ABA dumps Sedgwick’s commissions guidelines

From Mortgage Professional Australia.

Banks will be free to take their own approaches to broker remuneration after the Australian Bankers Association abandoned a key part of the Sedgwick Review.

Originally the ABA set out for banks to collectively develop “guiding principles” for the way banks remuneration brokers and their own staff. However, the preparation, consultation and finalisation of guiding principles will no longer take place, according to an update on the ABA’s work by independent but ABA-commissioned reviewer Ian McPhee.

Each bank will instead develop its own approach to commission, a move receiving scathing criticism from McPhee: “In taking this decision to vary its implementation plan, the industry has forgone the opportunity to establish guiding principles and demonstrate strong leadership in this area which has traditionally had a high profile, by building on the momentum for change stimulated by the Sedgwick Review and ASIC’s review of mortgage broker remuneration.”

Banks have also dropped their original plan to work directly with legislators to change broker remuneration, McPhee reported. Instead, they will work with brokers within the Combined Industry Forum and “proceed without the need for regulatory or legislative intervention to achieve the outcome of improved payments and governance practices.”

Clearing the path for the Combined Industry Forum

McPhee’s finding that the ABA has effectively sidelined its own report represents a huge victory for brokers.

Sedgwick recommended ‘guiding principles’ which included decoupling remuneration from loan size and bringing broker governance in line with that of retail bank staff.

Furthermore, Sedgwick recommended banks implement these changes by 2020, putting banks on a completely different timeline to that adopted by brokers and the Government following ASIC’s separate remuneration review.

Now banks can develop their own principles for remuneration, they will be free to take pragmatic approaches to commissions which better meet brokers’ expectations. It also opens up the intriguing possibility that banks who are more reliant on brokers – such as the non-majors – could adopt more generous remuneration arrangements than those with larger direct channels.

The signs of division 

MPA reported earlier this week that the Sedgwick’s proposals could soon be buried by the banks.

The first signs of division emerged during the Treasury’s consultation process following ASIC’s Review, where different banks took very different views to those expressed by Sedgwick.

Westpac explicitly criticised the use of flat fees, noting: “a flat fee commission structure could prompt an increase in split banking as brokers seek to maximise income by submitting smaller deals.”

The final straw may have been the announcement that ANZ CEO Shayne Elliott would be the ABA’s next chairman. Elliott told the House of Representatives last week the commission changes were ‘complicated’ and needed more work: deputy CEO Graham Hodges added that “the devil’s in the detail because clearly, it’s going to affect thousands of brokers.”

Brokers ‘not recording the outcomes’ of IO discussions: ASIC

From The Adviser.

Brokers may be having the appropriate conversation with borrowers on interest-only home loans, the financial services regulator has said, but there has been some “pretty poor record keeping”.

The financial services regulator announced last week that it would “shortly” begin reviewing the loan files of brokers with a “high proportion of interest-only loans” as part of its work “to ensure that consumers are not paying for more expensive products that are unsuitable”.

The review was triggered by the fact that interest-only (IO) loans are now often more expensive than principal & interest loans, and it is therefore becoming “ever important now for lenders and brokers to explain and justify why they are putting people into more expensive loans”.

Speaking to The Adviser, Michael Saadat, ASIC’s senior executive leader for deposit takers, insurers & credit services, elaborated that while the regulator believes that brokers are having the appropriate discussions with consumers about the reasons for taking out IO loans, the record keeping on loan files has not been of a high standard.

He revealed: “In the past, I’d say we have seen pretty poor record keeping on that front, where there has been very little on the loan file which tells you why the consumer got that product. In general, when we have looked at loan files in the past, we have seen [responses to the question]: ‘What were the consumers’ requirements and objectives?’ In many cases, we see things like: ‘To buy a house’. That is pretty implicit, but it really doesn’t tell you too many things about what type of product, what type of loan, what type of rate, etc.

“So, our view is that although these discussions are happening… brokers are having these discussions, but they’re not recording the outcomes of those discussions. And it’s hard to prove that you’re meeting your obligations if you don’t have something on a file that shows why you have recommended a particular loan.”

