Australian Broker magazine Issue 8.07

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ISSUE 8.07 April 2011

Brokers discount Genworth claims

Ellie Comerford

 LMI portability

assertions called into question Brokers and industry bodies have disputed claims by Genworth that LMI premiums do not represent a significant barrier to refinancing.

In its submission to the Senate banking inquiry in March, the mortgage insurer argued that borrowers hit with a new LMI

premium when they attempted to do a dollar-for-dollar refinance represented only 1% of the market. However, MPA Top 100 Broker Brad Nolan of Eastern Financial Solutions said this is not an accurate representation of the market.

“I think they can make any figure look the way they want,” Nolan commented. “It would be a small amount of those who actually opt to repay the LMI to refinance. They have no measure

Gender agenda

of those who considered refinancing only to change their decision because of having to pay LMI for a second time.”

Fellow MPA Top 100 Broker Justin Doobov of Intelligent Finance agreed, saying the figures do not take into account those put off by the high cost of a second LMI premium.

“The statistic is only counting people who have paid LMI again; it doesn’t measure how many people wanted to change lenders but did not because of the new LMI charge,” he remarked.

Calls have been growing in the industry for LMI portability. As part of the federal government’s banking reform package, LMI portability is set to be examined.

In response, Genworth CEO Ellie Comerford has said a measure of portability already exists.

“The fact of the matter is most people’s understanding of LMI shows it’s not clear that there already is a degree of portability.

A borrower can request a refund if they switch loans within a certain period of time. There are various degrees of refunds, and discounts are also available.

“Maybe there needs to be more transparency about what is and isn’t offered. The ICA is working with Treasury to decide what that will look like, and for it to go into the mortgage facts sheet. We all want consumer education. We want consumers to know whether they are entitled to an LMI refund or discount,” said Comerford.

Page 20 cont.

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Women brokers ‘the way of the future’ Page 2

Service snafus NAB Broker explains the 2010 service glitch Page 4

Fee-for-all Industry clashes over fee-forservice future Page 18

Inside this issue Viewpoint 21 The future of clawbacks Analysis 22 Are aggregators ready for ASIC? Opinion 23 Turnarounds unlikely to improve Insight 24 Persisting, and building relationships Market talk 26 Queensland market in conundrum People 32 Broker keeps flooded clients afloat Caught on camera 33 NAB Broker briefs Sydneysiders

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News Women brokers the way of the future

Queensland-based mortgage broking group Loan Clinic is championing the role of women in mortgage broking, claiming they will be “the face of the financial industry of the future”.

John Frame, who established Loan Clinic in 2005, said the group currently has “an all-female broker team” of five – apart from himself – and that it is aiming to recruit an additional seven women over the coming year.

“While I believe men make good brokers, women are strong on relationship building and have wide networks from their work, personal and children’s circles, and let’s face it, are perhaps more comfortable dealing with other women,” he said.

While Frame said the financial services industry was previously male-dominated, he claims this is changing over time, citing as an example a 2008 ASX study, which showed 37% of women own shares

directly – just behind 40% of men who do.

“The increase in the last decade has been quite significant and likewise we are seeing this trend in our sector,” Frame said.

“More and more women are becoming very driven in growing their wealth and financial independence, doing the groundwork on all financerelated matters and providing for their retirement.”

He added that women were more inclined to talk about finances and health amongst each other whereas men rarely did.

At present, Frame said 92% of the group’s business comes from referrals from existing clients, and most of these referrers are women.

Tanya du Preez, a 36-year-old Loan Clinic broker, recently won the Achievement Award at the MFAA’s Excellence Awards. She said her greatest achievement has been leaving behind a well-

established corporate career and, in a relatively short time period, building a successful business Tanya du Preez doing what she loves – helping business owners and investors achieve their financial goals.

She said Loan Clinic’s John Frame had helped her “find a niche” in the market early in her career. She said she hoped to continue to leverage strategic relationships (with financial planning and accounting firms), and was also keen to mentor other women who were eager to join the Loan Clinic co-operative as the group builds on its femalecentric model.

New ID check task could fall to brokers Brokers could be called upon to perform identity verifications for lenders when registering or transferring a mortgage under a new conveyancing scheme, Gadens Lawyers has said.

In an update from the law firm, Gadens senior partner Jon Denovan has told stakeholders the new National E-Conveyancing Scheme, under which the lodgement of land dealings occurs electronically, could see lenders using brokers to verify a client’s identity. Denovan said the scheme could potentially “create a bias against brokers and lenders without large branch networks” by requiring face-to-face meetings with clients to perform identity checks. Even customers who belong to banks with large branch networks could be heavily inconvenienced by the need to physically go into a branch to

complete an identity check, Denovan commented.

