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.