If Lo Doc or No Doc loans disappeared from the scene, do we think it would have an impact on property prices?
http://www.brokernews.com.au/contents/news/1/5587/details.aspx
http://www.brokernews.com.au/contents/news/1/5587/details.aspx
What happens to property prices if Lo Doc disappears?
- Thread starter Token Funder
- Start date
Somehow I don't really see this one getting through. Most lo doc loans are funded by lenders that rely solely on brokers as their distribution network, there are too many groups (not just brokers) that would not want this type of legislation to get through.
None of the major banks offer no doc loans.
If this legislation does go through, it will probably be modified substantially. It may become necessary for brokers to perform some due dilligence on the customers income, then write some sort of justification to the lender for their decision to allow a lo doc loan. The other alternative is lo doc requirements may become more stringent.
Ultimately though, I don't see this having a substantial effect on the property market. Lo doc lending is a relatively small sector of the market.
None of the major banks offer no doc loans.
If this legislation does go through, it will probably be modified substantially. It may become necessary for brokers to perform some due dilligence on the customers income, then write some sort of justification to the lender for their decision to allow a lo doc loan. The other alternative is lo doc requirements may become more stringent.
Ultimately though, I don't see this having a substantial effect on the property market. Lo doc lending is a relatively small sector of the market.
So, if you're a broker and you are required to take reasonable steps to ensure the Lo Doc/No Doc borrower isn't gilding the lily from an income perspective and failure to do so could put your licence at risk, are you writing less Lo Doc/No Doc in the future as a consequence?
Commonwealth Bank do.
Guys i think there is another issue which the market hasnt picked up on yet with LO DOCS and that is the very real possibility that they will become much harder to get in the future and if they do at MUCH higher interest rates.
I have posted below an article on Kangaroo bonds sourced from bloomberg.
I think bond holders are going to require much more stringent leding criteria in the future. Australia has to source a significant proportion of its bond sourcing from overseas.
ABN Amro, Countrywide Will Shun Kangaroo Bond Market, S&P Says
By Laura Cochrane
Jan. 30 (Bloomberg) -- ABN Amro Holding NV and Countrywide Financial Corp. will be among sellers that shun Australian-dollar corporate bonds, creating an A$11 billion ($9.8 billion) hole in the local debt market, according to Standard & Poor's.
Just A$14 billion of the A$25 billion of Australian-dollar corporate bonds maturing this year are likely be refinanced because offshore banks and financial companies will focus on their domestic markets amid the credit squeeze, Philip Bayley, director of capital markets at S&P in Melbourne, said in an interview today.
Australian dollar-denominated debt sold by overseas companies, known as kangaroo bonds, comprised a record high 52 percent of all corporate bonds sold in the country last year, S&P figures show. The local bond market, which shrank 33 percent in 2007, will contract more if Australia's real estate investment trusts can't refinance bonds because of the collapse of Centro Properties Group and MFS Ltd., Bayley said.
``Bond issuers are all coming out of Europe and North America and that is where they will be focusing rather than worrying about the kangaroo market,'' he said.
A total of A$42.3 billion of corporate bonds were sold in Australia last year, the lowest since 2004, as buyers fled on concern that subprime-related losses would spread and sellers were deterred by the rising cost of borrowing.
Peter Block, head of debt capital markets at ABN Amro in Sydney, said ``market conditions'' would determine if the bank continued to sell debt in the Australian market. Calls to Countrywide in California made outside business hours weren't immediately returned.
Property Trust Funding
Real Estate trusts operated by companies including Westfield Group, the world's biggest shopping mall owner, and Sydney-based GPT Group have A$1.6 billion of debt due this year, S&P said.
``It's going to be a question of what price the REITs can roll over at,'' Bayley said. ``If investors demand pricing that is too high they will look at alternatives; they will look at the bank market or look to go offshore,'' he said.