What ASIC wants to see on IO loan files

Mr Saadat added that the next stage of the review into interest-only loans will be “getting these individual files and looking to see how consumers’ requirements and objectives have been documented on those files”.

He said: “If [borrowers] have been provided with an interest-only loan and they are an owner-occupier, we will be looking for a summary or an explanation on the loan file that describes why the consumer was provided with an interest-only loan. So, that’s really the key thing.”

Adding that ASIC “won’t be that prescriptive in terms of our expectations”, Mr Saadat revealed that what the regulator wants to see is “information on the file which is sufficient to explain why the consumer’s decision (or suggestion from the lender or broker) to go into an interest-only for an owner-occupier loan was the right one”.

The lending industry has already begun responding to some of these concerns, with Commonwealth Bank launching a new IO simulator to help brokers show customers the differences between these type of repayments as well as principal & interest repayments.

Mr Saadat told The Adviser that these types of tools, which delve deeper into why consumers need an IO product, help “make the consumer aware of some of the risks involved with going down a particular path”; for example, “the fact that at the end of that period, you do need to make higher principal and interest payments and, over the life of the loan, you may end up paying more interest as a result”.

Mr Saadat concluded: “Investors may have other reasons for getting an interest-only loan — they may be tax reasons, for example, whereas those reasons don’t necessarily apply to owner-occupiers. And that doesn’t mean that owner-occupiers should never have been given an interest-only loan. Of course, there will be cases where that still is appropriate. We just want to make sure that it is appropriate and that you’re documenting the reasons for that.”

The regulator’s crackdown on IO loans has begun to bite, according to some industry data. New data from Mortgage Choice has revealed that there was a 60 per cent decline in interest-only mortgages over a period of just six months.

According to Mortgage Choice’s latest home loan approval data, the proportion of interest-only loans written by the brokerage dropped from 35.95 per cent in April 2017 to 14.64 per cent in September 2017.

CEO of Mortgage Choice John Flavell said that the “significant decline” was a result of lenders hiking rates for these loans.

Are the banks trying to bury the Sedgwick Review?

From Mortgage Professional Australia.

ANZ CEO’s comments suggest proposals for changing broker commissions have become a thorn in the banks’ side.

Commission changes proposed by the Sedgwick Review have been thrown into doubt, after the CEO of ANZ and soon-to-be chairman of the Australian Bankers Association admitted more work needed to be done to implement them.

Shayne Elliot, speaking to the House of Representatives, “we’re going to implement all that we can. The one that’s clearly the most complicated is around fair paid brokers and the only reason there is it’s hard for us to do that unilaterally… We agree with the intent, we’ve just got to work that through.”

Prompted to explain his approach, Elliot argued that “if we do it alone what will happen is we’ll be out of business”. He explained that the banks were working with the ABA and brokers. Deputy CEO Graham Hodges added that “the devil’s in the detail because clearly, it’s going to affect thousands of brokers.”

Elliot’s comments are particularly relevant after it was announced yesterday become will be the next chairman of the ABA, starting in December. The ABA originally sponsored the Sedgwick Review as part of a package of measure to improve consumer trust in banks.

Sedgwick in detail

Stephen Sedgwick’s proposals are hugely unpopular with many brokers. They include decoupling commissions from loan size, thus going further then ASIC’s suggestion to avoid pushing consumers to get bigger loans.

On publication of the Review, all of the banks agreed to implement its proposals by 2020. However, bank submissions to the Treasury, following ASIC’s separate review, show how divided the banks’ are on the broker commission proposals.

Westpac warned that “a flat fee commission structure could prompt an increase in split banking as brokers seek to maximise income by submitting smaller deals”, arguing that any commission change would increase costs for the industry.

Alongside NAB and CBA, Westpac reiterated the importance of working with the industry to develop commission changes. ANZ declined to make their report public.

Proposals to sink or swim by November

With the Combined Industry Forum planning to recommend commission changes to the Government as soon as November, the deadline is looming for banks to change their approach.

