What’s going to happen to Low- doc loans?

Low-doc lending is unlikely to ever go back to the way it was in 2007 and 2008, but will remain a product available to a particular niche clientele, according to Lenders Mortgage Insurance provider Genworth Financial.

Acting chief executive of Genworth Financial, Paul Caputo, told Australian Broker the “main issue” with the continued growth of the product type has been the advent of new regulations, where “you really have to provide that a person has the capacity to repay the loan”.

“Having a person state their income makes it very hard under those regulations to get around that,” he said.

Genworth announced policy changes back in 2008 that required borrowers to provide their most recent 12 months worth of BAS statements, which has the capacity to show the revenue a business is generating.

“We feel that under those policy conditions, it does validate that a person does have the capacity to repay,” Caputo said.

However, Caputo said this is unlikely to mean there will be a low-doc revival to pre-financial crisis levels.


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