Australian Broker magazine Issue 8.15

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ISSUE 8.15 August 2011

Trail book broker attempts media gag

Galvanised: Former VOW Financial CEO Jeff Zulman to launch professional trail book consultancy to protect the ‘vulnerable’ after experience with Buy A Trail

 Mark Whittingham offers broker settlement deal to silence negative comment

Mark Whittingham, director of Home Loan Selection Services Pty Ltd (HLSS), has sought to gag mortgage brokers from complaining publicly about his

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trail book broking service, Buy A Trail, after an Australian Broker investigation into his activities.

In a draft ‘Deed of Settlement’ document obtained by Australian Broker, HLSS seeks to reach a financial settlement with mortgage brokers that the business is currently in dispute with, on the condition they “cease and desist from making or publishing any defamatory statements”, and “immediately

Getting direct

write and confer with any third parties unconditionally retracting all defamatory statements made and denying the truth thereof”.

The settlement offer from company director Mark Whittingham comes after an investigation from Australian Broker, which yielded evidence that multiple mortgage brokers, who have been looking to build their businesses through the acquisition of new trail books, have complained of difficulties in dealings with HLSS and Buy A Trail. Complaints include claims of not having trail books supplied after the payment of a deposit, and most consistently, the difficulty or inability of having these deposits refunded. The amounts in dispute have ranged from a few thousand dollars, into the tens of thousands for large books.

In the “Deed of Settlement”, HLSS acknowledges as part of its “Recitals”, that “…the parties are in dispute concerning a course of dealings between them regarding the sale and purchase of trail books”. The document goes on to offer terms of settlement, which includes a promise from HLSS to pay an unspecified sum or “settlement sum” within seven business days into a nominated bank account, which would be considered a “full and final settlement” of the dispute. Another term states that upon receipt of the settlement sum both parties would “agree to mutually abandon any rights, entitlements or Page 20 cont.

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Brokers slam ING Direct service Page 2

Proofing PI Office document printing a new risk Page 4

Higher hurdles 80% benchmark set for conversions Page 6

Inside this issue INVESTIGATION 20 HLSS and Buy A Trail complaints Opinion 23 Support second tiers: ING Direct Analysis 24 An industry succession plan Insight 25 Growing, by getting LinkedIn Market talk 26 The economy: pros and cons Toolkit 27 How to set up solid referrals People 28 Lawler, YBR and the future Insider 30 The new (virtual) property tycoons

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News Brokers blast ING Direct service …

Brokers have reacted with a litany of complaints over ING Direct’s service proposition, following “veiled threats” in a recent communication from the second tier lender.

The bank’s executive director of delivery, Lisa Claes, warned that brokers risked becoming irrelevant to ING Direct’s customers if they continued to send the majority of their deals to the Big Four.

Following the comments, a number of MPA Top 100 brokers have come forward, calling on ING Direct to improve its proposition to brokers.

Past AMA winner Daniel O’Brien, of PFS Financial Services, commented that he avoids using ING Direct where possible, saying he has found their call centre and BDM support “inadequate and ineffective”.

MPA Top 100 Broker Gerard Tiffen of Tiffen & Co said he has thus far had good experiences with ING Direct, but that deals sent to the lender had to be “squeaky clean” in order to get through. He questioned Claes’ comments, calling them a “marketing ploy”.

“Funny. One minute they are saying they’re the fifth-biggest

lender, [and the] next they are crying poor,” Tiffen said.

Fellow MPA Top 100 Broker Jeremy Fisher of 1st Street Loans argued that second tier lenders need to lift their service if they expect to see good broker volumes.

He called on second tiers such as ING Direct to offer direct access to credit assessors, as well as guaranteed 48-hour turnaround times.

Fisher defended brokers’ use of the majors, saying they currently provided the most competitive all-around options.

“I don’t want to think that [second tiers] are falling behind, but unfortunately with the majors currently being extremely competitive on both rate and service – and willing to match any competitor’s offer – it is hard to direct clients away from them,” Fisher said.

Intelligent Finance’s Justin Doobov, also an MPA Top 100 Broker, said ING Direct was a good lender for “plain vanilla clients”. Doobov commented that, in order to win over brokers, second tier lenders need to compete on service and credit policies rather than focusing on price.

“The smaller lenders are falling behind because the majors have lifted their service game. The majors are still very rigid with some of their credit policies, so this is the angle that the smaller lenders and second tiers need to attack on to gain back the ground.

The majors will always win the pricing war, and this pricing war will not be beneficial to any of the stakeholders,” he said.

ING Direct: The good and the bad “I had a client that had been given a formal approval by the lender, advised the real estate agent, etc, and 24 hours later had the formal rescinded due to the assessor not having fully completed his assessment. You can imagine how stressful and embarrassing this situation can be.” – Rose de Rossi, Diversifi “We value our partnership with ING [Direct]. Regularly, ING competes with the majors and provides our customers with greater choice. [Second tier] players are critical to keeping the market competitive and to the evolution of our industry.”

– James Green, Oxygen Home Loans

… but ING Direct open to feedback ING Direct head of broker distribution Mark Woolnough has made an offer to talk to brokers directly about any complaints they have with its service.

In response to a litany of complaints from top brokers over ING Direct’s service proposition in comparison with the major banks, Woolnough came forward on the Australian BrokerNews forum to make clear the bank was open to discussion and feedback.

Woolnough went on to offer his direct contact details, as well as an offer to speak with any brokers

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directly. “I would be happy to talk through your concerns and listen to your feedback and arrange for a member of our sales staff, be it a state manager and/or business development manager to meet with you should you so wish,” he said.

ING Direct executive director of delivery Lisa Claes has also responded, saying the lender has implemented a variety of service initiatives to improve its proposition to brokers. Claes said the bank has rolled out credit assessor access to 1,000 brokers,

and intends to expand on this. She said the bank has undertaken an outbound call program for its credit assessors and also invited brokers to make inbound calls.

In regard to broker complaints over credit policy, Claes said ING Direct had commenced “a comprehensive credit scan” and had cut standard employment requirements from 12 to six months. “Our recent and ongoing investment in these enhancements proves that our strategy to focus on the broker channel remains unchanged,” she said.

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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.

This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

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ASIC positive on licensing ahead of crackdown ASIC has claimed success following the completion of the initial licensing of the credit industry, and has warned it will take a tough stance on unlicensed activity.

The industry regulator has now licensed 6,081 businesses under the NCCP, and has registered 24,005 credit reps. ASIC Commissioner Peter Boxall said the licensing process, which he called “successful and smooth”, had resulted in several notable outcomes, including the formal refusal of four licence applications, additional conditions imposed upon 11 licensees and the requirement that many applicants submit compliance plans.

Following the initial licensing, ASIC revealed 400 applications

were declined due to being incomplete or inadequate. A further 637 applicants withdrew their applications before they were finalised.

Since the onset of ASIC’s activities under NCCP, the regulator said it had received nearly 2,500 complaints in relation to credit matters, and launched 105 investigations. It also touted actions it had taken against industry players since the onset of NCCP, including permanent bans handed to three individuals, the issue of an infringement notice to a Sydney broker and the cancellation or suspension of five credit registrations or licences.

ASIC said it had also reached negotiated outcomes with several individuals who either voluntarily

cancelled their registration, removed advertising deemed unlawful by the regulator or agreed to cease engaging in credit activities.

Boxall said the regulator would take a “less forgiving approach” to any unlicensed conduct as the licensing regime matures, and said ASIC would continue its surveillance program. He stated that ASIC would now turn its attention to monitoring responsible lending in the home loan and payday loan markets.

As ASIC beefs up its surveillance activities, Boxall said it would focus on identifying individuals who registered to provide credit services, but have not been licensed. He said the regulator is concerned these individuals may

continue trading in spite of not being licensed to do so.

Licensing by the numbers Since the onset of NCCP reforms, ASIC has: • licensed 6,081 businesses • registered 24,005 credit reps • formally refused four licence applications • declined 400 incomplete or inadequate applications • imposed additional compliance conditions on 11 licensees • permanently banned three individuals • suspended or cancelled five credit registrations or licences • issued one infringement notice

Contract printing could spell PI trouble Brokers should check their professional indemnity policies before signing onto bank propositions like contract printing or upfront valuations, nMB’s Gerald Foley has stated.

ANZ and St.George revealed earlier this year that they had added contract printing capabilities to their broker offering, following CBA’s move last year to extend the service to a select number of its brokers.

However, nMB managing director Gerald Foley has commented that adding further loan processing activities onto the list of brokers’ responsibilities could violate some brokers’ PI policies. “I have asked a number

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of lenders not to cover our brokers on that, because they need to check their PI policies to see if they cover that off. Not all do,” he commented.

Foley used the availability of upfront valuations as an example, saying that while such a service could provide convenience to the broker and client, it could also fall afoul of PI insurers.

“Some policies will allow brokers to initiate a valuation, but not to receive a valuation. The reason is because in the past, that’s been a big source of fraud. There’s no problem with that happening, but as a broker you need to check that you’re covered to take on that responsibility. Brokers should talk

to their PI insurers,” he said.

Foley also expressed scepticism that moves by banks to introduce such services were altruistic in their motivation. Rather, Foley commented that more responsibility was being handed to brokers without the benefit of better remuneration.

“I just see that as being outsourcing some of the bank’s internal duties to brokers and not paying for it. Banks have been pushing more and more onto the broker at the same time they’ve been cutting commissions,” Foley said. “No doubt there’s some advantage to the broker, but it’s a large advantage to the bank as well,” he added.

Gerald Foley

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Market witnesses 80% conversion benchmark badged first-timer exodus achievable Brokers should be able to hit 80% conversion ratios as an industrywide benchmark, outgoing head of intermediary distribution at St.George Steven Heavey has stated.

The lender recently announced a “streamlining” of its commission structure, which will see it revive year-one trails. The new structure will also reward brokers with a conversion ratio of 80% or above with an additional 15 bps upfront in addition to the 50 bps already on offer. Heavey said he feels 80% is a benchmark brokers should be able to hit.

“We think 80% conversion ratios in this industry is a realistic target for most brokers,” he commented.

Heavey emphasised application quality, and said brokers have a variety of tools at their disposal to ensure good conversion ratios.

“With all the tools brokers have these days, such as serviceability calculators and upfront valuations, 80% should be a reasonable benchmark. I think the industry needs to say on a whole that 80% is a reasonable benchmark. We’re not shying away from quality,” Heavey said.

St.George Flame broker Adam Bourke said he was satisfied with the commission changes, and that while the 80% conversion ratios may mean a minority of Flame

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brokers will have to aim higher to keep commissions intact, the benchmark provided good motivation.

Adam Bourke “I suspect the change to the upfront metrics will only affect a very small percentage of brokers. Most Flame brokers will only have to make slight improvements to achieve 80% to make the top commission rate, and the new metric would be a good reason to do so,” he said.

The re-emergence of year-one trails is a development Heavey said he hopes will make St.George a better proposition for brokers.

He predicted that other lenders will also make moves to entice brokers as credit demand remains low.

“The reality of the mortgage market today and low credit growth in general means all lenders are going to look for whatever competitive advantage they can get,” he said.

Bourke agreed, and said he hoped the changes could prompt similar moves from other banks.

“The move signals to the market that St.George sees the mortgage broking channel as a strong source of volume and it will hopefully reinforce that message with other lenders.”

Talk of rising enquiries from first homebuyers has not translated into sales, new data suggests.

Loan Market claimed a 10% spike in enquiries from first homebuyers in June. However, a study by comparison site RateCity has indicated 60,000 fewer first homebuyers entered the market in the 12 months to May 2011 than in the 12 months to May 2010.

RateCity CEO Damian Smith said Australian Bureau of Statistics figures showed around 7,500 first-time buyers per month active in the market in the 12 months to May. This compares with around 12,500 per month in the previous corresponding period.

Smith claimed that, with property prices largely flat over the past year, interest rate rises and the winding up of the FHOG Boost were behind the drop-off.

“Despite the Reserve Bank board’s decision to keep rates steady for the past seven meetings, it’s clear that prospective buyers are wary about jumping into debt because their monthly repayments are going to be higher than they were in late 2009,” Smith said.

While the end of the FHOG Boost may have taken many prospective first-time buyers out of the market, Smith said reviving the boost would be counterproductive. “The answer is not to introduce further grants to stimulate growth. Historically, grants doled out to new buyers have tended to increase property prices without increasing the supply of new housing,” he said.

Rather, Smith said the answer to stimulating first homebuyer activity was increasing incentives for prospective buyers to save for a deposit. He called for restrictions on the government’s First Home Saver Account Scheme to be eased.

“First home saver accounts continue to be overly complex, and as a result most prospective homebuyers are unaware of the generous rates of interest offered by these types of accounts.”

These restrictions, Smith said, meant few first-time buyers had taken advantage of the accounts.

“In March this year there were just over 27,000 first home saver accounts held by Australians with a combined balance of $173m, according to APRA, which is about $6,000 per account on average. To put that in perspective, there will be over 90,000 first homebuyers taking out mortgages in the next 12 months, so less than one in three are taking advantage of the savings incentives,” he said.

