Upside Down Mortgage

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Mortgage Default Australia

1. Low Doc Loans stands for low documentation loans. These are typically used to purchase property and to be accepted for this type of loan a consumer does not need the same level of documentary proof as required for standard bank loans. Most banks require verification of income, assets and liabilities, and want to see pay slips and tax returns, before they will give the go ahead on a home loan.

2. The low doc loan market accounts for around 5 per cent of Australian home loans and has grown up to service the needs of self employed workers. It also helps people who don’t lodge full tax returns, and people who find it hard to provide proof of earnings to get a home loan. This form of credit approval is known as self verification. Consumers on low incomes and those with poor credit ratings also use low doc loans to purchase homes.

3. This type of loan is characterised by higher interest rates, as lenders charge for the increased risk that comes with not checking pay slips and tax returns. The level of risk lenders take in not checking documents is illustrated by the default rates on low doc loans, which are about 3 times higher than mainstream loans.

4. Other features of low doc loans can include a requirement for extra security, such as a car or other asset, as well as the need to provide a larger deposit towards the cost of a property. Typically low doc customers have to take out mortgage insurance, which often protects the lender rather than the consumer. Fees and charges on this type of credit product are normally higher as well.

5. In the past, low doc loans were provided by non bank lenders, but in recent years the market has become increasingly competitive and mainstream lenders and banks also compete for low doc custom. Long gone are the days when a bank would tell a customer to go away and get a bigger deposit.

6. Predatory lenders have given low doc loans a bad name. Rogue lenders and brokers prey on hard pressed home owners, typically with the intention of enriching themselves at the expense of their victim by setting up unaffordable loans and charging excessive fees.

7. Australian Tax Office officials swooped on a large number of low doc loan customers after they conducted an inquiry into tax evasion. They found that about half of a study sample of 350 people with low doc loans, across 8 different lenders had not lodged tax returns. On average these people were three years outstanding with their returns. Tax office officials took action against this group, making them lodge tax accounts, with 8 finding themselves convicted for tax offences.

8. The future of low doc loans has been thrown into question by plans to reform the way brokers operate. The Australian government’s draft National Finance Broking Bill has put forward plans to make brokers responsible for ensuring consumers have the means to repay their debts. Critics of the draft bill believe this could kill off low doc and no doc loans, as it would be very hard for brokers to meet their requirements if the bill became law.

9. Commentators have predicted Australian home owners with low doc loans could suffer higher repayments as a result of the credit crunch. The credit crunch has left consumers with a poor credit rating vulnerable to higher credit costs.

About the Author:

Tristan Dunston is an independent public relations consultant specialising in finance and privacy matters. He loves whitewater kayaking and photography

Source - Bad Credit Loans – 9 Things You Need to Know About Australian Low Doc Loans

Australia - sets a moral precedent

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Housing Bubble Cartoons

Question: This is a bit of a long shot but does anyone remember the name of this kids programme?

It was about 1989 (ish) and it was about a little mouse type of thing who had a wizard friend who used to make dreams for all the kids in the village, and the dreams used to be kept in bubbles on shelves and then sent out at night to all the children in the world. There was a baddie on it too though who used to make nightmares and sometimes he'd swap the dreams for the nightmares and this little wizard helper would have to get to the nightmare and change it to a dream before it reached the kids! In the beginning and end credits the little character would float along a rainbow in one of the dream bubbles and it would pop just in time for him to fall at the door of the wizards house??? Oh it was in cartoon form by the way??? Please help its bugging me!!

Answer: I have spent ages trying, all I get is rubbish about the meaning of dreams, rainbows and how to get rid of mice.

CONFESSION 12: Confessions of an Independent Filmmake

Subprime Blog

Question: dow is down, subprime=worse, natl debt=8 tril+, trade def=large. should we worry? or is this just a bus cycle?

check brad setser blog for more.

Answer: U can worry all you want, but it'll just make u sick after getting confused by all the economic mumbo jumbo.

Best thing to do is just be frugal about your own consumption and credit dealings. Everyone else may be irresponsible (be it individual's or the government's spending), but u don't have to be.

Foreclosures, Subprime Mortgages & America's New Tent Cities