Australian Broker 17.08

MAY 2020 ISSUE 17.08

Data on COVID-19’s impact on lending Australia’s lending market has begun to feel the eff ects of the uncertainty /10

Cash flow lifeline for SMEs Which lenders are approved for the SME Guarantee Scheme? /17

ANGUS SULLIVAN Group exec Angus Sullivan says swift turnaround times and supporting clients through COVID-19 have become CommBank’s key focus /14

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Growing risks for borrowers Extra scrutiny of income and employment could leave home buyers exposed /20

ALSO IN THIS ISSUE… Buyers retreat from property But for how long? And how can brokers continue to support customers? /23 Broker on broker Raj Ladher on how employment issues could derail home loan approval /25 Extramarital affairs cause carnage Navigating the financialruinof affairsis all in a day’s work for this broker /30

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NEWS

IN THIS SECTION

Lenders Major amends processes brokers must follow /04

Industry groups APRA closes the door on new banks /06

Market data shows Earliest impact of COVID-19 on lending /10

Aggregators Aggregator launches COVID-10 tool for brokers /12

Technology Brokers urged to be extra vigilant to avoid scams /08

www.brokernews.com.au MAY 2O20 EDITORIAL

SALES & MARKETING

Editor Sarah Megginson

Publisher/Sales Manager Simon Kerslake

News Editor Madison Utley

GLOBAL WATCH How is the mortgage and broking world responding to the COVID-19 pandemic overseas?

Here’s your snapshot of the news that matters most to the mortgage industry in Canada

NATIONAL HOME SALES WEAKENED coronavirus pandemic drew first blood in Canada in March, when national home sales declined by 14.3% month-over-month, according to data from the Canadian Real Estate Association (CREA).

“March 2020 will be remembered around the planet for a long time. Canadian home sales and listings were increasing heading into what was expected to be a busy spring for Canadian realtors,” CREA president Jason Stephen said. “After Friday the 13th, everything went sideways.”

This offset the 7.8% annual increase in non-seasonally adjusted activity and accompanied a 12.5% monthly drop in new listings.

THE

Production Editor Roslyn Meredith

ART & PRODUCTION

Global Head of Communications Adrijana Monevska

CORPORATE

Designer Jommel Ramos

Chief Executive Officer Mike Shipley

Production Manager Alicia Chin

Chief Operating Officer George Walmsley

Traffic Coordinator Kristine Jamir

Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

Madison Utley +61 2 8437 4700 madison.utley@keymedia.com

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DEMAND FOR REVERSE MORTGAGES INCREASES with the same liquidity crunch that is flattening every layer of the economy, from out-of-work waitresses to the country’s largest banks, Canada’s over-55s require – and deserve – a solution that protects the fruits of their labour.

“This demographic needs cash flow to live on,” says Home Equity Bank’s VP, referred sales, Sue Pimento, adding that homeowners in this age bracket are increasingly enquiring about reverse mortgages as a source of both interim and long-term retirement funding assistance.

“Necessity has motivated many people to consider reverse mortgages,” Pimento says, “and we have noticed a drastic increase in business enquiries.”

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tel: +61 2 8311 5831 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

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Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Seoul

INSOLVENCY FILINGS REACH NEW HEIGHTS before the pandemic, Canada’s insolvency rate was already at its highest EVEN level since 2010, according to the Office of the Superintendent of Bankruptcy Canada.

February saw 11,575 insolvency filings, a 9% increase on the same period last year.

Ontario accounted for the greatest provincial increase during that month, at 3,837 filings. This represented a steep 16.8% year-over-year rise.

Quebec came in a close second with 3,770 filings, having ticked up by 1.9% annually. And while British Columbia reported a relatively modest 895 insolvency filings in February, the rate of increase has accelerated with an annual upswing of 13.4%.

This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

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NEWS

LENDERS RBA PRAISES LENDERS’ ROLE IN ECONOMIC RECOVERY RBA has given an update on the implementation of its recent policy package, highlighting the importance that the strength of the banking system has played in mitigating the financial fallout from COVID-19. With national output likely to fall by around 10% over the first half of 2020 and unemployment on track to rise to 10% by June, RBA governor Philip Lowe said the next few months were going to be “difficult ones” for the Australian economy. “We are likely to experience the biggest contraction in national output and income that we have witnessed since the 1930s.”

THE

WHOLESALE LENDER RESPONDS TO COVID-19 of Australia’s largest distributors of white label home loans has announced a series of business updates, including its appointment of a new executive.

Advantedge Financial Services has officially appointed Adam Brown as general manager, while former GM Brett Halliwell has moved to a new senior leadership role. In response to COVID-19, Advantedge will focus on simplifying its offering. “The range of enhancements will further streamline broker processes and provide more value and support to both brokers and their customers,” Brown says.

ONE

“Embracing tech is not a ‘nice to have’ any more – it’s become a pure necessity” Chris Thomas General manager of commercial, NAB

Commercial Loans

MAJOR BANK AMENDS PROCESSES BROKERS MUST FOLLOW NAB has amended its broker policy for consumer lending to better adapt its processes to the COVID-19 environment has announced changes to its Know Your Customer, verification of identity and interview requirements. The bank now requires brokers to use the IDyou app, developed and powered by MSA National, for the remote sighting, collection and verification of identity documents.

Brokers have been instructed that they must use the app until further advised.

In addition to using IDyou, the bank requires brokers to interview customers via video calls to sight them with their original documentation.

It will then be necessary for brokers to include a record of the video interview process in NAB

the summary tab in ApplyOnline, as NAB has made it clear it may request this information later if not provided in the submitted notes.

Otherwise, brokers are expected to follow the ApplyOnline application process as usual, such as by using the Document Verification Service (DVS). If DVS is unsuccessful, they will still be responsible for making enquiries to satisfy the discrepancy, whether by asking further questions or obtaining more documentation.

Additionally, the requirement to include the Customer Identity Check (CIC) form remains.

The bank has clarified that this change is a “temporary measure”, but it did not provide further insight into how the processes will be adapted upon the termination

of the government’s social distancing guidelines.

NAB has assured brokers that, by following the amended process through IDyou, they will be in compliance with all relevant requirements.

According to NAB general manager of commercial, Chris Thomas, each week of this crisis sees the industry advancing a year in its ability to harness technology to enable different ways of working.

“Technology has presented options for businesses over the last decade that have really only been gradually taken up, and this pandemic has sped up the adoption, because embracing this tech is not a ‘nice to have’ any more – it’s become a pure necessity,” said Thomas.

“There have always been questions around how brokers interact with customers: does it need to be face-to-face or can it be done virtually? It’s proven now that it can be done virtually, as there is still a lot of business to be done, despite the health crisis.”

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You can count on CommBank.

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• $2,000 Cashback when your customers switch their eligible home loan to CommBank.

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Principal and Interest repayments, with no establishment fee or monthly loan service fees. Minimum package lending balance of $150,000².

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We’ll support your customers by paying home loan repayments for around 12 months, if the customer, their spouse or dependant passes away or is medically certified with a terminal illness³.

• Your customers can manage their home loan and banking needs 24/7 with our CommBank app and NetBank. With helpful insights and tools at their fingertips, they can stay up to date and informed.

Visit commbroker.com.au for more information and the latest updates

Things you should know: ¹Owner Occupied interest only loans are eligible if funded on or from 7 April 2020. Customers must refinance their home loan from another financial institution. New loans and top-ups are not included in the minimum refinance amount. Bridging loans and the refinancing of an existing Commonwealth Bank or Bankwest home loan are ineligible for this offer. ²An annual package fee, currently $395, applies. ³Age and loan eligibility requirements and other limitations and exclusions apply. Refer to the full terms and conditions in the Home Loan Compassionate Care Information Booklet available at commbank.com.au/compassionatecare. Applications for finance are subject to the Bank’s normal credit approval. Approval criteria, fees, charges, terms and conditions apply. Commonwealth Bank of Australia ABN 48 123 123 124 Australian credit licence 234945.

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NEWS

INDUSTRY GROUPS FBAA OFFERS BROKERS NEW REVENUE STREAM FBAA has partnered with an international money transfer company, Send, to make an additional income stream available to its finance and mortgage brokers. Send provides international transfers for individuals and businesses more quickly and at a lower rate than banks, a service that can meet the needs of many broker clients who need to transfer money overseas, or of brokers themselves who are in need of moving funds.

“As brokers will be paid a commission, this will assist them and their clients,” said FBAA managing director Peter White.

THE

CIF ANNOUNCES LEADERSHIP SHAKE-UP of 14 April, the chair and deputy chair of the Combined Industry Forum have completed their terms and will pass the baton to a new leadership team. Former chair Anthony Waldron and deputy chair Mark Haron have been succeeded by co-chairs Simone Tilley, ANZ general manager of retail broker, and Mark Hewitt, AFG’s GM of industry and partnership development.

“The CIF has played a leading role in ensuring the industry has one voice and ensuring a sustainable and competitive mortgage broking industry,” said Waldron.

AS

APRA CLOSES THE DOOR ON LICENCES FOR NEW BANKS The regulator has suspended the issuance of any new banking licences for ‘at least six months’ in response to the economic uncertainty created by COVID-19 has sent a letter to applicants currently waiting to receive licences, explaining the “fundamental change” being felt both in Australia and abroad as a result of the spreading virus.