Rates just don’t rate with FHBs RP Data’s Cameron Kusher has stated that reduced interest rates have failed to entice first home buyers as much as they have in the past. Kusher pointed to an average SVR of 7.8% in May 2011, and said the last time the average SVR was at this rate was in late 2008. FHB activity in the current market, Kusher said, is 30% below its level in the comparable interest rate environment of 2008.

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Don’t count on Diploma ‘rubber stamp’

Brokers should not count on completing their Diploma in Financial Services via a “rubber stamp” recognition of prior learning (RPL) process, due to the complex lending competencies that must be demonstrated.

Intellitrain general manager Byron Gray has said the number of brokers who could potentially complete the Diploma course using the RPL process would be “significantly less” than the 75% who managed this for the Certificate IV. “There is a perception that the

Diploma upgrade will be no different to the Cert IV,” Gray said. “But with the Cert IV, brokers were largely already doing it. There is a smaller percentage operating at the level required by the Diploma.”

Gray said the Diploma deals with all aspects of “complex” lending, and is not specifically focused on commercial, as is often thought.

He said residential deals involving small business people demonstrate complex aspects, and these may fall under the Diploma qualification.

Intellitrain’s RPL process requires the previous completion of the Cert IV qualification, the provision of business testimonials from clients involved in complex deals, as well as the submission of assessments and case studies that map the required course competencies.

Citibank tips fixed rate reductions Fixed rates could see further downward movements as the European debt crisis continues to bite, according to Citibank head of mortgages strategy, marketing and product.

In July, Citibank reduced its standard three-year fixed rate by 33 basis points to 6.99%.

Citibank’s Belen Lopez Denis said at the time a softening yield curve due to increased uncertainty over European sovereign and private sector banking debt was translating directly into reduced bank funding costs for fixed rates, making them more affordable for consumers.

The Citibank move is based on a forward-looking view of fixed rate pricing. She also predicted downward moves could be seen more widely among lenders in the

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market. “It’s difficult to comment, but don’t be surprised if fixed rates are coming down fairly soon.”

Following the rate reduction, Lopez Denis said downward moves in fixed rates were making these loans more attractive when compared with variable rates, labelling the current significant differential between fixed and variable rates as a “really unusual circumstance”. “If you think about it, 6.99% can be lower than some of the variable rates available in the market,” she said.

Citibank’s move to reduce fixed rates made it “very, very competitive” when combined with its free 60-day rate lock option, she said. “I have heard one other lender from the second tier with a similar level of fixed rates, but they do not have this

“People sometimes think because they have been a broker for 25 years that this is enough, but it’s not quite that simple,” Gray said. “Your experience must meet the requirements under the Diploma, and for many this will not be the case.”

The standards and competency requirements for the Diploma of Financial Services are set by the Federal Government. Registered Training Organisations such as Intellitrain then create processes that will ascertain and demonstrate whether an individual meets these competencies.

“You may have worked in a bank for 15 years doing residential lending, but that doesn’t necessarily mean the loans were ‘complex’ enough to meet Diploma competencies,” Gray said.

Gray also said a ‘rubber stamp’

mentality also should not apply to the Diploma due to its content.

He said while there was a perception many brokers did not learn anything from the Cert IV qualification, he said for the majority completing the Diploma, it will mean learning new things.

“While there is a time and cost benefit to going through the RPL process, as it is faster and more cost effective, once brokers do talk to us about the Diploma they can usually see the benefits of doing the entire course,” he said.

Gray argues that aspects within the course – such as asset and equipment finance and leasing – can provide new opportunities for leveraging the finance needs of existing clients, as well as expanding their businesses into completely new areas.

rate lock feature for free – even the majors don’t. It gives brokers and consumers certainty that the rate is locked in over a long term.”

Citibank’s current Mortgage Plus standard variable rate for LVRs between 80% and 90% is 7.05%, while loans over $500,000 with LVRs less than 70% are priced at 6.90%. The pricing is based on Citibank’s recently introduced “rate for risk” policy.

Lopez Denis said the rate for risk approach had seen a good response from brokers and consumers.

“At the time the structure was introduced on our Basic Variable product, we saw an immediate 30% increase in volumes on an average daily basis. Brokers like being able to show their customers that the higher equity they have, the more reward they get,” she said.

Citibank’s ‘Mortgage Plus’ SVRs Loan amount $150,000 to less than $500,000

Loan amount greater than $500,000

Standard Variable/ Standard Variable Offset

Interest Rate

Comparison Rate

LVR less than 70%

6.95% p.a.

7.26% p.a.

6.90% p.a

7.22% p.a.

LVR between 70% – 80%

6.99% p.a.

7.31% p.a.

6.95% p.a

7.26% p.a.

LVR between 80.01% – 90%

7.05% p.a.

7.36% p.a.

7.00% p.a.

7.32% p.a.

Interest Rate

Comparison Rate

Source: Citibank (Rates correct at 29 July)

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For brokers Bank Banks forgiven for 2010 rate hikes of Melbourne is ‘business as usual’ Brokers in Victoria ended the month of July with access to a new regional bank brand, following the launch of the revamped Bank of Melbourne.

Westpac’s decision to rebrand of St.George Bank’s Victorian network to Bank of Melbourne put Victorian brokers in a transition phase, as the brands are switched over completely.

In July, brokers were given access to a new Bank of Melbourne broker website, located at partners.bankofmelbourne.com. au. From the site, Bank of Melbourne is allowing brokers to lodge new loans, using their existing St.George login, password and user ID details.

The bank’s management assured Victorian brokers they will be able to see all St.George loans that are in progress from within the existing ATOMS system, along with any new Bank of Melbourne loans they place with the bank. There was no change to loan submission or approval processes. The same applies to commercial business, with the bank directing commercial brokers to the ‘corporate business’ section of its website.

A spokesperson for the bank said that at the time of launch, products as well as broker commission structures on offer from Bank of Melbourne would be the same as those being offered by St.George, and it would update brokers as special offers become available.

Bank of Melbourne CEO Scott Tanner said in an email to third party networks that the bank was committed to “taking care of everything” to ensure a smooth transition.

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“You may notice some changes,” he said. “In the next few weeks, we will change our St.George ATMs to Bank of Melbourne ATMs, and from 25 July St.George branches and corporate centres in Victoria will become Bank of Melbourne.

And because we’re committed to investing in Victoria, we have already increased our business development team in Victoria and our local branch and corporate network will increase substantially over the next five years. While a number of things are changing, I want to assure you that Steven Heavey, and the team, is ready, as always, to help you,” Tanner said.

Tanner went on to urge brokers who have any questions about the new Bank of Melbourne brand to contact Victorian state manager of intermediary distribution Andrew James.

The bank previously stated that in future there will be changes to agreements to provide for the Bank of Melbourne, but that it would be in contact with brokers with any updates.

Melissa Gielink from Smart Lending said that a lot of customers enjoyed the Bank of Melbourne prior to it being taken over.

“When we mention that St. George is becoming Bank of Melbourne we get really positive feedback about that. The branding looks really good and a lot of clients say, ‘I used to bank with Bank of Melbourne’, so they are quite warm to that fact – it’s not a cold brand that hasn’t been tested in the market before.”

Marketing campaigns and fierce lending competition seem to have drawn consumer attention away from out-of-cycle rate rises as the banks have seen their satisfaction ratings recover.

The latest Roy Morgan Research Customer Satisfaction Rankings have seen big gains for the Big Four, with all the majors posting an increase in satisfaction. ANZ still sits atop the rankings, with CBA remaining last. However, a mere three percentage points separate the two.

NAB posted the biggest gain over the month, its satisfaction rating rising 2.2% to 75% overall.

It sits slightly behind Westpac’s 76% and ANZ’s 76.5%, with CBA posting 73.5% satisfaction.

Second-tiers and mutuals have continued to best the majors in satisfaction ratings, with foreignowned banks such as Citi, HSBC and ING Direct posting big numbers. Regionals have fared well also, with Bendigo Bank receiving an 87.3% satisfaction rating and Suncorp rating 83.4% satisfaction.

Bankwest beat out parent company CBA with an 82.9% satisfaction rating. Likewise, St. George pipped Westpac, attaining 80.1% satisfaction. The result spurred Roy Morgan

communications director Norman Morris to postulate that Westpac could see success with the impending launch of its Bank of Melbourne brand.

Business customer satisfaction lags well behind consumer satisfaction, with all the majors showing a double-digit gap between the two demographics.

Roy Morgan’s Business Satisfaction rankings indicate business owners are dissatisfied with the banks’ lack of contact, poor understanding of their customers’ industry and business and poor knowledge of the products and services related to them. Morris said banks need to begin focusing on shoring up results among business customers in order to move ahead in personal banking satisfaction rankings.

“It is important for banks to consider these two groups together because they obviously interact with each other as the two million business customers are also personal customers with the result that a poor performance in one segment will be likely to impact on the other,” he commented.

ANZ leads in business satisfaction at 63.8%, followed by Westpac at 63.1%, CBA at 60.7% and NAB at 59.1%.

SMEs unimpressed with regional rebrands New research has indicated SMEs don’t buy into regional rebranding strategies. According to the Australian Associated Press, a survey by research company DBM Consultants found SME customers show only slightly higher satisfaction with regional banks owned by the Big Four than with the big four themselves. Recent Roy Morgan research indicated similar results. SME customer satisfaction with Westpac ranked 63.1% in June, while satisfaction with Westpac-subsidiary St.George was only slightly higher at 64.5%. Likewise, CBA received a 60.7% satisfaction rating from its SME customers, while its Bankwest brand narrowly edged it out at 62.6%. In contrast, regional banks not owned by the big four have recorded significantly higher satisfaction rankings, with Bank of Queensland scoring 74.4% satisfaction and Bendigo 83.1%.

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Connective expands white label distribution Connective has officially launched its white label offering following a two-month pilot program.

The aggregator has rolled out its Connective Home Loans to its entire broker network, after test-marketing the offering with a select number of its brokers. Connective head of sales and business development Michael Goerner said the product had received positive broker feedback in terms of its service delivery and turnaround times.

Goerner said the aggregator’s white label offering will include rates from a base of 6.99%, and unique features for construction loans including a builders’ access site to track payment progress. He said the product would also aid brokers in client retention by providing SMS and email notifications beyond settlement, informing brokers any time a client contacted the Connective Home Loans customer service centre. The loan will carry a maximum LVR of 95% with capitalised LMI, Goerner said.

Goerner said the product’s commission structure will include tiered up-fronts and trails, and commented that with the

product’s broader release and anticipated increase in volumes, he expected both rates to borrowers and commissions available to brokers to improve.

Michael Goerner Goerner commented that the structure of the product, which is serviced through National Mortgage Company and funded through ING Direct and Adelaide Bank, would allow the aggregator “greater independence and the ability to alter funding arrangements should it be required or desirable to do so”.

As uptake of the loan increases, its structure can change to suit broker and borrower feedback.

“We’ve set it up to be a work in progress,” he said. “We can bolt in and bolt out funders, so we have control over the service and delivery of the product. The structures we have built enable us to keep all parties honest. It’s a win-win, because borrowers and members benefit from the strict controls on service. With other lenders on the panel, that’s something they can’t control necessarily.”

Firstfolio wades into non-bank waters Financial services company Firstfolio has announced it is in negotiations to acquire a controlling interest in a nonbank lender.

The company revealed it plans to take a controlling stake in Calibre Financial Services, allowing Firstfolio to enter the non-bank lending market in earnest.

Calibre, which provides white label funding and products and servicing to mortgage managers and aggregators, has a combined loan book of around $440m.

CEO Mark Forsyth said the move would open up the non-bank market to the company due to Calibre’s securitisation structure and line of warehouse funding.

“In acquiring an interest in Calibre, Firstfolio gains a securitised lending platform that will give us additional options over funding, product and pricing of residential mortgages as a non-bank lender. It will be a great supplement to our existing lines,” he commented.

Forsyth said the securitisation potential afforded by the deal comes at a time when hunger for RMBS transactions is returning to the market.

“Two or three years after the worst of the financial crisis, institutional appetite for quality RMBS issues is growing, and we will be in a position to satisfy that demand,” Forsyth said.

Firstfolio executive director Mark Flack has stated that the acquisition represents

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a “natural extension” of Firstfolio’s business model. As aggregators increasingly bring white label products to market, he said he expects other aggregators with the scale to support such infrastructure to increasingly make moves into the non-bank lending space.

Flack said the acquisition would allow Firstfolio to focus on “niche prime products,” which will sit beside the company’s existing product suite. He commented that the funding platform created by the deal will allow the company to branch out into areas beyond residential lending, such as equipment finance. Flack said Firstfolio will aim to announce additions to its product suite by year’s end.

Mark Forsyth

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Brokers underestimate NCCP dangers Brokers and lenders have underestimated the dangers inherent in the NCCP and the possibility of legal action by borrowers, an industry consultant has said.

Much discussion has surrounded the role of ASIC as industry regulator, and whether the watchdog will take a tough or forgiving stance to compliance.

However, SAKS Consulting principal Steve Paterson believes the real issue lies with litigious borrowers, not the industry regulator.

Paterson has commented that there is little in the NCCP or regulatory guidance to stop borrowers using financial difficulty as an excuse to bring litigation against lenders and brokers.

