27th June 2007

Dear Investor,

Low doc lending – what’s all the fuss about?

You have probably read in the papers recently about the increasing popularity of what is called “low doc” lending. So, what is “low doc” lending, and what is La Trobe’s position on it?

Traditionally, a lender considers three separate criteria in deciding whether to lend money to a potential borrower, where the loan is to be secured by a mortgage over real property. These are called the “3Cs” which look at a borrower’s:

  • Character – are they creditworthy and responsible?
  • Capacity – will they be able to service the loan?
  • Collateral – is there sufficient value in the property to secure the loan?

After assessment of the above a lender will then require substantial documentation, such as tax returns, payslips and the like, to support the character, capacity and collateral assessment of the potential borrower. This approach is called “full doc” lending; it is very time-consuming and some lenders Application Forms can be up to 20 pages long.

La Trobe, introduced “low doc” lending in 1990, and recognised that there is a different, but equally valid, approach to “full doc” lending, which however does not necessarily compromise the quality of lending.

La Trobe, in its approach to “low doc” lending, still applies the “3Cs” principles. We still obtain an independent credit check on the potential borrower, we still obtain self certification that the borrower can service the loan, and we still obtain an independent valuation of the security property from an independent and qualified valuer. However, the way we obtain the information is streamlined, and requires less supporting documentation, which benefits all parties involved. For example, La Trobe’s Application for Finance is only 2 pages long, and borrowers who are “time poor” appreciate this simplicity.

Are there any downsides to “low doc” lending? With less supporting documentation, there is room for the borrower to provide misleading information in the application for the loan. However, with the deterrent effect of significant criminal penalties for obtaining finance by deception in all States in Australia, and with the appropriate application of the “3Cs” principles, La Trobe has found that the potential problem of misleading information being provided by the borrower can be largely alleviated.


Best regards,
Chris Andrews

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Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.










La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer



* La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. You can get a copy of the PDS by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
(1) The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may achieve lower than expected returns. Past performance is no guarantee of future performance. Investors risk losing some or all of their principal investment.
(2) Withdrawal rights are subject to liquidity and may be delayed or suspended.
(3) As at 30/11/10 the La Trobe Australian Mortgage Fund had received a Morningstar RatingTM of 5 stars. The Morningstar Rating is an assessment of a fund's past performance - based on both return and risk - which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. © 2010 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the above data or content to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant product disclosure statement, before making any decision. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.pdf
(4) 3.75 star rating out of a possible 5 star rating indicates that Adviser Edge believes that La Trobe has performed in line with its peers and exceeded its peers on some fronts.
(5) The Standard and Poors rating of 4 out of 5 stars indicates that S + P has high conviction that La Trobe Financial will consistently generate risk-adjusted fund returns in excess of its relevant investment objectives and relative to its peers.
(6) The award was given to the La Trobe Australian Mortgage Fund, Pooled Mortgages Option.
Research Ratings are subject to change. To view the latest research information please visit www.adviseredge.com.au or www.standardandpoors.com.au. Ratings issued by Adviser Edge Investment Research AFS Licence No. 236783 and Standard & Poors Information Services (Australia) Pty Ltd AFS Licence No. 258896 are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. The ratings are only one factor to be taken into account in deciding to invest. Research Houses receive a fee from La Trobe for rating the product. The Adviser Edge rating is generally a measure of the rated entity's capacity to meet its repayment obligations in all market circumstances.
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