Gadens said though the National E-Conveyancing system is currently “a few years away”, lenders are being requested to give feedback on the proposal to use brokers to perform ID checks, in much the same way as many brokers currently undertake AML/CTF identification for lenders.

According to Denovan, the proposal necessitates that lenders accept liability for the accuracy of the checks brokers perform.

Denovan wrote that the suggestion to use brokers has been based upon the fact that brokers are now licensed and carry PI cover. It also requires lenders to ensure brokers receive adequate training and

to carry out regular quality assurance checks.

Gadens has also revealed another option being considered is allowing Australia Post to verify identity on behalf of lenders. The law firm is currently gathering feedback on the proposal, and has asked lenders if they would be willing to underwrite the performance of brokers carrying out the checks.

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NAB Broker explains service snafus NAB Broker has promised to provide “compelling, consistent” service, after admitting a oneoff December 2010 technical glitch had fermented negative perceptions among brokers.

Speaking to over 300 brokers in the ballroom of Sydney’s Hilton Hotel in late March, Flavell said that based on feedback from its broker network, a desire for constant service was a key priority, and that it was no good being “good one minute and terrible the next”.

Flavell said a system enhancement in November 2010 – when the bank removed a piece of legacy software to establish one platform for processing loan applications – had resulted in a period of blackouts when brokers were unable to track the status of these loans via instant SMS messaging, as well as online. At

the time, Flavell said there were 270 “in-flight” loan applications.

NAB Broker service feedback data showed that as a result, 38% of brokers were unsatisfied with the bank’s service at the time, and only 39% declared themselves satisfied.

However, Flavell said the bank was now resourcing ahead of time and “running rich” in its processing team to ensure consistency. As a result, Flavell said more recent data showed a shift in satisfaction, with 55% of brokers now indicating they are satisfied with the service, and only 22% dissatisfied.

Flavell said he considered the bank’s current average turnaround of 7.5 days to be “too high”, and that the bank would “feel more comfortable” with a turnaround of between five and seven business days, as long

ASIC moves to axe ageism ASIC has provided new guidance to preclude lenders from discriminating against borrowers on the basis of age.

With some industry pundits predicting NCCP regulations could potentially shut over-55s out of the borrowing market, ASIC commissioner Peter Boxall has said lenders should not take a restrictive approach to older borrowers.

“We are concerned by reports of older borrowers whose employment will reduce, or cease, before the end of the loan term, being refused loans because some lenders are adopting an unnecessarily restrictive approach to meeting

the responsible lending requirements,” Boxall said.

Boxall commented that older borrowers often have a variety of assets other than those from employment which could be used to service a mortgage.

“Undertaking the range of enquiries required by the legislation will often reveal other ways that they will be able to repay the loan,” he commented.

In response to the issue, ASIC has updated RG 209 to include clarification that reasonable enquiries into a borrower’s financial situation can reveal other means by which a loan can be serviced, even when there is no

as this is provided at least 90% of the time, in line with desires for consistency.

He said that this meant there was an obligation on both parties – both bank and broker – to ensure that loans were submitted appropriately and processed effectively. He declared himself “frustrated” with other banks who indicated that the responsibility for conversions lay entirely with the broker.

Reassuring brokers, Flavell also indicated the bank will hold its commissions at their current level for at least the next few years. He said the commission model had been designed to withstand a business cycle of seven to eight years, and the “principles are still sound” in the middle of the cycle.

NAB Broker figures show that brokers will soon begin to see the continued income stream. It has also provided new guidance on issues which should be considered by lenders when assessing a borrower’s ability to repay a loan.

Boxall said responsible lending should not keep people from securing housing finance on the basis of age.

“The new responsible lending requirements in the National Credit Act are an important protection for consumers, but they should not be an inflexible barrier to credit for any segment of the population, and should not prevent consumers obtaining credit that they can reasonably afford,” Boxall commented.

ASIC further clarified RG 209 to state that the use of automated

John Flavell

long-term benefits of NAB’s “ramped” trail commission structure, which pays higher trail commission over time, up to 0.35% after five years. systems such as lender software to test the reliability of income information could help satisfy requirements that licensees take reasonable steps to verify a borrower’s income.