“Borrowers under stress in the future can probably use the NCCP to press lenders, who will probably then look for any broker fault.

There appears to be little restraint on borrowers pushing strong or weak cases for compensation, and lenders and brokers could well face increasing legal defence or possible outcome costs,” he said.

Faced with situations like this, Paterson said many brokers and lenders would be forced to settle borrower claims, regardless of their validity, to avoid negative publicity. Paterson believes the danger lies in the fact that the NCCP does not adequately define the parameters of “not unsuitable”

credit facilities.

“Determination of the word ‘unsuitable’ could have very wide meaning a long time into the future,” Paterson remarked.

Unfortunately, Paterson said, a clear picture of these definitions may not emerge until lenders and brokers find themselves becoming NCCP test cases in the course of litigation.

“Difficulty abounds given the lack of NCCP precision and by regulatory positioning that appears to say the courts will decide the principles later. My point is that later may well prove too late for some market participants who might become the case law fodder seemingly required to set rules and precedents,” he said.

To mitigate this risk, Paterson said brokers need to pressure lenders to better define broker responsibilities around determining credit suitability.

When in doubt, though, err on the side of caution, Paterson said. He commented that lenders and brokers should seek to apply even more rigorous standards than those required by the NCCP.

Bank dominance grows as non-bank future debated Banks have continued their lending dominance, as the industry debates the competitive viability of non-banks.

The MFAA has pointed to Australian Bureau of Statistics lending finance figures showing banks have taken a 92.5% share of the mortgage market, the highest since housing finance figures started being recorded in 1992. By comparison, mutuals accounted for 2% of mortgage lending, with non-banks writing the remaining 1.2% of home loans.

MFAA CEO Phil Naylor commented that non-banks are being “squeezed out”, and said the figures show government intervention is needed to stimulate sagging competition in the sector.

“This is an important part of the Australian economy and it is being dominated by one type of lender. The figures tell us that the non-banks are the most competitive when it comes to interest rates, yet they are being squeezed out of the market,” Naylor commented.

Interest rate data backs up Naylor’s assertion. The average standard variable rate among the four majors was 7.79% in May. Mutuals had an average SVR of 7.32%, whereas non-banks had the lowest average SVR, at 7.01%.

“History shows us that when non-bank lenders are thriving, borrowers pay less for their mortgages as well as have more

choice in their lenders,” Naylor said.

Naylor again advocated for the adoption of the Canadian securitisation model, saying the root of bank dominance was the lack of competitive funding sources for non-banks.

The figures come amid industry debate over the competitive future of the non-bank sector. Provident Capital head of lending distribution Steve Sampson commented in an interview with Australian BrokerNews TV that he believes legislative changes have made non-banks re-examine their proposition, and that the sector is now well-positioned to halt its market share decline.

“Non-banks have probably never been in a position better than they are at the moment. I think the changes in the environment, politically and from a government perspective have made us have a really good hard look at the products, service and what we’re selling,” he said.

However, Redconcierge director Sarah Wells believes major bank dominance is set to continue.

“I think unfortunately nonbanks aren’t in a space to compete at the moment. There’s such a focus on pricing and competitiveness in the marketplace, and their costs of funds are just too high to enable them to compete,” Wells commented.  For full video commentary, see Viewpoint on page 22

Diversification could expand consumer perception Product diversification could expand consumers’ view of the mortgage broker value proposition, Mortgage Choice has said.

Following the company’s launch of a white-labelled vehicle finance loan, Mortgage Choice spokesperson Kristy Sheppard has commented the company’s strategy of diversification will benefit brokers as consumer perception of the role of mortgage brokers expands.

“Our primary focus remains home loans, but with Australians becoming increasingly time poor and more trusting of the mortgage broker value proposition there lies great opportunity in extending our duty of care across a wider range of consumer finance products.

Cross-selling also helps to create a ‘stickier’ customer, a more satisfied customer and it raises Mortgage

2-13 news.indd 12

Choice’s profile across other product areas, which is even more important in today’s subdued housing finance market,” she commented.

While such diversification could lead to consumers’ expanding their idea of the services mortgage brokers provide, Sheppard said consumer awareness of this diversification was still lagging.

“There is a growing awareness of the industry’s expansion into areas other than home loans amongst customers of mortgage brokers who offer non-core products, but as for those who don’t use brokers I’d say that awareness is limited. Many of us tend to promote our complementary products offering via below the line communication,” she said.

However, this lack of awareness

could change as the mortgage broking industry further embraces diversification, Sheppard commented.

With the company’s expansion into vehicle finance, Mortgage Choice CEO Michael Russell said the company was presenting a cross-selling opportunity for brokers.

“Not only do Australian households purchase or replace a car every three-and-a-half years on average, they generally replace one within six months of changing or refinancing their residence,” he commented.

The company has also launched a consumer-focused iPhone app, focusing on home loan borrowing, repayment and stamp duty calculators. The application will also serve to direct consumers to local Mortgage Choice franchisees.

Sheppard said the app would serve to “provide our brokers with a tool that heightens consumers’ awareness of Mortgage Choice while helping them better service potential and existing customers’ technological needs”.

Michael Russell

8/1/2011 12:09:36 PM

www.brokernews.com.au

House prices continue to stumble Median house prices have seen their fourth consecutive drop in the June quarter.

Australian Property Monitors data has shown a 0.6% fall in national median house prices for the quarter, along with a 0.8% fall for unit prices. The decline adds to a year-on-year fall of 2.4% for houses and 2% for units.

Across capital cities, Sydney escaped house price decline by posting a modest 0.1% rise.

Melbourne house prices also staved off drops, remaining steady for the quarter. However, unit prices in both cities declined, falling 0.9% in Sydney and 2.1% in Melbourne.

In spite of the stunted result, APM senior economist Andrew Wilson expressed optimism about the markets in Sydney and Melbourne. He argued that the year-on-year falls for the cities were not enough to erase robust growth from previous years.

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“This is an encouraging result for market stability considering both cities recorded extraordinary, nation-leading house price growth in the 18 months between December 2008 and June 2010, rising by 19% in Sydney and 28% in Melbourne,” he commented.

Brisbane and Perth, meanwhile, have continued to decline, with prices for houses and units falling in both cities. Likewise, Canberra saw significant declines over the June quarter, as house values fell 2.8% and unit values declined 1.3%. Wilson attributed the result to affordability concerns and “subdued confidence”.

Darwin was the only capital city to see year-on-year rises for both house and unit prices, with houses gaining 1.3% on the year and units climbing 2.4% in value.

Wilson said the varied result across capital cities indicated local conditions were proving more significant than any broad

national trends. However, median prices on a whole have continued to underperform. Wilson predicted, though, that a buyer’s market brought about by falling values could prove tempting in the months ahead, and spur renewed activity.

“The prospect remains ... of

13

increased buyer activity emerging through the spring selling season,” he said. “Early signs are emerging of increased first homebuyer and investor activity in most markets, albeit from a low base. That will help to encourage market activity and confidence.”

Falling prices: Year-on-year change for median values -0.90% -0.20%

Sydney

-2.10% -2.10%

Melbourne

Houses

-3.20% -3.20%

Adelaide

-2.40% -2.60%

Canberra Perth

Units

-3.90% -4.90%

Brisbane

-6.10% -5.80% -1.80% -2.60%

Hobart

2.40% 1.30%

Darwin -2.00% -2.40%

National -8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

Source: Australian Property Monitors

8/1/2011 12:09:38 PM

14 www.brokernews.com.au

News Second tier banks urged NFC adds desk-bound to band together broker support Second tier banks should provide a united front to deliver consumers a compelling alternative to the four major banks, amid continued contractions in market share.

National Mortgage Brokers managing director Gerald Foley has called on second tiers to “find ways to work together to make the broker experience a better and easier one”.

“Maybe consider some joint advertising and agreed standards around accreditation processes, loan application forms and supporting document requirements,” Foley said.

“Start with some small steps on a long journey back to a truly competitive market.”

Foley’s comments come on the back of recent coverage of an ultimatum delivered by ING Direct to the market’s mortgage brokers, which argued that brokers could become the architects of their own demise if they do not support second tier lenders.

The statement drew a chorus of responses from Australian BrokerNews readers on the Australian BrokerNews online forum, which reflected a desire to use ING Direct in favour of the major banks, but also dissatisfaction with the lender’s current service proposition.

Foley acknowledged the difficulty for brokers and consumers to support second tier lenders only as a means to stimulate broader competition.

“Brokers do already understand the need to support the second tier

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banks – but at the same time when the majors are offering very sharp rates and lower establishment costs – it is not a broker’s or their customer’s role to ‘make a statement’ against market domination to their own immediate, financial detriment,” Foley said.

“The independent, second tier banks have to get better at providing competitive product, delivering consistent service and making the whole lending experience smoother for brokers and their clients than they do at the moment,” he added.

Foley lamented the “stranglehold” the major banks have on lending, due to a continued ‘flight to perceived quality’, the recent banning of deferred establishment fees, and the use of major-controlled subsidiary bank brands and their funding into mortgage originators and managers.

“The result is total lending share of well over 90% with most wholesale and retail aggregators and room and desire to increase share further,” he said.

National Finance Club is developing a team of desk-bound account managers, which will support brokers in addition to its existing business development manager team.

Speaking with Australian Broker, NFC general manager Andrew Clouston said the mortgage manager had previously relied on traditional mobile, on-the-road business development managers, but that it that would commence training its first two office-based account managers to augment its broker support services in early August.

NFC envisions that each new account manager will support 30 brokers, and that it will put at least eight of these new staff in place over the next 12 months.

Clouston said the new account manager team will be tailored to support more mature members of NFC’s broker network, who had used the group’s products for a number of years and, as such, did not require the full training and support attention of a BDM. Meanwhile, BDMs will be focused on higher touch clients and ‘onboarding’ new brokers. It will be up to brokers as to which style they prefer, according to National Finance Club.

Clouston said that traditional BDMs try to be available at all times to deal with inbound broker enquiries, but due to the nature of their role they were at times unable to be on-call to answer queries from their network.

NFC expects to use the account managers in both a ‘reactive’ sense – to field inbound queries – but also in a ‘proactive’ sense Andrew Clouston – to assist in distributing new products, such as the group’s asset finance product.

Retail brand Club Financial Services and broker-facing mortgage manager NFC, both now a part of the broader Firstfolio financial services business, currently work with a total of approximately 1,000 brokers.

Clouston said that a recent streamlining of NFC’s offering down to a single product had assisted in the group’s traction as a mortgage manager.

“Our retail distribution is now focused on a single wholesale offering, as opposed to multiple offerings. This has enabled us to better train, educate and create a clearer understanding among brokers, giving them confidence in us and a clearer message for clients.”

NFC is currently growing 10% month-on-month. Between January and June this year, settlements had increased by 80% and lodgments were up 100%, which almost delivers on a previous commitment to double its business in the first six months of 2011.

8/1/2011 10:30:01 AM

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INDUSTRY NEWS IN BRIEF Australia still attractive to investors Australia is still seen as a growth region by international investors, in spite of a lagging property market, CB Richard Ellis has claimed. At a market outlook breakfast in Sydney, CBRE head of research for Asia Pacific, Nick Axford, said investors are still attracted to Australia, and are particularly active in the commercial market. “Globally, we are still seen very much as a growth region where investment capital will continue to flow, and we’ve continued to see this in the current quarter, with approximately 50% of all purchases having been to foreign investors,” Axford said. Prime property is driving demand both domestically and globally, Axford claimed. “Investors are targeting only the very best quality, prime grade property with a focus on the quality of covenants and income streams and the larger, more liquid markets. Going down the quality spectrum, investor interest tends to drop significantly.”

Bank of Melbourne to offer discounts The new Bank of Melbourne will offer discounts to customers who take out multiple products with the bank, according to its chief executive Scott Tanner. According to the Australian Financial Review, the new bank will offer retail customers tiered pricing, with a potential discount of one percentage point off its standard variable mortgage rate.

Tanner said that as part of its strategy, it would seek to reward customers for having more products across banking divisions that will include banking, insurance and wealth management.

Tanner told the AFR: “The more products you have with us, the more balances you have with us, the better the quality of your relationship with us, the more you will save. It’s a very simple proposition and nobody’s actually doing it.” He flagged the regional lender would be competitive on price.

Debtor finance soars Debtor finance has seen a significant increase as small businesses struggle with cash flow, a lender has claimed. Bibby Financial Services managing director Greg Charlwood said SMEs are facing worsening cash flows, leading more to seek out finance. Charlwood referred to a recent survey commissioned by the company, which found 47% are waiting longer to be paid for goods and services than at the same time last year. The poll found 49% of respondents tipped cash flow as their biggest concern, with manufacturing and professional services the most common sectors to indicate they faced trouble paying staff and expenses on time. Business owners also indicated they face greater pressures than a year ago, with 52% saying their stress levels have grown over the past year. “The uncertain economic outlook is creating increased anxiety among proprietors of small and medium-sized enterprises,” he said.

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Perth properties continue decline Perth properties have experienced 15 consecutive months of price decline, the REIWA said in July. Data from the organisation showed property values in Perth fell by 2% in the June quarter, tallying their fifth quarter of declines.

