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Specialist lenders outgrow tarnished reputation

Two specialist lenders have hit out at the widespread use of the terms ‘low-doc’ and ‘non-conforming’, arguing that they no longer reflect the core business of the sector.

Pepper Australia responded to an article in The Australian newspaper on Tuesday entitled ‘Low-doc loans make an unwanted return’.

In a statement released yesterday, Pepper said the article featured some misleading and incorrect statements about the lender.

“Alternative documentation loans have been designed as an alternative way to verify a self-employed borrower’s ability to repay a home loan in the absence of tax returns,” Pepper Australia said.


“Pepper believes that the term ‘low-doc loan’ is both misleading and outdated in the Australian context of specialist lending.

“In 2008 the Australian Government overhauled the mortgage lending sector, strengthening and improving the industry for everyone but also crucially redefining what ‘low-doc loan’ means.

“Today the term carries little relevance for Pepper and the wider industry, as it does not accurately reflect current methods of income verification, which Pepper strictly complies with.”

Similarly, specialist lender RedZed has also spoken out about the misuse of the term ‘non-conforming’ loans.

“I’ve never seen a customer walk in and identify themselves to a broker as a non-conforming borrower,” RedZed managing director Evan Dwyer said.

“They will walk in and say they are self-employed,” Mr Dwyer said.

“They run their own business and they’re proud of that,” he said.

Mr Dwyer said he also takes issue with the term ‘non-bank’, telling Mortgage Business that it “seems to suggest in some way that it is not something it should be”.

“For me, all lenders are margin players,” he said.

“The only difference between a bank and a non-bank is that you are not an ADI.”

Peter Wood, Asia-Pacific general manager of specialist lender Bluestone, said Australian non-conforming loans have been tarnished by what happened in the US during the GFC.

“If you drill down to what happened in the US, they gave loans to people who had no income whatsoever and they never thought property prices would fall,” Mr Wood said.

Finsure managing director John Kolenda agrees, but said specialist lending is still an important part of the market.

“There probably has been a tarnishing of those types of products stemming from the backlash of the US, but that sort of practice is far removed from the product styles in this country,” Mr Kolenda said.

“There are still consumers out there who need solutions,” he said.

Last month, ASIC released a positive review of low-doc lending practices in Australia.

Consequently, Bluestone’s Peter Wood said the group has seen renewed confidence among brokers.

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