Dear Editor, I am disturbed by what seems to be your unbalanced reporting of Vendor Finance arrangements, or ‘Wraps’ in your article ‘Government Wise to Dodgy Property Deals’. While I have not participated myself in providing these or buying using this method, I have studied its development closely, and I see this kind of vendor finance as having an important place amongst home-ownership options. Your article seems to imply condemnation of ‘wrappers’ who buy at standard bank rates then lend at 2% more. These wrappers are covering increased risk, and as such it seems to me to be normal financial practice in terms of the ‘risk vs return’ ratio. Perhaps more to the point, though, is that the well known non-conforming lenders would be charging a further percentage point or two, resulting in a really high-risk situation for the borrower, which often sets them up to fail. It is a relief indeed that there is now a ‘middle of the road’ option that doesn’t either preclude these compromised borrowers completely, or else charge them an unjustifiable rate of interest. Furthermore, my study indicates that vendor finance arrangements offered by these usually small businesses are more flexible with regards to the needs of the borrower and not as ready to foreclose without any consideration as per the reputation of the large non-conforming-loan corporations.
I am also disappointed by the very inadequate analysis of the situation provided by Neil Jenman. He calls vendor financing ‘pure exploitation’ and states that these borrowers ‘cannot afford a loan’. This is too simplistic by far, and completely ignores the circumstances of people who, for example, have no deposit, or no savings, or irregular income, or a default on their credit file, or who may be discharged or undischarged bankrupts. It is superficial to assume that because they are in this situation they have no ability to repay, as there are a myriad of events that can lead to any one of these circumstances. Many wrap deals that I have heard of have involved country properties where payments are less than or equal to city rents. If these potential borrowers have been paying their rent consistently over time, why shouldn’t they obtain access to lending that allows them to break out of the rent trap. I do not deny that there have been some unscrupulous wrap dealers who have given the industry a bad name, but please don’t throw the baby out with the bath water. Have we abandoned the great Australian dream? Surely we need flexible options like vendor finance now more than ever before as the dream slips away from increasing numbers of us. Please be fairer in your presentation of this issue, and don’t limit access to this wonderful opportunity by creating an air of distrust in the mind of the general public.
Sincerely,
(name)