REIWA president Alan Bourke said the current value decline has lasted longer than the one-year fall in Perth property values experienced in 2008. While the period of decline has lasted longer, Bourke said, prices have yet to retreat as significantly as in 2008. Perth values have thus far posted a 6% decline, compared to a 12% fall in 2008. Properties are also sitting on the market for longer. Bourke said the average number of selling days has increased to 82, its highest level since the Perth property boom of 2004–2007.

“Buyers must be patient and realistic about price,” he said.

NSW falls behind on housing WA has the nation’s strongest economy, while NSW lags in housing construction and infrastructure development. In CommSec’s latest State of the States report, WA has overtaken the ACT as the nation’s strongest economy, while NSW has slipped below states such as South Australia and Tasmania to rank second-last in the report, just ahead of Queensland. NSW ranked 17% below the decade-long average for home building, while the ACT tracked 80% above the average. Urban Taskforce CEO Aaron Gadiel said recent home approval statistics indicate the home construction sector in NSW is not due for a bounce back anytime soon. He said the NSW government should bring forward planned reforms and development levies to stimulate greater activity.

No relief for rentals Vacancy rates rose in June, but the rental market remains tight with no signs of relief in the near future. New data from SQM Research has indicated the national vacancy rate rose 0.2% in June, to 1.9% nationally. Every capital city apart from Darwin saw an easing of vacancy rates over the month. The market for rentals, though, remains tight. SQM Research stated that no capital cities recorded vacancy rates over 3%, and Canberra has recorded a vacancy rate of just 0.7%. SQM managing director Louis Christopher said this result will continue to see rents outpace inflation. “Nationally our vacancy rates suggest that rental conditions for tenants remain tough, and at this stage we do not see any significant relief in sight. I would suggest rents will continue to increase at above inflation over the short to medium term,” he commented. Melbourne has recorded the highest vacancy rate of any capital city, at 2.8%. It had the highest month-onmonth increase, with vacancies climbing 0.4% in June. SQM Research attributed this to increased construction in the city.

8/1/2011 10:30:04 AM

16 www.brokernews.com.au

News ‘One-stop shop’ vital Second GFC won’t for broker survival destroy Aussie banks The ‘one-stop shop’ model is the only way ahead for the mortgage broking industry, a property accounting firm has claimed.

Australian property accounting and advice firm Chan & Naylor has said mortgage brokers will have to offer a wide range of products and services in order to remain competitive. CEO of the firm, Sal Carrero, has commented that brokers must align themselves with specialists in a wide range of financial products in order to stay afloat in the current market.

“I just can’t see how they could survive otherwise. The only other way to survive is to do deals that none of the majors could do,” he commented.

Such an evolution is imperative for brokers looking to enact a fee-for-service model, Carrero said.

He commented that borrowers looking for a “straightforward, vanilla loan” would not be willing to pay a fee for mortgage advice alone, and that brokers would have to offer further advice on debt management, risk products and self-managed super funds in order to justify charging a fee. Chan & Naylor finance partner Albert Waldron agreed, and said the firm has had no trouble charging clients a fee for a holistic financial services offering.

Sal Carrero

“Our property service ties in closely to our accountancy service and our financial planning service, so that’s our reason and point of difference to a traditional mortgage broker.

“The holistic offering is the only reason I feel we can charge a fee,” Waldron commented.

Without these services, Carrero said, fee-for-service would not be viable. He referred to a recent Mortgage Choice survey which found 61% of respondents would not be willing to pay a fee to a mortgage broker.

“I think it’s probably even higher than that – it’s just that people wouldn’t have told the truth at the time.

“I’m shocked it’s that low if people are just doing vanilla loans,” he said.

Australian banks could weather a global debt crisis, the RBA has predicted.

In a speech to the Property Council of Australia, RBA assistant governor Malcolm Edey has claimed Australian banks have strengthened their funding position, and would be resilient should the European debt crisis cause another global economic downturn.

Edey said Australian banks have limited direct exposure to the banks most at risk from sovereign debt concerns. Though he commented that Eurozone defaults could disrupt wholesale funding markets, Edey argued that Australian banks have decreased their reliance on these funding measures.

“In the post-crisis environment, the Australian banks have significantly strengthened their positions. They have increased their reliance on domestic deposit funding, lengthened the average term of their wholesale funding, and correspondingly reduced their reliance on short-term wholesale debt. These changes will help to make them more resilient to any disruptive event in international credit markets, should it occur,” Edey said.

In spite of the strong position of the banks, Edey commented, Australian financial institutions will not see a return to the lending

growth of the pre-GFC era. He pointed to low credit demand and high household saving rates, and said a return to double-digit lending growth is unlikely.

“If those trends continue, I think it will be good for financial stability, but it will also mean that our lending institutions have to get used to lower rates of expansion than were typical in the pre-crisis years,” he said.

In a separate speech to the Anika Foundation this month, RBA governor Glenn Stevens said this consumer caution was likely to fade with time, with savings rates and consumption levels returning to average. However, Stevens said growth in consumption and credit demand was unlikely to return to pre-GFC levels unless accompanied by growth in productivity.

“The thing that Australia has perhaps rarely done, but that would, if we could manage it, really capitalise on our recent good fortune, would be to lift productivity performance while the terms of trade are high. The income results of that would, over time, provide the most secure base for strong increases in living standards. That sort of an environment would be one in which the cautious consumer might feel inclined towards wellbased optimism, and re-open the purse strings,” he commented.

Banks work to scuttle refi business Bank retention teams are working hard to stop customers refinancing, brokers have indicated.

Recent Australian Bureau of Statistics figures show a rise in refinancing activity, but Loan Market has claimed this activity is being curtailed by bank retention teams working to keep borrowers from exiting their loan facilities.

Data for May showed an 11.4% month-on-month increase in refinances, despite overall home loan growth of only 4.37%.

Loan Market spokesman Paul Smith said fierce competition between the banks may not be drawing new entrants to the housing market, but it is seeing a spike in mortgage-holders switching their loan facilities.

“We’ve clearly entered a period where the growth in refinancing is largely offsetting the subdued activity in home purchases.

Obviously the natural disasters

14-17 news.indd 16

earlier in the year kept many people out of the market, but those already in have been able to enjoy the benefits of some highly competitive lenders and market conditions,” he commented.

However, Smith said refinancing activity could be much higher but for aggressive moves by bank retention teams.

He stated that Loan Market has received feedback from brokers that bank retention teams are scuttling potential refinancing deals, and pointed to a recent survey indicating that brokers had not seen an uplift in refinancing activity.

According to Smith, this is largely due to the work done by lenders’ retention teams.

“Existing customers who enquire about upgrading or changing their mortgages are being given a lot of attention by these retention teams who are

often willing to review their pricing in some circumstances.

The comments coming back were that customers have been enquiring, and they have been full leads, but then the banks came to them and said they could upgrade their terms or provide better pricing. We are seeing lots of lenders, especially the big ones,

pulling out the stops to hold onto their clients,” Smith remarked.

While it may impact on broker volumes, Smith commented that banks renegotiating terms for borrowers was not necessarily a bad result. However, he said brokers should walk borrowers through any re-negotiated terms offered by banks.

8/1/2011 10:30:10 AM

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17

8/1/2011 10:30:11 AM

18

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News What a difference a year makes … or not. Australian Broker reflects on the punditry, breaking news and trends that made headlines in the magazine 12 months ago Australian Broker issue 7.15 Headline: Low-doc lending declared ‘dead and buried’ (Cover) What we reported: What’s happened since: Last year, leading industry figures pronounced low-doc lending effectively gone due to NCCP legislation and tightening credit policies. FAST managing director Steve Kane, FirstMac CFO James Austin and Resi CEO Lisa Montgomery said responsible lending practices meant low-doc loans could be labelled “dead”, and said their demise would leave a hole in the market, with some borrowers unable to obtain credit. Iain Forbes of Australian First Mortgage and Mark Hewitt of AFG took a somewhat less bleak view of the market, saying low-doc lending would become less common, but remain viable.

It appears the industry forgot to tell low-doc lending it had died. With banks tightening their credit policies, business that was once considered prime has fallen to specialist lenders. Pepper Home Loans’ acquisition of GE Capital’s $5bn loan book earlier this year showed low-doc lenders are still making moves in the market. Though many lenders have re-badged low-doc products as ‘self-employed’ loans, Bankwest recently revived its Low Doc Home Loan, shunning a name change. Bankwest head of specialist lending Ian Rakhit said low-doc lending should no longer carry the stigma it saw during the GFC.

Headline: Fixed rate demand fails to materialise (page 13) What we reported:

What’s happened since:

Headline: Interest rates could hit 12.5% by 2016 (page 16) What we reported:

What’s happened since:

Mortgage Choice last year pointed out weak demand for fixed rate mortgage products, in spite of a rash of rate-cutting from lenders. In June of last year, fixed rate products accounted for only 2.6% of all approvals for the mortgage broker. Mortgage Choice spokesperson Kristy Sheppard expressed surprise at the time, saying the company had expected the rate cuts to flow through to increased demand.

Sheppard theorised that many fixed rate products remained too highly priced to successfully lure borrowers, and that some borrowers might have been banking on a sustained period of cash rate stability.

Economist Phil Ruthven painted a bleak picture for attendees of the FAST Business Excellence Conference last year. Ruthven, the founder and chairman of IBIS World, predicted that global economic recovery would see Australian interest rates skyrocket, peaking at 12.5% by 2016. He said Australia would likely suffer through its next recession somewhere around 2018, and praised the Australian government for helping the country dodge the bullet of the GFC.

Fixed rates have seen a bit of a renaissance in the past year, with Mortgage Choice indicating the products accounted for 12.33% of all the company’s approvals in June. The average fixed rate has also spiralled downward, bringing it within a hair’s breadth of the average standard variable rate. RateCity indicated earlier this month that fixed rates were averaging 7.35%, a mere five basis points above the average SVR of 7.30%. Citibank slashed its fixed rates 33 bps in July to 6.99%, 79 bps below the average SVR of the Big Four.

2016 is still a long way off, so it’s difficult to judge Ruthven’s prediction.

However, most economists seem to believe interest rates don’t have much further to go in the RBA’s tightening cycle, and most have revised their rate forecasts to predict one hike towards the end of the year and possibly another to follow sometime next year. Westpac, meanwhile, has actually predicted a drop in rates, saying the RBA will make sharp cuts to the cash rate throughout 2012 to lower it by 100 bps.

WORLD

Google muscles in on mortgages

FHBs get affordability boost

Canadians beat Aussie settlements

The UK mortgage market was afire with speculation over Google’s intentions in July, after the internet giant launched a new online mortgage comparison site.

Called ‘Compare UK Mortgages’, the site follows the release of a similar service in the US, called Google Advisor, which also includes a mortgage comparison element.

The comparison service appears at the top of the Google site when the word mortgage is searched for, according to Mortgage Strategy, and only features advertisers. Compare UK Mortgages features sponsored links from a number of key market lenders, such as Woolwich, ING Direct, Lloyds TSB, NatWest and Royal Bank of Scotland.

Local mortgage brokers were sceptical of the service. Mark Lofthouse, CEO of Mortgage Brain, told Mortgage Strategy: “While Google may provide more information upfront, it will not be able to compete against the expertise of brokers.”

ING Direct explained its involvement as being a move to be involved in a comparison website for the “10% of the population confident enough to source their mortgage directly”.

New Zealand first homebuyers saw affordability rise in June to its highest levels since 2004 according to Roost Home Loans, due to low interest rates and increases in after-tax income.

The report found that prices of cheaper homes remained flat during June, which assisted in boosting affordability for young double-income households across the country.

Central Auckland affordability is the worst, though low interest rates are helping to ease this burden. The Roost report found Queenstown was the least affordable location, and Invercargill was the best.

The Roost Home Loan Affordability finding for all of New Zealand argues that the proportion of a single median after-tax income needed to service an 80% mortgage was 52.6% in June, a drop from 51.3% in May. However, the window of opportunity could be short-lived. Stronger than expected growth and inflation figures prompted economists in July to bring forward their forecasts for the Reserve Bank’s first cash rate hike to October or December from January next year.

Canada’s top mortgage brokers have left Australia’s best brokers in their wake, after Canadian Mortgage Professional Magazine found the top three Canadian brokers all settled over $200m each in 2010. CMP’s number one broker – Gord Pipkey, of VERICO Mortgage Services in Richmond, BC, said he was “shocked and honoured by this result”. Having been a mortgage professional for over 25 years, Pipkey put his success down to being a bit oldfashioned. “If I did a good job, I always said, ‘someone will come back to me’.”

Pipkey managed to settle over $263m in loans, while the two runners-up managed $255m (Dan Eisner, True North Mortgage) and $213m (Jim Tourloukis, Advent Mortgage Services).

Nine of the top 10 settled over $100m in loans during 2010. In Australia, MPA’s Top 100 last year was taken out by Mortgage Choice’s Wendy Higgins, who originated $141m worth of loans. Four of the top 10 Australian brokers originated over $100m in mortgage loans.

