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Limited outlook for low-docs

Low-doc lending will remain a product available to a particular niche clientele, but is unlikely to ever revive back to the levels seen in 2007 and 2008, according to LMI provider Genworth Financial.

Acting chief executive of Genworth Financial, Paul Caputo, said 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.

"We do think there still will be some low-doc lending within the market, particularly under the policy change we made back in 2008, but the volumes are going to be nowhere near what they were in the 07/08 period," Caputo said.

"It's still going to be a product that does suit a particular niche market, but its going to be at lower levels than it has been historically," he added.

By Ben Abbott | 09 Aug 2010