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Follow your own credit policy on low-docs, warns lender

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Australian Broker | 19 Nov 2012, 05:00 AM Agree 0
A major low-doc loan provider has warned brokers against relying on lenders' credit policies
  • PeterT | 19 Nov 2012, 10:27 AM Agree 0
    Having seen a number of accountants letter produced by 'friendly' accountants, I agree with the article in saying that brokers shouldn't be accepting these at face value.
    It also goes both ways. I've seen plenty of accountants letters stating a low taxable income where I know there is more going on behind the scenes.
  • QEDRisk | 19 Nov 2012, 10:28 AM Agree 0
    I think that part of what does not help here is that the industry still uses the term "low-doc". We should adopt the mantra that there are only "loans" and that all borrowers need their income streams objectively verified.

    For brokers, this means having YOUR own methods and calculations that you use every single time on every single customer. I loathe the term "credit policy" for brokers as it has other connotations, but this is what Denovan et al are talking about.

    Make your own templates or find a provider that can supply them!
  • Adrian | 19 Nov 2012, 10:54 AM Agree 0
    Its quite simple really. Both the Lender & Broker have the joint responsibility to "make reason enquiries" into a borrowers financial situation. Both need to achieve a strong level of comfort from these enquiries, that the income being declared by the borrower seems to be reasonable and accurate account of their true income position. There can be no "one fits all" approach, as everyone's situation is different. Provided both Lender & Broker can make sufficent commentary in their assessment, supporting how they gained the comfort that the income declared seems to be accurate, then their should be no problem. An Accountants Declaration / Detailed conversation with the accountant, can in a lot of cases be a lot more beneficial in verifying a borrowers income, than trying to work out an income based on silly percentages of a turn over figure! (which a lot of lenders adopt as the only process).
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