Who better to extol the virtues of non-bank lenders than brokers who are already firmly committed to offering their products to clients?
The positives of using non-bank lenders far outweigh any negatives, according to Sherlock Holmes Lending Solutions’ managing director, Melanie Burns.
The Melbourne firm appreciates the fact that non-banks don’t suffer from the one-size-fits-all mentality that can afflict some banks, Ms Burns says.
“Banks have hard and fast rules, whereas the nonbanks are far more flexible. They still adhere to all the requirements, but will look at things on a case-by-case basis,” she says.
Sherlock Holmes specialises in non-conforming loans, and sends about 80 per cent of its volumes through MKM Capital, La Trobe Financial, RedZed Lending Solutions and Pepper.
Ms Burns has noticed that the non-bank lenders she uses turn over their BDMs and underwriters far less frequently than the banks.
She adds she has been dealing with many of the same contacts for the past 10 years and enjoys direct access to decision-makers.
“They’re excellent to deal with. If you don’t get them on the phone, they’ll call you straight back, and they know their products,” she says.
Non-banks are more eager because they don’t have such large marketing budgets, she adds. “I think non-bank lenders have had a focus on dealing with the third party channel, whereas the big banks have sometimes only gone down that road reluctantly,” she says.
The only negative that she can think of when it comes to non-bank lenders is rates and fees, noting there is a myth among some customers and even brokers that non-banks charge “exorbitant” rates when in fact they are far more reasonable.
“I believe they’re priced accordingly, given the risks involved, but selling that to some borrowers who are used to dealing with banks, they might not understand,” Ms Burns says.
Non-banks 'work a lot harder'
Property & Finance Solutions director Terry Nunn is another fan of non-bank lenders.
The Wollongong-based firm writes a combined 25 per cent of its volumes with Sintex, Thinktank, Liberty Financial and Pepper.
Mr Nunn says he has had only positive experiences with those lenders “because they work a lot harder to get things through the front door”.
They occupy niches the banks don’t fill and are also more willing to consider a wider range of proposals, he explains.
Part of the reason is that non-banks are more likely than banks to have ex-brokers as BDMs and underwriters, he says.
“The staff at the non-bank lenders are more attuned to market requirements. They’ve got people who know what they’re doing,” he adds.
Like Ms Burns from Sherlock Holmes, Mr Nunn says there is a misconception in the market that non-banks charge very expensive rates.
“People go pale” when he first raises the idea with them, he says.
However, clients quickly come around once he explains the facts to them, Mr Nunn points out, and many of them are then pleased with the thought of steering their business away from the big banks.
Moving with the market
One thing Select Mortgage Services broker Ted Bindel has observed about nonbank lenders is that they can change pricing and product features more rapidly than the banks.
“They’re smaller players in the market, so they’re more flexible. It’s very easy for them to change direction with the market,” the WA based broker explains.
Mr Bindel works with Homeloans and Liberty Financial, which handle up to 10 per cent of his loans.
“The big banks have a massive market share and can pick and choose what they want, but sometimes the non-banks will pick up things that fall through the cracks,” he says.
Non-banks don’t try to be all things to all people; instead, they “try to make deals work” and “try to find answers that the big banks don’t”, he says.
“You look at Homeloans: they’ve got a variety of funders, so there’s an opportunity to shop the deal within the one lender to find the best fit for the customer,” he adds.
However, clients sometimes raise concerns about using lenders with which they’re unfamiliar, Mr Bindel says.
“The biggest myth that you come across is that they’re vulnerable – that they’re not likely to be around as long as the majors,” he says.
Mr Bindel adds that those fears go away when he explains that the non-banks are tightly regulated by APRA – and that, in any case, the risk lies with the lender not the borrower.
Another issue with non-bank lending may concern where the funds are sourced from.
Tony Bice of Finance Made Easy agrees this can be a real hurdle when trying to sell a non-bank product to a customer who may not be familiar with the lender.
However, Mr Bice says most non-banks source funds from the majors and his advice is to “sell the funder and not the nonbank lender”.
Give the client confidence that they’re dealing with a “big institution”, he advises. Throw in a sharp rate and a unique policy niche and the job is done, Mr Bice says.
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