Centro, an Australian owner of U.S. malls, lost more than A$4 billion of its market value since it said Dec. 17 as it struggled to refinance A$3.9 billion debt. Southport-based MFS, an asset manager that has property funds, slumped 69 percent on Jan. 18 after announcing plans to sell new stock to cut debt accumulated to fund acquisitions.
Among the biggest overseas companies that have Australian- dollar bonds maturing this year are ABN Amro Holding, with A$1 billion, Morgan Stanley with A$780 million and Countrywide with A$350 million, Bayley said.
Countrywide, the mortgage lender that Bank of America Corp. plans to buy, collapsed after rising defaults on mortgages caused a A$1.2 billion third-quarter loss at the company. Fourth quarter losses totaled $422 million.
I have posted below an article on Kangaroo bonds sourced from bloomberg.
I think bond holders are going to require much more stringent leding criteria in the future. Australia has to source a significant proportion of its bond sourcing from overseas.
ABN Amro, Countrywide Will Shun Kangaroo Bond Market, S&P Says
By Laura Cochrane
Jan. 30 (Bloomberg) -- ABN Amro Holding NV and Countrywide Financial Corp. will be among sellers that shun Australian-dollar corporate bonds, creating an A$11 billion ($9.8 billion) hole in the local debt market, according to Standard & Poor's.
Just A$14 billion of the A$25 billion of Australian-dollar corporate bonds maturing this year are likely be refinanced because offshore banks and financial companies will focus on their domestic markets amid the credit squeeze, Philip Bayley, director of capital markets at S&P in Melbourne, said in an interview today.
Australian dollar-denominated debt sold by overseas companies, known as kangaroo bonds, comprised a record high 52 percent of all corporate bonds sold in the country last year, S&P figures show. The local bond market, which shrank 33 percent in 2007, will contract more if Australia's real estate investment trusts can't refinance bonds because of the collapse of Centro Properties Group and MFS Ltd., Bayley said.
``Bond issuers are all coming out of Europe and North America and that is where they will be focusing rather than worrying about the kangaroo market,'' he said.
A total of A$42.3 billion of corporate bonds were sold in Australia last year, the lowest since 2004, as buyers fled on concern that subprime-related losses would spread and sellers were deterred by the rising cost of borrowing.
Peter Block, head of debt capital markets at ABN Amro in Sydney, said ``market conditions'' would determine if the bank continued to sell debt in the Australian market. Calls to Countrywide in California made outside business hours weren't immediately returned.
Property Trust Funding
Real Estate trusts operated by companies including Westfield Group, the world's biggest shopping mall owner, and Sydney-based GPT Group have A$1.6 billion of debt due this year, S&P said.
``It's going to be a question of what price the REITs can roll over at,'' Bayley said. ``If investors demand pricing that is too high they will look at alternatives; they will look at the bank market or look to go offshore,'' he said.
Centro, an Australian owner of U.S. malls, lost more than A$4 billion of its market value since it said Dec. 17 as it struggled to refinance A$3.9 billion debt. Southport-based MFS, an asset manager that has property funds, slumped 69 percent on Jan. 18 after announcing plans to sell new stock to cut debt accumulated to fund acquisitions.
Among the biggest overseas companies that have Australian- dollar bonds maturing this year are ABN Amro Holding, with A$1 billion, Morgan Stanley with A$780 million and Countrywide with A$350 million, Bayley said.
Countrywide, the mortgage lender that Bank of America Corp. plans to buy, collapsed after rising defaults on mortgages caused a A$1.2 billion third-quarter loss at the company. Fourth quarter losses totaled $422 million.
Hiya Blue
CBA dont do No doc loans.
they do offer lo doc loans,....................there is a considerable difference.
lo and no doc of some form will always be around.
Even before the " new venerable lo doc" a product of this millenium , we already had access to solcitior loans at 65 % lvr, which were/are straight asset lends.
