Specialist: the ideal pathway back to Prime

Specialist lending: Why you need this product as part of your toolkit

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Specialist lending has matured into a reputable product that helps an increasingly broad range of customers get their credit in good standing. NZA chats to Luke Jackson, general manager at Resimac New Zealand, about the big benefits of embracing this lending solution

THE REASONS an applicant may not appeal to a larger, conservative lender – for example, a big bank – are surprisingly broad. “Many believe those who need a specialist mortgage got themselves into that situation through financial illiteracy, financial mismanagement, excessive risk-taking, or other nefarious reasons – which is simply not the case,” says Luke Jackson, Resimac’s general manager for New Zealand. Specialist lending has come a long way since its early beginnings and has become a market worth exploring for brokers, he adds. “It’s hard to estimate the size of the specialist market in New Zealand, but it deserves the attention of New Zealand lenders, despite being smaller than others such as the prime market.”

One of Australia and New Zealand’s premier non-bank lenders, Resimac was recognised as Non-Bank of the Year at the 2020 Australian Mortgage Awards. Offering competitive interest rates and flexible home loan options with great features, Resimac's flexible funding program provides solutions to a wide range of customers through the company's network of broker and adviser partners.

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“We’ve always had an attitude of providing assistance and taking a pragmatic approach. We view our specialist products as a stepping stone on the customer’s journey to recovery, and also as a way of accelerating it”

Luke Jackson, Resimac

Who borrows from specialist lenders? Jackson says that in his experience specialist lending is most beneficial when bad things happen to good people. “It’s really relevant and valuable when a customer experiences unforeseen negative circumstances such as going through divorce or recovering from health issues. It gives them the opportunity to reset or catch up, drastically improving their recovery.” He explains that any significant changes in the size of the specialist market are driven by macro factors contributing to greater hardship, arrears, defaults and bankruptcies.

“Specialist lending products are legitimate and reputable products with the checks and balances in place to protect the applicant, and there’s actually little difference to other mortgage products”

Luke Jackson, Resimac

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Specialist lending: Why you need this product as part of your toolkit

How specialist products do – and don’t – differ From Resimac’s perspective, its specialist product is no different to its prime or prime alt-doc products – or indeed those offered by banks and other lenders. “They’re all reputable regulated products designed to suit a particular applicant at a particular point in their life. All our products offer larger loan values, lower mortgage-based interest rates, longer loan terms and great features,” Jackson says. However, these products benefit a different type of client. Specialist products are designed to accommodate applicants with higher risk profiles, as measured in terms of credit events such as arrears, defaults and bankruptcies. “In Resimac’s case, there are three levels of specialist product

on offer –Clear, Plus and Assist – to cater to different risk profiles. Clear being for those with the lowest risk and Assist for those with the highest acceptable risk.”

Jackson notes that many applicants avoid specialist products as they don’t want to be labelled. Another reason, and common misconception, is that a specialist application is more complex and harder to submit. “Yes, a little extra documentation is required, but otherwise it’s largely no different from any other application," he says. "Furthermore, you can help the application process by providing as much detail as possible to tell the applicant’s story and help us understand.” There is also stigma when it comes to preferences for lender types. “We see customers viewing the fixed-term prime full-doc loan from a major bank as the gold standard in mortgage products. This is what everyone aspires to have. And 10-plus years ago, when lenders were less regulated and some more unscrupulous, this would have been justified – but not now.” Jackson says as societal and customer preferences change, customers become increasingly diverse and finance products and lenders become more regulated, this gold standard is becoming less relevant. “This is apparent in the recent CCCFA reforms resulting in more customers falling outside the criteria for a prime full-doc product courtesy of the severe scrutiny and assessment of their bank statements by some lenders.”

The reality of rebuilding With one of the most oft-stated benefits of specialist lending being the opportunity to rebuild and repair credit history, this begs the question – what does that actually involve? And who can it help? Jackson gives an example of an applicant who’s going through a divorce. He says in some divorces, upon advice from legal counsel, the parties may cease satisfying their joint financial commitments – they may stop repaying their mortgage or making credit card repayments, which impacts their credit history. “One partner may then want to buy out the other’s share of their property, but because of the arrears and defaults they’ve accrued, they’re no longer eligible for a prime product. This is where specialist plays its part, giving them the opportunity to make that buy-out. And after the divorce, after they’ve rebuilt their credit history thanks to the specialist product, the customer could then potentially refinance and transition to another product.” With the range of specialist products on offer, designed to suit those with a variety of impairments, recovery time depends on the particulars of each case, though generally speaking, the fewer impairments – and assuming the client meets all their loan commitments – the quicker the recovery.

The bottom line for brokers Jackson says Resimac’s experience with specialist customers has shown that a broker can expect to be working with their client throughout their journey to recovery and beyond as they transition to a prime product. “Furthermore, they’ll often need support in peripheral areas such as financial literacy, accounting, planning and property advice – areas where brokers can play a big part. It’s likely your specialist customer will turn into a customer for life.” He suggests interested brokers start by finding out more about the specialist products available and what’s required. “Through this education, hopefully it will become clear that these are

legitimate and reputable products with the checks and balances in place to protect the applicant, and there’s actually little difference to other mortgage products. The easiest way to do this would be by contacting a Resimac BDM – they’ll be more than happy to walk an adviser through the range and their features.”

And when a suitable customer presents themselves, this will help the broker confidently educate and advise them of the advantages of specialist products, which are comparable and credible alternatives to prime products and offer more immediate benefits.

Resimac loans: Key stats

50,000 customers

$15bn loan book

Resimac offers a wide range of finance solutions, with products ranging from Prime through to Specialist, Full Doc and Alt Doc, as well as Investment. Resimac bases its rates on "security, not purpose".

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