Peter Boxall

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Bank of Melbourne eyeing aggressive growth Pioneer seeks The CEO of newly-rebranded However, some Victorian exercise,” Power growth after Bank of Melbourne is seeking brokers are sceptical as to whether commented. to triple the brand’s impact consumers will be drawn in by the Smartline in Victoria. rebranding. Melbourne-based broker Tony BDM beef up Bank of Melbourne is set to broker Vincent Power of Investors Petrevski said the launch in August, as Westpac rebrands St.George branches in Victoria with the previously defunct name. The bank has said in a statement it intends to grow to more than 100 branches and 300 ATMs within the next five years, including opening 14 new branches throughout 2011.

St.George currently holds a 4% market share in the state. With Westpac hoping the resurrected Bank of Melbourne brand will better connect with customers, CEO Scott Tanner said he believes the market is ripe for a local bank, and that Bank of Melbourne can see this market share grow.

“Our customers and the market have told us that they want a local bank, one that is really engaged in the local communities in which it operates. Bank of Melbourne will be that bank,” he said.

Direct Financial Group said that rebranding St.George branches will not necessarily capture the community feel of the previous Bank of Melbourne.

“The public liked the Bank of Melbourne for many reasons. It had great customer service principles and was seen as friendly by many people. The Bank of Melbourne doesn’t exist now. You can bring back a name but you can’t bring back the soul of the place. Changing the name plate over the door is just a marketing

rebranding was not likely to see Tony Petrevski brokers writing more business for the former St.George branches.

“Personally in my 11 years at Smartline, I have only submitted three loans to St.George, with the last one being in February 2008,” Petrevski said.

“It all depends on what service they will provide. It’s all about the delivery from the back end that generates more business,” Petrevski commented.

Regional rebrands Westpac has not ruled out rebranding St.George in both Queensland and Western Australia. The bank’s COO, Andrew Moore, has been reported to have said the group wants strong regional brands that “resonate with customers in specific geographies that are looking for alternatives to the major banks”. However, for now Moore said it is “absolutely supporting” the St.George brand in those states.

Big Four continue mortgage growth stoush

NAB has seen its home loan growth for February outpace the other major banks, new APRA figures have indicated.

According to APRA’s monthly banking statistics, the bank grew its mortgage book by nearly 1% during the month. While Westpac and CBA each grew by less than a quarter of a per cent, ANZ saw its loan book grow less than half a per cent.

Speaking to brokers in Sydney this month, NAB’s general manager of broker distribution John Flavell said the bank will continue to set its sights on lending growth, with current growth rates at seven times system. Flavell indicated the quality of NAB’s mortgage book would make lending growth sustainable.

“Our average LVR is 73%, and 83% of our business is under 80% LVR. Instances of loans slipping into default are about 20% of what they were two to three years ago.

That’s why we can maintain our competitive position and do away with fees and charges,” Flavell said.

Flavell also commented that the third party channel would become increasingly important in the bank’s loan book growth. He said NAB was working toward building a 20–25% market share of the home loan

market through Homeside.

“We believe with the strength of our value proposition that at least one in four to one in five home loans written by brokers should be written on Homeside paper,” Flavell said.

The APRA figures also indicated a turnaround in business lending, which saw its strongest monthly growth in two years in February.

ANZ posted the strongest growth in business lending, raising its loan book by 2.2%. The bank was followed by NAB, which grew its business lending by 1.5%.

While Westpac also posted a strong result of 1.1% growth, CBA cut its business loans by 0.2%.

Commonwealth Bank remains the biggest mortgage lender among the Big Four, while lending the least to business.

Pioneer Mortgage Services is recruiting new BDMs and looking at new funding options as it seeks to kick-start a Brad Driffill rapid growth phase over the next 6–12 months.

The mortgage manager, based in Queensland, has recruited two new BDMs – one in WA and one in Victoria – and plans to recruit further state-based representatives in NSW and South Australia in the next 6–12 months.

The new recruitment plans follow the addition of Queensland-based BDM Michelle Newby in July 2010.

Brad Driffill, who recently left his role as Vow Financial account executive to join Pioneer as its permanent BDM in WA, said the group had been in a “holding pattern”, but was now focused on growth following the GFC. “Now that they’ve gotten through the GFC and survived, they’re looking to expand and grow the business,” Driffill told Australian Broker. “That requires greater volumes, and they need people on the ground in order to achieve that.”

Steve Lake has joined as the group’s new BDM in Victoria, while Tony Dale heads the group’s sales operations from Queensland.

Driffill said the group will also be looking at expanding product options for brokers. “We will be looking to bring on different funders underneath Pioneer’s banner,” Driffill said. Pioneer’s current funders are Adelaide Bank and Resimac.

Driffill said Pioneer would also market its service, ease of accreditation, lack of minimum volume requirements, and its “healthy” commission structure for brokers.

