Sometimes our clients can be their own worst enemies.

This can be either intentional or through ignorance.

Some clients will omit to tell you certain facts because they are concerned that their loan may not be approved, or even out of embarrassment (for example defaults etc.)

Others will genuinely not realise that they are not giving you the full story.

An example I had recently was a client who I submitted as a PAYG client, she had the payslips and the PAYG summary.  The client had advised me that she was an employee of the company and had been so for a number of years.  Serviceability was great as was every other aspect of the application.

Of course, what was not mentioned was that the company was owned by a relative who had also added my client as a Director of the company.

As far as the client was concerned, she was an employee.  From a credit perspective, she's really a self-employed applicant.  Unfortunately this type of situation wastes time and means for reworks, that is if the lender doesn't drop the deal altogether.

So, as a broker it is important to dig and dig deeper.  This was a great client with an impeccable financial history and so I didn't see the need to run a credit check on her prior to application.  That simple step would have saved me having to rework the entire file.

While in the process of building a rappoire with your clients, focus on convincing them that they need to let you know it all, warts and all.  By knowing the full situation, you can structure the application accordingly or in some cases advise the client that you simply can't assist them.  Don't be afraid to walk away from a scenario if you don't think you can't assist - your time is valuable too.

Cashout is one of the bugbears within the lending market at the moment, no longer will most lenders accept "Cashout for future investment purposes" as a valid argument for extending a client a large lump sum of available cash - particularly for self-employed applicants.

Even the old Line of Credit facility is being scrutinised heavily, but then consider the line of credit from a lenders perspective.  Firstly - the LOC is effectively a great big credit card - so if your client struggles with impulse control - there's a good chance that a LOC will allow them to spend up and possibly get themselves into a difficult financial situation.  For that reason I only recommend a LOC to clients who demonstrate a very disciplined approach to both saving and debt.  Using a LOC to consolidate credit cards or personal debts is a risky strategy.  The second aspect that a lender needs to consider for a LOC is their actual Capital.  When a lender issues a LOC they need to effectively set aside the funds to meet the LOC limit so that the client can draw those funds down at any point.  Now, if a client doesn't utilise all of those funds, then the lender has set aside Capital which is not being used, therefore they are not earning interest on it.  One Regional Bank recently underwent a review of it's LOC facilities and realised that it had over $4B of Capital that was not being used out of a total of $11B in LOC limits.  So when a bank isn't earning interest on $4B worth of funds it probably get's a bit nervous.  So, there are a couple of reasons why lenders are now so cautious with their LOCs.

Back to the cashout.  There are a few lenders who will still allow cashout in significant amounts for your clients.  If cashout is a major factor in your clients proposal, make sure that you clearly understand the lenders policy on cashout before you submit the deal.  One mistake that we've all made is to rely on a BDM advising you to submit the deal after you explain the scenario to them.  BDMs are great and serve an important purpose in the lending process, BUT, wherever possible, ask to see the lending policy for cashout.  Most lenders have credit manuals or similar docs for brokers - so download a copy of that lenders policy and learn how to interpret it.  This can save both you and your client some time.

Your Internet Presence.  Do you have one?  How effective is it?  I'll be holding an online workshop through our chatroom in www.brokermentor.com.au tomorrow (Friday 30th October) at 10am for 1 hour.  Login to the chatroom to join the workshop.  During the workshop I'll explain some of the methods you can use to grow your online presence.  This workshop is available for both those who are taking part in our mentoring program and any other brokers who would like to participate.