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By: Jessica Darnbrough
Better Mortgage Management has dismissed claims that low doc loans will not be available in a post-licence arena.
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BMM’s managing director Murray Cowan said the mortgage manager had been inundated with concerns from brokers that thought low doc loans would not be viable upon implementation of the National Credit Code (NCC).
Under the new NCC, brokers and lenders are required to obtain information regarding the borrower’s financial situation and take reasonable steps to verify the borrower’s financial situation.
“On the face of it, this would restrict low doc lending where limited verification of income is required,” Mr Cowan said.
However, Mr Cowan said there are still many ways in which a broker can assess a lo doc borrower’s suitability for finance under the new legislation.
“BAS statements, bank trading statements, investigation of asset and liability positions, researching credit history, accountant’s letters and client interviews are among the many ways you can assess suitability of a low doc applicant, with the individual circumstances of each application the determining factor in which instruments you utilise,” he said.
“There is provision in the NCC for ‘scalability’ which allows for flexibility when determining the extent of enquiries expected to determine suitability of the application. For example, if the application is for a low LVR and the applicant has a strong asset position and long trading history which has been verified, that may be sufficient evidence of suitability”.
Mr Cowan said changes to the Low Doc market as a result of the new code were a positive for the industry as it was clear that Low Doc lending had moved away from its traditional purpose of assisting self-employed borrowers in recent years.
“No Doc or asset lend style loans with little or no income verification became popular in times of rising asset prices but these loans were designed to assist investors and not specifically self-employed borrowers and are no longer acceptable under the code”, Mr Cowan said