In the correspondence, APRA highlighted that financial institutions, especially those that take customer deposits, occupy a “unique position of trust”.

“The financial safety of these institutions is key to the financial stability and well-being of the community and, as a result, these institutions are subject to higher standards than many APRA

sectors of the economy,” it read.

“This includes higher entry standards. The process of granting an APRA licence is intended to help ensure that a new entrant will be able to honour the financial promises it makes under all reasonable circumstances.”

Not only has APRA put a pause on handing out new licences for the sake of consumers, but past experience has also shown that it is challenging for new market entrants to succeed even under normal economic conditions, let alone in the current environment.

In fact, some analysts are confident COVID-19 will lead

to consolidation of the financial services market, reversing the recent increase in licensed ADIs and resulting in a quarter of industry participants exiting the market within the next five years.

The only exception to APRA’s temporary suspension of new licences will be in the “rare case” that the granting of a licence is necessary for APRA to carry out its mandate.

Applicants have been told APRA will keep its approach under review and be in touch when the granting of licences is set to resume.

The hold is expected to last at least six months, but APRA will continue to assess current licence applications throughout the pause to minimise any delay in launching when normal activity recommences.

Applicants have been invited to reach out to discuss the contents of the letter if they have any pressing concerns.

“The CIF has played a leading role in ensuring the industry has one voice” Anthony Waldron Former chair, Combined Industry Forum

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NEWS

TECHNOLOGY TECH COMPANY UNVEILS COVID-19 SOLUTION has rolled out a specialised solution for brokers and lenders as social distancing reduces the opportunities for face-to-face meetings and complicates verification of identity of new clients. Its COVID-19 Care Package is designed to support brokers by offering immediate access to a cloud-based, online WebVOI service that securely and accurately replicates the verification process between broker and customer without the need to meet face-to-face.

INFOTRACK

A ‘SOCIAL DISTANCING FRIENDLY’ LOAN PROCESS day, brokers are being pushed to adapt to interacting with customers in a world that has essentially become contactless. Neobank 86 400 says its home loan process was crafted as a “social distancing friendly solution” they can use. “The entire home loan process can be managed electronically, from remote ID checks to expense and income data collection and signing online forms,” said 86 400 home loan lead Melissa Christy.

EVERY

“We urge brokers to … watch out for themselves and any vulnerable clients who are at increased risk of becoming a target for fraudsters” Tony MacRae General manager of banking, MyState Bank

8

HOW TO BE SCAM AWARE Source: MyState Bank



Be wary of any online requests or unsolicited phone calls asking for personal or financial details; it is highly unlikely a government department or other legitimate business would ask for that information via these channels.

you remain unsure about the validity of a request, look up the  Ifnumber of the organisation in question on their official website and call that to confirm rather than using the number in the message. email addresses and links by hovering your mouse over the  Inspect URL to see where it leads; if something looks suspicious, don’t click on it.

Generic greetings such as “Dear sir or madam” are a red flag that you’re likely reading a phishing email. to legitimate sources such as the World Health Organization and the Australian Government  Go Department of Health for your coronavirus updates.

BROKERS URGED TO BE EXTRA VIGILANT TO AVOID SCAMS MyState Bank has warned brokers to be alert to potential scams that could be a risk to their business, and to encourage customers to do the same have been advised to exercise caution as financial scams crop up around the COVID-19 pandemic, attempting to exploit the heightened levels of fear and anxiety.

According to MyState Bank general manager of banking Tony MacRae, extra vigilance is needed to ensure brokers’ businesses and their customers are not exposed to fraudulent activity.

The exec specifically warned against phishing scams sent by email or text messages which seem to provide official information about coronavirus.

“The sender claims to be from government departments, regulators or one of the key lenders,” MacRae explained.

BROKERS

“We know brokers are overloaded with information from different sources during this time, including lenders and industry associations, which could make it difficult to determine what is legitimate and what is a potential scam.

“These emails will often ask receivers to click on an attachment or embedded link, which will likely download malicious software onto their device to allow scammers free rein over their personal information and the financial data of their clients.”

MacRae also encouraged brokers to be thoughtful in their choice of which video conferencing platforms to use to communicate with customers, as some have been proven to be less secure, and

susceptible to trolls hacking into private meetings.

“MyState Bank understands that mortgage brokers want to keep their customers as protected as possible and will support the channel in this endeavour by helping educate the wider community to spot the warning signs of fraud and possible scams they may be targeted with,” he said.

“We urge brokers to have these conversations with their customers, and watch out for themselves and any vulnerable clients who are at increased risk of becoming a target for fraudsters.”

The bank provided some tips (see boxout) to help brokers protect their businesses and customers.

If you come across any suspicious behaviour, report it to the relevant authorities, such as ASIC or the ACCC. For more information or aid, ACCC’s Scamwatch has further resources to help recognise and avoid scams, as well as a subscription service that provides real-time email alerts detailing the latest scams.

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TECHNOLOGY UPDATE

LENDERS AHEAD OF CURVE WITH DOCUMENT VERIFICATION SERVICE “Taking friction out of the approval process means faster time to approval for the end customer and reduced costs” Tony Carn, Chief Customer Officer, NextGen.Net

inability to liaise with customers face-to-face due to the COVID-19 directives has focused the spotlight on the ApplyOnline Document Verification Service (DVS).

The DVS integrates with federal and state government databases, enabling lenders and brokers to validate governmentissued identity documents online via ApplyOnline – thereby eliminating the need to obtain physical copies, and at the same time complying with social distancing protocols.

But don’t assume the value of DVS is limited to this brave new and unprecedented normal, advises NextGen.Net Chief Customer Officer, Tony Carn.

Post COVID-19, the DVS integrated functionality will continue to play a key role in achieving straight-through processing (STP).

“Clunky, high-risk manual processes are not an option if lenders want to stay ahead of the curve,” says Carn.

“The need to f latten the ‘COVID-19 curve’ is just jolting people into the reality that DVS, along with ApplyOnline eSign THE

(a tool that enables lenders and brokers to source digital signatures from applicants) are necessities in a robust, safe, compliant and efficient infrastructure.”

The ApplyOnline DVS service was rolled out to a number of lenders, including NAB and CUA, in February and March 2020, and already they’re seeing the benefits of this new service.

“Those lenders didn’t do so in anticipation of a pandemic; they were simply forward-thinking and recognised it as a great solution on a standalone basis,” says Carn.

NextGen.Net is one of the first authorised ‘gateway providers’ in the mortgage industry for the Attorney General Department’s DVS, which provides electronic validation of governmentissued documents, such as birth certificates, citizenship papers, drivers licences, marriage certificates, and Medicare and passport information.

“The DVS feature facilitates checks and validates relevant identity documents on all 22 government databases in a

millisecond,” says Carn.

“The benefit for brokers is that they don’t need to source copies of documents. For lenders it means that documents don’t need to be validated because they’ve been auto-validated within ApplyOnline. For customers the gain is a faster turnaround time.

“Identity documents are a big driver of reworks and requests for further information, and the ApplyOnline DVS eradicates that. It’s a much more efficient, seamless and contemporary methodology for validating identity,” adds Carn.

Integrating DVS with applications means dispatching the results electronically to the lender, resulting in less friction in the overall process and fewer reworks.

“Taking friction out of the approval process by having less reworks means that it’s a faster time to approval for the end customer, and that efficiency extends to reducing costs by doing it quicker and achieving better outcomes,” says Carn.

“Eradicating the need for lenders to ask for reworks saves time and money and eliminates the

frustration generally associated with driving the right outcome.” eSign, Carn adds, “makes fraud an avoidable issue and enables customers to sign documents quickly regardless of their location. In the current climate the fact that physical verification of ID documents and manual signing of key loan documents like application forms is no longer necessary is a huge plus”.

Remote working and social distancing makes both eSign and DVS more pertinent currently, but outside of that they both stack up as standalone solutions.

“They cut down on friction, they give greater compliance and certainty, and they’re stronger and more robust processes that reduce cost, time and effort, and reworks,” affirms Carn.

COVID-19 is causing lenders and brokers to have to work a lot harder, and critically a lot smarter, because it’s more difficult to engage customers.

“But, as they say, never waste a disaster. Learn to work smarter now by engaging eSign and DVS and reap the benefits henceforth,” declares Carn.

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NEWS

MARKET AUCTION VOLUMES SLUMP UNDER COVID-19 PRESSURE impact of the increase in scheduled auction volumes following the Easter weekend slump was minimised by nearly 50% of the results coming back as properties being withdrawn, according to CoreLogic data. While 1,848 capital city homes were scheduled for auction the following weekend as compared to the Easter period when just 634 homes were taken to auction, 50% of these were recorded as being withdrawn in the initial results collected. Of the successful auctions, 60.2% of properties were sold prior to the scheduled auction event.

THE

LENDERS INVITED TO JOIN SME GUARANTEE SCHEME government has made offers

THE to 34 lenders wishing to

EARLIEST DATA SHOWS COVID-19’S IMPACT ON LENDING An aggregator has released its March data to illustrate how the Australian lending market has begun to feel the effects of the uncertainty caused by the COVID-19 pandemic AFG Index released in April broke down March activity in the property market as a subset of the usual quarterly data it provides, to allow for closer examination of the impact the health crisis has had on lending.

