The heads of both broker associations have come out swinging at the recently-released draft residential mortgage lending guidelines from the Australian Prudential Regulation Authority.
Mortgage and Finance Association of Australia CEO Phil Naylor said his association will make a submission to counter-act the guidelines.
“I think there are undertones in the proposal which imply that lower-quality or riskier loans are likely to come from the third party or brokers sector,” he told Australian Broker.
“That simply is not correct. Loans from brokers face a range of checks and balances, including the requirements under the NCCP, MFAA
’s procedural requirements and the lenders' own requirements.
“We would assert that a broker loan is subject to more checks than one from the proprietary channel. Anecdotal evidence from lenders indicate that broker loans are at least of equal, if not higher, quality than proprietary channel loans.”
Naylor said while MFAA
does not object to APRA reviewing its guidelines, it is “barking up the wrong tree” to infer broker loans are more likely to be risky.
There are a number of comments in the paper MFAA
will be taking issue with, including the proposal that claw back policies be strengthened to include higher levels of delinquency and process failures, he said.
“In general, brokers are not responsible for such events and do not have the ability to resolve them.”
Other risk management practices APRA is pressing on lenders includes putting limits on loans relative to incomes, reporting on broker relationships and performance, stress-testing borrowers and taking care when rapidly expanding market share.
Finance Brokers Association of Australia CEO Peter White
told Australian Broker
that APRA has “obviously got a screw loose” and is on the wrong track by targeting brokers.
In the guidelines, APRA emphasised the importance of “prudent” lending standards, and among other measures discouraged banks from offering high up-front commissions to brokers.
“Experience has shown that commissions paid upfront tend to encourage less rigorous attention to loan application quality,” the banking regulator said.
But White did not mince his words when expressing his displeasure on the guidelines.
“It’s the biggest crock of s*** I’ve seen for a long time. I’m astounded to be honest. I’ve got solicitors on to it as FBAA
will be making a major submission in reply.”
There should be no argument against upfront commission as brokers need to be paid for doing their job, White said.
“Brokers don’t get an annual salary; they have no annual leave, no sick leave. If they’re not working they don’t get paid.
“Whoever in APRA has written this obviously does not know what lending is about – and that is a major worry. The people making recommendations and writing regulations have never worked in the lending industry in their life,” he said.
“APRA has their heads stuck in an exceptionally dark place.”
White suggested concerned brokers make submissions – “strength in numbers” – and said if anyone would like to send him comments at email@example.com
he will include it at the end of FBAA
Comments on the draft regulations
can be made up until 21 July.
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