I recently posted this comment below about a story I read on www.lendingcentral.com
The full article can be found here
What help will there be for the nonconforming market segment?
In the past 12 months there has been a marked reduction in the numbers of lenders and the products they sell.
This all comes back to less choice for the consumer and some of these Mums and Dads are really Hurting!
Mortgage Now is Australias Largest Exclusively Non Conforming Brokerage and as such, we feel the pain of our clients. Even more so now that the offerings have been cut back so sharply.
How will the Federal Govcernment help the Non Conforming Borrower?
What will the Federal Government do to help the struggling Non-Conforming Lenders?
So many of our clients have issues that only a few months ago didn’t count. They were conforming clients that would sail through but now keep getting told by the conforming community that they dont qualify.
While Mortgage Now can help them and at competitive rates, it is an area of lending that is growing and needs to be addressed.
I just hope the Federal Government does not forget about The every day Aussies that have had it tough.
Posted by LC Team, Monday, September 29, 2008
Will the Treasurer Wayne Swan’s plan to invest $4 billion into the home mortgage lending market to buy residential mortgage backed securities boost competition and mark the end of sleepless nights within the non-bank sector?
Non-bank lenders’ share of new owner-occupied loans has shrunk from more than 20%in July 2007 to less than 10% currently.
MFAA CEO, Phil Naylor says “the whole non-bank sector was within months of a total collapse”.
“The Government buying the asset class will give non-bank lenders a chance to fight back when liquidity returns,” says Sayer.
Despite successfully obtaining alternative funding to keep Mortgage House propped up until 2010 Sayer says this is simply a short-term strategy and ultimately securitisation is the life blood of the non-bank sector.
“Are we going back to securitisation when it returns and are we dependent upon it? Absolutely,” he says.
Sayer and Montgomery believe that Mortgage House and RESI will qualify for the Federal Government’s funding. Speculation is that there will be two investments of $2-billion each but how that will be apportioned is yet to be determined.
“We don’t know who will be able to access these funds. Or indeed what the pricing is going to be,” says Montgomery.
“You can inject as much liquidity into the marketplace as you like but if it’s not priced competitively you may as well not do it because a significant part of the area where the non-banks have lost ground is in their pricing.”
Montgomery understands that eligibility will be decided by a ballot system.
“But how it will be operated and if it will be direct or through our funders hasn’t been revealed,” she says disclosing that the word is that it will be through funding partners.
The timing is crucial, she says maintaining “it needs to be delivered swiftly because we’re still losing ground to the banks, which is all part of the ‘flight to perceived quality’ that consumers have been displaying over the past 18 months as a result of the banks’ scare campaign”.
Sayer strongly advocates that only “good” non-banks should qualify for funding.
Maintaining that one of the key drivers should be the arrears factor he suggests the criteria should be, “if you’re a specialist non-bank lender the performance of your portfolio should be at least as good as a bank’s portfolio”.
Montgomery, who along with many others in the non-bank sector has been actively lobbying the Federal Government to intervene in the liquidity crisis, says the restoration of consumer confidence needs to be the number one priority once Swan’s plan is activated.
Sayer takes a more controversial stance maintaining that it is the mortgage broker that the non-bank sector needs to win back from the banking sector.
“The biggest contributors to the success of non-banks are brokers and they got burnt because non-bank lenders put their rates up before banks,” he says.
“Traditionally consumers loved using brokers because they fished out the best deal but they got hammered by consumers for implementing dud deals when the non-banks raised their rates So to avoid further embarrassment with consumers brokers are now taking most of their business to banks because they feel that banks won’t penalise the customer.”
Yes, there is one positive legacy of the liquidity crisis. The level of camaraderie that has been displayed in the non-bank sector, says Montgomery.
Sayer agrees. “It’s brought us together because we realise that we’re all in the same boat trying to run successful businesses.”
Chuckling he says, “Mark Bouris (Wizard Home Loans chairman and founder) and I catch up and talk these days whereas in the past we used to eye each other from different ends of the room”.