“The March quarter began with a very active property market, largely driven by record-low interest rates,” said AFG CEO David Bailey.

“This has resulted in a flood of activity in March as brokers help borrowers shore up their positions against the impacts of COVID-19 and rush to complete transactions as shutdowns loomed.”

March was therefore a record month for AFG, with almost $6.15bn in lodgements recorded.

“When looking at the quarterly THE

data set, the third quarter is traditionally a quieter time due to the festive season break; however, lodgements were up 33% on the same period last year,” said Bailey.

This held true across the country, with NSW up 32%, Victoria up 40%, WA up 19%, SA up 20% and Queensland up 32% on Q3 figures from 2019.

The Index also revealed that the major banks have claimed back some of their lost market share, with increasing numbers of borrowers choosing from the big four brands.

Major market share now sits at 60%, the highest level since 2018.

Consequently, non-majors have taken a blow, with leaders like Macquarie dropping from 11.34% to 8.78% and ING’s market share

down from 3.45% to 2.48%.

The shift has troubling connotations as choice and competitive offerings have never been more crucial to the wellbeing of consumers, but Bailey points to action taken to support this.

“With the current crisis impacting liquidity in the market, it has been very pleasing to see the federal government’s swift response. The support for the non-ADI sector through its $15bn Australian Office of Financial Management (AOFM) initiatives will support competition,” said Bailey.

“When we come through the other side of the health crisis, the maintenance of competition and choice for products across a broad number of lenders is an important cornerstone of an effective lending market that Australian consumers and businesses should be able to depend upon. The AOFM’s actions will ensure that is the case.”

participate in the Coronavirus SME Guarantee Scheme to help provide small businesses with access to working capital. Under the scheme, lenders can provide eligible SMEs with unsecured loans of up to $250,000 for terms of as long as three years, with no repayments for the first six months. The government guarantees 50% of each loan so the funding can be offered more cheaply and more freely than through regular business loans. A total of 22 lenders have so far finalised their involvement.

“The third quarter is traditionally a quieter time … however, lodgements were up 33% on the same period last year” David Bailey CEO, AFG

PROPERTY MARKET REACTS TO PANDEMIC Source: AFG Index

33% AFG lodgements were one-third higher in March quarter 2020 than in the same period last year

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$6.15bn

60%

March was a record month for AFG, with over $6bn in lodgements recorded

Major banks have reclaimed lost market share, which now sits at its highest level since 2018

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NEWS

A G G R E G AT O R S

VALUE YOUR SUPPORT NETWORK, SAYS LIBERTY head of an aggregator group has highlighted the importance of cultivating a support system to navigate challenges that are much more difficult to weather alone. “It’s important to recognise the value of building a strong supporting network,” said Brendan O’Donnell, MD of Liberty Network Services. “It can be lonely out there ... Without a strong support network, you run the risk of hitting a wall and burning out when now, more than ever, brokers need to stay in touch with their customers, providing help, guidance and comfort in navigating their finances.”

THE

AGGREGATOR LAUNCHES COVID-19 TOOL FOR BROKERS AGGREGATOR UNROLLS DIGITAL VOI SOLUTION aggregator has unrolled a AN digital offering to help minimise disruption to brokers’ businesses as the industry continues to adapt to the measures introduced around COVID-19. AFG has introduced its remote verification of identity (VOI) solution by implementing MSA National’s IDyou. “It’s vital to allow brokers and their clients to proceed with loan applications and still ensure the VOI is completed within the appropriate guidelines,” said head of sales and distribution Chris Slater.

12

AFG’s new client assistance calculator is designed to help brokers communicate the options available to customers facing changed circumstances due to the pandemic has launched a COVID-19 Action Plan Calculator designed to equip brokers to have “more informed discussions”.

“Lenders are offering support to mortgage holders if they have suffered a loss of income due to COVID-19; however, our brokers are telling us their clients need help to understand what changing the structure of their loan … will mean long-term,” explained the aggregator’s head of sales and distribution, Chris Slater.

“The calculator enables a broker to demonstrate a clear AFG

picture to their clients of how their loan will look both now and into the future based on a variety of options available from the lender.”

The tool helps predict the potential impact any action could have on the loan balance, maturity date and monthly repayments. It can compute various scenarios, including paying the minimum loan repayment, moving to interestonly repayments, changing the monthly loan amount to a preferred amount, and showing what will happen when

repayments start again after pausing them completely for a period.

Brokers can save the calculator’s determination as a PDF and then email or share the results via video call with their customer.

“The relationship between a broker and their customer continues to be strong,” said Slater. “At times like this, the broker’s ability to work with their customer and their understanding of lenders and the available options are just as important as the assistance the broker provides a customer when considering a home loan choice.

“We encourage all mortgage holders affected by a loss of income due to COVID-19 to start the conversation with their broker and lender as soon as possible to find their way through the current situation.”

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Subscribe to the most reliable independent news source for mortgage professionals “Australian Broker, in either print or online, is a news source we check daily. It’s speed, insights and focus on current issues makes it a ‘must have’ news source for the industry.”

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FE AT URES

BUSINESS PROFILE

COMMBANK RISES TO THE CHALLENGE Processing loan and deferral applications, achieving swift turnaround times and generally helping customers who are anxious about their immediate future are the key areas CommBank is focusing on right now – and the major bank admits it wouldn’t be able to do so without the support of the broker channel

no denying the pressure that banks are under at the moment, with questions being asked and enquiries being launched from all corners – customers, businesses and politicians alike.

In fact, lenders have been so inundated in recent weeks that according to reports they are fielding as many enquiries in one week as they usually handle over the course of a year.

Angus Sullivan, group executive, retail banking services at Commonwealth Bank, says finding ways to facilitate swift turnaround times and process client enquiries as quickly as possible has become its key focus.

“The coronavirus pandemic presents a challenge like no other, and our Australian-based call centres are open for business and processing applications,” Sullivan says.

“We have processed approximately 80,000 requests from customers to defer their home loan repayments as at 27 April.

While we continue to receive ongoing and significant demand from customers experiencing financial hardship due to the coronavirus, our investment in people and technology has allowed us to respond, while also maintaining our industry-leading end-to-end application processing and turnaround times.”

The bank is committed to “doing whatever we can to help customers who are worried about THERE’S

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the immediate future and still navigating the home buying journey”, Sullivan adds – but it is also paying attention to the needs of its staff, to make sure they’re coping in a high-pressure environment that often involves stressful conversations with anxious customers.

“Our people are having to navigate complex conversations with our customers; however,

and confidential counselling and coaching service available to employees and their families, provided by a team of qualified professionals who have experience in wellbeing coaching and counselling.”

An interesting dynamic is that many CommBank staff are also customers of the bank, which means they may need to access some of the assistance packages

“Our people are having to navigate complex conversations with our customers … especially those who are dealing with financial hardship situations” they are particularly skilled and highly trained at managing these, especially those who are dealing with financial hardship situations,” Sullivan says.

“We understand that these are difficult times for our customers and also our people, and we’re very proud of how our employees have responded during these unprecedented circumstances to support our customers when they need us most.

“To support our people, we offer a range of health and wellbeing resources. These include a free

that have been rolled out to support financial wellbeing.

The bank’s latest offering, Home Loan Compassionate Care, is one such product (see boxout, opposite page). Designed to help homeowners cope in a time of genuine stress, it is “a first for Australians”, Sullivan explains.

“We know that mortgage repayments are the single biggest financial commitment for Australian homeowners, so we announced in February that we would support our customers by making their home loan

repayments for around 12 months at no cost to the customer, if an eligible borrower, their spouse or dependant passes away or is medically certified with a terminal illness,” he says.

“We’re proud that together with AIA we have been able to deliver this for new home loan customers and will be making it available to our existing customers at no cost, to thank them for their loyalty.”

CommBank is also pleased to continue working with a number of first home buyers.

Despite property market conditions and the general economy being so uncertain, there are plenty of people who have been saving for a deposit and, up until very recently, had been planning to buy their first home.

The First Home Loan Deposit Scheme – which provides a government guarantee that allows first-timers to enter the property market with a deposit of as little as 5% of the purchase price – is still in play, and Sullivan confirms the bank is still seeing strong borrower appetite from first-time buyers.

“As Australia’s largest lender, we help more Australians buy their first home than any other bank, and it’s exciting that we can help get more first home buyers into the market under the First Home Loan Deposit Scheme,” he says.

“Since the scheme launched on 1 January, 1,000 Australians have purchased a property with CommBank. In addition, CBA has

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In partnership with

Angus Sullivan, group executive, retail banking services, Commonwealth Bank

HOME LOAN COMPASSIONATE CARE CommBank will provide complimentary protection to owner-occupier homeowners, supporting them by making their home loan repayments for around 12 months if they, their spouse or dependant passes away or is diagnosed with a terminal illness This product was launched following research by CommBank that revealed that one third of Australians would only be able to cover their home loan repayments for up to six months if they, their spouse or dependant passed away or was diagnosed with a terminal illness One in 10 homeowners responding to the survey confessed that they would only be able to cover their mortgage repayments for one month or less based on current income and savings The research also revealed that over half of Australian homeowners have not had a conversation with their spouse or dependants about managing their mortgage if they passed away or were diagnosed with a terminal illness Visit commbank.com.au/compassionatecare

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helped a further 2,400 customers secure a place under the scheme through our home loan channels, including brokers.”

