Lenders and brokers should be sharing responsibility for responsible low-doc lending, rather than letting newly enfranchised regulator ASIC push the weight of verification on to brokers.
Following the release of an ASIC review of broker adherence to responsible lending which identified problems with low-doc broking, Liberty Financial's John Mohnacheff has come out in support of the MFAA, saying brokers should not shoulder full responsibility for verification.
"It's going to take some time for ASIC to get a better understanding of how brokers can and do operate," Mohnacheff said, arguing that there should be a "happy compromise" between broker and lender responsibility.
"The investigative powers of a lender are much greater; lenders have got access to a lot more information than a broker will ever have," Mohnacheff said.
For exapmle, lenders are able to statistically analyse borrower applications, allowing them to assess whether stated income is "about right", based on occupation, location and age.
Brokers should not be responsible for checking the veracity of accountant's letters, he added.
"The relationship is not between the accountant and the broker, the relationship is between the accountant and their client. A broker can ask that they provide as much as they can, but it is not up to a broker to adjudicate if that information is right or wrong.
"As long as a broker can provide as much as they deem they are able to, then the lender can look at it and make a decision," he said.
Mohnacheff said the low-doc lending area has many "peculiarities" depending on the lender, and the expectation that brokers should be able to know all of them is "unjustified".
Liberty is seeing more brokers steer clear of low-doc lending as a result of the legislative changes, which are leaving brokers fearful that they may be held liable.
"We are very disappointed - bitterly disappointed," Mohnacheff said.
"There is a few brokers who really understand low-doc lending and they have maintained the volumes they are doing, but it's the newer or less experienced brokers that are too scared to go there," he said.
This is having a resultant effect on low-doc volumes. "No one can say low-doc volumes are strong. I'd like them to be strong - it helps business people to get deals across the line," he said.
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