Low-doc lenders need to provide brokers with better education, Pepper Home Loans has said.
An ASIC review released last week found issues of non-compliance among low-doc brokers, saying there were instances of brokers inadequately recording information or verifying client income. Pepper Home Loans COO David Holmes said the review's findings are indicative of a lack of education on low-doc requirements.
"ASIC’s findings fairly reflect the low-doc or alternative income verification market six to 12 months ago, where they saw inadequate recording of information by brokers. This was not the same problem with low doc or no doc loans prior to the GFC, but simply a result of a lack of training and understanding of the requirements of a broker when assessing a new loan," Holmes said.
Holmes drew a distinction between the current low-doc environment and that existing prior to the GFC. He said current low-docs required tighter verification procedures. Holmes said brokers were still learning new low-doc procedures at the onset of ASIC's review.
"With the NCCP legislation being introduced on 1 July, 2010, the industry is still in the early phases of educating brokers on the new lending requirements. We all need to acknowledge the high priority for brokers and lenders to adequately record all information, which is the cornerstone of the ASIC legislation and now also one of their major concerns," Holmes said.
Lenders and aggregators are now spending "many hours" training brokers on responsible low-doc lending, Holmes said. He argued that the industry had a responsibility to provide brokers with adequate education.
"The answer is simple for the industry: provide greater education for brokers to ensure they fully interpret the loan process requirements. As the loans continue to become the newer form of ‘alternative income verification’ loans, brokers need to be taught the appropriate approval requirements, particularly considering these loans are dealt with on a case-by-case basis," he said.
Holmes said Pepper would continue to work with brokers individually to ensure full NCCP compliance.
'We can work our way through it': Naylor
ASIC, MFAA clash over verification
ASIC's first verdict: Low-doc brokers found wanting