So-called "true" low doc loans are enjoying a comeback in the market.
Collins Securities announced it is releasing a new refinance low doc loan that will cater to self employed borrowers.
"Self employed borrowers once courted by the major banks and other lenders have been left out in the cold of late and treated as second class borrowers," said the company in a statement.
"This will change with the release of the new low doc product, the product will fill a large gap in the market."
The product will be released on the 1 February.
Latest Comments
Total:
13
comment(s)
Dean on
14 Jan 2010 09:41 PM
"Treated like second class borrowers" ????...That''s because THEY ARE second class borrowers. Particularly when compared to a true fully verified applicant. There should be even greater differences in both product and price.
Greg6547 on
15 Jan 2010 12:12 PM
Oh dear! Dean, you should give the game away and return to the Bank. LoDoc facilities are sought for so many reasons. The costs and LVRs are set to mitigate lenders increased risks. The borrowers are not second class anything. Now brokers who lead potential borrowers and falsify stated incomes - they could be second class ..... But that is another point of discussion altogether.
Melb Broker on
15 Jan 2010 12:20 PM
Dean, pull your head out of your backside. Those who are self employed are the backbone of our economy. If we didnt have such a large number of self employed business owners in this country we wouldnt have the employment ratios we have in Australia. They are as good as any PAYG clients and are often better when it come to borrowing. They understand finance and investing better than most PAYG clients.
Dave on
15 Jan 2010 05:29 PM
They are First Class Borrowers getting a second class lender.
Robbo on
18 Jan 2010 09:26 AM
Dean - you need to switch careers. You shouldn''t be treating ANY of your clients as second rate borrowers - and I bet you don''t tell your Low Doc clients that you view them that way, as you would risk losing a deal - an I bet you wouldn''t want that. Increase Low Doc rates????? Why? They already pay 1. higher LMI premium, 2. the LMI kicks in at a lower LVR, 3. the rates are already usually higher (with the exception of a few lenders), 4. They usually have to provide 12 BAS statements now anyway, 5. the restrictions on Low Doc facilities are tougher than prime loans. Added to that is the fact that your Low Doc clients are already behind the 8 ball by dealing with someone with your attitude. Switch careers - I''ve heard there is plenty of jobs in the mining industry.
Quality Brokers are Few on
18 Jan 2010 01:42 PM
Well I just need to jump in here and support Dean a little bit. In terms of low doc loans; they have higher default rates, more fraud, and get approved without full evidence of income. Obviously these clients are not as strong as prime clients with tax returns (self employed or PAYG).
Banks are still active in the low doc 80% market however they need BAS. Any legitimate business completes their BAS on a regular basis; and if they don’t – will have GST arrears, ATO fines and probably shouldn’t be in business anyway. They probably don’t understand the 2 page BAS form and can’t afford to pay a bookkeeper a couple of hundred dollars to complete the form.
Now in terms of BAS (for the few brokers that can read them), the main areas a bank looks at are sales, expenses and capital expenses. The funny thing is that in some cases e.g. major banks, they simply take a percentage of turnover. Therefore if the business turns over 2M per annum they can declare 1.2M profit – even if the BAS shows a loss for 12 months. That''s pretty lose if you ask me!
If you are a broker and can’t work with that then stick to PAYG lending and your non bank lenders. The majors have approved 6 low doc 80% for me in the last 2 months – 2 were refinance. None declined. I write about 2 pages of supporting info on the business, what they do, who their customers and suppliers are, and an assessment of the BAS etc.
If your low doc 80% can’t get approved with a major bank you either don’t know how to qualify your clients or don’t know how to write the deals. The banks are still approving all of mine!
Steve L on
18 Jan 2010 01:59 PM
To add some to this debate, it is like anything in life. You have the good, the bad and the ugly. There is plenty of fraud in the PAYG / fulldoc space and I would suggest MUCH more fraud than in loDoc. The difference in the LoDoc fraud is that it comes down to brokers and clients colluding together to come up with an income figure. As for full doc, it is usally that PLUS the docs being made up. Fraud is everywhere, always has been and always will be. Ask a lender what they would prefer and LoDoc fraud is less harmful than full doc due to the LVR restrictions. As for loDoc clients, again, you have the Good, the bad and the ugly. To lump everyone in a crappy boat is quite ignorant and smacks of an agenda. So Dean...what is it? perhaps you need to broaden your horizons a tad? Not all borrowers are good, not all bad and not all ugly. It is up to a good broker to place the clients in one of these categories, and then it is up to the brokers scruples to decide the next path of action (Application or eff off!). To write off LoDoc would be to throw the baby out with the bath water. Good luck for a great 2010
Dean on
19 Jan 2010 05:37 PM
Dear Melb Broker....I agree that the self employed are a critical segment of the economy however just because they are self employed doesn''t automatically make them a low doc client?....It probably does if you are (a) just plain lazy or (b) simply not financially competent enough to get the appropriate financials + tax returns and do the deal fully verified. Get it fully verified and get the client a better deal - Simple. Or do you have something to hide?...Like lack of serviceability (you have heard of that haven''t you). Your very simplistic comments just reinforce the fact that you''d better just stick to doing your Low Docs....Good luck cowboy.
Steve L on
20 Jan 2010 09:45 AM
Again Dean, you are lumping all loDoc borrowers together. Some people cannot produce their tax returns for various reasons. One may be they are delaying doing the ITR''s because their expenses are spread over numerous years, and to do the ITR now would result in a tax debt that would effect their cash flow, then their business. however wait 12 months and things can even themselves out somewhat. Or perhaps, they have a rediculously complex structure that would take the client and their accountant time ($$$) to complete and have ready for the lender. More likely, the lender will not understand the structure and this will become a hurdle in the client achieving their financial goals. But yes, some brokers are just too lazy i do agree with you there. From experience, I would think 30% of LoDoc could be done as full doc. However when the rates where the same / are the same (Sub 60%)...why go to the additional trouble? Doesn't seem worth it for all parties involved really does it?
Lo Docs & Taxes on
24 Jan 2010 07:49 AM
Over 15 years of business, I have completed perhaps only about 6 Lo Doc loans and these were primarily due to lack of time available to complete financials. It should be only the borrower that simply signs away that they have sufficient income to repay the loan and the broker should not need to provide to the lender an income figure/s for "loan servicing". Otherwise, there should be no issue with the Lo Doc product or any other product that does allow for income/tax verification so long as these borrowers are paying taxes like all other Australian citizens.
Melb Broker on
01 Feb 2010 02:56 PM
Dean, Aggain with the silly assumptions. Will you not learn? Good come back though - giddyup Dean.
Nick on
21 Mar 2010 05:24 PM
I believe we will soon see the day when a broker ends up in jail for being a party to fraud or tax evasion/money laundering resulting from low doc lending. Low doc loans should be banned. How can a borrower give a declaration of his or her taxable income when no tax returns have been lodged. Such loans should be allowed only with the accountants blessing for the protection of all.Advertising like "if the bank said no" come to us because among other loans we also have low doc in itself makes certain inferences. Brokers are playing with fire here and it could cost them dearly.
Greg6547 on
22 Mar 2010 03:43 PM
There is a place for LoDoc facilities in the market. Many people cannot substantiate, to the acceptance of the lender or mortgage insurer, the full amount of their income - for whatever reason. They are not second class and their collectiove delinquency rates are generally at a low level. Settle down guys, the lenders cost the deal based on risk, let them make the call.