Wilson National: Brokers surging to mortgage managers

By BN | 28 Jan 2010

Mortgage manager Wilson National has noticed three trends which indicate brokers are moving away from banks in favour of mortgage managers.

"Firstly, there has been a significant increase in the number of Wilson National home loans processed in comparison to bank loans amongst our group; Secondly, there has been an overwhelming response to the Wilson National Local Area Manager (LAM) program, and finally, there has been a sharp rise in the number of inquiries from brokers looking to white label their own product," the company said in a statement.

Wilson National MD Geoff Wilson said there were "clear signs" major banks "are looking to squeeze brokers out of existence".

"Many brokers are realising the resourcing, effort and time to get a bank loan over the line is becoming unsustainable from a business point of view with increasingly high processing costs. At the moment many brokers are really struggling to make a profit, and many are looking to find a reliable alternative which will take their business into the future," he added.

Over the next six months Wilson National will be expanding its business through its LAM program. Wilson said a number of brokers had put in applications for the program.

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Commented by: stephen at 28 Jan 2010 04:24 PM

And who is Wilson National? When all the dust settles brokers and non-bank lenders will be left with the high LVR's, crappy low-doc deals and stretched first home buyers. Good clients will remain with banks because mortgage managers products are crap in comparison e.g. products / flexibility. I've been in finance since the 1990's and wouldn't give my own loan to a non-bank. Why would I do it to my clients?

Commented by: B at 28 Jan 2010 05:59 PM
Yep. Non banks are second tier lenders for second tier brokers.

Commented by: Broker at 29 Jan 2010 12:49 PM

Thats a very smart comment Stephen. Why dont we send all our business to the banks who raise interest rates, slap on volume requirements, and pay less commission to the brokers. Its because of guys like you there will be no broker industry left. And if you think non-bank lenders dont have competitive products and poor service you have your head in the sand. Its a fact that client satisfaction is much higher with non-banks... Wake up!

Commented by: Diversify at 29 Jan 2010 12:51 PM
I agree. Brokers are there to offer diversification not just with the lenders. With the branches being able to offer bigger rate discounts than brokers by cutting their own commission, the clients will just go to the branches themselves. There has been numerous times when i have sent a client to the branch due to them being offered a better rate.

Commented by: stephen at 30 Jan 2010 12:15 AM

OK broker. I will test your intelligence.

Example. Client goes to broker with a paid off home worth 800k. He needs a 500k investment loan for business/shares. He tells the broker (via email) he plans to buy a new home within two years and will sell his current house. He wants a flexible structure with tax benefits associated to investment debt.

1 year later he sells and buys a new home. Settlement’s are 3 days apart. Under the brokers supervision he sells for 800k, pays off his debt of 500k, has 300k cash, and buys for 1M. He borrows 700k.

The new debt is personal and has no tax benefit. The client complaints to the ombudsman when he finds out his new debt of 700k is not tax deductable; because he borrowed for the new home. What is the problem you might ask?

THE BROKER SHOUD HAVE: Taken the funds from the sale and placed it in account for 3 days. This becomes security for the investment loan. Three days later he should use the cash from the account to buy new home. This allocates the cash to the purchase and leaves the debt untouched and still tax deductable; because it is the same loan that was used for investment.

The poor broker did not understand simple tax structures. Unfortunately the lender could not offer substitute of security to cash, then back to a the new property, therefore the client had no choice but to discharge and re-borrow for personal use.

The difference to the client was over 30k in tax deductable interest per annum. This is 150k over 5 years which accounts to approx $70,000 in real money. The client also paid DEF on the loan and now has legal fees to recover from the broker. The client is suing the broker for 100k

Under the new legislation the broker will be liable as he needs to keep a record of why he advised the product. The non-bank simply did not offer a product sophisticated enough for an investor / business owner and the broker was negligent and naive when it came to lender selection and loan structuring.

Bring on regulation. Most your brokers are already dead because you have no idea what you are doing.

This is one of the original uses of TD as security. Why else would you use a td as security for a loan when the rate paid is less that you pay on the loan.

So - you think you are smart broker. Non-banks products are simple. As I mentioned above; first home buyers, low doc and high LVR's. Investors that use non-banks will get burnt.

This is one example of many. Brokers that deal with investors need to be accountable for their mistakes.

Commented by: Dave at 01 Feb 2010 12:24 PM

Ooohh Stephen can I have some of what your on, it's obviously very good if you are wanting to turn a non deductible personal home loan into a tax deductible investment loan. I think even without regulation what your suggesting would make any person accountable. For any broker offering any loan who doesn't want accountability then find another job. Oh and I don't know how many brokers supervise the sale of their clients homes most I know are way too busy. Good luck in what ever you end up doing Stephen.