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

First homebuyers confident amid contradiction First homebuyers have aboveaverage levels of confidence when compared with the market average, despite more expecting difficulties in meeting payments over the next 12 months.

Genworth Financial’s March Homebuyer Confidence Index found that first homebuyers were less likely to have experienced mortgage stress in the past year.

Only 17% of these buyers indicated they had faced mortgage stress, compared to the market average of 21%.

This finding came despite government incentives that propelled higher numbers of first homebuyers into the market earlier than they may have entered during 2008 and 2009.

However, nearly one in four or 24% of first homebuyers surveyed expected to find it difficult to meet repayments over the next 12 months, compared to a national average of 19%.

For these “strugglers”, Genworth’s research suggested that the rising cost of living had now overtaken interest rate rises as their prime area of worry. Sixty six per cent of those surveyed by the mortgage insurer rated cost of living as their biggest concern, while 51% named rates.

Genworth Financial CEO Ellie Comerford acknowledged that there was more 95% LVR activity in the market among lenders in recent months that was primarily targeted at first homebuyers, and

said she expected an increase in 95% LVR loans written.

However, she said that to date, the interest Genworth had recorded in fresh 95% LVR products had not been “overwhelming”, or reminiscent of pre-GFC levels of interest.

Genworth’s findings suggest that first homebuyers are the most likely to take on higher levels of debt, with 38% of this segment comfortable with an LVR over 80%, compared to a 29% average.

Overall, the Homebuyer Confidence Index measured a 1.5% decrease in confidence since September 2010, though this was driven largely by unique, geographically specific dives in confidence in Queensland and

Western Australia due to recent natural disasters.

Genworth had received approximately 1,000 hardship applications as a result of the natural disasters, the group said.

Homebuyer confidence • Cost of living overtakes interest rates as highest concern for strugglers • 21% of borrowers are finding it difficult to meet mortgage repayments • Less borrowers have an appetite for leverage, or new property investment Source: Genworth Financial

Aggregator choice does matter: Scott New PLAN CEO Trevor Scott has predicted brokers without the resources of a major aggregator behind them could face difficulties under the NCCP compliance regime.

Scott said large aggregators will provide brokers with better resources to ensure compliance.

“Brokers without the backing of an aggregation group like PLAN Australia may struggle under new licensing requirements,” Scott commented.

Scott said PLAN has devoted much of its resources to upskilling its management and business development teams.

“We’ve been aware of NCCP regulation for some time and have taken the steps to not only ensure PLAN Australia’s readiness to tackle any administrative challenge associated with the new legislation but also how we can make the transition to NCCP as easy as possible for our members,” Scott remarked.

In spite of many of the fears surrounding the new compliance regime, it could present a business opportunity for brokers, Scott believes.

“NCCP legislation, despite its challenges for both brokers and aggregators, has changed the face of our industry forever and has given us a true framework from which to build a professional industry that participants are proud to belong to and will continue to attract quality talent,” he remarked.

The transition to compliance for PLAN’s members has been “a smooth one”, Scott claimed.

He said the aggregator has devoted its resources to communicating with and preparing brokers for the changes they will face under NCCP. “We’ve also been able to tap into the capabilities of our parent Advantedge Financial Services,” Scott remarked. He said PLAN has continued to maintain contact

Trevor Scott

with brokers in order to ease them into the compliance regime, and educate them about its implications.

“We’ve used a range of communication channels to work

with members in this regard, from e-communication initiatives and public relations campaigns through to member workshops/ road shows and one-on-one meetings,” he said.

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Connective next to join white label drive

Michael Goerner

Connective is promising to deliver its brokers a brand new white label offering by May or June of this year, and will target volumes of between 5% and 10% of its business.

Speaking with Australian Broker, Connective principal Murray Lees said the group is “quite advanced” in its discussions with potential product funders for the new badged product.

Lees said the 5–10% target would be a “good result”, and that looking at the aggregator’s current volumes, this would still represent “a big amount of money”.

Connective has recruited a new head of sales and business development to develop and roll out the white label product.

Michael Goerner, who was most recently head of commercial lending with Liberty Financial, has been charged with managing the roll out.

Lees has also promised the final product will surpass the expectations of its broker network.

He said the focus would be on service, and enabling consistent, predictable turnarounds.

“If you’ve been in the industry long enough, you’ll be able to think back to a time when the key thing was the ability to get a simple deal done quickly,” Lees said.

While he said the product would need to be attractive for customers and meet thresholds for brokers in regard to commissions,

the ability to get an answer quickly was paramount.

