10th January 2008
Interview on La Trobe Low Doc Loans
- What Low Doc loan products do you offer through the broker channel?
La Trobe provides our complete range of Lite Doc® self certification lending solutions for Brokers and have done so since 1990 when we introduced the “low doc” concept to the Australian market. Our unique range of Lite Doc® loans covers residential and limited commercial security for any purpose including 100% business borrowings, vacant land, residential construction/development loans, and owner builders. We also serve borrowers in regional locations who are underserved by traditional lenders. Our Lite Doc loans require no mortgage insurance to an LVR of 80%. Lending options include variable or fixed rates with capital repayments allowed (of up to $10,000 per month), terms of up to 40 years, and interest only permitted for periods of 1 to 5 years.
- When did you launch your first Low Doc product?
La Trobe pioneered the Low Doc lending concept in the Australian market in 1990. Our research at that time pointed to a genuine need for a Lite on Documentation Loan. As such we primarily structured the loan for self employed borrowers who were required to provide traditional methods of income substantiation. The traditional methods of testing capacity to repay did not work well with self employed borrowers.
- How could you describe a typical consumer that fits the criteria for Low Doc loans?
Traditionally a borrower would have been asked to provide a letter of income, payslips and/or their most recent taxation returns. Low Doc Loans waive this traditional paper based verification methodology in favour of a self certification method. In recent years we have seen an increase in self employed, sub contract, permanent/part time and employees who do not want to be locked into a short fixed term employment contract. Low Doc lending by responsible lenders can ensure these consumers are still catered for where serviceability is unable to be provided by traditional means and measurements.
- What level of understanding would you say consumers in general have of Low Doc products?
Consumers today are better educated when it comes to financial services in the market place and also have a wider choice with a greater and growing array of lenders. Low Doc lending now forms an integral part of most lenders overall strategy and portfolio as they can either deal directly with the public or through an established broker network. The level of consumer understanding of this market is unquantifiable as most consumers still find the whole application, approval, documentation, and settlement process very foreign as if it is a different language... and it probably is.
- What level of understanding would you say brokers have of Low Doc products?
Generally speaking the reputable and experienced finance brokers in the market place have a high level of understanding of the Low Doc loan facilities. However this does not always apply to the different Low Doc products on offer by lenders. For example - a low initial interest rate similar to a full doc home loan offered by some lenders may allow for attractive marketing but it is pointless if the loan conditions and lender parameters are not much different (or the same) as for a full doc loan.
- What is one piece of advice you could offer to brokers who wish to deal in Low Doc loans?
Successful brokers today should really take a proactive approach to familiarise and align themselves with a flexible Low Doc loan provider who will cover all possible lending circumstances that in turn can be tailored to suit their client’s needs. The right lender can provide speed, flexibility and a service level for the broker that should help increase productivity and improve time efficiencies which we know are critical key performance indicators for a brokers business.
- Where do you see the Low Doc market heading during the next 12 months?
As Australia continues its growth in self employed "work from home” and SOHO (small office home office) employers, we will see continued growth in the self employed Low Doc market. An example of this change in demographics has been the increase of self employed finance brokers who were once employees of bigger financial institutions.
La Trobe has watched the growth and popularity of this market closely over the years. We have always been committed to implementing new and innovative changes that benefit Australian borrowers and brokers alike. Our, non-securitised, balance sheet and flexible lending approach available through our complete Lite Doc® lending program will allow this to continue into the future.
- What happens to Low Doc lending under Anti-Money Laundering Laws
Under the new Anti-Money Laundering laws lenders must properly identify the low-doc customers which may be counter-intuitive. As an example, the Federal Government is currently concerned about lost tax revenues from people who have not submitted tax returns but are applying for low-doc loans. The Australian Taxation Office (ATO) revealed that at least half of the low-documentation borrowers surveyed in late 2004 had not submitted a tax return for an average of three years. The ATO has accumulated AUS$23 million in taxation payable and penalties from an audit of 140 low-doc consumers. It was anticipated that the threat of a full-scale ATO investigation would curb incidents of tax avoidance. The investigation may however only prompt future regulatory compliance such as the requirement that all ‘low-doc borrowers’ Tax File Number (TFN) details are submitted to the ATO at time of loan application.
- Do you have any figures on the growth or popularity of your Low Doc products with brokers/consumers?
Our own numbers suggest the Low Doc market has increased substantially since the major and regional Banks entered the Low Doc arena two plus years ago. Official statistics however state less than 15% of all home loans nationally are now made on this basis. Our own business volumes prove Lite Doc is becoming increasingly accepted in the Broker and consumer markets in which we choose to operate, as it appears to provide a quicker path to approval and settlement for their clients.
- Have you achieved any milestones?
Today we receive over $2 billion of loan applications per year and have a dedicated national team of 130 staff who provide what we believe to be an unparalleled level of customer service in the marketplace.
We continue to be a market leader with Low Doc and remain truly committed to servicing the Broker channel across Australia. Innovative thinking such as our 2 page Application Form has provided the market with a real point of difference, as other lenders continue to operate with application forms that can be up to 23 pages in length.
In more recent times we have also launched a new initiative to the market that we are very proud and excited about which is the La Trobe ON THE SPOT APPROVAL. This has already generated an overwhelming response through our broker network who are constantly providing positive feedback on how this concept is helping their own businesses achieve the incremental growth they are after.
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Head of Lending
Iain Pepper is a Vice-President and the Head of Lending for the La Trobe Group.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 145 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.
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