Ian McPhee, who is tasked with assessing the banks’ progress implementing the Sedgwick Review, provided a roadmap for a potential U-turn in a report in July.

Acknowleding the banks had a range of views on commissions, McPhee wrote that “should the industry decide not proceed with the guiding principles then a clear basis for the decision should be articulated, consistent with the approach for previous variations to the implementation plan.”

CBA’s view on commissions published by Treasury

From Mortgage Professional Australia

Commonwealth Bank’s views on commissions have been made clearer after the Treasury made public CBA’s submission to ASIC’s Review of Mortgage Remuneration.

When the Treasury first revealed submissions from banks, aggregators, and associations last week, CBA did not appear to have made a submission. A spokeswoman told MPA that the bank had “contributed via the ABA’s [Australian Bankers Association] submission” and CBA’s submission points several times to the ABA’s Sedgwick Review, without explicitly repeating Sedgwick’s proposal to de-link broker commissions from loan size.

However, CBA’s submission also diverges from the ABA’s views. CBA state that “we note and support the comments in the ABA’s submission regarding a self-regulatory model, however it is important that the frameworks responding to both the Retail Banking Remuneration Review [Sedgwick Review] and Report 516 [ASIC’s review] be aligned.” CBA then requests further consideration and guidance from ASIC.

Divisions appear between the major banks

CBA’s guarded views regarding commissions are not necessarily shared by other banks.

NAB’s submission called for changes to the calculation of upfront commissions, whilst Westpac’s rejected many alternate remuneration models, including ASIC’s own commission-by-LVR suggestion.

The ABA’s submission strongly supported self-regulation through the Combined Industry Forum, which includes the MFAA, FBAA and other representatives through broking. CBA, alongside other banks, faces a balancing act between the Forum’s recommendations and those of Sedgwick, which they publically vowed to implement by 2020 if not earlier.

ANZ’s views remain unknown as their submission to the Treasury remains private, if indeed one has been made.

Growing frustration with public reporting proposal

One area where CBA was open in their views was ASIC’s 5th proposal, for more public reporting of the industry.

“The development of an enhanced public reporting regime should have regard to the nature of any commercially sensitive data,” warn CBA, “there may be some instances where data should remain private and more suitable to inform the regulator’s supervisory activities,”

Brokers have also criticised ASIC’s 5th proposal, with the FBAA arguing that “the very concept of publicly reporting this data is misguided and we do not support any part of it.”

Brokers should be given ‘identifier numbers’: MFAA

From The Adviser.

Mandatory broker identifier numbers should be established and used on every home loan to help provide ASIC with “the complete and accurate broker picture it desires”, the MFAA has said.

Writing its response to Treasury’s consultation on ASIC’s Review of Mortgage Broker Remuneration, the CEO of the Mortgage & Finance Association of Australia (MFAA), Mike Felton, noted that ASIC had “uncovered areas where inadequate data existed across the industry”.

Indeed, ASIC’s report into remuneration proposed that there needed to be better oversight of brokers and broker businesses, potentially by using “a consistent process to identify each broker and broker business”.

To meet this requirement and “produce reliable data sets to assist with better governance and oversight”, the MFAA has suggested that brokers should be provided with an individual number.

Mr Felton wrote: “The MFAA believes that the ASIC report provided a snapshot of the industry, and for the first time, collated a consistent data set to assess remuneration practices. It also uncovered areas where inadequate data existed across the industry…. ASIC is keen to work with the industry to determine the required data set, as well as to seek advice on what would be other good measures of consumer outcomes. The MFAA sees that this is an extremely important task, as this process will also produce reliable data sets to assist with better governance and oversight.”

He continued: “The MFAA believes that an important first step would be to develop a single broker identifier number to enable ASIC to get the complete and accurate broker picture it desires.

“We believe that such an identifier, when developed, should be mandatory for use on each home loan sold. Such a unique identifier of the broker that has intermediated any loan must be provided to the lender with the application and stored by the lender throughout the life of the loan and for a period of seven years after the last interaction with a customer in line with other NCCP Act requirements.”

