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Jessica Darnbrough
A recent straw poll has revealed that one in two brokers has stopped writing low doc loans because of NCCP.
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According to The Adviser's most recent straw poll, 51 per cent of the 441 respondents have ceased writing these products as a result of the new legislation.
While half of all mortgage brokers believe NCCP has stopped them from writing low doc mortgages, two industry stakeholders have said this a myth that needs to “be overcome”.
Speaking to The Adviser, RESIMAC's chief operating officer Allan Savins said brokers are of the assumption that low docs are “unsuitable” under the new legislation, however, this is simply not the case.
“I know a lot of brokers believe low docs will not satisfy the various requirements outlined under NCCP. But, the reality is that there is nothing in the legislation to suggest these types of loans are ‘unsuitable’,” he said.
“Low docs are still a viable mortgage type. They simply require ‘alternative’ documentation to the traditional full doc loans.”
Mr Savins went on to say that this market could be “potentially lucrative” for brokers as there is still a lot of demand for these types of loans from genuine self-employed borrowers.
“Pre-GFC low docs accounted for almost 25 per cent of all new loans written,” he said.
“Today, they account for approximately 2 per cent. With this in mind, the question must then be asked: where have all the genuine buyers gone?
“Even if you believe half of these borrowers would not be able to get a loan today because we no longer have no doc mortgages, 1 day loans or PAYG low doc loans, that still leaves 10 per cent of borrowers who need a low doc mortgage.”
Mr Savins comments were echoed by Homeloans' Greg Mitchell, who agreed there was still “solid demand for low doc mortgages”.
“I do believe the low doc mortgage reputation has been tarnished. That said, there are still plenty of trustworthy, good self employed borrowers that need this type of loan.”
It is for this reason that Homeloans recently launched a new suite of products that cater to genuine low doc borrowers.
Earlier this week, Homeloans launched its FlexiChoicesuite of products. The products are aimed at borrowers who fall outside the typical mortgage insurer and bank lending criteria.
“This new range considers applicants who have an ‘adverse’ credit history,” Mr Mitchell said.
“That encompasses borrowers such as those who are self employed, contract workers, credit impaired, or who have reached their exposure with mortgage insurers.”
