Low doc lending may have slowed but contrary to recent media reports it is far from dead.
Peter Hall, country executive of Genworth Financial agreed that there has been a decline in low doc lending however he believes there is still a viable market for brokers and lenders to focus on.
“There will always be a demand for products and features for the self-employed sector,” he told Mortgage Business
Tighter lending practices over the last year have seen higher LVR products and no-docs virtually disappear while liquidity constraints have sidelined many non-bank lenders who previously held much of the market.
But while many lenders have pulled back from low-doc lending there are still some that see the self-employed sector as a key market.
Huw Bough, head of broker sales RAMS Home Loans believes that there is still a significant target market for legitimate low doc lending.
“There are around two million self-employed borrowers across Australia who make a significant contribution to our economy,” he told Mortgage Business.
“We are seeing a steady flow and continued demand for RAMS low-doc products,” he said.
Mr Bough said the market was simply experiencing a trend toward “more appropriate pricing and policies” to reflect the risk associated with low-doc lending.
Lenders now recognise that there is a higher price for risk, but according to Mr Bough “low-doc borrowers with strong credit histories wouldn’t necessarily be charged higher premiums.”
“It is more a matter of understanding who represents a legitimate low-doc customer and who doesn’t,” he said.
Mr Hall said the market’s evolution could see the documentation required broaden, for example to include a BAS statement to support borrowers’ self-certification.
“We believe demand for some form of product that caters to the needs of the self-employed borrower should continue...given the number of self-employed Australians in the workforce,” he said.
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