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Low Taxpayer Risk With Low-doc Loans








The Lowdown on Low-Doc Loans





"Can't claim it is risk free, but we claim our approach minimises the exposure to taxpayer," Australian Office of Financial Management (AOFM) chief executive Rob Nicholl told a parliamentary committee in Canberra on Friday. Mr Nicholl said the AOFM had no sub-prime loans among the mortgages underpinning the residential mortgage-backed securities (RMBS) in its portfolios. The parliamentary inquiry was examining the Australian banking sector in the aftermath of the global financial crisis. The collapse of the US sub-prime mortgage market in 2007 was the precursor to the global financial crisis. Mr Nicholls said the AOFM`s mortgages with at least 30-day arrears were just 1.1 per cent of its portfolio. He said this was less than that for full document and broader prime loans. The AOFM's investment in RMBS was $11.1 billion as at August 31, with the mortgage pools backing these investments being $25 billion, Mr Nicholls. Of these, less than two per cent, or just over $400 million, were low-documentation loans, a type of loan usually given to people who did not gain approval for mortgages from more traditional sources. Liberal senator David Bushby acknowledged the Labor government was right in boosting the RMBS market following the global financial crisis. Mr Nicholl said the AOFM had "some good stats" following Mr Bushby's comments that the AOFM had made money on RMBS products. <br>For the original version including any supplementary images or video, visit http://news.brisbanetimes.com.au/breaking-news-business/low-taxpayer-risk-with-lowdoc-loans-20120921-26bdg.html









Limited-documentation and no-documentation mortgages once were used primarily by self-employed professionals, small-business owners and individuals who are heavily dependent upon periodic bonuses or commissions. In limited or no-documentation programs, applicants typically state their income and assets to the loan officer but are not required to show detailed proof of that information for the lender's files. Generally, applicants are required to have good credit histories, but at the extreme -- no income verification, no asset verification, or NINA -- they need not document much of anything to qualify. The attraction of such mortgages for lenders or brokers is that they come with higher rates and compensation for the loan originator. Low-documentation mortgages were only a small fraction of the market in the 1990s, but today they are big business. This year they represent more than 16 percent small business loans Perth of all new home loans, according to Inside Mortgage Finance, a Bethesda trade publication. Wall Street rating agency Standard and Poor's says volume jumped by 50 percent from mid-2005 to mid-2006, based on mortgage securities pools it analyzed and rated. Unlike in earlier periods, however, today's low-doc borrowers are much more likely to be people who could, but choose not to, document their income with W-2 forms or pay stubs. According to a comprehensive survey sponsored by Inside Mortgage Finance and conducted by Campbell Communications, 39 percent of all low-doc borrowers this year are salaried wage-earners, the same percentage as self-employed borrowers. Why do they prefer to go the low-doc route? <br>For the original version including any supplementary images or video, visit >http://www.washingtonpost.com/wp-dyn/content/article/2006/11/24/AR2006112400503.html/article/2006/11/24/AR2006112400503.html]content





7 things you should know about low doc loans





3. Require additional security The additional fact that should be kept in mind while accessing low doc loans is that they require extra security. The amount of collateral required as pledge is far more than in the regular cases and hence the aspirant should be well versed with fact in advance. 4. Enhanced features One of the best features of the low doc loan is that the borrower gains extended access to a range of loan features and options that were previously unheard of or available for him in the market. Such loans could also be termed as a time and money savers for the informal and self-employed workers who find it hard to avail loans. 5. Increased opportunities to earn credit At present, due to increase in competition in the lending market, majority of the big names in the lending business, including the banks now offer low doc loan services. Earlier, only non banking financial institutions with limited presence used to offer these loans to the aspiring candidates. <br>For the original version including any supplementary images or video, visit http://www.dynamicbusiness.com.au/finance-cash-flow/7-things-you-should-know-about-low-doc-loans-07052013.html



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