‘Low doc lending' a ‘red rag’ to ASIC

Speaking to The Adviser, Mr Denovan said the term put brokers off writing specialist loans and was a “red rag” to ASIC.

“The worst aspect of it is the way people call it ‘low doc’. In fact, low doc for many years has not been low doc – it should actually be called ‘more doc’ because borrowers and brokers are required to find alternative documents.”

Mr Denovan said ASIC was planning to release a report in March which would offer further guidance to brokers about ‘low doc’ and specialist lending.

He said brokers who were still wary of becoming involved in this market segment were mistaken if they believed it existed on the cusp of NCCP requirements.

Brokers who are wary of higher interest rates should also reconsider, according to Mr Denovan.

“ASIC once said that an interest rate of 30 per cent per annum on a home loan will not be unsuitable if the customer can afford it,” he said.

“Interest rates are not relevant in determining unsuitability. They might be relevant in determining whether you’ve gone the best job for your customer – but a higher interest rate is irrelevant so long as the customer can repay it without hardship.”

Mr Denovan said he had been working with ASIC to provide more guidance to brokers on specialist lending requirements.