The MFAA noted that while there were existing identifiers in use, such as credit licence numbers or credit representative numbers, it is not “clear whether these numbers cover all brokers and staff”.

As such, the association proposed that it could therefore require a “different number” to be used by those who operate directly under their employer’s ACL number.

“This solution may initially be a lender-specific unique identifier, but in time ideally each broker should receive a single identifier across all lenders,” the submission read.

Mr Felton concluded: “To respond to the need for greater transparency and data collection, which will assist the industry to self-regulate, the MFAA recommends a series of significant changes, including (in time) having mandatory ‘unique identifiers’ for brokers for each loan funded, the provision of loan concentration and performance data to aggregators to allow for data/risk-based monitoring, and improved public reporting to increase transparency in the mortgage market.”

The association has previously recommended that lenders pay upfront commissions on the drawn amount net of offset, with a top-up, and that brokers should improve transparency when offset accounts are recommended or used.

It is currently working with the Finance Brokers Association of Australia (FBAA), the Australian Bankers’ Association (ABA), the Customer Owned Banking Association (COBA) and the Australian Finance Industry Association (AFIA), as well as unnamed “representatives from bank and non-bank lenders, aggregators and brokers”, to develop a cross-industry response to ASIC’s report on mortgage broker remuneration.

The Mortgage Industry Forum will formally present its progress to ASIC, Treasury and the industry by the end of the year.

What Aggregators Told the Treasury About Commissions

From Mortgage Professional Australia.

AFG, Connective, Aussie, Mortgage Choice, Loan Market, Smartline and Specialist Finance Group made submissions in response to ASIC

Aggregators and franchise groups have near-unanimously criticised changes to commissions in their submissions to the Treasury.

Three wholesale aggregators and four franchise groups, representing thousands of brokers, were responding to ASIC’s Review of Mortgage Broker Remuneration, published in March this year.

Connective’s submission summed up the general mood, stating: “the review seems to abandon the existing responsible lending framework, instead seeking to solve a poorly defined problem with an impossible to implement solution.”

Most aggregators rejected all alternative commission arrangements, giving reasons similar to Mortgage Choice’s argument: “to suggest that it would be effective to change the shape or quantum of broker commissions based on LVR, interest-only or lower loan amounts would not be correct. Broker economics need to line up with lender economics and consumer outcomes.”

NAB’s submission proposed upfront commission be linked to the drawn down amount, but only Smartline tentatively endorsed this approach, saying it “may make sense”.

Backing the MFAA, attacking the ABA

In their submissions, aggregators overwhelmingly backed the MFAA and industry self-regulation, which was endorsed yesterday by Minister Kelly O’Dywer.

Aussie and Loan Market pointed to the MFAA’s submission as reflecting their views, with the former noting “[Aussie] believes that potential changes that introduce unreasonable levels of complexity or inconsistency should be avoided. It will, therefore, be necessary to achieve industry consensus on any proposed actions before changes are implemented.”

Aggregators also attacked the Australian Bankers Association and its Sedgwick Review of commissions, with Smartline stating that “it concerns us that the ASIC report references the ABA report, which in our view was manifestly inadequate, lacking in substantive evidence to support recommendations, while being commissioned by a representative group with significant vested interests”

What about bank-owned aggregators?

Choice Aggregation, FAST and Plan Australia were represented within NAB’s submission to the Treasury which proposes major changes to commissions.

Bank ownership did not, however, appear to have an impact elsewhere. Aussie, which as of last week is 100% owned by CBA, was highly critical of changes to commissions.

Connective, which is part-owned by Macquarie, agreed with ASIC that controlling ownership interests should be disclosed to customers, whilst Mortgage Choice, which is ASX-listed, asked for further guidance on what constitutes a controlling interest.

Neither VOW nor Yellow Brick Road were listed among submissions to the Treasury, although it is possible they made anonymous submissions or submissions through the MFAA or FBAA.

Broker clients not better off, say consumer groups

From Australian Broker.

Mortgage brokers don’t always obtain better priced loans for clients than the banks and they don’t always offer a diverse range of loan options, according to a joint submission from four consumer groups to Treasury.

