...Improved Mortgage-Market Quality in Australia Contributes to Decade-Low Arrears The Australian mortgage market is of higher quality than in January 2009 when low-documentation (low-doc) loans made up 14% of the Dinkum RMBS index and arrears were at a peak of 1.84%. Low-doc loans are primarily given to self-employed borrowers who often do not have up-to-date financial information. Self- employed borrowers are more vulnerable to economic cycles and business interruptions than salaried borrowers. Prime low-doc loans represented only 2% of the market as of September 2015, coinciding with decade-low arrears of 0.91%. Over the past decade, it is evident that asset quality (with respect to income certification) has had a significant contribution to arrears performance. The peaks in arrears coincide with periods with the highest portion of low-doc loans outstanding. With the introduction of the National Consumer Credit Protection Act 2009, lenders and mortgage brokers are required to take reasonable...
