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LOW DOC BROKER VIEW: LARRY STRANGE, FINANCE COMPANY AUSTRALIA Larry Strange encounters a large number of self-employed clients because he specialises in the commercial lending space, and finds himself arranging low-doc loans for business clients, backed by residential security. When it comes to applications, Strange observes that lender requirements have changed hugely since the GFC. “Those days are well and truly gone.” He finds that accountants’ declarations are the most popular method of verification, providing the client has a good relationship with their accountant. He advises brokers to take particular care to verify that the income the client is declaring is their actual current income, not projected income. Strange sees low-doc loans as “just another avenue of lending, which makes sense for a self-employed person if they don’t have the required documentation.”
representative of a licensee, they cannot provide credit assistance or advice.”
Adapting your application process One major concern for brokers looking at nonvanilla clients is whether it’ll require changes to their application process, especially given brokerages are being pushed to document and standardise their processes to aid efficiency. It’s therefore encouraging that low-doc, altdoc and full-doc application procedures are becoming increasingly similar. Indeed, several lenders told us the application processes for their low-doc and full-doc loans were almost identical. “There shouldn’t be any need for a broker to change their assessment process for low-doc loans,” says La Trobe’s Bannister. “The only difference between our Lite-Doc loans and our Full-Doc loans is income verification.” This happens very early in the process, so the rest of the
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process and subsequent turnaround times remain similar to full-doc loans. The converging processes are a result of the lending environment, explains Pepper boss Rehayem. “Both the lender and the borrower have an obligation to ensure they carry out the ‘same’ level of income/capacity to repay assessment as they would for a fulldoc loan... In today’s environment, we do not have policies that are of lower quality or standard when it comes to assessing a borrower’s income.” Reducing back-and-forth between broker and lender is paramount in reducing turnaround times, argues Liberty’s Monacheff. Whilst understanding the client and their goals might seem obvious, “by taking the time to understand what the client wants and how Liberty can tailor a solution, brokers can massively reduce the turnaround time.” A well-executed screening of the client
conversations should be relayed to the lender in the form of file notes.” Homeloans boss Hair put forward a number of additional tips, including checking the borrower’s ABN and GST registration on the ABN register, being aware that trading statements can involve a longer turnaround time due to complexity, and taking the time to make sure an accountant’s declaration is completed correctly, if necessary for an application.
Combating fraud Fraud remains a serious concern throughout all areas of lending, and has been particularly associated with the low-doc space. However, low- and alt-doc lenders are determined to challenge this assertion, and put forward a number of reasons. “It is easy to pigeonhole the low-doc segment as being more prone to fraud,” comments Bluestone’s D’Vaz. “But in reality – and from our experience – this is not
“Some low-doc borrowers will respond to local area campaigns, others to more targeted marketing, and then, finally, some will require a direct touch” John Monacheff, Liberty Financial can also help brokers be seen to add value, notes Royden D’Vaz, director of sales, marketing and distribution at Bluestone. “It is often the detail that provides the opportunity to match the client with a lower interest rate or more feature-rich product, or in some cases finding a solution for them.” Thorough reviewing of the client’s documentation is obviously important for a number of reasons, but it can also aid turnaround times. RESIMAC’s Carde outlines an example when confirming income. “For an alt doc, it is no different, but instead of looking at a payslip you are looking at an accountant’s letter, BAS or bank statements. If any doubt or confusion exists, the broker should seek permission from the borrower to speak with their accountant directly to gain a better understanding of the borrower’s business operations and financial performance. Once completed, those
the case.” Pepper’s Rehayem believes traditional assumptions should be reversed. “In my opinion, the full-doc loans process is more likely to be targeted by fraudsters. The assessment process tends to be more commoditised as opposed to the alt-doc process.” Lenders pointed out how they go to extra lengths compared to a full-doc process. La Trobe, for example, seeks assistance from independent accountants to confirm borrowers’ stated incomes. “We find that by involving another independent professional the incidence of fraud is greatly reduced,” Bannister explains. Improvements in software are also helping lenders combat fraud in the low-doc space. “Technology these days allows brokers to undertake more checks than ever before to verify the information being provided,” notes RESIMAC’s Carde. “From simple Google
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