While the submission, written by CHOICE, Consumer Action, Financial Counselling Australia and Financial Rights Legal Centre, released on Tuesday (29 August), centred on the Australian Securities & Investments Commission’s (ASIC) Review of Mortgage Broker Remuneration, it also made a number of suggestions outside of the six proposals initially presented by ASIC.

One key call to action involved increasing standards in the industry, with consumer groups saying that some clients fail to receive the service they expect when visiting a broker.

“Advertisements for brokers claim that they will find customers the right loan, provide tailored advice or get a great loan for the client. However, their actual obligation to clients is quite low – brokers are only required to provide credit assistance that is ‘not unsuitable’ for the consumer.”

The groups called on standards to be lifted, pointing to findings in the original ASIC report which showed that:

  • The difference in interest rates between proprietary and third party channels is small with the direct channel being cheaper in some cases
  • Individual broker businesses send 80% of their loans to four ‘preferred’ lenders with these lenders being different across brokerages

“Given the trust consumers place in brokers, they should all be held to a higher standard than arranging a ‘not unsuitable’ loan for their customers. They should be required to act in the best interests of their customers,” the groups wrote.

The National Consumer Credit Protection (NCCP) Act should more clearly define what a mortgage broker is and detail any new obligations that a broker should meet, they added.

Scrapping commissions

The groups also called for both upfront and trail commissions to be removed to “best serve consumer interests”. The current remuneration structure creates two types of conflicts, they said, with brokers possibly either recommending loans too large for a consumer or recommending one loan over another due to its higher commission.

“Based on cases that financial counsellors and community legal centres see, it appears that some mortgage brokers are so motivated by commissions that they put customers at significant risk and take extreme steps, including likely document fraud and breaches of the responsible lending obligations under the [NCCP Act],” they said.

The groups recommended that upfront commissions be replaced with a fixed fee for advice model (either through a lump sum or hourly rates) while trail be scrapped entirely.

“For consumers, there is some implication that trail accounts for service delivered by the broker over the life of a loan. It is incredibly unclear what service is being delivered,” they said.

CBA CEO apologises to brokers

From The Adviser.

Ian Narev, the outgoing chief executive officer of the Commonwealth Bank, has apologised to brokers for some of the “uncertainties” it has caused.

Speaking at Aussie’s biannual conference on 28 August, Mr Narev touched on the changes in credit policies and rates, etc., following regulatory changes on certain segments of the home lending market, as well as the “difficulties” the bank has had in implementing them.

Mr Narev said: “Given this is the first time many of the banks have got used to things like investor home loan [changes] and interest-only caps, the transition to these caps has been difficult and has caused a little bit of uncertainty for people in this room that we’re really sorry about. And we acknowledge it.

“I think that we are in an environment where there is still good lending to be done, but it will probably just be a little bit calmer than they had be, and that is probably a good thing.”

The CBA CEO also emphasised that it was “very committed” to the broker channel, but understood that there was “ongoing work” that needed to be done.

Noting the completion of CBA’s purchase of the remaining shares in Aussie last week, Mr Narev said: “I think the key is, we bought Aussie (initially the third ownership in 2008 building up to today) because it is such a successful business under its current business model and we don’t want to change it.

“John [Symond] has said that the key to Aussie’s success has been its independence, customer focus, not being tied to any particular bank, so we’d be crazy to change that. So, it’s more of the same, more successful. So as John says, we [can] step back from it and let it continue its great momentum.”

Brokers are “good for customers”, said Mr Narev.

He acknowledged that while the bank has “never shied away” from wanting to do its own business through its branches and direct channels, using a broker was “good for customers”.

He said: “A large number of Australians want to go through a broker, and that’s why we deal with brokers and have a relationship with Aussie, because it’s good for customers. And we’re very committed to the channel. We understand that as part of that, there is ongoing work and investment that we need to do in our processes to make it easier to deal with us, and that’s something we listen to very carefully and we aim to continuously improve, because you have to be good at it to be competitive in the channel.”