Commented by: stephen at 01 Feb 2010 01:46 PM

OK Dave. So my background is accounting and tax. This is not rocket science. If a debt is investment it is deductable. If you swap the security for that debt from a house to cash to anther house. Then the purpose of funds has not changed – only the security. The debt remains the same.

Hence you can convert the personal asset that is security to another form of security e.g. cash. But not if your with a non-bank lender.

You say you don’t have time to supervise the process but you would be prepared to stuff it up and get a commission whilst you lose the client their tax benefits. The brokers comments above you are focused on his commission – what about the clients financial position?

The point remains. Don’t play with assets you don’t understand. If you lose the client 70k via bad tax strategy you should be held accountable. If you dont have time to supervise the process what are you getting paif for?

Commented by: b at 01 Feb 2010 02:02 PM
Hi Dave. Steven is a long winded accountant having a tantrum but he is right. If the loan stays the same you can substatute security. I am a broker in an accountant’s office and they do this for investors all the time. Steven - keep in mind it is not our place to give tax advice we just set up the loan.

Commented by: Geoff Wilson at 03 Feb 2010 01:42 PM

Non Bank lenders can provide substitution for security no problem at all in fact at Wilson National we do it regularly. There are also other ways to structure loans so that these obstacles can be avoided. Yes your right, structure is very important but that has nothing to do with the loan being a Non Bank loan or a Bank loan. As far as our products being flexible, they are very flexible; unlimited splits full access to account management, card and chq access and our good quality servicewhen a client calls us. Our Local Area Managers (the new wave brokers)have the ability to give their clients complete service with all the things they need, and not just tell them to call the bank, its called a relationships, for which broker are increasing unable to provide due to the lack of control they have over a clients affairs. Wilson National has had an overwhelming amount of enquiry by brokers nationally wondering what the hell they are going to do with the diminishing value proposition to their clients. We can approve loans quickly, clients can call and talk to us and we are not passing the client onto another company who ends up owning the business.

Commented by: Paul at 03 Feb 2010 02:22 PM

I work for obne of the majors. I saw a client last night and approved their deal for 690k on the spot. I can use the COS as the val so I printed their contract this morning. That's 12 hours from meeting the client to having contracts ready. If I met them in a branch they would have got their contract at first appointment. I understand that brokers need non-bank lenders because they will neverr be able to compete with bank staff. they need their point of difference.

Commented by: melb broker at 03 Feb 2010 03:06 PM
paul, your comments are a joke, If you think we cant compete with bank staff (by the way, I earn your full year salary in 3 months)why would you bother making comments on a broker website. I worked for one of the majors for many years and have never looked back. Whats your employee number again?????

Commented by: Paul at 03 Feb 2010 04:21 PM

Well well melbourne broker. I actually work as a franhcisee of the bank so get paid like you (upfront and trail). Settle 6-9M per month and have done for 4 years. trail >330k p/a, two support staff. I'm pretty happy. If your not sure about it do some homework. 3 or the major 4 now have self employed managers plus BOQ who's managers own branches. one week application to settlement is not a problem where I'm sitting. Not struggling to settle deals like most brokers.

Commented by: Broker at 03 Feb 2010 05:09 PM
I think you guys are getting off the track. Mortgge managers are a great asset and we need to support them.

Commented by: Solution steve for non bank at 04 Feb 2010 12:01 AM

As a proactive broker, there is no way you would let a timing mismatch of 3 days occur even if the contract settlement dates were mismatched by 3 days or up to 14 days+. You would simply obtain approval for the substitution, point out the implications to the solicitor and customer as soon as you were told about the sale and purchase and they would delay the sale to do as substitution. If you did nothing, you have a problem.

I must also say, the example provided by Steve sounds more like a financial planner type customer not an accountant writing mortgages advising on investments.

As for the broking industry, will the banks miss this opportunity to reclaim the customer? Not yet, they need 600 branch managers up to speed first. Fortunately, its a service industry and in Steve's example, a branch would probably have a new manager by the time the next transaction took place who new nothing about the original loan and simply write a new loan to hit the stretch numbers and play dumb. Seen it before.

There are still plenty of opportunities whether your a broker or franchisee, its continuing to do the basics very well and keeping the customer the centre of what we do.

Commented by: Michael at 05 Feb 2010 02:19 PM
Stephen what has that stupid long winded example got to do with wether non banks are a viable alternative or not???????Mate answer the question about how people like you are destroying the broker market by over supporting the banks instead of hiding behind some crap about "testing intelligence". So you think you know how to structure a loan, big deal....

Commented by: Broker at 05 Feb 2010 04:20 PM
Anybody that is giving new business to CBA or Westpac needs to have a good long hard look at themselves, and get some better loan comparision software!. Why on earth would you support a bank that DOES NOT support you?????????????????????????

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