The bank also announced at the beginning of April that customers who had reserved a place under the scheme but had not yet found a property could now request an extension of the deadline to find one, which would give them additional peace of mind during this difficult period.

Another new product the bank has launched to assist its customers during this time of heightened anxiety is CommVal, a valuations platform that aims to improve the customer and broker experience around valuation ordering.

“We have been investing heavily in our valuation infrastructure with the launch of our CommVal platform, and we will continue to invest in technology, including using more of our proprietary

calculators all designed to help them deliver the best customer outcomes,” Sullivan says.

“We’ve also invested in people and systems to help us deliver market-leading turnaround times and processing through our dedicated assessment teams and Australian-based call centres to ensure we’re providing fast, consistent decisions.”

To that end, Sullivan says CommBank remains committed to the broker channel and recognises the important role that brokers play in helping to meet its customers’ complex home buying needs.

“In addition to support for customers experiencing financial hardship as a result of the coronavirus pandemic, including deferring home loan repayments for six months, I am proud that brokers can count on CommBank to help them and their customers achieve the

“I want to personally thank all of our broker partners for their support, as we recognise the importance of a strong mortgage broking channel” property data to improve the quality and frequency of internal decisions, deliver faster turnaround times when an external valuation is required, and provide better visibility and tracking of the valuation request for the broker,” Sullivan says.

This is all part of CommBank’s overarching strategy to streamline processes and communications with brokers, to ensure they have the smoothest possible experience and achieve optimal outcomes for their clients.

“We provide our brokers with support, expertise and convenience through a dedicated team of relationship managers and our Broker Support Hub, and we’re investing in technology through our CommBroker website, a full-service online support hub for our broker partners where they can access CommVal, Application Status Tracker, policy, tools and 16

best outcomes,” he says.

“This includes industry-leading turnaround times and refinance decisions; competitive products, including our lowest-ever advertised rate of 2.29% for customers considering fixing some or all of their variable rate mortgage to a one-, two- or three-year term (owner-occupied, paying principal and interest on a Wealth Package); and $2,000 cashback when customers switch their eligible home loan to CommBank.”

Providing such optimal outcomes to clients wouldn’t be possible without the support and leverage of brokers, Sullivan says.

“I want to personally thank all of our broker partners for their support, as we recognise the importance of a strong mortgage broking channel and welcome any feedback on where we can do better.” AB

BIG CASHBACK OFFER At a time when every dollar counts, many borrowers will be interested in CommBank’s latest offer. New borrowers can receive $2,000 cashback when they switch their home loan to the bank. The offer is valid for refinancers who apply before 3 August 2020 and have their loan funded by 9 October 2020, with a minimum refinance amount of $250,000.

This offer (which is not available for bridging loans) will apply on all owner-occupier interest-only customers who fund from 7 April 2020.

LOWEST-EVER FIXED RATES

CommBank’s fixed package rates have been reduced to their lowest-ever advertised rates

Owner-occupier customers making principal and interest repayments (with CommBank’s Wealth Package) can now access a rate of just 2.29% p.a.

(3.99% p.a. comparison rate)

The reduced rate applies to new applications for one-, two- and three-year fixed rate loan products

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SPECIAL REPORT

HOW IT WORKS: SME LOAN GUARANTEE

The new Coronavirus SME Guarantee Scheme offers a cash flow lifeline to small businesses that have been financially affected by the pandemic. The important question for brokers shepherding customers through this time are: will commissions apply on these loans? The answer: it depends

businesses have experienced dramatic declines in revenue since the country was largely locked down at the end of March, and are struggling to cover their financial obligations.

The government has announced a raft of measures to put a financial foundation under the Australian economy, and one of the major initiatives for small businesses is the new Coronavirus SME Guarantee Scheme.

Under the new scheme, lenders can provide eligible SMEs with unsecured loans of up to $250,000 for terms of as long as three years, with no repayments required for the first six months.

An important aspect of the scheme is that, in addition to partnering with many of the major banks, it leverages the ability of smaller, non-bank lenders to distribute funding quickly.

“The inclusion of five non-bank lenders in the scheme means there is a greater chance of credit flowing to viable small businesses that need it,” says Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman.

“Non-bank lenders are accustomed to lending unsecured and getting funding to SMEs quickly, so it’s important the selected fintechs pass on the lower rates for loans under this scheme to small businesses, as they are backed by a 50% government guarantee.

“Essentially this means the government is taking on half of the risk of the loan, and that needs to be reflected in loan pricing.

This is something my office will be monitoring closely.”

MANY

There are no fees for lenders participating in the scheme, and the government will guarantee 50% of each loan, so the funding can be offered more cheaply and more freely than with regular business loans. This allows the lender to minimise its risk and increase its appetite for SME loans.

Already, the appetite of the business community to access these funds appears to be strong: Commonwealth Bank confirmed that it has processed and approved 3,700 loans to small businesses, worth approximately $315m, since the scheme was announced.

With a range of both non-bank lenders and banks on the panel, there are plenty of options for borrowers; however, some lenders have indicated that loans provided through the scheme, which will generally be available to both new and existing customers, will not be eligible for broker commission.

Some have commented that they will not be able to confirm the commission structure for brokers until funds become available, while others have confirmed that a partner remuneration program will be launched, but the specifics are not yet known.

Prospa is one non-bank lender in the latter category.

“The government has recognised the important role non-bank lenders play in promoting competition among the banks, providing fast access to capital and securing financial inclusion for small businesses,” says Prospa chief revenue officer Beau Bertoli, before reiterating the essential role that brokers are playing right now.

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman

“The inclusion of five non-bank lenders in the scheme means there is a greater chance of credit flowing to viable small businesses that need it” Kate Carnell, Australian Small Business and Family Enterprise Ombudsman “Brokers are trusted advisers to small business, and in these uncertain times this role is crucial, as small businesses need a lot of help and a lot of empathy. Brokers have always been a vital part of what we do, and we will be working

closely with our partners to quickly distribute funding to eligible customers,” he says.

“We know many brokers are small business owners too, and that these are really tough times, so we’ll continue to work hard to support our www.brokernews.com.au

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John Mohnacheff, group sales manager, Liberty

partners and their small business customers in any way we can.”

Meanwhile, Liberty is one of the lenders on the panel that has confirmed it will be paying brokers a commission on any loans written through the scheme. An upfront commission of 0.45% of the approved amount will apply to all successful loan applications; however, no trailing commission will be paid.

“The Australian broker industry

exploring their options. Brokers are encouraged to contact our underwriting teams directly to discuss any unique or complex scenarios they may have. We know that timely responses are important and believe that opening the lines of communication between us and our business partners helps us to deliver on tight turnarounds.”

Mohnacheff adds that the new SME loan guarantee provides confidence to lenders, which is

“The Australian broker industry has our commitment to continue providing funding to support our valued customers during this challenging period” John Mohnacheff, group sales manager, Liberty has our commitment to continue providing funding to support our valued customers during this challenging period,” says John Mohnacheff, Liberty’s group sales manager.

“We want small businesses to know that they are not alone, that help is available, and their broker is a great starting point for 18

essential in the current environment in which many small businesses have been impacted by the repercussions of COVID-19.

“The SME Guarantee Scheme is a vital measure to help support them during this challenging time.

We have extensive experience working with small businesses, and we understand the challenges they

APPROVED LOAN GUARANTEE LENDERS The government has made offers to 34 lenders wishing to participate in the Coronavirus SME Guarantee Scheme to provide small businesses with access to working capital that will help them manage the impacts of the COVID-19 pandemic.

The following 22 lenders have finalised their involvement: • Australian Mutual Bank • Bank Australia • Bank of Queensland • Bank of us • Bendigo and Adelaide Bank • Commonwealth Bank of Australia • Get Capital • Heritage Bank • Judo Bank • Liberty • Moula Money • MyState Bank • National Australia Bank • OnDeck • Prospa • Queensland Country Bank • Regional Australia Bank • Summerland Credit Union • Suncorp • The Capricornian • Unity Bank • Westpac

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face, so we’re working to do all that we can to assist,” he says.

“Being a participating lender in the SME Guarantee Scheme with our new offering, Liberty Business Care, allows us to extend our experience to further support individuals, households, businesses and our economy at this critical time. We would also encourage any brokers with customers or scenarios where they are unsure how to help, to reach out to their Liberty BDM … as we assess applications on a case-by-case basis, so we can offer solutions for each customer.”

The response from banks in terms of paying broker commissions varies.

NAB has confirmed that “the nature of this specialised loan and the urgency in which it is being provided has deemed [broker]

services at Commonwealth Bank.

“As part of our support for brokers, we have made the decision to pay trail commissions on eligible loans.”

And at Suncorp, the bank “stands with our brokers”, a spokesperson said. “If a broker is accredited with Suncorp to write small business products, then we will be paying standard commissions in accordance with existing agreements.”

