Low doc borrowers getting into trouble

Borrowers with “low doc” home loans are emerging once again as the class of customer more likely to end up in the collections division of a bank, with rising delinquencies for low doc loans at a time of reasonably stable arrears for those with fully verified loans.

Fitch Ratings today published its quarterly review of arrears on securitised pools of home loans in Australia, and dubbed the “Dinkum index”. Arrears overall across the $37 billion pool of loans monitored by Fitch is pretty stable.

The percentage of home loans between one and two months overdue is 0.52 per cent; those three months or more overdue are 1.19 per cent. For low doc loans the percentage overdue by one to two months was 1.75 per cent at the end of December 2009, up from 1.37 per cent in September. Those overdue three months or more is 4.82 per cent.

Source: Banking Day