NAB - No more Low Docs

[Rolf Latham]

Hiya WW

That may be true of the overall portfolio.

However, I can report ( anecdotally again) that say until about a year ago, on in 5 to one in 6 was a lo doc or similar.

So of the new stock shes probably more like 20 %, hence the focus on reducing lo doc lvrs............but in truth I feel its the mortgage insurers simply over reacting to what happened in the US.

Hard for them not to though

ta
rolf

 

[Spectre]

rates going down
fuel (for now) going down
MI's tightening up and many banks succumbing to lending out less money in the search for better quality clients

interesting mix.

 

[WinstonWolfe]

wow rba just surprised the market again.... 0.75% drop

If rates drop 25% from their high, that should counter a 25% lowering of lo doc LVR (80->60%).....at least from a serviceability POV.

Trick is to find/save the extra 20% equity......suppose the FHOG helps the bottom end.

 

[GoAnna!]

Perhaps more and more are qualifying for full doc loans and those that are left applying for loc doc are on average lower quality?

 

[Token Funder]

Expect further restrictions in Lo Doc over the short term..what we're seeing is thin end of the wedge.

My call is that over the medium term you can forget about using a Lo Doc for anything other than property purchases and limited refinancing (OO will be *a lot* easier than IPs) and a *fresh* ABN without supporting BAS statements will be useless.

Short version: if you have an LVR greater than 60% and you can't show a bank or BAS statement consistent with the income you're declaring, want to access cash for purposes other than buying property or expect to be able to move your IP from lender to lender for a lower rate or equity release, you better start looking for an alernative plan.

 

[Aimjoy]

Perhaps more and more are qualifying for full doc loans and those that are left applying for loc doc are on average lower quality?

Mmmmmm I agree, I am scum. The lowest of the low.....bottom feeding scum.

 

[GoAnna!]

Mmmmmm I agree, I am scum. The lowest of the low.....bottom feeding scum.

Hehehehehe Not sure which side I am on at this point in time. Just thinking from the banks' perspective. I certainly have more incentive now to get my tax returns up-to-date.

 

[Aimjoy]

Just thinking from the banks' perspective. I certainly have more incentive now to get my tax returns up-to-date.

Yup, I still remember going to a seminar a few years back where Ed Chan said "there is nothing in the tax act that says capital gains is not income" in response to an audience question about how to justify the number declared as income on a lo doc application.

So if you earn $100K at work and you have $1.5M property portfolio growing at say 10% - there's another $150K plus the rental income at 5% = 75K So all up the declared income would be $325K.............No wonder they were referred to as "lie docs".

If you weren't up to this strategy and could cope with only 70% LVR's then you could always do a no doc and avoid all the fuss (lies is such a strong word).

Anyhows when credit is less crunchy I suspect we will be back to "Asset Lends" which as you know is an 80% LVR on the strength of the asset rather than the borrower. But in the mean time, as you say, back to the tax returns for the more "fuller" docs.

The good thing though about people learning from history is that people don't learn from history and in another 10+ years or so we will go thru the same cycle with a fresh set of bankers wanting to make a name for themselves and looking to the equivalent of Macq Bank as something they aspire to.......so it will be back on again....woo hoo.

 

[Nth Brisbanite]

Let's get back to the original thread. My broker said that NAB will still be offering 80% low docs. He said that if his contact at NAB doesn't know anything about it then it's just a rumour.

 

[Spectre]

NB

Need to distinguish between NAB and NAB Homeside as they are 2 different channels with 2 different MI's.

So one might cease where the other could continue - overall IMO the MI makes the call

 

[Token Funder]

Yup, I still remember going to a seminar a few years back where Ed Chan said "there is nothing in the tax act that says capital gains is not income" in response to an audience question about how to justify the number declared as income on a lo doc application.

The Tax Act very specifically differentiates between the notion of ordinary income and capital gains.

In any case, it is irrelevant and intellectually dishonest to suggest that the capital appreciation in an illiquid asset is the same as income. It's a form of self-delusion, the main reason why I see Lo Doc borrowers fall over and given the changing environment around Lo Doc lending is a recipe for disaster.

Ed should pull his head in.

 

[DavidMc]

Lets just not hope they start taxing it in the future as income, which, if they were smart they might just do... :|

 

[steveadl]

Thats fantastic news, i hope the rest of the big 4 banks follow through with it.
Responsible lending reduces the probability of a major crash later on (apart from the fact that im a shareholder in all 4 banks)

Not all Low Docers are necessarily bad guys, some of us just don't have the financials the banks require for traditional loans. I've never missed a payment and I've got many loans - let alone some small business guy who just wants to buy one PPOR for himself.

I was chatting to an ANZ lending manager today - as of next Friday they don't do 80% LVR low docs anymore - but will do 60%ers.

Because their LMI provider is no longer coming to the party. Hence they can still go 60%, but not up to 80% anymore.

 

[Perth Investor]

Because their LMI provider is no longer coming to the party. Hence they can still go 60%, but not up to 80% anymore.

Steve

ANZ self insure, so it is an ANZ decision not to participate in the low docs above 60, not an external party.

Noel

 

[Rolf Latham]

Hiya Noel

ANZ LMI is portfolio insured via MGIC.

MGIC arent insuring any more lo doc exposure.

Longer term you will see lenders like WBC , who portfolio via GE will have limitatiosn imposed as well.

CBA restrictions are just around the corner too so the rumour mill has it.

ta
rolf

 

[steveadl]

^ ^ like Rolf said.

 

[steveadl]

PS Rolf, any idea yet as to what sort of restrictions CBA are looking at?

 

[Rolf Latham]

rumours only

cash out restricted to $50K (or letter from accountant / financial planner)

- want to see trading statements and/or BAS

ta
rolf

 

[Spectre]

Hi
met with westpac today in a little seminar thing.
I specifically asked where they were at re low docs.
response - make hay while the sun shines

so if you're sitting around thinking about market and timing and you havent fixed up your lending / existing loans yet... odds are your costs are going to be increasing because the lenders are either going to charge you a non packagable interest rate product or they're going to pull out of the market altogether...

So better to move quickly than slowly cuz if you wait you may not be able to get anything

Or, do your tax returns

 

[StuartW]

The Tax Act very specifically differentiates between the notion of ordinary income and capital gains.

In any case, it is irrelevant and intellectually dishonest to suggest that the capital appreciation in an illiquid asset is the same as income. It's a form of self-delusion, the main reason why I see Lo Doc borrowers fall over and given the changing environment around Lo Doc lending is a recipe for disaster.

Ed should pull his head in.

I could not agree more. Growth in equity is a paper profit and not income by any stretch of the imagination.