Commissions aside, there remain concerns that these new governmentbacked loans won’t be delivered in a time frame that will guarantee small businesses’ survival through the economic hardship brought on by the COVID-19 pandemic.

Four in five business owners (79%) believe banks will not be able to approve and settle loans

“Brokers are trusted advisers to small business, and in these uncertain times this role is crucial, as small businesses need a lot of help and a lot of empathy”

BUSINESS ELIGIBILITY CRITERIA FOR SME GUARANTEE SCHEME

Loans through the scheme are available only to businesses with incomes affected by COVID-19. They must be registered for GST and have an annual turnover of over $75,000 and less than $50m

A loan cannot be secured under this scheme to refinance drawn facilities with another lender, or to purchase a business.

The funds must be used to support current and upcoming cash flow needs

Loans must be used for business purposes only, and the total sum of unsecured loans (from any/all financial institutions) relating to COVID-19 relief must not exceed $250,000

Beau Bertoli, chief revenue officer, Prospa commission not applicable in this instance”.

“Our new Business Support Loan is available to existing broker-introduced customers experiencing the impacts of COVID-19; however, no broker commissions will be paid. We ask that our brokers direct their commercial customers to contact their NAB business banking manager or submit a request online,” said an NAB spokesperson.

“They can also call our customer care team, and if brokers have any questions about how NAB can assist their customer, we encourage them to talk to their NAB commercial broker BDM.” Commonwealth Bank has taken a different approach.

“Our customers were able to apply for loans under the Australian government’s SME Guarantee Scheme from March 23, a day after the government announced the scheme,” says Angus Sullivan, group executive, retail banking

under the scheme as quickly as is necessary, according to a survey of 207 business owners commissioned by lending platform lend.com.au.

The research found that 70% of businesses feel they need the loans to survive. Of these, 12% said it was already too late for their business, and 32% said they would need a loan by the first week of May. Lenders, however, remain confident that all the right steps are being taken to support the business community at large.

“The government’s response has been swift and considered, and their support will enable lenders to help thousands of small businesses cope with the significant impact of COVID-19,” says Prospa’s Bertoli.

“Recent measures like the scheme and stimulus packages reinforce that government understands how crucial small businesses are to the economy, and the importance of getting capital quickly to those who need it.” AB

Some criteria vary between banks and lenders.

For instance, Westpac is offering an online-only fixed rate loan to existing customers, but new customers are only eligible for a variable rate loan

The scheme will support up to $40bn of lending to SMEs, with the government guaranteeing 50% of new loans issued by eligible lenders until 30 September 2020

Eligible businesses, which can include sole traders and not-for-profit organisations, must be tax residents of Australia; that is, based, registered and operating in Australia

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NE WS ANALYSIS

GROWING RISKS FOR BORROWERS

Rapid changes in the way bankers and lenders are confirming loan applicants’ employment and income could leave thousands of property buyers exposed to the risk of their loans not settling

buyers looking to secure a home during the housing market slowdown are being urged to carefully consider their employment status before they sign on the dotted line.

Banks and lenders have always had a policy of checking employment status at any stage during a loan application. However, historically, after confirming employment status and income to satisfy the finance clause, they would not have typically checked a second time after the finance clause had passed.

But this is becoming standard practice, and there is now a higher risk that previously approved loans could be withdrawn as late as on the day of settlement.

“Most, if not all, lenders will be PROPERTY

doing rigorous checks on all applications, even if the application was previously approved, and there will be a number of people in a world of pain if they have already

“I would imagine banks’ credit teams will be extremely cautious with some industries, such as hospitality, airline, tourism and retail (non-grocery).”

“Most, if not all, lenders will be doing rigorous checks on all applications, even if the application was previously approved” Raj Ladher, home loan specialist, Your Mortgage Broker exchanged [contracts] and now have issues with employment,” says Raj Ladher, home loan specialist at Your Mortgage Broker.

This puts some buyers at risk of losing their deposit if they are unable to settle the loan.

Mike Felton, CEO of the MFAA,

confirms that even those borrowers who have an unconditional finance approval could be at risk.

“There are certainly risks where the customer has an enforceable contract to purchase and they experience a material change in circumstances before settlement occurs. Where the customer has unconditional finance approval, most lender contracts have clauses that allow the lender to withdraw if there has been a material change in circumstances between unconditional approval and settlement,” Felton says.

“When COVID-19 first appeared there were a number of deals in the pipeline, and whilst the lenders have not been obliged to settle these, it is the MFAA’s view that this is just another form of

WHERE TO FROM HERE?

“I want to see lenders looking to the future, instead of focusing on the current situation. It would be good to see more considered and measured approaches to credit assessments on incomes, particularly assessing if the borrower’s credit has been good in the past and whether or not they will recover financially in the short term.”

Peter White, managing director, FBAA

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“For those wishing to purchase property during this pandemic event, extreme caution needs to be exercised. Clearly there is an elevated risk of a change in income or employment status, which can result in withdrawal of finance and loss of deposit, so customers should only be entering the market where they are comfortable with secure employment that supports taking on a new commitment at this time.”

Mike Felton, CEO, MFAA

“Every vendor who is selling is a motivated vendor right now. If they were just shooting the breeze and putting a listing out there with a vague hope that they could hit powerball, COVID-19 is not a likely time that this strategy would work, so buyers in this market must factor in all risks and weigh it up carefully” Cate Bakos, president, REBAA

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COVID-19-related hardship and should ideally be approached by lenders by having a conversation with the customer as to what is in the customer’s best interests.”

The process of rechecking employment status as late as on the day of settlement may not have been standard practice; however, FBAA managing director Peter White points out that when markets are impacted by abnormalities, such as the GFC or COVID-19, increased credit investigations always rise to the forefront of attention.

“Over the decades, lenders have regularly checked the employment status of borrowers post the finance clause if they knew or felt they needed to. I’ve seen and experienced this over the 42 years I have been in this industry, through the many recessions we’ve had, since the 1980s and through the GFC in 2008,” he says.

“In today’s COVID-19 period it is very obvious that some employment markets have suffered far more than others. This means people’s future employment and their incomes are in question, so this is a normal and prudent credit risk profiling measure.”

For borrowers who find themselves in this situation, White says brokers are “undoubtedly the most suited to assist [them]” in the current environment.

“There are always solutions available to some degree, but this is highly subjective to the person or business’s specific needs. Borrowers need to seek tailored guidance to help them navigate through this time,” White says.

“Real estate agents and their

respective associations need to be cognisant of the current environment. They need to be flexible and understanding that things are not the norm, and work together for the desired outcomes.”

Cate Bakos, president of the Real Estate Buyers Agents Association of Australia (REBAA), agrees, saying this economic shift has the potential to impact a huge number of potential property buyers.

“We are taking the approach that any client who has concerns about their job security needs to carefully consider whether now is the right time for them to be purchasing a property. Examples include

is much easier to buy in than in recent times.

“Brokers should offer helpful, pragmatic advice. The buying conditions are softer and more opportunistic for their clients, so if the clients can move forward with a low-risk purchase, they should be encouraged,” Bakos says.

“Brokers need to help buyers weigh up the risk, the reward, the mitigants and the Plan B (and C, if they can). And they should call out the risk-takers and remind them of the magnitude and likelihood of the risk, if they have genuine concerns about a cavalier purchaser.”

From this point onwards, all

WANT MORE BREAKING NEWS? For more up-to-date news and comprehensive analysis of issues affecting mortgage brokers and the industry at large, visit

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“Any client who has concerns about their job security needs to carefully consider whether now is the right time to be purchasing a property” Cate Bakos, president, Real Estate Buyers Agents Association of Australia employment risk, limited ‘Plan B’ risk, such as if they have tight borrowings, or single-lender eligibility, or no buffer funds,” Bakos says.

At the same time, she believes that in the current market it’s an ideal time to buy for those who have a deposit and a solid income.

If every potential buyer decided to sit on the sidelines and heed the careful, protective advice that encourages them not to buy in this market, Bakos says low-risk applicants would pass up a great opportunity to get into a market that

applications being approved “should be fairly safe”, Ladher adds, as the majority of job losses flowing through as a result of the pandemic have already occurred.

“These loan applications will be assessed with the impacts of COVID19 already factored in; however, as it’s an ever-changing beast, purchasers need to have contingencies such as cooling-off periods and get-out clauses. More than ever, potential borrowers need a mortgage professional to help them through the mortgage maze,” he says. AB www.brokernews.com.au

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PEOPLE

Have an interesting deal?

Had a particularly difficult or interesting deal? Why not share it with us? Email:

sarah.megginson@keymedia.com

BIG DEAL

As owner-manager of Mortgage Choice in Berwick, David Thurmond says only about 10% of the loans he works on are truly complex – but this particular deal, for an investor with multiple cross-securitised properties, really takes the cake for having plenty of moving parts THE FACTS

Client Investor and homeowner

Loan size and term $1.8m

Goal To finance splitting two blocks of land into three, to build a new home

Location Victoria

THE SCENARIO

Only about 10% of our deals are what I call complex, and I actually really enjoy them! They’re a welcome change from standard loan applications. This particular deal certainly falls into the complex category.

We were approached by a new client, who came to us after noticing our shopfront. They gave us a call last September, and we began working with them then. It’s still ongoing eight months later, in April.