“It’s not a product that will be all things to all people. The key thing will be getting brokers to understand if they put a deal in to us, we’ll get that turned around in a reasonable timeframe.”

Lees said brokers had been consulted extensively as part of the development, and that they had a “strong appetite” for a white label, and had been prescriptive about its shape.

Goerner’s extensive background in this area would contribute to the successful rollout, according to Lees, who said Goerner “knows his stuff inside out”.

Prior to his role at Liberty Financial, Goerner held roles in operations, sales and project management at BMC Mortgage Corporation, and the Commonwealth Bank.

COIN mints new mortgage software Macquarie-owned financial planning software provider COIN has launched a new software suite for brokers and financial planners, as it zeros in on mortgage services.

The software package, COIN Mortgage, has been developed to assist brokers in managing the flow of client information they take during the loan application process, and particularly to assist them in meeting new National Consumer Credit Protection requirements.

A key feature of the product is that it enables product research and comparisons, which provide a client-targeted view at point of sale across different products, which COIN said will help brokers increase the efficiency of loan searches and improve client engagement.

The product includes features such as the automatic population of credit advice statements when a loan is recommended, which can be saved for audit purposes; the creation of customised workflows that build in the new regulatory requirements; automated flow of client data into lender ‘apply online’ application forms and aggregator software; automated loan status updates from application to settlement, enabling tracking of clients’ loans from a single view; and automatic creation of refinancing or top-up applications using existing data.

Macquarie Adviser Services head of product and technology for COIN, Robert McCabe, said

the product was developed after consultation with mortgage brokers and Macquarie’s mortgage team. “One of the common requests was for a solution that made life easier for brokers at a time when there is a lot of change in the industry,” McCabe said.

“The introduction of the NCCP legislation has created a new imperative for brokers to implement a robust process to

A growing number of financial advisers are seeking to diversify their business manage compliance obligations,” he continued. “The industry is also becoming a more competitive space as a growing number of financial advisers are seeking to diversify their business streams and move into mortgage broking.”

McCabe said COIN would target smaller brokerages, as well as larger broking groups and aggregators, who would all be able to integrate and tailor the software to their business.

The new product forms part of the wider COIN Office product suite, which includes both financial planning and mortgage broking software.

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News

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Borrowers unconvinced by bank price wars The high-profile mortgage price war between the major banks has yet to convince consumers, a survey has found.

According to the Loan Market survey of 420 potential or existing borrowers, only 12% of respondents believed price discounting moves by the banks signalled genuine competition in the marketplace. Borrowers showed scepticism about the campaigns, with 45% saying the price war would only boost the profiles of the banks.

While 20% of respondents said the discounting moves were a welcome development, they indicated they did not believe such pricing initiatives would last.

“There’s obviously some scepticism among borrowers about the potential benefits of the major banks trying to outdo one another to win over customers, but the bottom line is there are some good deals to be had and customers can save a lot of money by choosing the right deal,” Loan

Borrowers clamour for 100% loans Borrowers still have an appetite for 100% LVR mortgages despite the fact lenders aren’t offering them, Loan Market has said. According to the company, web searches for no deposit loans have increased almost 30% since the start of the year. Loan Market COO Dean Rushton said the company’s own website saw enquiries for the loans hit a six-month high in February.

“First home buyers are looking to get into the property market but many are trying to do so by borrowing the whole cost of the property. However 100% home loans were justifiably the first products to go with the GFC and those enquiring about this product will not get a loan.

Market COO Dean Rushton said.

Rushton commented that though consumers were sceptical about the price war, they could still stand to benefit by switching lenders.

“The major banks competing head-on can only lead to benefits to consumers,” he said. “Loan Market has always been a strong advocate of increased competition in the home loans sector. The key is to choose the offer or promotion that best fits your financial situation and offers longterm value.”

The current discounting, whether or not it represents real competition, can still lead to

significant savings for borrowers, Rushton said.

“Australians traditionally are reluctant to change lenders but these developments are likely to have some customers reassessing their position. Right now we have variable rates greater than 1% below the banks’ standard variable rate from our panel of lenders. The opportunities are definitely there,” he commented.

The survey also found that despite the high-profile nature of the price wars and substantial marketing resources devoted toward them, 23% of consumers were unaware banks were competing for home loan business.

How consumers view the price wars

Great for bank PR, but will mean little to customers: 45% Pleased to see real competition: 12% Welcome the moves but don’t believe they will last: 20% Unaware of a price war: 23%

DEF ban could sink borrowers in deeper debt The ban on DEFs could have the unintended consequence of tempting borrowers to take equity out of their home for frivolous purchases, it has been claimed.

