Lenders to explain non-conforming loans

by Ben Abbott03 Feb 2012

Lenders have promised to continue to help dispel broker fear about non-conforming mortgage products.

Earlier this week, MKM Capital operations manager Michael Watson said one of the biggest challenges in the non-conforming sector was reassuring brokers they can be NCCP compliant.

Provident Capital managing director Michael O'Sullivan agreed, saying many brokers in the market still think that they are "basically prohibited" from writing them under NCCP.

“There is still work to be done in getting brokers and the industry at large to understand where these products sit, but as people start to work their way through the details of the new requirements it will become clearer there is still a place for non-conforming loans,” he said.

O'Sullivan said the suitability of these products gets back to the basis on which brokers recommend them to borrowers.

“Is there clear evidence of their capacity to repay? It may not be available from traditional sources, but can be attributed to others – such as cash flow, or accountant’s letters – it gets back to knowing the client’s position and the benefits to them of entering the transaction,” he said.

At the end of last year, Provident Capital launched a revamped Platinum non-conforming product for code-regulated residential investment lending. At the end of February, O'Sullivan said the lender will broaden the product’s reach to include the owner-occupied residential market.

“The inquiry level has so far been good – we are not writing loans yet, but once we finish off the documentation and the credit processes we’ll be ready to go,” he said.“Towards the end of last year we saw a noticeable increase in applications and settlement for non-conforming loans.”

O'Sullivan said the market was overcoming legislative challenges for a good start to the year.

"2011 was a tough year across the industry, both in terms of coping with compliance and legislation, and the diminishing market - broker numbers were down, and volumes were down. Generally, a tough place was made even more uncertain by changes to regulation, but now that people are starting to put that behind them, they are seeing a glimmer at the end of the tunnel."

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