has hit back at APRA
, saying the regulator is “completely incorrect” in its assertions about the third party channel made in its final prudential practice guide on residential mortgage lending (APG 223).
“Its assertion however that ‘commissions paid upfront (to brokers) tend to encourage less rigorous attention to loan application quality’ is completely incorrect,” MFAA
chief executive, Siobhan Hayden said.
This comes in response to an article Australian Broker published yesterday, in which APRA
cautioned lenders to be more “prudent” when it came to dealing through the third party channel.
“A prudent approach to the use of third parties for residential mortgage lending would include appropriate measures to ensure that commission-based compensation does not create adverse incentives. Such measures would include consideration of appropriate claw back provisions and ensure that incentive arrangements discourage conflicts of interests and inappropriate behaviour,” the guide states.
However, Hayden has defended brokers by saying that the rigour applied to mortgage lending by brokers since the NCCP normally exceeds what is currently delivered directly by the banks.
“The ‘prudent’ and ‘reasonable’ suggestions offered to ADI’s in APG 223 are most often ‘required’ and ‘fundamental’ within a mortgage brokers business,” she said.
“Confidence of the Third Party channel by ADI’s is demonstrated by the fact that 50% of new loans to Lenders are now attributable to mortgage brokers.
“I am disappointed to read such comments from APRA
's Chairman and it demonstrates that Mr Byres has little or no knowledge of the Third Party market.”