Untapped opportunities

These non-conforming offering enable everyday borrowers alternative access to loans, but for many reasons, some brokers seem reluctant to fully embrace the specialist lending sector.

But Jon Denovan, partner at Gadens Lawyers and expert on the National Consumer Credit Protection Act, says brokers who are not speaking with clients about their ‘out of the box’ options are neglecting their responsibility to their clients.

“It’s a mystery why some brokers are refusing to service non-conforming borrowers. Perhaps they have forgotten where the broker industry came from,” he tells The Adviser.

“You don’t become a broker just to do ‘slam dunk’ prime loans; you become a broker to assist customers find a loan.

“Often the customers that need the most help are non-conforming borrowers, so turning your back on these borrowers is to ignore a key reason [why] the industry exists.”

However, contrary to popular belief, not all recipients of specialist loans have an unfavourable credit history.

Mario Rehayem, director of sales and distribution at Pepper, says much of the lender’s business comes from self-employed borrowers.

“We have a strong focus on the self-employed,” Mr Rehayem says.

“A lot of the self employed clients might not have their financials in place during their set up, so we have alternatives for them, such as our Alt-Doc product.”

And with more than two million independent contractors or self-employed Australians in the nation, the opportunity for specialist lending is vast.

Specialist lenders like Pepper have found an important niche sector and, according to Mr Rehayem, Pepper’s products all stem from consumer demand.

“We have products out there that are actually tailored to what best suits the client at the time of application,” he explains.

“Not everyone has their financials ready at the time of application and not everyone has a business that represents their last 12 months of pay or their current 12 months. Due to that, there are a lot of areas that we tailor for and a lot of our products have been developed purely on the back of customer needs. We understand what works and what doesn’t work in the industry.”

But while consumers are calling out for these products, some brokers are still unsure of how to position themselves around specialist products since their rates are often considerably higher than those of a major bank or credit insurer.

“The area where brokers struggle is the actual offering of the product, not writing the product – writing the product is exactly the same as any other home loan,” Mr Rehayem says.

“Offering the product is different because now you’re talking about a higher interest rate, you have a couple of fees a ached to it for risk.”

To combat this, Pepper has devised a five-step plan. These steps outline clearly the conversation a broker should be having with their clients when offering this type of loan (for details, see pages 10-13).

In this Broker’s Guide, The Adviser will outline what brokers need to do to gain the maximum benefit from the self-employed borrower sector.

From knowing the product to developing the perfect specialist loan pitch, this supplement will cover all the key requirements.