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8/1/2011 10:36:53 AM

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19

OPINION

The road to success Mortgage market complexity will ensure the future viability of mortgage broking businesses for those brokers positioned to capitalise, writes Charles Tarbey The history of the Australian mortgage industry has seen the dominance of different players at varying times. While the mortgage process and loan allocations were essentially controlled by banks and lawyers in the 1970s, it became clear in the 1980s and 1990s that real estate agents wielded much influence on the post-buying decisions made by purchasers of their properties, and as a result the larger banks started paying loan referral fees.

These changes paved the way for the rise and ultimate boom of the mortgage broking industry in the mid-1990s, where constraining regulations were minimal, allowing smaller operators to thrive.

Such prosperity was curbed when the global financial crisis hit, the impact of which the industry continues to deal with.

The demand for residential real estate is down nationally, and with it the need for housing finance. In addition, the big banks have been moving to curb the amount they pay in referral fees for some time and are driving campaigns to attract customers directly, offering discounted rates and other incentives that smaller loan providers often simply cannot match.

There is no doubt that such changes have hurt the mortgage broking industry, with many broking firms closing down (one in four over the past 12 months, according to MISC research) and conducting less business. In addition, with the federal government having taken responsibility for consumer credit laws as of this year, the administrative costs faced by brokers have made it more challenging to stay afloat.

There is a silver lining to this situation.

If mortgage brokers are intelligent in the way that they position themselves, both in terms of the structure of their operations as well as their branding, I strongly believe they can continue to enjoy ongoing business success.

The mortgage process can be complex and is not something that consumers go through regularly. And while the industry changes that are occurring – including the recent abolition of mortgage exit fees – are largely positive for consumers, they still have the potential to further complicate the process. Thus, many consumers will turn to trusted professionals to provide ongoing advice. As with any business, in times of confusion consumers may be inclined to turn to recognisable, familiar brands that they feel safe dealing with. Brokers will therefore often benefit from aligning themselves with a well-known brand.

Such advice from a mortgage professional is sought by borrowers not just when a property is purchased, but also in preparation to make a purchase and down

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Charles Tarbey

the track when refinancing options are explored. Working to establish relationships with clients can help brokers to build longterm customer loyalty, repeat business and word-of-mouth referrals.

Now more than ever the ability to generate leads quickly and cost effectively is of crucial importance to brokers, and advances in technology can assist us in achieving that. If brokers are able to put in place a lead generation system that allows them to limit the time spent going out and prospecting for new business, they should be able to accommodate more clients and write a greater number of loans.

This is precisely what I have worked to achieve at Century 21 Home Loans with our automatic lead generation system – which systematically supplies Century 21 Home Loans brokers with leads directly from Century 21 real estate offices every time a customer walks through the front door.

Despite the challenges brokers are facing in the current mortgage industry, there are some incredible loan writing opportunities as well. I firmly believe that if brokers are smart and have efficient business structures in place, they will be able to write a higher volume of loans and achieve longterm customer relationships – ultimately leading to survival and increasing success.

Charles Tarbey is the chairman of Century 21 Home Loans

If mortgage brokers are intelligent in the way that they position themselves … they can enjoy ongoing business success

8/1/2011 10:36:55 AM

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News

For all the latest mortgage industry news, visit www.brokernews.com.au

INVESTIGATION liabilities arising from this matter.”

HLSS director Mark Whittingham previously operated now defunct lead generation business Lead Search. As reported in Australian Broker in 2009, Lead Search was wound up by the Supreme Court due to what Whittingham claimed were “unpaid advertising accounts”. At the time, he blamed the business failure on attacks from a small number of brokers, as well as Australian Broker reporting.

“Whilst I understand some of you may feel let down with what has happened, I am also very upset after 20 years in the industry it ends today,” Whittingham told brokers at the time.

However, his involvement with the industry did not end there, as he continued his directorship of Home Loan Selection Services and the “Buy A Trail” book broking business. Since 2009 there have been multiple warnings from peak industry association the MFAA, and internally by the market’s aggregators, to take care when dealing with trail book vendors.

Jeff Zulman, former CEO of aggregator Vow Financial, is currently on the cusp of launching a new consultancy business that will assist brokers in purchasing trail books. Zulman told Australian Broker it was his previous experience with Buy A Trail that “galvanised” him to offer the market more “transparent” assistance when seeking trail book purchases.

A former merger and acquisition consultant with a strong legal background, Zulman said he first encountered HLSS and Buy A Trail after subscribing to its mailing list. After identifying an attractive potential $250,000 purchase, Zulman said initial contact with HLSS promised the WA book was of “very high quality”, and was sourced from an established professional.

“I thought at the time that this was the type of larger book, the type of anchor or stable book that I wanted,” Zulman said.

However, Zulman said after showing initial interest, his legal background made him question the deal. He said red flags included the inability for him to complete adequate due diligence before making a deposit, inadequate paperwork for his needs, and a lot of verbal – rather than written – undertakings. Zulman was also unable to get a suitable character reference from a lawyer.

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Finally, after checking with mortgage industry sources – including the head of the aggregator of the book that was being offered – Zulman said he was able to ascertain that the book appeared to be similar to one that had been previously touted by Buy A Trail over a year before.

“I had planned to quietly go about buying books, but after this experience, and speaking to brokers, I realised how vulnerable they are and how daunting it can be,” Zulman said. “You can imagine the pain and anguish being felt out there. Imagine how many smaller brokers are in trouble, if some of the more experienced money is getting caught out.”

Difficulties with deposits

Indeed, Australian Broker can reveal that Zulman is not alone.

Bernie Kelly, executive director of newly launched aggregator Trigon Financial, claims he went through what he felt was an “absolute nightmare” experience with HLSS and Buy A Trail. He said “under no circumstances” would Trigon Financial consider dealing with the business again.

Kelly, who is a veteran of the global funds management industry, and who recently launched the Trigon Financial brand in Australia, said that in the process

Imagine how many smaller brokers are in trouble, if some of the more experienced money is getting caught out of building the business, he was interested in sourcing trail books valued “in the millions”.

Kelly said the process of buying a book through HLSS at first “appeared to be above board”, and that the modus operandi employed was “sophisticated”. However, Kelly said he was caught out after paying HLSS a “very significant” deposit.

“Some people think that buyers will simply give up trying to recover funds. In fact most buyers become so frustrated by the process and costs that they simply walk away,” Kelly said. “Our potential loss was very significant, and we

made it very clear that the matter would not rest,” he said.

Trigon Financial was eventually successful in having its deposit refunded after 14 weeks.

Kelly is only one of eight mortgage brokers or businesses who have come forward to detail their negative experiences, and many – unlike Kelly – are still battling to get deposits back.

General manager of Callaghans Financial Services, Michael Williams, said he has engaged legal representation in an attempt to retrieve $15,000 in deposit paid.

While they initially asked for 50% upfront, Williams said HLSS had eventually lowered the deposit price. However, he is now seeking to retrieve the deposit after long delays in setting up a meeting with the seller.

Another Victorian-based broker – who refused to be named – told Australian Broker he was currently in pursuit of a deposit valued in the tens of thousands. The broker said after paying the deposit, there had not been much more from Buy A Trail than “piss and wind”.

Likewise, a Queensland-based broker is seeking the return of a 20% deposit paid on a number of loan books, after a deal was struck with HLSS but there were delays in meeting with the seller.

South Australia-based Brian Lucas, from Proper Advice, said he was actually “surprised” when he managed to get his deposit back after three months of “contacting everyone he could” and instructing a solicitor to pursue $4,800 in funds. Lucas said after paying the deposit, he sought his money back when the trail book information sent through to him from Buy A Trail contained details that were five years old, causing “something to click”. Lucas said while he got his deposit back, he was forced to spend $1,200 on legal fees, and by his calculations $1,000 of his own time, chasing up the money over the three-month period.

Brokers interviewed by Australian Broker routinely complain of being unable to meet Mark Whittingham in person, while having severe difficulties in contacting him over the phone, as well as being unable to get meaningful responses or actions as a result of communications via email.

Australian Broker has also obtained a private investigator’s report on HLSS, Buy A Trail and director Mark Whittingham.

Contained within, a full Veda Advantage company credit report indicates that Home Loan

Bernie Kelly

Selection Services Pty Ltd has a number of defaults listed against it, has been referred to a debt collection agency to recover a sum of money, and also has a number of court judgements – the most recent in 2010 – against it.

Continuing to operate

Home Loan Selection Services Pty Ltd and Buy A Trail continues to advertise trail books in mass mail outs. Email communications sent out by HLSS and Buy A Trail as recently as June 2011 advertise a range of trail books from aggregators Connective, VOW, Choice, FAST and Loan Market, with values quoted from $1,200 per month up to $20,000 per month. The books advertised are from Victoria, New South Wales, Queensland and Western Australia. It encourages brokers to reply to the email and supply their name and phone number.

Australian Broker has also obtained copies of a Home Loan Selection Services’ initial email contact with interested brokers, which directs them to contact Mark Whittingham with any queries. In the email, HLSS includes a requirement for a deposit of 20% of the agreed purchase price to be paid on the same day of an “acceptance of offer”, but prior to the signing of contracts. The email says this deposit will be “fully refundable” should a broker wish to pull out up until the contract stage. Further, the email to brokers states that if brokers wish to cancel after contracts have been drawn up, a fee of $2,000 would apply, but the balance of the deposit would be returned. The email promises that HLSS will then set up a meeting to go through client files and “have a general chat to the broker” selling the book, completing due diligence.

HLSS goes on to say a formal contract will then be drawn up within seven to 14 days.

When contacted by Australian Broker, Mark Whittingham

8/1/2011 2:43:49 PM

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INVESTIGATION provided a defence of the Buy A Trail business, labelling the allegations against him as “rubbish”. In response to complaints about the most common complaint – the severe delays in refunding deposits after they had been paid – Whittingham said he was unable to comment as “every case is different”.

“A deposit might have already been paid to a broker, or they might have changed their mind and gone through a different course of action, or they might have asked for another trail book,” he said. “It just depends on the situation at the time, and how quickly someone thinks is a fair and reasonable time to get a deposit back.”

In regard to delays in setting up meetings, Whittingham blamed this on buyers and sellers. “There have been occasions where you can’t arrange meetings in a timely manner, because it is subject to files being ready and brokers wanting to meet at the same time.

So, it depends on the case, because everyone has their own situation.

We’ve also had several brokers who have been overseas – and it’s not going to happen tomorrow if you are overseas.”

Whittingham also denied intentionally seeking multiple deposits for a single book. “It would depend on the book. If a sale falls over because a buyer changes their mind or whatever it might be at the time, of course we are going to try the book again. But it is not unless someone has decided to pull out, or the broker selling the book doesn’t want to sell it to them or whatever it might be. We wouldn’t do that on our own devices.”

Finally, Buy A Trail does not advertise trail books that do not exist, Whittingham said. “That assertion is totally false.”

Mark Whittingham was able to supply a list of referees for his business, and Australian Broker has established that at least two buyers have successfully purchased five trail books between them through the business, while others have managed to successfully sell their books.

However, at the time of going to press, no referees we spoke to could support the business by providing on the record comments. Some referees supplied by HLSS also complained of difficulties and delays in completing transactions.

United we stand

The MFAA has issued repeated warnings in its member magazine, Mortgage and Finance Brief, on the issue of trail book scams, including its most recent issue this year.

Last year’s March and November editions also warned members to be vigilant when buying books.

In the most recent warning, the MFAA states it is aware of so-called “trail books” and “databases” being offered for sale by entities with a “poor history of ethical dealing”.

“The MFAA has been informed by a significant number of complainants that one particular operator refuses to make any data available until an offer is made for the book and a substantial deposit paid – prior to any due diligence being undertaken by the purchaser,” the published MFAA warning reads. “Apparently, it is also suggested that should the offer be withdrawn, the deposit will be lost. Members are advised to take great care if they are considering the purchase of a trail book.”

While the MFAA warning states that “many operators are principled and fair in the business they undertake,” it suggests brokers should only consent to buy a “book” if the member is satisfied

Mark Hewitt

regarding the quality of the book and the customer relationship management (CRM) files, and not before an offer of its value to the purchaser can be assessed.

When contacted by Australian Broker, MFAA CEO Phil Naylor said there was little the association can do aside from continuing to warn its membership of unethical players.

“When the person complained of is not a member of the MFAA there is little we can do,” Naylor said.

“Matters that appear to be serious are referred to the appropriate regulator.”

Naylor said that wherever it is possible, the MFAA will publish general warnings to the membership about persons “believed” to be rogues.

ASIC is understood to have received a number of complaints in regard to Home Loan Selection Services Pty Ltd and Buy A Trail specifically, including a number during the current 2011 calendar year. However, the regulator has indicated it is not undertaking action at the current time.

However, it has encouraged individuals affected by these companies or other schemes to come forward and provide information on their experiences.

Naylor said the efficiency of ASIC is only as good as the information they are given. “The key driver here is brokers being aware and not letting “rogues” con them, rather than shutting the door after the horse has bolted,” Naylor said.

FAST managing director Steve Kane argues that the issue is more of a business issue, than a regulatory issue. FAST – along with Choice, PLAN and AFG – have all been active in warning their members about industry issues “not in the best interest of the broker”.

