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Jessica Darnbrough
Ex-broker Kate Thompson, has sparked a storm across the industry for naming and shaming lenders that she claimed have used “inappropriate” lending practices.
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Earlier this week, Ms Thompson appeared on ABC’s 7:30 Report arguing that various lenders were offering low doc home loans to applicants they knew could not afford the repayments.
The former Western Australian Broker of the Year told the ABC that she was encouraged by the banks to make up fictitious stories about customers so they could get loans and to falsify their income.
As a result of this, in late 2008, Ms Thompson's offices were raided by police after a string of her clients, predominantly retirees and lower-income earners, claimed their incomes had been falsely inflated.
But Ms Thompson claimed the blame should not lie solely with her as Australia’s lenders would “coach her” on how to get the deal over the line.
“I do not think there was a bank or non-bank lender that wasn't doing it. From my files alone, I am certain I could evidence every single bank," Ms Thomson told the ABC.
Ms Thompson's claims have since been slammed by a number of industry stakeholders, including brokers, who believe the Mortgage Miracles director is wrong to foist the blame onto the lending institutions.
Speaking to The Adviser, House and Home Loan's Rael Bricker said while he doesn’t doubt some lenders were committing “dubious” lending practices before the GFC, it was up to the broker to make sure they completed their due diligence on the client.
“Low doc loans were originally created so that high earning borrowers who often worked for themselves could get finance. They were not launched so that anyone could get a loan,” he said.
“Brokers that find themselves in trouble over low doc loans have no-one to blame but themselves. Customers trust us to provide them with good financial advice and lead them down the right path.”
Mr Bricker’s comments were echoed by My Loan Expert’s Stewart Noble who agrees that all brokers should conduct their own due diligence to ensure their clients can make the loan repayments.
“It just takes one bad apple to spoil the barrel,” Mr Noble told The Adviser.
“While I do not think the lenders are entirely innocent, it is up to the brokers to make sure the financial advice they give is sound and reliable.”
Mr Noble said the parliamentary inquiry, which has been launched as a result of Ms Thompson’s claims, is unnecessary.
"What’s done is done. I believe NCCP has cleaned up the industry. Similarly, the GFC has stopped most lenders from offering low doc loans. Lending standards are tighter than ever, so I don’t think this is a problem anymore.”
CreditED’s Kym Dalton agrees and believes it is “premature” to call the current discussion on low docs a “scandal”.
“What seems clear is that there’s bound to be increased regulatory and media focus on lending to low doc borrowers and those deemed to be vulnerable in general,” he said.
“You can’t change the past, only future and what’s done is done, however for those who continue to be involved in low doc and other forms of specialised lending, it would be prudent to re-examine their policies and procedures concerning income verification, disclosure and the composition of responsible lending checklists.
"For those deemed to be vulnerable it’s doubly important to ensure that they comprehend the extent and nature of their responsibilities. Brokers and lenders should consider rounding out their responsible lending checklists and disclosure by mandating the CreditED programme that provides the benefit of core learning for consumers and the compliance benefit to industry of independently measured comprehension.”