National Mortgage Brokers managing director Gerald Foley believes removing exit fees as a barrier to refinancing may prey on vulnerable borrowers who want to tap into their accrued equity for big ticket purchases.

“By removing DEFs and making refinancing easier, you’ll start to find that some borrowers who are prone to tapping into increases in equity in their property may go back and refinance. People don’t really refinance. They re-borrow on

their properties,” Foley said.

As people re-borrow on their homes, Foley explained, they will continue to extend the life of their loans. Foley commented that each time borrowers refinance, it is likely they will extend the term of their mortgage another 25 or 30 years and leverage themselves deeper in debt.

“At some point, people who are now getting closer to the age of spending less time in the workforce are going to have to say ‘What’s my strategy now to pay off this loan when I cease work?’,” he commented. “If we make refinancing easier, some people will be tempted to re-borrow on a regular basis, continually tapping

into recently gained equity and continually extending the term of the loan.”

Foley said this could especially be true of borrowers in lower socioeconomic circumstances, who feel they can only afford large purchases by tapping into their home’s equity.

“To a degree, this is generalising, but there will be some people who go for big ticket, aspirational items and will be tempted to access their equity because it’s easier to do. That’s not to say they wouldn’t have done this before, but now they can do this every 12 or 18 months instead of every three to five years,” he remarked.

Foley added that borrowers who do not draw equity out of their homes through refinancing will subsidise those who do as lenders increase costs to protect profitability.

“Every borrower will now pay for the ability to refinance or re-borrow, whether they do it or not,” Foley said.

Gerald Foley

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News CBA retains broker favour Credit reporting regimen not all positive Commonwealth Bank remains the most popular lender among brokers, having tallied a 13% increase since last month in loans submitted by brokers.

According to Stargate’s latest Symmetry Market Index, CBA accounted for 29% of the total lender products sold by brokers. Also posting a 13% month-on-month increase was NAB’s Homeside range, which accounted for 11% of total lender products sold. Stargate chief executive Brett Spencer said the result shows competitive moves

by CBA and NAB are generating results as the majors try to grab home loan market share.

“This month’s results show that the ongoing campaign by NAB and CBA for market share is paying dividends for both lenders through increased exposure,” Spencer commented.

Commonwealth Bank has retained its top spot with its Rate Saver product remaining the most

Marketing pays off: The Big Four’s broker volumes in March Volume Change: February to March 22% 13%

13%

-23%

CBA

NAB

Source: Stargate

Westpac

ANZ

popular. CBA products accounted for four of the top 10 most popular, while Homeside had two products in the top 10. While NAB’s Homeside Home Plus Variable Rate ranked as the second most popular product, Spencer said broker feedback showed NAB needs to work on service delivery to the channel.

“According to broker feedback from 727 brokers, NAB needs to improve its turnaround times in the face of increased submissions,” Spencer said.

The results show that the campaign by NAB and CBA for market share is paying dividends The index also indicated that Westpac has replaced Bankwest as the third most popular product, while ANZ slipped 23% in loans submitted by brokers in comparison to February. Average loan values were also up, increasing from $386,000 to $389,000.

Spencer commented that the months ahead could see further changes in the Index as NCCP regulations change the lending landscape.

“With brokers getting comfortable with the NCCP requirements, it will be interesting to see what effects this will have on the number of quality loans submitted to the major banks,” he remarked. “We also expect the fallout from the government’s decision to abolish exit fees to play a huge role in the coming months on consumers’ lender preferences.”

The implementation of a new ‘positive’ credit reporting regimen this year could push more brokers into the non-conforming space, a leading non-conforming broker has claimed.

Under current law to date, credit reporting has only included negative credit incidents – such as loan defaults and failed credit applications – being recorded on an individual’s credit file.

However, new draft legislation would see the inclusion of a range of positive credit information. This would include credit accounts held by a client, the dates they were opened and closed, the credit limits on these accounts and the client’s credit repayment history.

Oasis Mortgage Group’s Graham Reibelt told Australian BrokerNews the legislation was a “draconian big brother step” that would empower lenders “enormously”, and impact the majority of clients’ credit worthiness in a negative way. He also suggested it will result in more brokers being pushed into the non-conforming arena as more credit problems are encountered.

Consumer groups have voiced concern that lenders could access repayment data that would show them a customer has been late on repayments by periods as short as one day.