The CEO CBA continued: “Ultimately, you want your proprietary channel to be as good as possibly can be and your relationship with the brokers to be as good as it can possibly be, and let the customer make the choice. And at the heart of this, in my mind, is making sure you’re customer-focused and help the customer in whatever way he or she wants, whether that’s through our branches or website or through a broker.”

Mr Narev later told The Adviser: “We didn’t buy the [Aussie] business only to sell it; we bought it because we have a great relationship with Aussie. We see it as strategically important, so there is no change as a result of the change in ownership.”

‘Trust in the bank has weakened’

Speaking on the morning of the announcement that APRA was to hold an independent inquiry into the bank’s “governance, culture and accountability frameworks and practices”, Mr Narev conceded that “trust in the bank has been weakened”.

He said: “What APRA has announced this morning is that it wants to take an independent look into a number of frameworks in the way we manage business in certain ways. [It comes] in the response to the fact that, over recent times, trust in the bank has been weakened. That is undeniable.

[But] we’re very confident in the practice of the Commonwealth Bank, and we’re also very confident that we’re all focused in the right direction…. The reality is that in the modern world, the public needs confidence and therefore APRA has obviously made this announcement that it wants to hear from some independent people as to how the bank is going versus hearing form us. That has our full support and cooperation.”

Mr Narev continued: “What we can see here is a very strong, highly respected prudential regulator, APRA, saying that, in order to make sure public confidence is as high as it can be, let’s have an independent process … where people can [hear from] voices other than the voices inside the banking system.”

He added: “We welcome it, and we think APRA is the right body to be administering that and we will be fully cooperative.”

When asked about whether he believed that there could be any reputational damage to Aussie brokers, as a result of some of the negative press circulating about CBA, Mr Narev emphasised that while CBA owned the company, Aussie was independent.

He said: “People here work for Aussie … nothing changes. But recognising that Commonwealth Bank is the owner of Aussie home loans, we know that people have an interest in us.

“What we can tell people — and make sure that people are very clear about — is where we have made mistakes, we will put them right…. And what people here can have confidence in is that we have a long-term view of the business. We will manage it for the long term, build trust, strengthen reputation and do whatever we can to make sure that Aussie is successful as its always been.

“As an owner, our sole goal is to keep the business successful as it has been, and the logic tells me to keep it going as it’s been going.”

Chairman of Aussie John Symond also publicly gave his backing to CBA at the conference.

When asked his thoughts on the potential negative reputational impact CBA could have on brokers, Mr Symond said that he obviously felt “disappointment” but added that bad things do happen.

Noting that he was not privy to the details of what has happened or what is going to happen, he said that he remained a “huge supporter of the Australian banking system”.

He added: “I believe in the Australian banking system going forward and obviously have a close association with Commbank. I’m confident that they have the people, the skills, the belief, the vision, the culture that whatever crap’s happened, they’ll fix it.

“Do we like what’s happened? Obviously, no. But they will fix it.”

CBA hungry for broker business

From The Adviser.

Australia’s biggest bank could be making an aggressive play to win broker business after losing a significant amount of home loans through the third-party channel in recent months.

While its biggest rivals NAB and ANZ have been steadily increasing their share of broker-originated mortgages, major lender CBA saw its third-party flows drop by 8 per cent over the 2017 financial year.

The fall was more pronounced in the second half. For the six months ending June 2017, brokers wrote just 38 per cent of new home loans for the retail banking services, down from 46 per cent on the prior comparative period.

Regulatory measures to curb interest-only lending, introduced in March, have been a key driver. However, one Sydney broker believes that CBA is now back in business.

FirstPoint broker Chris Pryer told The Adviser that the major bank is marketing “some very competitive rates” at the moment and appears to have streamlined its third-party services.

“I know there are some other lenders with sharp fixed rates out there at the moment, but CBA are matching them, if not bettering them,” Mr Pryer said. “They are also giving large discounts on variable rates.

“Their turnaround times are still within 24 to 48 hours. We spoke to them this week, and by the sounds of things they are very much back on. They have delivered on the deals we have given them so far.”