This client has five properties in his portfolio and was seeking finance to fund a new development. Two of his properties are next door to each other, and the client wants to do a subdivision that will essentially combine these two properties and then split them into three. On the newly created block of land, the client plans to build his new family home.

In working through the situation with him, we discovered that he didn’t qualify for finance to build the new property and keep all of his existing properties – so he needed to sell one of the existing properties to make this possible.

The council also required a significant payment for ‘Open Space Contribution’ before work could begin.

The nature of this deal involves liaising extensively with council on the subdivision, which means it has dragged out quite a bit. A lot of prework had to be completed before we even got to the loan application stage.

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Lender ANZ

Aggregator Mortgage Choice

THE SOLUTION

The first step was to restructure the borrower’s entire portfolio to eliminate cross-security, maintain tax advantages based on his accountant’s advice, and improve cash flow and borrowing capacity.

In simple terms, it was a mess! In building his property portfolio the client had gone to his local branch and requested a loan – and they take the easy way out in most cases. This meant we had to untangle everything and separate all of his loans, while still ensuring that we were meeting his accountant’s requirements for tax

any of his assets, but there was no way to move forward without liquidating at least one property. We suggested he decide which one he would be most comfortable selling.

We would then run the numbers to see if it worked. Fortunately, with the property he chose, it did work.

But the property hasn’t sold yet. So, for now, we have executed in two stages.

We have ticked off stage one: we have completed the refinance and restructure of the client’s existing loans and extracted enough cash to cover the council and subdivision fees. We managed to keep him with one bank for all of his loans, but his properties are no longer cross-securitised and his loans are no longer tied together.

We are now finalising stage two: securing a construction loan for the new family home, with a bridging loan component to allow the client up to 12 months to sell one of his properties.

He has been pre-approved for finance and the deal has been signed off by the bank; we are just waiting for the subdivision approval to come through from council.

THE TAKEAWAYS

This deal reinforced for me the importance of taking detailed notes. All deals should have meticulous notes, but this is especially important for complex deals, as they generally take longer to complete. So, when you’re jumping back into a file after a few months, having waited for council decisions or building contracts, it’s good for the broker

One of our challenges as brokers is getting our clients to realise how difficult their loan is, while at the same time letting them know they’re in good hands

David Thurmond Owner-manager of Mortgage Choice, Berwick

deductible status on the investment loans.

To get our client to the point where he was good to go for finance on the new construction, we advised that he wouldn’t be able to hold all of his properties. He needed to sell an asset to make it work.

This is a lot of responsibility to take on as a broker. We are very cautious when providing this sort of information to a client, as we need to ensure that the information is relevant today and will continue to be relevant down the track.

Initially the client was resistant to selling

and client to know exactly where you left off – and what you’re working towards.

Also, one of our challenges as brokers is getting our clients to realise how difficult their loan is, while at the same time letting them know they’re in good hands. Clients don’t need to understand the minutiae, but when they know that a deal is complex and why it’s complex, they become more understanding about the time it takes to approve these loans, and more accommodating about the extra information the lenders will no doubt ask for. AB

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OPINION

PROPERTY BUYERS RETREAT – BUT FOR HOW LONG? There’s no way to predict just how deeply the property market will be impacted by the COVID-19 pandemic. At a time when property buyers are stepping back from the market, how can brokers continue to write loans and support their customers? are only just starting to see what impacts COVID-19 will have on the housing market, and it will take some time before we truly know how long and how deep the coronavirus issue will run.

You could say the biggest X factor is what the time frame will be before things return to normal, or the ‘new normal’.

Some of the greatest impacts on the property market will be the rise in unemployment, and the negative sentiment caused by high levels of uncertainty.

We saw an initial drop in auction clearance rates as a result of the sentiment change following the first lockdown announcements, and it’s likely we’ll see further contraction in buying and selling activity now that open houses and in-person auctions have been banned.

Like any disruptive change, the broker response to this issue will vary from person to person – and brokers, like all of us, are working through exactly what COVID-19 means for them. But many are taking the leap to prepare their businesses for this new period.

What will be particularly important for brokers during this time is careful management of their financials, and prudent cost management will be critical.

Equally important will be ongoing customer contact.

A key point to remember is that our industry is far better off than many industries in which incomes have been decimated overnight. There is a lot of uncertainty felt by many in the community in terms of financial security, and this is where brokers can really shine.

Right now, brokers should be focusing on how they can help customers understand any financial options available to them if needed due to hardship, and looking at restructuring or refinancing options as required. There are likely to be many clients in most brokers’ portfolios who would benefit from the great rates

offered by many lenders. In fact, we expect refinancing to be a key focus area in the coming months.

Obviously, the state and federal governments also have their role to play, and they have announced a number of stimulus packages to help bolster the housing market.

It’s important to note that there is no silver bullet. With the assumption that the virus won’t last forever, it is my view that we need to buy time, and that’s why

WE

control, the sooner we will see a return to positive property markets.

Until that happens, in my view, it’s best to follow the advice of the federal government, which is taking guidance from world experts.

My advice to brokers is to assume that we will need to operate under social distancing measures for six months at least. Rather than thinking about this as a short-term disruption, that we’ll be through within weeks, thinking about this

Some of the biggest impacts on the property market will be the rise in unemployment, and the negative sentiment caused by high levels of uncertainty

Stephen Moore CEO of Choice Aggregation Services

stimulus initiatives that support small business and help keep people employed make a lot of sense.

The flexibility shown by lenders around hardship has also been a positive. If we can push out the financial impacts, we can reduce the recovery period for the economy, which will benefit all.

From a policy perspective, I am hoping to see a review of a number of taxes, in particular stamp duty and local government fees on developments.

I believe this should be a long-term change, not just short-term.

It’s not just the government’s responsibility to get us through this period; it’s also up to all of us to act responsibly.

Right now, it’s time to batten down the hatches, both physically and financially.

Overall, while we do expect to see a decline in housing sales and auction results, the main question is around the depth of the decline. That said, the sooner we see the virus brought under

as a longer-term play effectively does two key things. Firstly, it helps you to mentally adjust and get your head in the right space, and secondly it forces you to act now to adjust the way you work.

Social distancing and isolation are currently the right things to do, but under normal circumstances ‘isolation’ can have quite negative connotations. Most of us are social beings, and we need the company of others.

With this in mind, we need to ensure we are looking out for each other now more than ever. Never hesitate to pick up the phone if you just want to have a chat with someone. And when speaking to others, remember to ask the simple question: “Are you OK?” There are so many ways we can still be interacting, whether it’s by phone, text, email, FaceTime, Zoom, or other media, so ensure that you continue to keep in touch with your colleagues, clients, peers, friends and family. AB www.brokernews.com.au

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PEOPLE

Get involved in the discussion Share your thoughts at

brokernews.com.au

FROM THE FORUM

Top comments from trending stories on brokernews.com.au

LENDERS AND BUSINESSES RESPOND TO SME GUARANTEE SCHEME The new Coronavirus SME Guarantee Scheme has confirmed that there will be 22 banks and other lenders on its panel, but many of these have said that they will not pay broker commission on any loans written through this scheme. Furthermore, research has revealed businesses’ overwhelming lack of confidence that the new government-backed loans will be timely enough to guarantee their survival through the period of economic hardship brought about by the COVID-19 pandemic. Four in five business owners (79%) believe banks will not be able to approve and settle loans under the Coronavirus SME Guarantee Scheme as quickly as is necessary, according to a survey of 207 business owners commissioned by lend.com.au.

This loan scheme is underwritten by our government at 25bps and carries a sovereign guarantee for 50% of the loan amount. The banks are charging interest rates of 4.5% to 5.5% pa under this scheme. This equates to profit gouging when our SMEs need access to cheap funds, as the government proposed. The banks should make a margin on the loan, but not at this level.

GH

While all of this is great, I can’t help but wonder what will happen post the three- to six-month mark if business conditions don’t improve?

Dave

Big banks looking to jab brokers again. They are our clients, not the banks’, and we are playing a valuable role in advising them on what they need, so why can’t we get remunerated for it. “Just send your clients along to us and we will look after them” – yeah, sure! We are small businesses, too. No one in the industry has the ticker to stand up to the big banks.

24

VERIFICATION OF IDENTITY PROCESSES UPDATED BY LENDERS A number of lenders have announced changes to their verification of identity processes, with one major lender commenting that each week of this crisis is seeing the industry advancing a year in its ability to harness technology to enable different ways of working. Several lenders are now making it possible to achieve the remote sighting, collection and verification of identity documents, for instance. So what is the broker industry’s response?

Wonder if the same rule applies to their branches? Probably not! And will that help them with the two-week file turnaround?? Doubtful. What a joke.

Dark horse

Broker

I wonder how quick “quick access” will be? There is a lot of positive talk at the moment; however, I am not seeing it being delivered quickly. By the time it is made available, there will be many more jobs lost and businesses closed.

“Each week of this crisis sees the industry advancing a year in its ability to harness technology to enable different ways of working.” Great – so another 20 weeks and you should be caught up!

Steve

Anon

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PEOPLE

Do you have a question for our broker mentors?