“For example, you have a Westpac credit card, and everything’s fine, they love you to death, you’ve been with them for 10 years, and they are happy to increase your limit,” Reibelt explained. “But maybe you’ve been late making the

payments a few times this year – maybe it was for health reasons, maybe you were travelling – but it was nothing major. Graham Reibelt “Well they [lenders] will have the right to list you as a late payer for being one day late. You then rock up to apply for your mortgage, and they will do a review of your history, and they’ll say ‘What makes you think you can afford the loan, if you can’t pay your credit card on time?’ ” Reibelt said lenders would need to relax their credit policy to allow for late payments, and has predicted the new legislation will result in a credit scoring system similar to the US, where borrowers will need to attain a certain number of points to be granted a loan.

As lenders are expected to start under the regimen with past data, they may also have the power to delve into a client’s past credit position to uncover discrepancies in information supplied by brokers and clients, uncovering any incidents of mortgage fraud.

“If lenders do a bit of an audit, then they can uncover an awful lot of information that hasn’t been disclosed fully to them,” Reibelt explained.

Reibelt said a few late payments doesn’t always indicate that a client is a bad credit risk. “We don’t always need or want the whole truth particularly when the information isn’t of material importance. It’s a bit like your wife asking: ‘Does my bum look big in this?’,” he said.

18 www.brokernews.com.au

News

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

SPECIAL REPORT: BROKER REMUNERATION

Clash of rhetoric over fee-for-service Senior industry executives have disputed the value of a market-wide move to fee-forservice, with some arguing that a James Symond broker’s value proposition is not enough to justify “slugging” customers with another fee.

Despite many individual brokers being in the process of moving to a fee-for-service model to top up declining commission incomes, AFG NSW state manager Chris Slater said AFG’s position was that a wider market move to fee-based service could kill the “golden goose”.

“We like to have a debate about how we can get the number of customers who use brokers above 40%, and that’s where the rubber hits the road for us,” Slater told an MFAA luncheon panel discussion in Sydney in March.

Slater said putting another fee barrier between brokers and the other 60% of customers in the market – with 80% of those customers using major bank brands – would not benefit the industry.

He added that declining commission incomes and increased compliance responsibilities under NCCP were not strong enough justifications for brokers to begin “slugging the customer” with a fee-for-service.

First Point broker Troy Phillips said a fee of $500 here and there would not help brokers, and

argued that rather than a fee, the mortgage industry should work collaboratively to put greater pressure on major banks and lenders to increase their commission offerings, and that eventually “distribution talks”.

However, Advantedge general manager of broker platforms Steve Weston said that introducing a feefor-advice was necessary to ensure brokers were not living on “bread and water”.

“Brokers aren’t getting paid for being in a professional industry like we are. We’ve seen commission cuts of 30%. And we have to do more today under NCCP than we did. We need to address that revenue gap.”

Weston said that one way to do this was a fee-for-advice. “From a consumer perspective, they get value and service from brokers.

Our job is to articulate the value they are getting, and once they truly understand the value, they will be happy to pay,” Weston said.

Aussie Home Loans executive director James Symond said that fee-for-service already exists, and that it was up to individual businesses to make their decision.

“A lot of people in the broking industry are already doing it – some of them extremely successfully,” Symond said.

“They see value in their service, they see value above and beyond the next person, so there is a fee-for-service proposition that exists. The industry needs to say, ‘Fine, if this exists, then let’s put some framework around it.’ ”

Commission increases dubbed “highly unlikely” Holding the line on current commission levels is the best brokers can hope for in the forseeable future, according to Advantedge’s head of broker platforms Steve Weston.

Speaking at an MFAA lunch in Sydney in March, Weston said that while he would be the biggest advocate of any “incredible onset” of competition that would lead to broker commission increases, “to be realistic, the best we can do is hold where we are”.

Weston told attending brokers that any hopes of commissions going up in the short to medium

term is “highly unlikely”.

“Where we’ve got to I think is a fair place at the moment. Where we’ve got it is as good as we can get in the short to medium term, that they [banks] are happy with commissions,” he said.

Due to the ultra-competitive price environment in the current market, Weston said banks were also likely to look closely at their commission pricing.

“Let’s face reality today; as much as we desperately don’t want commissions to be cut – and certainly none of the major lenders have come out and talked about it

Exit fee ban ups clawback pressure Brokers are under increased pressure to ensure customers are put into the right loan the first time, following a ban on exit fees that is expected to mean an uptick in clawbacks.

Speaking at an MFAA lunch in Sydney in March, Aussie Home Loans executive director James Symond said that the ban on exit fees was not a good move for the industry in terms of competition, particularly with regards to non-bank lenders. However, he said the “good news” is that it will make brokers focus more on holding on to their customers for life.

