Getting tough deals across the line

by Adam Smith12 Jan 2016
Many brokers deal with fairly straightforward residential deals the vast majority of the time. But some clients’ circumstances call for outside-the-square thinking. Non-conforming lenders specialise in outside-the-square. Here’s how lenders helped brokers deliver solutions to clients who didn’t fit the typical major bank scenario.

The scenario:

A broker recently presented a loan application for a self-employed borrower who was going through a divorce. The loan purpose was to refinance an existing joint mortgage into the name of the borrower solely combined with the consolidation of a few smaller consumer debts. Additional funds were also required to payout the ex-partner. The borrower had been in business for 16 months.

Unfortunately for the borrower the relationship had broken down to the point that unknowingly to them several utility bills had gone unpaid. The accounts were held in the name of the borrower, so as a consequence their credit report contained two recent default listings. These listings were a $1,600 electricity account and a $400 phone account. The borrower had maintained the repayments on the mortgage and the consumer debts.

A loan to 80% of the property value was required, and due to the stresses associated with the breakdown of the relationship the borrower had not yet had the opportunity to finalise their current taxation returns.

The solution:
The broker presented the application with a full explanation as to the default listings, together with six months repayment history on the mortgage being refinanced. Recent statements on the consumer debts being consolidated were also provided. To support the income position of the borrower, the broker provided a stated income declaration from the borrower together with an income verification letter from their accountant.

With the documentation provided, Resimac Financial Services was able to offer a Specialist Clear Alt Doc solution. With the two recent default listings both under $2,000, the borrower qualified for our entry level Specialist Lending solution.

Resimac Financial Services disregards all adverse credit report listings when they are under $2,000, irrespective of when they were listed. Self-employed borrowers who are unable to provide the current two years taxation returns have the option of providing either an accountant’s verification letter, six months BAS or 3 months business bank statements to support their stated income declaration. Solutions for self-employed borrowers are available to those who have been trading for at least six months.

The takeaway:
Brokers needn’t be put off by the fact that a potential client may not fit the guidelines of mainstream lenders. The underlying principles of the loan assessment process haven’t changed. The application still needs to meet servicing guidelines, the security being offered must be acceptable to the lender and finally the loan must not be unsuitable. The only additional requirement for a Specialist Lending application is the background story must detail why the borrower requires a Specialist Lending solution and more importantly what has changed to ensure the borrower isn’t in the same situation a few months down the track.

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