Email your question to:

sarahmegginson@keymedia.com

BROKER ON BROKER

Thanks to the pandemic, there are a number of homebuyers who have exchanged contracts on a property and may have even passed their finance clause date. But now, as Raj Ladher, home loan specialist at Your Mortgage Broker, explains, employment issues threaten to derail their loan approval

How can brokers help borrowers who may be at risk of having their loan denied due to employment issues?

Brokers need to leverage from A all the different types of lenders they have on their panel.

They need to speak to all their lender credit teams and BDMs to see what their credit appetite is for potential borrowers who have unfortunately been caught off guard if they have already committed – and basically, don’t put the client in the ‘too hard basket’ or leave any stone unturned. Naturally, lenders need to ‘lend responsibly’, so a thorough discussion needs to take place with the client on their ability to repay the loan. I always steer clients away from exchanging/committing on a property until they have an unconditional approval.

Q

Is pre-approval worth less now that these measures are in place? short, yes! There will be a A In number of people in a world of pain who have already exchanged and now have issues with employment. We are experiencing lenders changing their policy in regard to income, as they are being cautious about casual income, self-employed borrowers’ income, overtime and bonuses. Additional checks may be carried out with employers, and/or they may want additional income documentation from the self-employed. Although

Q

Raj Ladher, home loan specialist, Your Mortgage Broker

lenders may not officially have a high-risk category, naturally they will be more cautious with borrowers from, for example, the airline, tourism and hospitality industries.

How long do you think these expanded efforts to check employment will go on for?

Lenders’ credit appetite is A based on risk, and these rigorous employment checks will continue until they feel the

Q

potential borrower is not at risk.

I would say the additional checks will carry on until such time as the economy and the unemployment rate bounces back. Banks aren’t being problematic with these additional checks; they are taking a common-sense approach and lending responsibly.

If a borrower gets a loan and their employment is impacted weeks or a month

Q

after being approved, what do they need to do?

Most, if not all, lenders are A offering hardship assistance for three to six months for borrowers who have been affected by the pandemic. If borrowers are affected, they need to liaise with the lender immediately to see what options they have, for example the option of interest-only repayments or a mortgage repayment break. AB

PITSTOP MENTORING Are you new to the industry, or simply keen to learn from experienced mortgage brokers who have been in the trenches before and have words of wisdom to share? Consider this your opportunity for pitstop mentoring! If you have a question you’d like a senior broker to answer – on topics from generating leads and building your loan book to surviving a downturn and maximising marketing – email sarah.megginson@keymedia.com and look out for an expert answer in a future issue.

www.brokernews.com.au

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DATA

SOUTH AUSTRALIA

TAS SPOTLIGHT

Rental rates strengthen as offshore investors boost the economy Adelaide’s rental market is not far behind Hobart’s, with rents up by 2.3% in the 12 months to February 2020.

“It is clear that the rental market is starting to gain momentum again as the investment properties from the previous upswing are absorbed, and new development levels have moderated,” says Eliza Owen, head of Australia research at CoreLogic.

Adelaide’s strengthening position is reflected in its 0.8% growth in the February quarter, as reported by CoreLogic’s Home Value Index. In addition, according to the Real Estate Institute of SA’s Q4 Market Update, more than 4,000 house sales were settled in the December 2019 quarter in Adelaide’s metro. Heightened demand, which has translated to an uptick in the median dwelling price, has also come from interest in the market shown by overseas investors.

CBRE’s Residential Market Outlook report for 2020 indicated that foreign buyers accounted for the sale of more than $1bn worth of assets in 2019.

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Metro (H)

$480,000

0.9%

2.6%

$380

4.3%

Metro (U)

$326,122

-0.9%

0.4%

$330

5.1%

Country (H)

$280,595

0.0%

2.6%

$270

5.1%

Country (U)

$211,000

0.0%

-4.1%

$210

5.2%

WESTERN AUSTRALIA

Predicted rises in prices and rents likely to support recovery of Perth Perth is set to prove that 2020 is its year.

According to Domain’s Property Price Forecast for 2020–21, prices are expected to rise at the fastest rate since the wane of the mining boom in 2014.

“The market looks like it’s at a turning point – looking forward, the construction sector has really fallen away and vacancy rates are down, so all things point towards the rents rising,” says Domain economist Trent Wiltshire.

International tourism has been dealt a blow by COVID-19. However, Damian Collins, president of the Real Estate Institute of WA, believes more local interest could be reeled in.

“Certainly, the state government’s put a big focus on tourism, and coronavirus is going to be a bit problematic if it continues on for many more months,” Collins says. “But while we might lose some international migration, we’re also seeing that a lot of people from WA who might have gone overseas are travelling more locally now.”

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Metro (H)

$480,000

0.0%

-2.0%

$380

4.1%

Metro (U)

$380,000

0.0%

-4.6%

$350

4.9%

Country (H)

$345,000

1.5%

0.0%

$350

5.5%

Country (U)

$200,000

-2.1%

-5.7%

$310

7.8%

26

SLIPPING AFFORDABILITY Homeowners and tenants are beginning to experience the impacts of Hobart’s rising property values and rents to the latest Housing Affordability Report released by the Real Estate Institute of Australia (REIA), housing affordability fell in the three months to December 2019, with home loan repayments requiring nearly 30% of borrowers’ household income.

“Over the December 2019 quarter, the median house price increased in all capital cities, with Hobart having the highest increase of 7.8%,” says REIA president Adrian Kelly.

With many buyers getting priced out of the metro to some extent, regional areas like Launceston are capturing the overflow.

“Tasmania’s home values have been rising swiftly, with housing values rising faster across regional Tasmania than Hobart,” says CoreLogic head of research Tim Lawless in CoreLogic’s Home Value Index for February 2020.

However, there are affordable entry points ACCORDING

into the market to be found in regional Tasmania, given the relatively low prices and high rental returns on offer.

Meanwhile, rental rates in Hobart have risen by a whopping 5.5% in the 12 months to February 2020, making it the tightest capital city rental market by a significant margin.

“Hobart presents a continued crisis in the rental market, with the strongest growth in rents, a tight level of vacancy, and a growing short-term rental accommodation market crowding out long-term tenants,” says CoreLogic head of Australia research Eliza Owen.

The research firm’s affordability metrics indicated that households now need to put over 30% of income towards rent, while its Home Value Index notes that Hobart has the strongest yield dynamic, with a total return – which lumps together gross yield and annual capital gain – of 10.5%.

MARKET FACTS AND PREDICTIONS Source: Domain Rental Report, March quarter 2020

Strongest housing growth

Rising number of properties for sale

Hobart registered the strongest year-on-year growth in both unit and house prices of all capital cities

In the three weeks to 5 April 2020, Hobart saw a whopping 60% increase in listings compared to the same period in 2019

Rents expected to fall Shutdown of immigration into Australia could see rents fall by up to 10%, predicts AMP Capital chief economist Shane Oliver

SUBURB TO WATCH: BRIDGEWATER Median price (houses) $259,500

Median price (units) $255,000

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

10%

48%

51%

7%

12-month growth

Average annual growth

Weekly advertised rent

Indicative gross rental yield

33%

27%

$290

6%

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AUSTRALIAN CAPITAL TERRITORY

Future increases in apartment stock could constrict price growth Australia’s capital has long struggled with affordability in both the rental and buyer markets – and with demand constantly increasing, the trend is expected to continue until supply rises.

“Demand is strong, and population growth is at 2% a year – if not more – in Canberra, so that’s why we see rents rise rapidly,” explains Domain economist Trent Wiltshire.

A predicted moderation of price growth could be opportune for tenants and buyers who want to get a foothold in an affluent rental market.

Canberra reported the fastest rental rate increase of 0.7% over January, alongside Sydney and Hobart. Nonetheless, over the years, rental growth has slowed in Canberra – a decline attributed to increasing supply levels.

Herron Todd White’s Month in Review report for March 2020 pointed out that the comparatively affordable unit markets in and around Belconnen, Woden and Gungahlin have attracted many potential buyers, particularly since these areas offer a range of amenities.

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Metro (H)

$713,000

1.8%

3.0%

$575

4.4%

Metro (U)

$445,000

1.2%

1.9%

$480

5.7%

NORTHERN TERRITORY

Top End fails to sustain a positive trend, but housing affordability improves

HIGHEST-YIELD SUBURBS IN TASMANIA Suburb

Property

Gross rental

Median

Quarterly

12-month

Average

type

yield

price

growth

growth

annual growth

GAGEBROOK

H

8%

$220,000

0%

6%

8.4%

CLARENDON VALE

H

8%

$247,000

0%

12%

8.4%

HERDSMANS COVE

H

7%

$240,000

3%

14%

6.3%

BRIDGEWATER

H

7%

$259,500

2%

10%

4.5%

PRIMROSE SANDS

H

7%

$270,000

7%

8%

4.8%

RISDON VALE

H

7%

$295,000

4%

16%

4.5%

NEW NORFOLK

NEW NORFOLK

CHIGWELL

H

U

H

7%

6%

6%

$280,000

$262,500

$345,000

4%

7%

6%

12%

12%

8%

Darwin’s dwelling prices slipped over the January–February 2020 period by 1.4% to a median of $386,345. According to CoreLogic’s Home Value Index, this makes Darwin the only capital city in Australia to have recorded a decline in the three months to February.