Kane said FAST has informed brokers formally on “several occasions” that they should check the details of the seller in full if they are interested in purchasing a trail book, that they should contact their FAST partnership manager for assistance if a FAST broker is selling a book, and that deposits

What should you do when buying a trail book? a) Ask for a trial period. The promoter should provide a number of genuine leads (for example) or information to enable you to test the product/service; b) The buyer should not pay any large sums until such a trial period has expired (a small deposit may be fair based on the vendor’s genuine costs); c) Always ask for the names of previous users and references to contact to verify the product/service; d) Be careful about signing any contract and being ‘pushed’ to sign and pay due to “others are anxious to buy this book/these leads” type of pressure; e) Ask your colleagues/aggregators/industry association for help in verifying the book.

Source: MFAA

20-21 Investigation.indd 21

Steve Kane

should not be paid prior to full contractual obligations being met.

“FAST has advised the same information at our professional development days,” Kane said.

Likewise, Choice Aggregation Services CEO Stephen Moore and PLAN CEO Trevor Scott said Choice and PLAN had undertaken similar initiatives.

“Brokers who are interested in buying loan books should ensure they undergo appropriate due diligence,” Moore said. “This includes the specific trail book, the reputation of the incumbent broker plus the entity – or person – facilitating the sale. Not all business is good business and you really want to be confident in who you are dealing with,” he said.

If in doubt, Moore urged brokers to contact Choice who will “provide some guidance”.

Kane said as a result of its warnings, it had received no formal complaints recently. Likewise, Choice and PLAN have confirmed these groups had also fielded no recent complaints.

Australian Finance Group has also issued a warning, following “several complaints from brokers who were having trouble closing their purchases or recovering their deposits”.

A statement from the market’s largest aggregator said brokers should “do their homework” when buying or selling trail books, including speaking to BDMs and an accountant or lawyer.

“They should also thoroughly review the book being purchased to ensure the vendor has been in regular contact with their customers, that email addresses and mobile phone numbers are held and that all compliance requirements are in order on the files,” the statement said. “We also recommend that whereever possible they deal direct with the vendor or purchaser, as we are aware of at least one middle man company with questionable credentials.”

8/1/2011 2:43:50 PM

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Comment VIEWPOINT

Non-bank market share has plummeted in recent months, leading to claims the sector is being ‘squeezed out’. What do leading brokers and non-banks think about the future?

Sarah Wells

Steve Sampson

Ken Sayer

Redconcierge

Provident Capital

Mortgage House

On non-banks, and competition: Non-banks are not in a space to compete at the moment. There is such a focus on pricing and competitiveness in the marketplace, their cost of funds are just too high to enable them to compete. A decade ago banks became far more encouraged to support brokers when they started to see some of their business going to the non-bank or second tiers. So they sweetened the offer for the brokers. So definitely, the last 18 months, with brokers putting the majority of their business to the big four, it is going to affect us going forward, and is now.

On the non-bank proposition: Maybe brokers are going to look at the fact that if it is 20 basis points more expensive with a non-bank than it is with a major, they have a better chance of the client staying long-term with a major, through being able to use retention units and sharpen the rate. And if a client were to leave, then at least they are going to get to two or three years worth of trail out of the customer, and get past that clawback experience.

On the glass being half-full: Non-banks have probably never been positioned better than they are at the moment. I think with the changes in the environment – including politically – it’s made us have a good hard look at our products, our service and what we are selling. What we need of course is support from more of the brokers.

On Provident, and non-bank propositions: We are not clawing back from brokers. We have put that into position to try and give ourselves another competitive edge against the banks. So currently I guess we are trusting that brokers will enjoy our service, that customers will like our service and that they will stick with us for a period of time.

On the big four bank threat: Polarisation of the four majors cannot be a good thing for the broking industry; it’s going back to the old days where the banks will play the fiddle – they’ll decide how much commission they want to pay, they’ll decide who they want to deal with, they’ll make their own rules – that’s dangerous.

On the state of the non-bank lending industry: The banks are very aggressive and non-banks have been on the decline for at least four years now. However, the decline has subsided.

The market share will probably continue to diminish; however, funding is freeing up, pricing is also improving, and the non-banks will be back.

How can non-banks win broker favour?

We haven’t introduced a bank-style clawback.

We’ve made a business decision that we would only clawback loans up to a year, but that doesn’t happen in our book. We have to engage the brokers, and we have to get closer to them, and they have to have confidence in the new processes.

On the Mortgage House value proposition: On all of our applications are underwritten real time. So a broker would interview a client online, answer all the questions, and it will instantly underwrite it. No four-hour delays and now 24-hour SLAs. So we are trying to up the ante in terms of a value proposition I guess.

OPINION

Time to wake up, or become irrelevant Mortgage brokers will become the architects of their own demise if they continue to direct the vast majority of business to major banks, argues ING Direct’s Lisa Claes Don’t be mistaken – the current spate of fierce competition in the home loan market does not necessarily bode well for the long-term future of competition in the market, and mortgage brokers are in danger of becoming an early casualty.

I have to declare my hand here. ING Direct is the fifth largest home lender in the country and currently delivers almost all of its home loans via the broker channel. However, this will only continue while the broker channel has relevance to our customers.

Right now nine out of 10 new home loans are being written by the big four. That has climbed from a decade ago when it was seven in 10. The smaller competitive wholesaler mortgage manager end of the market has declined from 10% in 2006 to 5% in 2011. The broker channel itself, having peaked at 45% of the market in 2007, has plateaued at around 41%. What’s more, brokers are sending most of their business to the big four banks, institutions that are likely to have a preference for their own branch networks.

The past, and the present The early 90s saw brokers and mortgage managers, led by Aussie John Symonds, champion competition by directly taking on the

22-23 Viewpoint+Forum+Opinion.indd 22

big four banks in home lending. The broker channel ignited competition as brokers forced a proliferation of choice. At the same time, independent mortgage managers emerged as a viable channel of substance. As a result mortgage margins narrowed and customers benefited. At the same time ING Direct entered the market and drove business through the broking channel and quickly established itself as the fifth largest home lender in the country.

The GFC, and choice However, the landscape quickly changed with the onset of the GFC with many at the smaller end of the market either disappearing through lack of funding or being swallowed by the big four.

The digital era has delivered more information to customers online, particularly in the form of comparison pricing. It is easy for a customer to compare home loans online in the same way they compare prices for insurance, or any other goods or services. Comparison pricing information is becoming less of an advantage for brokers as is personalised service.

The one true advantage of the broker offering is providing the consumer with an informed choice, backed by experience. The concern is that choice is diminishing. Sure, competition in the current slowing home loan market is fierce but the number of players is getting less. Fewer players will give brokers fewer options and less potential to add value for customers. And a lack of competition, a concentration of market power compounded by

a drive to maintain profitability will tempt banks to drive customers to direct channels and reduce commissions in a bid to cut costs.

The interesting point here is that brokers are reducing their relevance, perhaps inadvertently, by driving 80% of their business to the big four.

What do brokers think will happen when fewer players have a bigger slice of the pie? Looking at any other industry the answer is simple – greater pricing power for the surviving incumbents and less choice for consumers.

What needs to happen?

To thrive, the broker channel needs to maintain its unique value proposition to customers and to lenders. From a customer perspective, brokers will need to ensure the customer gets the best all-round deal with the best service possible. In practice this means a complete understanding of lender propositions at all levels of the market.

Brokers and banks will need to work closely to ensure the service and experience for the customer is fast and efficient. Brokers will also need to be completely transparent in their recommendations for customers and show they are adding real value for the customer.

Whatever the outcome brokers cannot assume their success over the past 15 years will continue and market concentration of home lending to the big four could be the biggest threat they face.

Lisa Claes is the executive director of delivery at ING Direct

8/1/2011 10:34:18 AM

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FORUM It was all about ING Direct, as brokers balanced an obvious desire to use the bank with concerns about its service proposition (Brokers return fire at ING Direct, 20/07/2011).

We would love to deal with ING Direct more but find it so difficult. We have to put the application into a certain format to match your rules – we just wish one of the rules was that your assessors would read our notes. We can’t email anything – it’s all faxes. We can’t speak to an assessor either, so it takes four days and two faxes to point them to the notes we sent in originally. I could go on, you have a great product range, good brand recognition and a compelling customer service offering but you are simply way too hard to give business to and we get paid less. From a business owner’s perspective, dealing with ING on loans under $200k is unprofitable. I would hope that this information is not new to you.

Ozboy on 19 Jul 2011 10:44 AM I think some of these second-tier lenders need to make the overall experience of lodging deals the same as the majors have perfected it. I lodged one deal with ING Direct a few years back and it was like pulling teeth. I didn’t track down that road again...

MelbBroker on 19 Jul 2011 10:52 AM If you do not meet ING Direct’s volume levels brokers are banned for life. How many more loans would they have if they accepted loans from all accredited mortgage brokers?

Ray Cooper on 19 Jul 2011 12:28 PM Lift your commission and accept online and email applications and supporting documents. That will increase your market share. Simple.

Canberra broker on 19 Jul 2011 12:33 PM The above comments are spot on when it comes to dealing with ING Direct. Yes they are a good lender and they have sound products. Until they fix up their end, make it easy to submit deals, allow us to deal with the decision makers, speed up their processes and fight on rates as the other lenders are doing, their current position in the ranks won’t change.

Garry on 19 Jul 2011 12:34 PM

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I love ING Direct products and would much prefer to deal with ING for my clients BUT, the main issue is postcodes and apartments – places like West Perth and East Perth – 95% LVRs and guarantor loans or family pledges. That’s where the big four leave the others behind.

SKEPTICAL on 19 Jul 2011 12:40 PM You have to sit and wait for four days for something to happen every time you send something back and that something could be sorted via a quick phone call or reading of the notes. That is just eight days gone and nothing has been assessed. You just can’t afford, from a time perspective, to deal with them as you are not giving your clients the best outcome, with stress from their end that they can’t exchange yet. Service levels are not up to scratch – that’s for sure.

DB on 19 Jul 2011 12:42 PM All the comments by other readers are spot on. ING Direct has to lift their game, no doubt the products are good but the application process needs to be made more transparent and the broker should be able to speak to the assessor, a two-minute conversation can save two days, I was dissappointed the most when they came up with reduced commissions (mirroring majors) with a complex slabs, etc Nav Matta on 19 Jul 2011 01:07 PM If ING Direct had only kept Gadens NMS, I would have been writing more business with them. I find their lending criteria quite narrow, otherwise the products are good. It’s not only about products, it’s also about the front-end and back-end processing that matters to brokers.

As a broker we tend to look at “the road of least resistance” to keep our clients happy.

Jim Beam on 19 Jul 2011 01:50 PM As a regular user of ING Direct I have no issues with the service from the BDMs, as it’s very good. The above brokers do, however, make some valid points, and ING Direct at times can be quite archaic in its approach to procedures and lending, although I believe some real changes for the better are in the wind. Having said all that, there are a great number of very monocular brokers out there who can only see “their” bank – usually the one they used to work at, and all their loans go there. Personally I would like to think that sort of blind adherence to lending with just one or two majors is on the way out.

Kenbee on 19 Jul 2011 03:08 PM

What do our online readers have to say about the market, and the outlook for rates? (Poll: What is the likely cash rate in 2012?)

This is my prediction for the 2011/2012 year. WA prices will continue to slide for another few months, making it 18 months of continual decline and then it will bottom out.

Eastern seaboard property prices will continue to slowly decline over the whole year and probably bottom out at around a 10%-12% fall.

The carbon tax debate will rage on for a few more months until Labor and The Greens will ram it through anyway. This will correspond with the continued decline of business confidence, which will head further south than Macquarie Island. The big retailers will continue with once in a life time sales just to get shoppers through the door.

Finally, the Reserve Bank will be forced to drop the cash rate by a 1% over the period to stop Australia going into “a technical recession” (which is different to the recession we are already experiencing). mortgageandlease on 22 Jul 2011 05:29 PM

What is the likely cash rate at year-end 2012?

Views are polarised – even among banks – as to where interest rates are headed. We asked our readers for their views on the likely rate movement by the end of 2012

26%

35%

20%

4.25% 4.5% 5% Cash rate

19%

5.25%

Source: Australian BrokerNews Poll date: 18/07/2011 – 29/07/2011

To vote in our latest online poll or get involved in our forum, visit our home page at www.brokernews.com.au

8/1/2011 10:34:19 AM

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Analysis redundant. If we wait around for that to happen we’re going to be waiting a very long time,” Brown says.

Attracting new talent

Leaving a legacy: The industry plans for succession While mortgage broking may be an ageing profession, some industry players are putting new careers before ‘cannibalisation’ as they draw new talent to the industry

S

tructured apprenticeship programs will be vital to ensure the ongoing survival of mortgage broking, industry leaders say. In a rapidly ageing industry, many of the highestquality, most experienced participants are leaving without a clear succession strategy in place.

Bankwest head of specialist lending Ian Rakhit says that there are those in the current market who have reached the age where they’re either retiring or slowing down. “We’re seeing some very experienced, very high quality brokers leaving the industry,” he says.

While franchise outfits such as Aussie, Yellow Brick Road and Mortgage Choice have targeted recruitment and mentoring programs, much of the industry is devoid of such structure when it comes to succession. However, Rakhit says aggregators are beginning to see the value of clear succession plans, and are putting systems in place to usher new entrants into the industry.

