Brokers tipped to win from ASIC reforms

Better Mortgage Management managing director Murray Cowan confirmed there had been a tightening in low-doc lending practices, which he said had been a positive reform.

“There were instances pre-2010 where the wrong people were getting loans with some lenders,” he told The Adviser.

“There’s a greater level of checking and cross-checking [of information provided by brokers] and the right type of borrowers are now getting the low-doc loans.”

The ASIC review cited APRA statistics, which show that low-doc loans at banks have declined from 6.4 per cent of new residential loans to 0.7 per cent since 2010.

That decline has partly been due to tighter lending policies and partly due to brokers shying away from doing low-doc loans, Mr Cowan said.

Mr Cowan said the ASIC review might encourage brokers to return to low-doc loans.

“This is a good news story that appears to indicate that ASIC is reasonably comfortable with what’s happening, which vindicates the work done by alt-doc lenders,” he said.

“It should give some of those brokers who have not been operating in the sector some confidence to re-engage that portion of their customer base.”

Uniq Finance owner Veki Brdjanin said lenders are now asking brokers for more supporting documentation to ensure the accuracy of applications.

“When you’re doing a low-doc loan you’re producing 12 months’ worth of BAS statements, then they want anywhere between three and 12 months’ worth of bank account statements,” he told The Adviser.

Accountant’s letters can also be demanded as a form of income verification, he added.

Mr Brdjanin said ASIC’s reforms had driven improvement, but that the level and quality of low-doc regulation was now about right.

[Related: Broker gets four years jail for low-doc fraud]