MFAA comes out swinging after APRA warns about risky brokers

by Julia Corderoy07 Nov 2014
The MFAA 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.”



  • by Vic Regional Broker 7/11/2014 8:57:17 AM

    It is great to see the MFAA acting quickly and with well thought out comments, to support its brokers.

    Hopefully APRA will realise after these comments and other commentary that it is simply wrong in its comments and its reasons.

    What is needed now is for the Bankers en-mass to come out as well and support its third party introducers! Will they? It's doubtful.

  • by John 7/11/2014 9:20:29 AM

    The facts are there for all to see. When has APRA ever said anything that was right? They stick their head up every now and then.

    Please APRA, get the facts right. Come to my office and you will see first hand how we operate. It does not mean anything what we are paid .50, .60, .70, what that means is that we work bloody hard and long hours to be rewarded. When you see the joy on a customers face, or hear the elation when told their finance is approved, that is what it is all about.

  • by Macarthur Broker 7/11/2014 9:22:54 AM

    Is APRA talking to ASIC? Obviously not. Wasn't this all addressed with the advent of NCCP? APRA needs to get its facts right before publishing such misleading information. Appropriate claw backs? Unfortunately I can show APRA that this is already in place. I know this from bitter experience.