Lo Doc back in the market
- Thread starter MTR
- Start date
They haven't ever gone away.
Just tougher to get, and some of us exclude them from our businesses while others specialise in them.
Certainly looks like some lenders are going down the uninsured route again to look to get some market share.
Ta
Rolf
Just tougher to get, and some of us exclude them from our businesses while others specialise in them.
Certainly looks like some lenders are going down the uninsured route again to look to get some market share.
Ta
Rolf
Seems I was right (now that's scarey), when I posted this comment back mid-GFC in 2009:
http://somersoft.com/forums/showpost.php?p=533203&postcount=3
http://somersoft.com/forums/showpost.php?p=533203&postcount=3
you were on the money prop
The rams brochure for my "local fran" was in my letterbox at the office
Odd though that the local one ins 9 ks away, and the letter box one was from 40 ks away
cannibalidation of territory perhaps ?
The older RAMS product works really well if there is a compliant accountant around the corner......... dunno bout the new one
ta
rolf
Odd though that the local one ins 9 ks away, and the letter box one was from 40 ks away
cannibalidation of territory perhaps ?
The older RAMS product works really well if there is a compliant accountant around the corner......... dunno bout the new one
ta
rolf
The accountants declaration isn't that easy these days. I reckon I knock back 2 out of three as they expect me to sign a declaration when they have zero proof or its hyper-dodgy from the outset.....
eg Conversation goes like this...
Will you declare I earn $250K.
How much did/do you earn ?
$150K...But I expect it might go up.
How do you expect that when last three years are all under $150K ?
Things are improving.
So how much did you earn last month ??
$10K
So why would I sign off it as being $20K .
I need the loan. This property is a sure thing. What about if I include deposits from my parents Can I call that income.
No
What about if I borrow $100K from the bank on my LOC and deposit that. Will you sign off on the extra income.
No. Its a loan. Its not income.
If the lender allows lo doc and I don't have to prove income why cant you just sign it ?
Is it just as bad for mortgage brokers etc with the type of people this product seems to attract ?? Obviously not all are bad but a large %....How do the lenders view the applications ? Suspicious or do you guys weed out the bad first ??
eg Conversation goes like this...
Will you declare I earn $250K.
How much did/do you earn ?
$150K...But I expect it might go up.
How do you expect that when last three years are all under $150K ?
Things are improving.
So how much did you earn last month ??
$10K
So why would I sign off it as being $20K .
I need the loan. This property is a sure thing. What about if I include deposits from my parents Can I call that income.
No
What about if I borrow $100K from the bank on my LOC and deposit that. Will you sign off on the extra income.
No. Its a loan. Its not income.
If the lender allows lo doc and I don't have to prove income why cant you just sign it ?
Is it just as bad for mortgage brokers etc with the type of people this product seems to attract ?? Obviously not all are bad but a large %....How do the lenders view the applications ? Suspicious or do you guys weed out the bad first ??
Most potential lo doc loans that come to us are usually doable on full doc of some type.
Lo Doc loans, and specialising in same would be a nice warm target for a practice audit.
I dont need that, nor do my clients
ta
rolf
I'm with you on this Paul (and Rolf). Almost every person I see wanting a lo doc loan falls into one of two categories:
1. They don't have the evidence to qualify for a lo doc loan unless the accountant signs off on something that doesn't existing such as Paul's example.
- or -
2. With a little extra effort they would qualify for a full doc loan.
These days there are essentially 3 ways of qualifying for a lo doc loan:
1. Lodged BAS statements for at least 12 months suggesting income to service the loan.
* I find if you can produce these, you can probably produce at least 1 decent tax return and we can find a lender to go full doc.
2. 12 months trading statements from your business and personal bank accounts.
* Again, if this stacks up, you've probably got a decent tax return. If you haven't you've probably been cheating on your tax.
3. Accountants letter verifying income.
* If your accountant can verify your income, why isn't there a tax return to do it?
Keep in mind the tax return doesn't have necessarily have to be lodged to get a full doc loan. Lenders will often accept an accounts letter accompanying the yet to be lodged tax return.
I know there's some legitimate exceptions, but they're rare.
