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When it all looks destined for the ‘too hard basket’, it’s often the specialist lenders that are happy to take on clients the big players won’t
If there’s a sector of the industry that’s both reinvented itself in recent times and enjoyed enormous success it would have to be the burgeoning specialist lenders category.
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According to Pepper’s director of sales and distribution, Mario Rehayem, demand for specialist lending has boomed over the past two to three years as more brokers add non-banks to their panels, and the sector sheds its reputation as a last resort for the credit impaired to become a genuine alternative to the banks.
Admittedly not in tune with the theme of the supplement, Mr Rehayem also debunks the idea that brokers need to ‘diversify’ their businesses to panel with a specialist lender.
“Specialist lending is just another home loan product that should be offered at every opportunity where it’s the best product that suits the customer at time of assessment,” Mr Rehayem says. “A broker should never assume the customer doesn’t want to know what alternative options they have outside mainstream lenders. Customers would always welcome an alternative option over a ‘sorry, I’m unable to help you’ outcome.”
Easy space to operate
Resimac’s chief operating officer, Allan Savins, agrees some brokers simply “don’t know enough about the specialist space or don’t want to know”, before adding they’re doing themselves and their clients a disservice.
Mr Savins says it’s not a difficult space to operate in and a broker’s existing database and referral partners are a great place to start targeting potential clients.
“It’s not always credit impaired borrowers in this category,” says Mr Savins, “moreover it’s simply borrowers who do not meet traditional lending requirements, and this may mean a borrower having a clean credit history. There is a captive audience for these types of lending solutions, and quite often they are within easy reach.”
Money flowing
The GFC hit the category hard. Credit all but stopped and many lenders shut their doors to that side of the business. But with monies flowing and demand once again high, they’re coming back into the market.
One such player is Bluestone, which has become an active player in recent months after a five-year hiatus. Company general manager Peter Wood says the attractiveness for brokers to use a specialist lender is to get a customer who, for one reason or another, has been rejected by the banks, get them the finance, get them back with a favourable credit history and, ultimately, get them back with a prime lender.
“Brokers who manage their database effectively can create a future pipeline of business,” Mr Wood says. “These borrowers will also become the biggest advocates for brokers and will have no hesitation in recommending clients both prime and non-conforming.”
Cutting the red tape
Another problem in the specialist space – primarily for the lenders themselves – is that brokers too often become lazy with their offerings to customers, preferring to stick to lenders they’re familiar with.
Paul Wells, La Trobe Financial’s senior vice president and chief investment officer, acknowledges brokers will often pass on loans they deem to be outside their comfort zone. “Brokers need to know we exist,” Mr Wells says of the specialist space, “that we can readily provide a solution, we can get the broker through that deal in a relatively normal timeframe and without making it too hard.
“Sure, these deals require a slightly modified approach, but as a specialist lender we create realistic solutions and do as much of the work as possible. The broker then earns their fees and strengthens their profile as a ‘can do’ provider to their clients.”
