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Regulators don't understand broking industry, says broker

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Australian Broker | 18 Nov 2015, 08:00 AM Agree 0
A veteran mortgage broker has said that the government and regulators often don’t understand the intricacies of the mortgage industry, after ASIC announced a new probe into the industry
  • Larry Terrance | 18 Nov 2015, 09:06 AM Agree 0
    Good comment from somebody who knows what they are talking about!
  • Scott | 18 Nov 2015, 09:13 AM Agree 0
    Spot on Ray, couldn't agree more!
  • SEQ BROKER | 18 Nov 2015, 09:23 AM Agree 0
    Absolutely Correct. There is no motivator for us brokers to recommend interest only. There is motivation from clients to ask for IO for investment just like Ray has outlined, and there is reason for IO in some O/O cases but it is borrower driven and they pay a serviceability price for it.
  • Correct.... | 18 Nov 2015, 09:26 AM Agree 0
    What Ray said...
  • Goodo | 18 Nov 2015, 09:27 AM Agree 0
    Lets hope the industry bodies stand up for the brokers on these investigations and make their own FULLY detailed & considered submissions to the Government. THAT'S WHAT WE PAY THEM FOR!
  • AF | 18 Nov 2015, 09:31 AM Agree 0
    This is what happens when public servants are authorised to regulate an industry they have no experience in and have never been self employed. That also applies to the political elite.
  • Chappo | 18 Nov 2015, 09:44 AM Agree 0
    I reckon ALL Public Servants sit around in their offices drinking tea and eating biscuits delivered by the tea lady whilst comparing cardigans.

    Or perhaps this is a generalisation or perception because I haven't been into their office to see the realities of their job.
  • Stephen Dinte | 18 Nov 2015, 10:09 AM Agree 0
    Many years ago St George (Advance Bank) promoted a 100% loan for FHBs purchasing brand new homes from a select number of builders. The builders contributed to a slush fund with the bank to cover any borrowers who defaulted. I know I wrote a lot of these loans at the time and have first hand knowledge that these kids did very well out of the deal as the capital growth on there homes over these years has been significant. Not certain that this could be repeated, but the point I wish to make is that had we the NCCP back then, ASIC would likely have had a fit in witnessing such lending practices. The same can be said for the current hysteria by AISC about I/O loans for owner occupiers. One tried and tested strategy for owner occupiers has long been providing a split loan with the fixed portion I/O and a smaller variable portion P & I. This allows the borrowers to concentrate on the variable portion in those first few years such that they can actually see some results (reducing balance) for their efforts. At the end of the initial fixed period, a loan review is conducted and adjustments made based on their then life stage. Simple, proven and effective. Helps build clients for perpetuity.
  • marty | 18 Nov 2015, 10:18 AM Agree 0
    Groan. Where is the consumers free choice in the matter. As long as we verify incomes, debts, actual living expenses and we sensitise the loan repayment with P & I repayments over the reduced term at actual rate plus 2.5% then I think we have covered this off. Move on Asic.
  • Broker | 18 Nov 2015, 10:45 AM Agree 0
    Agree 100% - it is astonishing that the likes of ASIC and APRA could be so clueless.

    A very strange mentality is very evident within both these organisations.
  • Terry | 18 Nov 2015, 10:47 AM Agree 0
    Correct Marty. Nanny state again!
  • Cynical | 18 Nov 2015, 10:51 AM Agree 0
    Big Picture - ASIC and APRA are run by a Government, who are run by big industry including banks, who would love nothing better than for interest only loans to be banned. Plus ASIC and APRA have to justify their existence. There's the motivation for this inquiry.
  • Chris Szigeti | 18 Nov 2015, 11:42 AM Agree 0
    Ray you are correct in what you say and Stephen Dinte you are spot on!
  • Skeptikal | 18 Nov 2015, 11:49 AM Agree 0
    Hold on, prior to arranging the loan aren't Brokers required to hand clients a Certificate of Appt or Credit Guide where we advise clients we do not give advice on investments and before entering into the loan they should seek advice from their Accountant or Financial Adviser? Also an ASIC requirement!
  • Dave Robinson | 18 Nov 2015, 12:33 PM Agree 0
    Mr Weir, how dare you promote a well thought out argument! How will ASIC/APRA and the Govt respond to something they can't understand.
  • Macarthur Broker | 18 Nov 2015, 01:21 PM Agree 0
    I'll admit to arranging an interest only line of credit a few years ago when business wasn't great but I could see the light at the end of the tunnel. Thank God APRA didn't protect me from myself and tell me to sell my house instead!
  • Ray Weir | 18 Nov 2015, 01:52 PM Agree 0
    In response to Skeptikal, advice on real estate investment remains unregulated.
  • marty | 18 Nov 2015, 03:18 PM Agree 0
    @Macarthur Broker.. You naughty naughty boy. Bit like the ex banker I know who topped up his home loan then resigned as soon as the loan settled to start his own business with a nice buffer in place to smooth out the transition. Now a very successful broker with 15 + years in business. Very naughty indeed.
  • Buddo | 18 Nov 2015, 05:15 PM Agree 0
    This topic, & that concerning 'broker remuneration' need to be treated very carefully by any government dept. Swan cut the DAF fees, thinking that would help borrowers 'shop around' & increase competition. It didn't & it doesn't.