“I’ve seen a number of groups introducing an apprenticeship-type program where they bring someone in of graduation age and train them up to be experienced, qualified mortgage brokers. I’m seeing a lot of activity in bringing new entrants into the market,” he says.

Planning succession

One of these aggregators is Vow Financial. Currently working on an apprenticeship pilot program, Vow CEO Tim Brown says the company is looking to develop a more widespread mentoring and recruitment program by year’s end.

Ian Rakhit Brown says the company’s pilot program currently aids some of its top brokers in recruiting new talent into their businesses.

“What they want help with is ongoing training and development mentoring. They’ve had a very low success rate in this area, especially around recruitment. We can help them by outsourcing the recruitment piece to someone who specialises in that area, and can help mentor new people into the business,” he says. “We’re targeting new brokers who come from a graduate background, and people within our network who can impart their skills with the eventual view to replace themselves, whether through equity or being bought out.”

Such recruitment programs are vital, Brown says. He believes the industry cannot simply take for granted that potential entrants will be attracted to it.

“Mortgage broking was caused by the cataclysmic event of the banks making people redundant. The banks are recruiting right now; they’re not making people

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Mortgage broking may seem a difficult sell as a career path. Not only is it a fickle market with no guarantee of steady income, but the barriers to entry have increased with the advent of licensing and NCCP compliance. However, Brown Tim Brown says many young graduates with an ambitious and entrepreneurial bent may be attracted to the autonomy of the role. Moreover, for these potential entrants, the barriers to entry may serve as a positive.

“I think now with licensing you can actually pitch it as a professional business with educational standards as to who can enter, whereas before it was harder to pitch as profession and anyone could enter,” Brown says.

The Vow program is targeting young graduates who exhibit these personality characteristics. The idea of working on commission, Brown says, is not a deterrent to this personality type. “They tend to come from that background where their mother or father worked in a sales role with commission as a payment structure, therefore it’s already in their psyche and they’re more willing to accept that payment structure.”

Many new entrants are happy to put in the upfront work in order to see future returns, according to Brown.

The key, he states, is to be forthcoming about the time it could take for new entrants to see a monetary return.

“One of the things we’re learning is that they are very ambitious, and that’s why it’s important to set the expectations upfront. As long as you meet the timelines, they’re willing to be patient. They’re happy to do a period of apprenticeship, but they want a lot of training and a lot of coaching,” he says.

Careers, not cannibals

Rakhit agrees that mortgage broking can still prove an attractive industry, even for young graduates who may have the option of a more secure future in other career fields. The autonomy the industry provides, as well as the possibility of financial returns, can continue to draw talent to the field, Rakhit claims.

“From an industry point of view, yes it’s a challenging job, and yes it’s a demanding job, but the demand for home loans – whilst quiet at the present – means there’s still a lot of business out there. We have all experienced cycles of higher demand and lower demand. When it evens out, as it will, brokers should see good business coming through. The volume of transactions still makes this an attractive but demanding career,” he says.

However, the industry must continue to be proactive in recruiting new talent, Brown remarks. Without recruitment and mentoring, he says, those already in the industry will suffer.

“I think, as an industry, what I’ve seen in my experience is that margins continue to reduce and reduce because we continue to cannibalise each other by not bringing new people in. There are only a finite number of people you can do that with before the margins begin to get down to nothing at all,” he says.

Flashback: Growth through succession?

In March, Vow Financial flagged its intention of seeking “substantial” growth above industry average growth rates, through new programs targeted at recruiting fresh blood into the industry, as well as potential joint ventures and alliances. CEO Tim Brown said the group was seeking growth above market levels of about 6– 7%, but this required new approaches. “If you want to grow substantially or exponentially, you need to do something different. And doing what the industry is doing isn’t going to give us that result,” he said.

8/1/2011 10:27:17 AM

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Insight

Grow your business by getting LinkedIn Social networking is the vanguard of marketing for mortgage brokers.

Intellitrain’s Byron Gray demystifies the opportunities inherent in being LinkedIn

L

inkedIn, like almost all social networking sites, has grown exponentially over the past few years and has well over 100 million users worldwide, 14% working in the finance sector.

LinkedIn is the Facebook for professionals; it enables you to easily develop a network of contacts across Australia, even the world, and leverage these contacts to build your business.

So, as a broker, how can you effectively use LinkedIn to benefit your business?

Build referrals

We all know that obtaining referrals is a key part of being a successful broker and LinkedIn offers you several ways to build up a stream of referrals.

Consider who your current referral sources are – clients, real estate agents, accountants, lawyers… they are all on LinkedIn and you can successfully develop connections with these professionals at both a local and national level.

Start building referral networks by using the ‘People Search’ tool. For example, if you live in North Ryde, search for Real Estate Agents in this area. Contact each of these through the ‘Connection Request’ tool and ask to join their network – in your request, specifically outline how you can work together for mutual benefit.

Obtain recommendations

Support the process of building your referral networks by developing your personal brand on LinkedIn. This can be achieved in a number of ways, however, one of the most powerful is ‘Recommendations’. Ask contacts to provide feedback about you and your service using the ‘Recommendations Tool’. These ‘testimonials’ are displayed on your Profile and increase your credibility.

I also highly recommend providing unsolicited Recommendations to your connections – this achieves two key objectives; firstly when your connection accepts your recommendation then this becomes a part of their profile with your name (building your personal brand and credibility). Secondly, by providing a recommendation, it’s highly likely that you’ll receive one in return, thereby further building your brand and credibility.

Recommendations are also seen in two ways, that is, when you provide a recommendation, this is shown on your own profile as well as the connection’s, further expanding your reach.

Promote your company

Byron Gray

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LinkedIn has a ‘Company Pages’ feature enabling you to create a mini-website within LinkedIn to promote your products and services to other LinkedIn users.

Here, you provide a brief company overview and details regarding your products and services. This area also provides an opportunity to receive recommendations or testimonials for the specific product or service. For example, if you provide a yearly Loan Check you can promote this service then request your connections to provide a recommendation or testimonial about their experience using this service.

There is another highly effective tool within this area, the ‘Follow’ feature. This enables anyone who views your Company Page to ‘Follow’ it and receive regular updates

streamed directly to them in a similar fashion to the Facebook ‘Like’ feature.

I’d also highly recommend that you add a link to your LinkedIn Profile and Company Page on your website and email signature as a minimum plus other promotional materials.

Promote your products and services

LinkedIn offers two key ways to promote a specific product or service: you can ‘Share’ it which captures the first few sentences within the product or service page that you can add extra comments to and ‘Post’ this to your network.

If your Profile is linked with your Twitter account then this will automatically send out a Tweet of these details.

And if you’ve integrated your Facebook page with your Twitter account the same information will be posted to your Facebook account and distributed to all of your Facebook friends.

A very powerful way to promote your product through three different mediums – LinkedIn, Twitter and Facebook at the click of a button!

The second way to promote your product or service is by creating a LinkedIn Advertising campaign. In essence, you create a very simple advertisement (or series of ads) then select the target audience. The real benefit here is that you can tightly define your target market who will see the ad. For example, you can feasibly define your target to female salespeople aged 25–34 in Real Estate Agents of less than 10 staff, based in Canberra.

Other opportunities

• ‘Answers’ – in this section you can post answers to questions posed by potential clients or referral partners to promote yourself as an Expert.

• ‘Groups’ – by joining groups you can share knowledge, post questions and comments seen by group members plus gain access to directly contact group members.

• ‘Blog’ – if you have a blog then you can integrate this into your profile.

In summary

LinkedIn is a powerful tool to build your professional network and promote your business to clients, partners and associates, plus it is easily integrated into your other online networks and activities.

Byron Gray is the general manager of Intellitrain, a specialist training company for the finance and mortgage broking industry. You can connect with Byron on LinkedIn through his profile http://au.linkedin.com/in/byronwgray

8/1/2011 10:27:18 AM

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Market talk

The future of the economy

E

What is the outlook for Australia’s economy?

Australian Broker contrasts the positives with the negatives, to find out what you should be expecting in the future

very day there seems to be conflicting information on the economy. One source says the property market is recovering, while another predicts apocalyptic price drops. A bank economist predicts interest rates will continue to rise, while another says they’re due for a cut.

So what’s the real picture of the Australian economy and the mortgage market? Unfortunately, there’s both good news and bad. Here are a few of the key indicators.

due to refinancing. The all-important first homebuyer market, while posting a slight improvement in May, is down nearly 40% in the past 12 months. The RBA also indicated earlier this month that credit demand was at its lowest since the Reserve started keeping records in 1976.

Interest rates

Lending competition

The outlook for interest rates seems to be cooling off, with most analysts now pushing back predictions of a hike until the end of the year, with perhaps one more to follow sometime next year. Westpac has gone so far as to forecast that the RBA’s next move will be downward.

Pointing to weak consumer and business sentiment, as well as fears over Eurozone debt, the bank has predicted the RBA will cut rates throughout 2012 to leave them 100bps below their current level.

While Westpac has given a glimmer of hope to mortgage holders looking for a rate cut, most of the market is still expecting the RBA to continue tightening.

NAB has forecast two more hikes before the RBA eases its restrictive stance. The other bad news is that any rate cuts wouldn’t take place in a vacuum. Westpac’s forecast is predicated upon some truly horrible conditions in the overall economy. It sees rising unemployment, a continued lack of consumer confidence and a sluggish housing market as precursors to the decreases.

Credit demand

Housing finance data for May showed some signs of life. The ABS indicated the total value of owneroccupied housing finance increased by 2.2% for the month, and is up 5.2% compared to the same time last year.

Investors stirred a bit as well, with a 4.4% increase in investment property finance for the month.

Investors may have posted a rise in activity in May, but investment finance is still down 12% compared to last year. Also, the rise in owner occupier commitments is

There’s no doubt borrowers are seeing better deals in the market. Intense competition is seeing lenders drop both fixed and standard variable rates. The average threeyear fixed rate now sits at 7.35%, just five basis points above the average SVR of 7.30%. In a market of sluggish demand for credit, lenders are making increasingly aggressive moves to gain the upper hand on one another.

Nearly all this competition is taking place among a handful of lenders, with major banks dominating the mortgage market. Recent ABS statistics indicate the major banks have taken a 92.5% share of the mortgage market, with non-banks writing only 1.2% of home loans.

The MFAA claimed the major banks are now the most dominant since lending records started being kept in 1992.

House prices

There doesn’t seem to be a whole lot of good news coming out of the housing market of late. However, rental rates have seen some positive growth in June, edging up 1.3%. Unsold stock on the market has also decreased, falling 2% for the month. Overall, though, a protracted period of flat housing prices seems to be the best case scenario any analysts are calling for.

The pace of house price decline accelerated in June as median prices fell 2%. Future expectations for house price growth also deteriorated, with a NAB survey finding the market had gone from expecting 0.6% growth in the previous quarter to an expectation of 1.4% declines.

Though unsold stock did decline in June, stock levels remain 23% above their levels last year.

NUMBER CRUNCHING How Australians feel about their finances Mortgages/ Loans

33

7

Household income

Household bills

7.79

60

17

Household savings

Average SVRs for May

65

18

32

53

20

7.32 7.01

15

63

Big Four

17

Mutuals

Non-banks

Source: MFAA

0% Very uncomfortable Source: ING Direct

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20%

40% Average

60% Very comfortable

80%

100%

At a glance…

*

$16m

* The amount paid last year to departing Commonwealth Bank CEO Ralph Norris

8/1/2011 10:24:11 AM

www.brokernews.com.au

27

Toolkit

Partnering for referrals Setting up a positive and lucrative referral relationship can be a difficult task. We’ve identified the key steps you should take to make your next link-up a winner

A

ccording to finance brokerage Diversifi’s director Rose M De Rossi, “opportunity is everywhere” when it comes to referral partners. Whether it’s traditional financial planner or real estate partnerships, or something a little more esoteric – like Diversifi’s partnerships with solution-based providers, such as a joint venture with an attic company and artificial grass business – these steps will help you building and solidifying your partners.

1) What should I look for in a referral partner?

According to Frontrunner Consulting founder Doug Mathlin, there are a number of things a broker should identify in their next potential referral partner: • Values alignment: Check you have similar values, such as treating the customer right every time, responding in a timely manner, and seeking to improve processes.

• Business alignment: Both businesses should be on the same track – the referrer should want business growth and sustainability, just like the broker.

• Trust: Referral partnerships are very important; without trust, there is no relationship.

• Proximity/availability: The most effective referral relationships occur when the parties are closely located – this makes client access easier.

• Know your referrer: It’s hard to recommend a service you haven’t experienced. Each party should be able to speak ‘from experience’ during client recommendation.

• Approachable: Make sure your client would be happy to have a two-hour conversation with your referral partner.

De Rossi said that when approaching a new relationship, the business checks to ensure that the service being offered is of professional standard. “We expect consistent communication, we expect prompt response times, both to our clients and ourselves, we expect quality of product and process, and we expect efficiency,” she said.

2) What should I avoid in a potential partner?

