ASIC does not properly understand the mortgage broking industry, mortgage brokers are concerned.
In a recent online poll conducted by Australian Broker
asking brokers if ASIC understood their industry, almost nine in 10 respondents (86%) admitted that they did not trust the corporate regulator.
Edwena Dixon, director of Melbourne-based Pinpoint Finance told Australian Broker
that the results are not surprising.
“The brokers that I know are not surprised by those results and they agree that ASIC doesn't understand the mortgage industry. Most believe that ASIC is either too afraid or unwilling to properly investigate the major banks and lenders and tend to view the industry from the ‘top down’ rather than having a thorough understanding of all levels of the industry.”
According to Dixon, the biggest misconception ASIC has about the industry is that brokers have more control over the mortgage industry.
“ASIC is operating under the assumption that brokers have more control over the mortgage industry than they do in reality. They should be investigating the banks and lenders, not brokers. We must abide by the rules imposed by regulators as well as bank and lender policies in order to be funded.
“If brokers are complying with all of the above and yet there are problems with the industry, then clearly the issue is with the regulations and bank policies, not with brokers.”
Ren Wong, managing director of national broker group N1 Finance, agreed, adding that brokers often do more compliance than bank branches.
“ASIC knows we have strict regulation to adhere to, but probably doesn't understand mortgage brokers run more compliance than bank branches in terms of home lending,” Wong told Australian Broker
According to Damien Roylance, director of Melbourne-based Entourage Finance, ASIC’s review of interest-only lending is an example of its misunderstanding of the industry.
“If ASIC says [consumers] have to pay [principal-and-interest] then they are not in tune with our industry because in some circumstances, even for owner-occupiers, interest-only loans can really work to their advantage,” Roylance told Australian Broker
“A lot of my clients are first home buyers looking to buy an apartment in Melbourne but they want to keep that apartment as an investment in Melbourne down the track. We have a very big property focus so we talk about the strategy of paying interest-only and building up the cash in the offset account so that when they buy another property in two years’ time they can still have that loan at that original loan limit for tax purposes and they have managed to keep cash in that offset account for a deposit for a next one.”
However, Otto Dargan, managing director of Sydney-based Home Loan Experts told Australian Broker
ASIC is doing the best of a very tough job.
“ASIC has a very good understanding of our industry. They've done an amazing job of consulting with lenders and we've sent several submissions to them when they've requested feedback about proposed changes.
“They're in the tough situation of forcing through unpopular changes like investigating clients living expenses. No broker wants to do additional work or to make serviceability even harder! But imagine you give a client a loan and you didn't notice that they pay private school fees of $25,000 a year? We've got to be professionals and work with ASIC not fight them.”
However, Dargan admitted he is not surprised that the majority of brokers feel a disconnect.
“I'm not surprised that most brokers don't feel understood by ASIC as there is very little direct communication between ASIC and brokers. If ASIC could sit down face to face with each broker and explain why they have the requirements that they do then we'd feel understood. But of course that just isn't possible. We hear everything second-hand from lenders, our aggregator or through the industry media,” he told Australian Broker