    However, brokers DO increase competition among banks, & if APRA or ASIC stuff around with commissions, they just may well ruin that 'competition' for the very people they think they are protecting.

    For heaven's sake... Someone at FBAA or MFAA tell these people to get someone on the ground & talk to brokers... Real life brokers, not someone who retired 20 years ago & find out that whatever the issue, be it I/O loans or commission, they need to butt out!
  • S. Gregory Uehling | 19 Nov 2015, 09:58 AM Agree 0
    It will be nice if APRA and the ATO get on the same page as well. With new regulations in place APRA dictates that a loan is considered an investment loan if the underlined security is an investment property not the purpose of the loan which is where the ATO chimes in. If a client pulls equity from an investment property to purchase a property for their aging mum in a retirement village, the title will need to be in the mums name thus cannot be considered an investment property for the client. In this case, the ATO won't allow this debt to be investment debt thus nin deductible and APRA will consider this an investment loan thus requiring the lender to charge a premium rate. This client loses out on both sides. It would be nice if APRA conformed to rules the ATO already has in place.
  • marty | 19 Nov 2015, 11:17 AM Agree 0
    @ S. Gregory Uehling... Yes you are spot on. To quote the deputy APRA commissioner they were "disappointed" with the data quality form the banks but it is easy to miss classify the data if you have a different definition of what exactly is an investment loan!
  • Cynical | 19 Nov 2015, 11:24 AM Agree 0
    APRA did not dictate rates would be different for OO or investment - that was the banks idea to use APRA as an excuse to fleece investors.
  • Siobhan Hayden | 20 Nov 2015, 12:07 PM Agree 0
    To update on Goodo’s message on communicating with the regulators - the MFAA team feels that our current engagement with ASIC is particularly strong. We meet regularly with the ASIC, provide submissions and challenge them on key issues or commentary about brokers. The challenge rests with the fact that decisions on our industry are made outside of these relationships and Treasury does not have a deep knowledge of the workings of our profession.

    To affect change in this area; we will shortly be announcing the appointment of a dedicated lobbyist who will work in partnership with the MFAA and key industry partners to ensure Treasury and Govt are more knowledgeable about our profession. 2016 is shaping up to be an important year with FSI recommendations being reviewed and implemented. The MFAA is happy to invest funds to ensure that our industry is appropriately understood. If you want to know more you can contact me on
  • marty | 20 Nov 2015, 12:22 PM Agree 0
    @ Siobhan Hayden. That is wonderful thank you Siobhan!! If you an extra levy I would be happy to donate: I was reading the equivalent trade magazine last night for financial planners and the Trowbridge fall out is a massive concern. Although I don't think mortgage brokers have a lot in common with life insurance distribution channels who knows how those outside the industry will see it.
  • Peter | 23 Nov 2015, 04:49 PM Agree 0
    Ray has nailed the issue with his comment. Neither ASIC nor APRA know anything about mortgage brokers. The fact that they don't have anyone on their staff who is or who has recently been a mortgage broker means that all their comments are ill informed and ill conceived.

    Typical of all the ill resourced controlling bodies they constantly come out with the dangers of a particular group and it is for that groups consumption. The cowboys only get caught if there is a complaint so ASIC and their like harp on about the 'dangers' of the industry in the hope of 'scaring' everyone into doing the right thing.

    The big problem is that those doing the right thing are harassed and become anxious while those not doing the right thing continue on their merry way. The very first thing these groups need to do is understand the industry and then take action against those not doing the right thing. At the moment everyone is lumped together and that surely is not the reality.
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