“A state’s economic performance is often reflected in population trends, and that’s certainly the case in Australia’s Top End, where the total population is in decline,” said Simon Pressley, managing director of Propertyology, in his analysis of state economic trends as of June 2019.

Real Estate Institute of Australia (REIA) president Adrian Kelly says “Darwin has the lowest median house price across Australian capital cities, 40.7% lower than the national average”. However, when it came to other types of dwellings, there was better news: REIA’s Real Estate Market Facts report for Q1 2020 showed an increase in the median price of other dwellings in Darwin over the December 2019 quarter.

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

4.1%

26.9%

5.0%

rent

yield

Metro (H)

$465,000

-2.1%

-5.1%

$480

5.3%

Metro (U)

$307,750

0.0%

-11.8%

$370

6.4%

Country (H)

$405,000

-2.9%

-5.1%

$500

6.4%

Country (U)

$289,000

-4.8%

-6.3%

$380

6.6%

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DATA

QUEENSLAND

Strong market and affordable prices predicted to help state weather the storm The data on Brisbane continues to be positive, with the property market recording growth in both house and unit prices.

Oversupply has been an ongoing topic of conversation, but CoreLogic’s head of Australia research, Eliza Owen, says, “With approvals data suggesting a decline in construction, and steady estimates of population growth, Queensland dwellings may fall into undersupply in the year ahead.”

Streamline Property Buyers managing director Melinda Jennison says record-low interest rates mean “it is also not hard to find positive cash flow properties in Greater Brisbane areas”.

While COVID-19 has caused a rift of uncertainty, Real Estate Institute of Queensland CEO Antonia Mercorella says the Sunshine State is capable of weathering the storm.

“Many locations across Queensland produced robust market conditions in the final quarter of last year, which – together with affordability factors – is likely to underpin our markets in possible tumultuous times ahead.”

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

WEEK ENDING 12 APRIL 2020 Across the combined capital cities, a very subdued 636 homes were scheduled for auction over the Easter week. So far, 472 results have been collected, returning a preliminary auction clearance rate of 29.3%, as the auction market continues to face challenges around social distancing measures banning onsite auctions.

Of the sold properties, 63% were sold prior to the scheduled auction date. The low volumes over the week are not unusual as, historically, Easter weekend is one of the quietest weeks of the year; however, the clearance rate is the lowest preliminary result recorded since CoreLogic commenced auction reporting in 2008. As more results are collected, it’s likely that the final clearance rate will come in even lower and withdrawal rates higher. Looking forward, we are expecting the withdrawal rate to ease as fewer auctions are scheduled, with vendors preferring to sell by private treaty, or defer their listings until some certainty returns to the market and economy.

ADELAIDE Total auctions

30

Cleared

9

Uncleared

21

PERTH Total auctions

4

Cleared

2 2

Metro (H)

$530,100

2.8%

7.3%

$460

4.8%

Metro (U)

$387,260

0.7%

8.8%

$395

5.3%

Uncleared

Country (H)

$345,000

1.9%

7.0%

$320

5.2%

Clearance rate

Country (U)

$280,000

0.0%

3.9%

$269

5.3%

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Units

Sydney Melbourne Brisbane

Adelaide

Hobart

Darwin

$430,000

$730,000

$493,000

$485,000

$466,000

Perth

$246,000

$0

$350,000

$100,000

$350,500

$200,000

$450,500

$300,000

$382,500

$500,000 $400,000

$510,000

$600,000

$560,500

$700,000

$710,000

$800,000

$660,000

Sydney’s housing values are still 3.7% below the peak they hit in 2017, but they are poised to recover nominally in short order, as per CoreLogic research.

“The buoyancy in Sydney’s property market from Q4 2019 is a direct result of property vendors being forced deeper into hibernation during the recent downturn that wiped 20% off the Harbour City’s property prices,” says Propertyology managing director Simon Pressley.

He believes prices will moderate again once vendors open their properties for sale, adding to the stock on market.

In CoreLogic’s Home Value Index for February 2020, head of research Tim Lawless says “a more significant downturn in consumer sentiment related to the coronavirus outbreak could become a determining factor that impacts the market over coming months”.

Nonetheless, with RBA lowering interest rates by 25 basis points to a historic low of 0.25% in March, this could stimulate market activity once economic conditions bounce back after the pandemic passes.

Houses

$900,000

$769,000

Tracking a fast recovery trend, Sydney’s values are forecast to rise again

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.1%

0.6%

4.4%

13.9%

Melbourne

0.0%

0.0%

3.0%

12.5%

Brisbane

0.1%

0.4%

1.9%

3.7%

Adelaide

0.1%

0.2%

0.8%

1.4%

-0.1%

0.2%

1.0%

-2.8%

0.0%

0.3%

3.2%

9.8%

Metro (H)

$940,000

0.9%

-4.2%

$550

3.1%

Metro (U)

$710,000

0.0%

-2.8%

$525

3.9%

Perth

Country (H)

$495,000

2.1%

2.1%

$400

4.3%

Combined 5 capitals

Country (U)

$425,000

1.2%

2.5%

$350

4.4%

28

50.0%

MEDIAN HOUSE AND UNIT PRICES

NEW SOUTH WALES

Area

30%

Clearance rate

$422,500

Area

CAPITAL CITY AUCTION CLEARANCE RATES

*The monthly change is the change over the past 28 days

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BRISBANE Total auctions

CANBERRA

32

Cleared

Total auctions

23

Cleared

10

Uncleared

13

7

Uncleared

25 21.9%

Clearance rate

43.5%

Clearance rate

SYDNEY Total auctions

309

Cleared

96

Uncleared

213 31.1%

Clearance rate

TASMANIA

MELBOURNE Total auctions

72

Total auctions

2

Cleared

12

Cleared

0

Uncleared

60

Uncleared

2

Clearance rate

Clearance rate

16.7%

VICTORIA

Area

n.a.

Median

Quarterly

12-month

Weekly

Gross rental

price

growth

growth

median rent

yield

Metro (H)

$734,166

1.0%

-1.2%

$430

3.1%

Metro (U)

$578,000

2.3%

5.7%

$430

4.0%

Country (H)

$390,000

1.4%

5.0%

$350

4.9%

Country (U)

$305,000

3.5%

10.5%

$280

4.9%

Median house price could hit $1m as performance streak continues Having recorded a nominal recovery in January 2020, it seems like Melbourne could reach even greater heights in the next year or two, depending on the impact of COVID-19 of course. In the three months to February 2020, CoreLogic’s Home Value Index showed 3.9% growth for houses and units combined.

“Structural factors may be at play, including a rise in borrowing capacity following changes to serviceability assessment from APRA in July 2019 and the dominance of owner-occupier buyers, rather than investors, through the recovery phase to date,” says CoreLogic head of research Tim Lawless.

If the trend is maintained, the median house value could hit $1m by 2021, according to Domain’s Property Price Forecasts for 2020–21.

“There’s strong population growth there, and I think we’ll also see a modest rise in rents in the year ahead,” says Domain economist Trent Wiltshire.

All data sourced from CoreLogic, April 2020

Be strategic Smart succession planning starts early Contact Trail Homes: experts in enabling lucrative succession.

Nick Young | 03 8508 6666 | 0417 392 132 | nyoung@trailhomes.com.au

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PEOPLE

Aggregator: PLAN Australia

IN THE HOT SEAT

In a burst of optimism and ‘arrogance’, Daniel O’Brien quit his banking job and launched PFS Financial Services in 2004.

Since then, the broker has seen every possible loan scenario cross his desk – including an extramarital affair that caused financial carnage Tell us a bit about your first job.

I was a chef at KFC. I still remember my hourly rate: $4.54 per hour!

A That was in 1995, which was long before rules and laws around occupational health and safety had properly kicked in. It was a very tough and physically demanding job – I still have the scars to prove it.

Q

How long have you worked in finance?

For over 20 years. I started out as a bank teller in Parramatta in A 1999, then moved to the city, to Martin Place, in 2002 as a branch manager. At the end of 2004, I quit the bank and started PFS as a mortgage broker. In hindsight, it was a pretty arrogant and dumb move at the time. I was 24 and had no idea what I was getting into.

But without that dumb, youthful arrogance, I would have not made the best financial decision of my life!

Q

What is one thing you wish everyday borrowers knew about applying for a loan?

That it’s not easy at times to get that loan approved. Most A people think that if they have a bit of equity, that automatically translates to a quick and easy loan approval, which is definitely not the case. It helps, but post royal commission everything is harder when it comes to loan approvals.

Q

Do you think anything positive has/will come out of the COVID-19 pandemic?

I think a lot of people will see that business doesn’t have to be done A the traditional way it has always been done. Clients can be interviewed via a video conference call. Loan documents don’t have to be printed, posted and executed in a broker’s office, as we can use E-DOCS.

Q

What is one aspect of the broking industry you would change if you could?

There should be no clawback. If I have churned a loan, fair enough. But A if a client sells their house and repays their loan after six months because the husband is having an affair with the nanny, then I shouldn’t be penalised for that! You aren’t penalising branch lenders for that, so why do brokers get burned? This scenario actually happened, by the way – ain’t love grand?!

Q

30

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