1. They don't have the evidence to qualify for a lo doc loan unless the accountant signs off on something that doesn't existing such as Paul's example.
- or -
2. With a little extra effort they would qualify for a full doc loan.
These days there are essentially 3 ways of qualifying for a lo doc loan:
1. Lodged BAS statements for at least 12 months suggesting income to service the loan.
* I find if you can produce these, you can probably produce at least 1 decent tax return and we can find a lender to go full doc.
2. 12 months trading statements from your business and personal bank accounts.
* Again, if this stacks up, you've probably got a decent tax return. If you haven't you've probably been cheating on your tax.
3. Accountants letter verifying income.
* If your accountant can verify your income, why isn't there a tax return to do it?
Keep in mind the tax return doesn't have necessarily have to be lodged to get a full doc loan. Lenders will often accept an accounts letter accompanying the yet to be lodged tax return.
I know there's some legitimate exceptions, but they're rare.
there are circumstances where a lo doc is a valid solution, and all is above board.
Just they tend not to come across my path much
ta
rolf
Just they tend not to come across my path much
ta
rolf
Its not all 'smoke and mirrors', my accountant is signing off because of a couple of reasons
1. I have overseas income of around $70-80K pa which banks will not recognise at this point in time, this will possibly change in the very near future.
2. I have projects/developments in the pipeline where we have projected profits of between 20-25%, when you have 3 on the go this is quite a chunk of money.
Lo doc for me will be a stop gap as required, depending on the scenario, once I sell one project I am back to full-doc, makes life easy for this project.
MTR
1. I have overseas income of around $70-80K pa which banks will not recognise at this point in time, this will possibly change in the very near future.
2. I have projects/developments in the pipeline where we have projected profits of between 20-25%, when you have 3 on the go this is quite a chunk of money.
Lo doc for me will be a stop gap as required, depending on the scenario, once I sell one project I am back to full-doc, makes life easy for this project.
MTR
I havent found low doc clients to be any dodgier than other clients.
The real ones to watch out for are the ones trying to do fraud.
They will come to you with payslips, rather than an accountants declaration though.
Some examples of low doc clients;
A tradeperson who spent part of the last financial year PAYG, assessors discount that part of the tax return, even though very similar income PAYG to self employed.
tradie recently returned from overseas. has a bunch of work lined up, sometimes with the same client, but no aus tax return for the previous year, and no formal 'contract'.
Property investors running a rooming house, or self managing properties etc. Income discounted heavily as a normal loan. as low doc it passes
Property investors whose investment income makes up more than 50% of their total income. again, many lenders would only use the taxable income from the return, and still discount to 80% the rental income, rather than the 'true' income of the client.
business owner whose tax affairs are complicated. multiple companies, trusts, partnerships etc. with 12 months BAS or accountants dec they avoid any potential drama's, such as having personal guarantees from some of the parties to the trusts etc etc
yes, there might be a fit with a normal loan for each of these scenarios, with a specific lender, and a specific LVR. However that lender may not suit the client for another reason, meaning low doc is the best option.
The real ones to watch out for are the ones trying to do fraud.
They will come to you with payslips, rather than an accountants declaration though.
Some examples of low doc clients;
A tradeperson who spent part of the last financial year PAYG, assessors discount that part of the tax return, even though very similar income PAYG to self employed.
tradie recently returned from overseas. has a bunch of work lined up, sometimes with the same client, but no aus tax return for the previous year, and no formal 'contract'.
Property investors running a rooming house, or self managing properties etc. Income discounted heavily as a normal loan. as low doc it passes
Property investors whose investment income makes up more than 50% of their total income. again, many lenders would only use the taxable income from the return, and still discount to 80% the rental income, rather than the 'true' income of the client.
business owner whose tax affairs are complicated. multiple companies, trusts, partnerships etc. with 12 months BAS or accountants dec they avoid any potential drama's, such as having personal guarantees from some of the parties to the trusts etc etc
yes, there might be a fit with a normal loan for each of these scenarios, with a specific lender, and a specific LVR. However that lender may not suit the client for another reason, meaning low doc is the best option.