Earlier in the year, CBA used brokers as a lever to control its interest-only mortgage volumes following instructions from APRA. For a period of time, CBA stopped refinancing investor mortgages through the third-party channel. Any CBA customers with an investor home loan looking to refinance would have to visit the bank directly.

The management of regulatory caps is now creating some interesting dynamics in the home loan market, such as price discounting, to win more business and rate hikes to cool demand.

“Different banks are turning the tap on at different times when they get their back office in order,” Mr Pryer said.

Lenders ‘intentionally disadvantaging borrowers’: FBAA

From The Adviser.

By requiring brokers to meet volume targets in order to retain accreditation, lenders are disadvantaging borrowers and potentially pushing brokers towards risky behaviour.

That’s according to Peter White, executive director of the Finance Brokers Association of Australia (FBAA). He was speaking to The Adviser in the fallout following an ABC Four Corners report that accused brokers and banks of using “aggressive sales tactics” to win customers in a target-based environment.

Responding to suggestions that the commission-based remuneration structure means brokers are prioritising loan volume over suitability, Mr White said that criticism should instead be aimed at the volume-based “hurdles” brokers need to leap in order to maintain their accreditation with lenders.

He said: “Brokers shouldn’t have to maintain minimum volumes just to retain their accreditation because at the end of the day . . . that sort of mentality of ‘you need certain volumes to retain accreditation’ has the risk . . . of potentially causing the wrong style of behaviour.”

Mr White added that accreditation hurdles can end up disadvantaging borrowers. “People shouldn’t be pushed in a certain direction. You should be able to have the freedom of choice that is the most suitable that you can do for your client and not do anything that may put a question over that.

“[The accreditation system] puts at risk them [clients and brokers] being able to access a certain lender, and what the outflow of that is [that] it puts the consumer at a disadvantage. Because, I might be a broker that writes one loan every two months with a specific lender… but every loan they get is the best client on the planet they’ll ever receive. But, if I’m not writing enough volume to sustain that accreditation, my client who may be best suited to that product… doesn’t get the opportunity, because that lender won’t hold my accreditation. So, the consumer misses out.

“So the lenders are intentionally disadvantaging borrowers in this country.”

Time to ‘neck’ the ‘ratbag’ brokers

The prevalence of “cowboy” brokers who enter the sector with hopes of making easy money quickly was also put under Four Corners’ spotlight.

Speaking on the topic, Mr White was unequivocal: “They’re the people that we want out of our industry. We want nothing to do with [those people] who shouldn’t be playing the game. Get rid of them… put them in jail. I don’t care. Get them out the industry.”

He stressed, however, that the instances of shonky “ratbag” broker behaviour were “extraordinarily” low.

“There’s something within the vicinity of 60,000 mortgages done every month. You’ve got one or two examples [of poor behaviour shown on Four Corners].”

Further, cases of borrowers suffering mortgage stress weren’t always brokers’ fault. Borrowers and lenders also need to take responsibility, he said.

“Sometimes it’s not necessarily the broker’s fault, and at the end of the day, it’s the lender who makes the decision on their approval. It’s not a one-stop blame shop. It can be issues on multiple sides, but unquestionably, the broker has a duty of care in their responsibilities and responsible lending conduct.”

Broker Ross Le Quesne of Aussie Parramatta agreed. He said that brokers do the legwork to ensure loans are suitable and repayable for clients, even when faced with a 2 per cent rate increase. He also added that “no one” forces a borrower to take out a loan.

“For someone like myself, that’s been in the industry for 15 years and been through many, many different cycles, I think… brokers do give them [clients] the best flexibility, the best choice and quite often the cheapest rate, because we have a variety of lenders and can review their products.”

The relationships brokers form with clients are designed to “create a client for life”, he said. The difference between brokers and home finance bank staff is that “if anyone’s good [at the bank], they get promoted and moved up the ranks and don’t maintain a relationship with the same person”.

He added: “There is so much to be said for having a good, ethical mortgage broker that does the right thing by you.

“I think the whole [negative attitude towards brokers] is unfair on mortgage brokers. Most of the brokers that I know… want to do the right thing by their clients.”