Telltale ‘turn-offs’ can include mismatched personalities, according to aggregator ALCo’s general manager, Lesley Wood. “At ALCo we always give the referrer a choice of brokers so they can determine who best fits their requirements. This also applies where the broker is looking for a risk writer or planner – there must be a fit to be successful.”

But there are other practical things to avoid. Mathlin said that if the prospective referrer is more interested in the ‘kick-back’ than the value of the relationship, this would indicate they are probably not making enough money from their core business. He added that if there is a ‘referral fee’ being offered, to make sure it goes both ways. “If a real estate agent wants 20% of the upfront fee, make sure you get 20% of any sales from listings you provide,” he said.

3) How should I approach building an agreement?

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Diversifi has multiple referral relationships, and Rose M De Rossi said that an agreement can be reached by following the steps below: 1) Homework: De Rossi argues the first step in approaching a potential referrer is to do your homework, by researching their website, visibility, social media presence and even search the individual owners to establish their business ethics. Mathlin said these referrers can be found through contacts, including clients, friends and associates.

2) Approach: Mathlin said a letter or email outlining who you are, what you do and your intentions is a good way to make an approach. De Rossi said a phone call is the best way to initiate first contact, as it is much harder to say no on the phone, and emails sometimes don’t end up with the person equipped for the enquiry.

3) Meeting: A series of meetings in both a neutral venue and each office is best, according to Mathlin, as it enables parties to get to know each other’s background, and also assess how they each do business as well as meeting their teams.

4) Proposal: De Rossi said a broker should have a well-documented proposal available in draft form to take to the interview, and they should be confident in your value proposition and fully explain how the relationship can be mutually beneficial.

5) Agreement: Brokers need to understand how to recommend each other’s businesses, and ensure each party will benefit from the relationship. Mathlin said parties should agree to the goals of the relationship for each party.

6) Communication: Mathlin said a regular relationship meeting – especially at the beginning – can help deal with teething problems. De Rossi said maintenance is about “communication, communication, communication”, and that Diversifi provides monthly reports with the outcomes of any referrals received.

4) Which professional relationships are the best?

ALCo’s Lesley Wood argues the best relationships depend more on the partner than the profession they are in. “We have seen successful referral relationships across various professions,” she said.

“In saying that, professions that are solution driven/ advice-based tend to support lending better in terms of quality leads, because the client is assessed – so the referrer is sending someone they feel the broker can really help.”

Mathlin agrees. “From my observation, the best and most lucrative relationships for brokers come from accountants. People generally trust their accountant and go to them for advice. Also, accountants know about their client’s borrowings and loans.”

However, Mathlin said there are many great real estate agent referrers as well as financial planners and others, and the key is that they have won a client’s trust.

What about the NCCP? Under the NCCP, referrals are allowed with several stipulations. According to Vicki Grey from law firm Gadens Lawyers, the current referrer exemption stipulates that the referrer cannot be an individual banned from performing credit activities, that the consumer must consent to having their contact details forwarded to a broker or lender, that the referrer has a business relationship with the broker or lender and that the broker or lender keeps a record of their referrers.

The exemption also requires that a referrer must advise customers if they receive a commission for their referral, that they cannot be a business centred around referrals, and that the referrer does business from standard business premises.

8/1/2011 10:24:12 AM

28

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People

Following the Yellow Brick Road Industry heavyweight Matt Lawler recently joined Yellow Brick Road as its new CEO. We asked him for his views on YBR, diversification, and the future of mortgage broking.

Q

Since leaving NAB Broker, what have you been up to?

I was on holiday – I would call it a mid-career break. I’d been working fairly intensely for 20–25 years, moving from one role to another and had never really had a good break. The trip was about a year in the planning for our family, and we decided it was the right time to take some time off and travel the world. It was great fun.

Q

Why did you choose Yellow Brick Road?

Firstly, I think the role at YBR – and the YBR business model – is actually broader than just mortgage and finance. So the model itself is involved in primarily giving financial advice to clients, but naturally, the type of clients we are looking to attract will require mortgage solutions, they will require insurance solutions, investment solutions, and possibly over time accounting solutions as well. So at the end of the day, the breadth of the role and what is being provided to clients – and giving high quality advice – is something that I have been passionate about, so that was very attractive to me when having a look at what the YBR model is going to try and do.

Also, I have spent a lot of time in large corporates, so I was looking forward to spending some time in a smaller company.

Q

How will you work together with Mark Bouris?

I’ve had a close association with Mark Bouris in the past. We first came together when NAB tried to buy Wizard a couple of years ago, and we have maintained the relationship. We share the same philosophy on where we see the market going and what clients are looking for in the market. Mark has a knack for picking markets and trends in consumer behaviour, and is also fantastic at building brands. My role is to build up the infrastructure support and capabilities and invest capital in the right areas, so that every customer that comes to the YBR brand is going to experience something similar.

Q

Why are you passionate about the YBR model?

It’s an alternative to the models that are out there. This one is not debating whether to diversify or not.

This model is very clearly set up to deliver that to the client. The other thing is its branded nature. It is very hard for brokers to find access to clients. With a branded solution – a well-known brand, a national brand – you can bring clients to the brand, as opposed to brokers working very hard to go out and find clients.

Q

So you’ve decided that diversification is the future?

I’m sure that brokers are over this

debate, and by now you are really doing it or you are not. There is no point in continuing to debate something over such a long period of time – you either believe it or you don’t. The starting point for me – and for the YBR model – has always been that if you believe your role with the client is about helping them to put the right strategies in place to achieve their goals, then it is not about diversification of products, it is actually about giving clients advice.

The natural outcome is they will ask you for multiple solutions.

Q

So what of brokers who choose not to diversify?

The single product model from a very good niche player, who works with a series of other specialists, is still going to survive, and will do well. All we are saying is that if we look at it through the client’s eyes, we see a lot of demand for someone to simplify the complexity of what they have to deal with. If you are very confident about solving clients’ problems, the next part is making sure that is actually an economical model over a period of time.

MOVERS & SHAKERS Vow fills compliance role

CBA chief Norris to depart

Vow Financial has recruited a new compliance manager, at the same time as the aggregator’s broker network is regularly requesting preemptive audits.

The aggregator has hired Jack Czechowski, who has previously worked in compliance for Count Financial, Suncorp and United Arab Emiratesbased aggregator, Gulf Lenders Network.

Czechowski will take over duties monitoring compliance for Vow’s broker network.

Vow marketing manager Matt Mitchener said that the aggregator’s broker network has been “forthcoming” in requesting business audits.

Commonwealth Bank has announced the retirement of chief executive Ralph Norris, and that it will replace him with an executive who masterminded the Bankwest takeover. Norris will step down as CEO at the end of November, with new chief executive Ian Narev to take the reins from 1 December. Narev was previously the bank’s group executive of business and private banking. Prior to that, he served as group head of strategy where he led the controversial acquisition of Bankwest and the CBA investment in Aussie Home Loans.

Brokers receive franchise honours A Parramatta mortgage broker has been one of eight franchisees nationally to be honoured by a national franchising body.

Mortgage Choice broker Kimberly Narayan has been inducted into the Franchise Council of Australia’s (FCA) first Franchisee Success Club.

The Club honours franchisees across Australia for achievements including financial, business success and community leadership.

Narayan’s induction follows a win at the FCA Victoria’s Excellence in Franchising Awards by fellow Mortgage Choice broker Anthony Smith.

Have you got people news? Send your movers & shakers to the editor at ben.abbott@keymedia.com.au

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8/1/2011 11:12:26 AM

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8/1/2011 11:12:27 AM

30

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Insider

Got any juicy gossip, or a funny story that you’d like to share with Insider?

Drop us a line at insider@ausbroker.com

The new tycoons…

awestruck when he saw the case of a Texas man who walked away with a $300,000 house for $16. No, he wasn’t a homeowner who failed to pay his mortgage and then managed to cry poor. He actually just swooped in on a house no one technically owned. It seems a mortgage lender had repossessed a property, and then subsequently gone bankrupt. With no one holding the title to the house, all our intrepid Texan had to do was file some papers, pay a $16 administrative fee and the house was his. They say everything is bigger in Texas. Evidently that also applies to the legal loopholes.

If ever there’s been a reason to de-friend someone…

ANZ has poked you… out of your house

“People don’t know who I am, but just look at my portfolio…”

R

eal estate agency Century 21 has pledged to “change the way Australians think about real estate” with the launch of a free online game, badged ‘Property Mogul’. Built around a distinctly futuristic sounding cityscape that could have come straight from the script of a 1980s sci-fi movie – ‘Centropolis’ – the interactive property game allows users to buy, sell and manage real estate, and achieve what the real estate agency calls “virtual property tycoon status”.

Now, Insider knows that being a property mogul is among the core criteria of being Australian.

However, is Insider the only one who sees the dangers of giving buyers – perhaps many of whom will be frustrated first homebuyers who are currently locked out of the market – an alternative to the potential pain and stress of becoming a real life property magnate? In

30-32 insider + directory.indd 30

the game, prospective property hunters can buy in 16 different neighbourhoods – including in a CBD, wealthy beachside and middle class suburbs, along with outer rural suburbs. To make an even stronger case for being a ‘virtual’ buyer, users of the game don’t even need to work hard for years to scrape together a deposit – or even apply for a mortgage.

That’s right. They are given one property and $1m in virtual cash at the start of the game. Sound attractive? Insider just hopes that giving such a virtual outlet for secret property fantasies doesn’t see a sudden and dramatic drop in demand in the ‘real world’ – that could surely put a hole in agency business.

As socially-awkward billionaire wunderkind and Facebook founder Mark Zuckerberg sits atop his mountainous pile of money and human skulls, no doubt trolling through the private details and personal photos of his millions of online denizens, he may begin to notice something new in his digital kingdom: People being kicked out of their real houses.

Mortgage lenders in Canada, New Zealand, England and even here in Australia have begun using the social networking site to serve foreclosure notices. As crudely impersonal as this may seem, it’s been endorsed by banks, lawmakers and even borrowers.

The argument behind the practice is, of course, that it enables lenders to receive an immediate response when they serve a notice, and that traditional forms of communication often fail to reach borrowers. If Insider were serving these notices, though, he’d try to do it with some pizzazz while communicating in a language Facebook users understand.

Imagine seeing this in your Newsfeed: “Bank of America took the ‘How long until we kick your delinquent ass onto the street?’ quiz and answered ‘Two days’.”

Bank holiday blues

Insider was left slightly disheartened after a recent decision from the Commonwealth Bank to throw open its doors – in a first among banks – on the 1 August Bank Holiday in NSW and the ACT. Despite this one-day respite from retail banking having long been enshrined in NSW law (and no doubt enjoyed to the full by bank employees), CBA sought an exemption from the NSW state government that would allow it to trade on this day.

Now, Insider is not one who oft chooses to defend bank employee entitlements (GFC, karma, etc) but Insider feels this individual case is more a point about the Australian way of life. Since when did Australians – albeit bankers – decide that living to work, was more preferable than working to live? To make things worse, CBA retail banking services group executive Ross McEwan affirmed the bank had canvassed opinions of staff prior to making the decision – and had been ‘delighted’ with the response when the bank called for volunteers to work. Mortgages to pay, perhaps? Insider can’t imagine the Queen stubbornly refusing to blow out her candles on her birthday holiday, and likewise, thinks bank employees should take a holiday when it’s given to them. Yes, even Insider would be willing to wait an extra banking day for this.

The old Texas two-step If there’s one thing Insider envies it’s seeing average people – such as himself – beat the system.

That’s why he was particularly

“So much for that long weekend…”

8/1/2011 10:41:53 AM

www.brokernews.com.au

Services

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at www.brokernews.com.au AGGREGATOR / WHOLESALE BROKER LoanKit 1800 466 085 www.loankit.com.au Page 14 PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 5 & 11

BANK Bankwest 13 17 18 www.bankwest.com.au Page 7

COMMERCIAL Think Tank Property Finance 1300 781 043 www.thinktank.net.au deal@thinktank.net.au Page 9

Homeloans Ltd (08) 9261 7000 www.homeloans.com.au Page 15

NCF Financial Services Pty Ltd. 1300 550 707 www.ncf1.com.au Page 8

Liberty Financial 13 23 88 www.liberty.com.au Page 3

Rapid Capital 07 5562 2485 www.rapidcapital.com.au Page 10

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 2

WHOLESALE Resimac 1300 764 447 www.resimac.com.au Page 17

Pepper Homeloans 1800 737 737 www.pepperonline.com.au Page 13

OTHER SERVICES RP Data 1300 734 318 Page 19

Provident Capital 1800 668 008 www.providentcapital.com.au Page 4 www.residex.com.au

LEGAL SERVICES Bransgroves Lawyers (02) 9221 9522 info@bransgroves.com.au www.bransgroves.com.au Page 6

31

The House Price Information People

SHORT TERM LENDER Mango Media 02 9555 7073 www.mangomedia.com.au Page 1

Residex 1300 139 775 www.residex.com.au Page 31 Trailerhomes 0417 392 132 Page 23

LENDER Citibank Mortgages 1300 652 059 www.mortgagebroker.citibank.com.au page 32

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To advertise in Australian Broker call Simon Kerslake on +61 2 8437 4786

8/1/2011 10:41:58 AM

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8/1/2011 10:41:59 AM