My cuurent take is, as interterest rates yields start to come down in the US as it looks like at the moment, investors with loose dollars, and scared of the share markets will once again take a shine to resi backed mortgages......lo doc, no doc or any doc
ta
rolf
CBA dont do No doc loans.
they do offer lo doc loans,....................there is a considerable difference.
lo and no doc of some form will always be around.
Even before the " new venerable lo doc" a product of this millenium , we already had access to solcitior loans at 65 % lvr, which were/are straight asset lends.
My cuurent take is, as interterest rates yields start to come down in the US as it looks like at the moment, investors with loose dollars, and scared of the share markets will once again take a shine to resi backed mortgages......lo doc, no doc or any doc
ta
rolf
PT_Bear said:
The CBA require a full disclosure of assets and liabilities, as well as a serviceability statement for all loans.
A true no doc requires neither of these.
Hi Rolf,
Big changes afoot on the LMI side which will further add to the retreat.
How optimistic are we today?
Hi, and solicitor loans are God's gift to those who need them.
I started my property acquisition with one of those.
8 years later when I saw a devt opportunity, the banks required so much paperwork [specifically they said my income was so high (overseas) I should have more assets], I offered my collateral, unencumbered commercial property to the same solicitor group.
Got my subdivision done, bought another one & have since sold about 65% of the residential.
|Hurrah solicitor loans! I pay higher interest never mind! Save on fees.
Ky
I started my property acquisition with one of those.
8 years later when I saw a devt opportunity, the banks required so much paperwork [specifically they said my income was so high (overseas) I should have more assets], I offered my collateral, unencumbered commercial property to the same solicitor group.
Got my subdivision done, bought another one & have since sold about 65% of the residential.
|Hurrah solicitor loans! I pay higher interest never mind! Save on fees.
Ky
Hiya TF
Still of the opinion that ............................
My cuurent take is, as interterest rates yields start to come down in the US as it looks like at the moment, investors with loose dollars, and scared of the share markets will once again take a shine to resi backed mortgages......lo doc, no doc or any doc.
There is contraction in the LMI backing, but pretty much all mainstream lenders that were doing lo doc loans 12 mths ago still are.........ANZ, WBC, CBA, STG Suncorp.
Yes the LVRs are lower in many cases because LMI providers have retreated.............in the middle term, the funds that are currently being chucked into Govt guaranteed bank deposits need to find a "secure" home somewhere.
The next speed hump of major defaults hasnt hit the US ( or AUS) just yet ( credit cards and unsecured credit) so that will further erode confidence in the short term.
So it might take a while lot longer before that loose money comes around, given the repricing of the equity markets in the last 90 days.
ta
rolf
Still of the opinion that ............................
My cuurent take is, as interterest rates yields start to come down in the US as it looks like at the moment, investors with loose dollars, and scared of the share markets will once again take a shine to resi backed mortgages......lo doc, no doc or any doc.
There is contraction in the LMI backing, but pretty much all mainstream lenders that were doing lo doc loans 12 mths ago still are.........ANZ, WBC, CBA, STG Suncorp.
Yes the LVRs are lower in many cases because LMI providers have retreated.............in the middle term, the funds that are currently being chucked into Govt guaranteed bank deposits need to find a "secure" home somewhere.
The next speed hump of major defaults hasnt hit the US ( or AUS) just yet ( credit cards and unsecured credit) so that will further erode confidence in the short term.
So it might take a while lot longer before that loose money comes around, given the repricing of the equity markets in the last 90 days.
ta
rolf
And in terms of access to funds many previously low doc borrowers could satisfy the banks requirements for full doc loans purely due to the drop in interest rates. At the same time many of those that have always satisfied full doc requirements may be reluctant to take out loans due to concerns about employment.
combined with the rises in rents and the annual pay rise ... that's us currently. we're refinancing to get a much better deal and lose the high rates of the lodoc loans.
My experience to date and the view of the capital markets guys is No Doc RMBS is dead as the proverbial, ditto for Low Doc for the foreseeable future unless you are, essentially, prepared to pay (in net terms) for someone to take it of your hands.
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