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Low-doc lending standards remain strong, even though the sector is not without flaws, according to industry figures.
The Australian reported earlier this week that low-doc loans had made an “unwanted return” and that low-doc loans “have become even easier to obtain as lending standards loosen”.
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Home Loan Experts managing director Otto Dargan told The Adviser that it was wrong to say low-doc standards have been falling.
“The lenders were overly cautious post-GFC and post-NCCP. Now they’ve seen low-doc arrears are low, so non-bank lenders are realigning policy and pricing with the actual risk they pose,” he said.
“It’s the unregulated no-docs that are the real worry. That sector is still filled with cowboys. We don’t believe there are any issues with low-docs supported by BAS, bank accounts or an accountant’s letter.”
Sintex general manager Cathy Dimarchos said that brokers and lenders both have a responsibility to ensure low-doc standards are upheld.
She also said there was no evidence to suggest that the low-doc sector needed to be monitored any more closely than any other type of lending.
Ms Dimarchos said Sintext has “strict” lending standards, although she added that some lenders sometimes make inappropriate use of low-doc loans.
“I think there are ways that the low-doc product can be used to get a loan across the line as opposed to producing a full-doc home loan,” she said.
Nectar Mortgages chief executive Paul Newell said it was wrong to claim that low-doc lending standards had fallen – and that, if anything, they had actually increased.
“It’s nothing like it was before – just declare your income and you got a loan,” he said. “If it’s a low-doc now, it’s gone through fairly stringent criteria to be pre-approved.”
Mr Newell told The Adviser that brokers and lenders were aware of their responsibilities under the new responsible lending rules, although low-doc loans could never be entirely free of risk.
“I think every loan carries a risk. If low-doc lending started to get out of control again, I think they would have to look at it, but at this point in time, low-doc lending makes up a really small portion of people’s books,” he said.
Since the responsible lending laws were introduced in 2010, low-doc loans at banks have declined from 6.4 per cent of new residential loans to 0.7 per cent, according to APRA.
APRA chairman Wayne Byres told a Senate estimates committee last week that “lending standards are being stretched”.
[Related: Pepper hits back at The Australian]
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