follow up specific concerns with individual brokers. He said the regulator would also work with industry bodies to promote compliance.

While ASIC's initial examination of NCCP compliance focused on brokers, the regulator said it would commence a review of lenders in the coming months.


  • by bretto 17/11/2011 3:06:59 PM

    10 years of brokering, over 50% lo doc - nil defaults. Pathetic to attack lo-doc lending. How about lending by lawyers, that would be a good start.

  • by iratebroker 17/11/2011 3:14:47 PM

    i know several bank branch managers and bank lending managers, these people promote and lend the same products we do yet they have no where near the compliance requirements we do. comments i get is if they were go through the paperwork we have to they would not be able to handle the volume required to keep the branch open. so the way things are, if i were not a broker and say a referrer, i could refer my deals to the banks by passing on a number, they do all the work, i no longer have resposibilites a broker does and i still get paid 0.3 - 0.4% of the upfront. with over 12 years in this industry, i think its time to quit brokering and be just a referrer........

  • by Western Sydney Broker 17/11/2011 3:46:40 PM

    Most of the dodgy loans are written by the bank branches trying to fulfuill their quotas. Write the loans first and ask questions after. As long as it looks ok in paper, they don't give a damn about the customer. Rules like Genuine savings, assessment notices for self-employed and salary credits into bank accounts go out of the window at the branches. They are required from broker applications only.