Despite stark differences between the US and Australian sub-prime markets domestic non-conforming lenders are feeling the squeeze from evaporating liquidity, forcing rationalisation for some lenders in recent weeks.
Liberty is the latest lender to react. It is believed Liberty will now schedule settlements a month in advance, with priority given to its LoanNet users – the company’s loan application and approval system.
Speaking of the US sub-prime crisis, Liberty Financial general manager of mortgages James Boyle told Mortgage Business that recent events have “had a significant impact” on the whole lending industry.
“We’ve had to make some adjustments to reflect the current appetite for the non-conforming market,” said Boyle.
“When all of this clears lenders who have respect for the value of risk will still be here.”
Liberty’s decision to revise its loan settlement schedule follows other moves in the non-conforming space in response to changing market conditions.
Bluestone Mortgages was the first non-conforming lender to announce rate adjustments in August this year. The lender has since lowered its 95 per cent LVR to 90 per cent.
Bluestone Mortgages CEO Alistair Jeffery believes flexibility, and the ability to take both a proactive and reactive approach to lending, is essential in the current funding climate.
“Commission structures and margins have to reflect true costs. Every day we receive new information that allows us to make the best decisions for the business’ future. A reactive approach to business is now normal,” said Jeffery.
Illiquidity has also impacted Pepper Homeloans, who late last month shelved its Xpress and Mega Xpress products, releasing 19 BDMs and other staff in the process.
Commenting on the decision to cull the products Pepper Homeloans CEO John Empey told Mortgage Business that the company will focus on core non-conforming products with good margins and wait until there is some normalisation of the capital markets.
According to Empey, the lender will re-introduce the Xpress and Mega Xpress products once stability is assured.
“RMBS are slowly establishing prices – there are a few backed up waiting to be issued so we should start to see a real pick up around March next year,” he said.
For a full analysis of the changing lending environment for Australia’s non-conforming sector, look out for issue two of Mortgage Business. Click here for subscription details.