“They’ll have to make sure the customer is in the right loan and that they are maintaining contact with the customer, so that when the customer is ready to go again with their next transaction, they are the first point of call,” Symond explained.

Speaking at a panel discussion at the event, other industry representatives agreed there was a possibility of increased clawbacks if more customers switch lenders following the ban.

However, AFG’s NSW state

manager Chris Slater also said the pressure on clawbacks created the opportunity for brokers to focus on doing the job right the first time.

“The real issue is that hopefully you have done a great job, so that when they do that next transaction they come straight back to you to do the next deal and you get reimbursed – yes, there is a clawback, but there’s another upfront,” he said.

Slater said AFG was encouraging brokers to focus on a thorough needs analysis at the start of the client relationship, which presents a chance to ask clients what their future intentions are.

“A lot of the time they won’t know, but a lot of times there is an opportunity to say ‘Listen, this is how we are remunerated, so if this is going to be a possibility I would like to know upfront’,” he said.

Slater said he knew of brokers who currently put a clause in their Finance Broking Contract reserving the right to recoup clawbacks.

However, he added that he did not expect refinance numbers to jump radically above AFG’s average recorded over the past five years.

Flash back: Non-bank clawbacks Recently, leading non-bank lender Homeloans Ltd admitted clawbacks may have to increase following the 1 July ban on DEFs. Homeloans general manager of third-party distribution Tony Carn said the ban would mean the entire non-bank sector, including Homeloans, would have to re-examine commissions. “Commissions will have to come under further scrutiny across the board,” Carn commented, adding that commission clawbacks would not be out of the question. “For us as a non-bank, we don’t enforce clawbacks. Quite frankly, though, we’re going to have to look at a clawback model. That’s the sad necessity,” he said.

– if you go up to the CFO and the CEO of the banks, right now in the last month or two there is this amazing price war on again, so suddenly the CFO with a calculator – he’s not listening to you or me – he’s saying the broker channel is now more expensive, it doesn’t make sense again. This is reality, how it happens,” he said.

Weston said any arguments made by the broker channel for holding commissions steady in the face of renewed pressure on commission levels may even be viewed as empty threats, following the increased broker volumes that flowed to the banks during the GFC, despite 30% commission reductions.

However, Weston said that long term the channel should not be

looking just to “hold the line” on commissions, but instead should be striving towards the absolute answer of pushing broker market share up to 60% “where it more realistically belongs”.

Steve Weston

www.brokernews.com.au

19

SQM reveals growing stock glut as values stagnate the most recent RP Data-Rismark Home Value Index, which showed that housing values in February remained largely flat as auction clearance rates lagged. RP Data research analyst Cameron Kusher said the market was quickly beginning to favour buyers.

“Auction clearance rates have been a little weak,” Kusher said.

“The number of homes advertised

for sale is at the highest level it has been since we started collecting this data, and other lead indicators such as the time it takes to sell a home and the margin by which vendors have to discount their property are climbing again after reaching a plateau in recent months. Conditions are certainly in favour of prospective investors.”

Kusher said while the past year

has seen modest capital gains in some cities, housing values are still in decline.

“When you consider that Australian inflation was 2.7% in the year to December 2010, in real terms Australian residential property values have been declining, which is a good outcome for prospective buyers,” he commented.

Soft market: Increases in unsold stock 70% 60%

60.2% 51.3%

56.9%

54.5%

55.5%

47.0%

50%

46.1%

Month-on-month change

40% 30.6%

Darwin

5.4%

5.3%

4.2%

1.1%

Perth

5.1%

Brisbane

15.6%

13.4%

Hobart

5.5%

Canberra

10%

Year-on-year change

National

13.7%

Melbourne

20%

28.0%

Sydney

30%

Adelaide

Housing stock on the market has hit a two-year high, a property research firm has found.

According to SQM Research, February saw residential listings rise by 16,926, representing a 5.3% increase on January’s result.

The findings have also indicated a 46.1% rise in the amount of stock compared to February last year.

SQM managing director of research Louis Christopher said the result showed a severe downturn in the market, which he claimed has been developing for some time. Christopher said the increase of stock in February could be explained by seasonal property cycles, but the increase of stock since last year represented a more serious trend.

“The increase in February’s listings across the country is a result of the reopening of the property season. However, the year-on-year increase cannot be explained by seasonal influences.

Rather it has been influenced by the downturn in the market, which has existed since January 2010,” he commented.

Adding weight to the result is

Source: SQM Research

20 www.brokernews.com.au

News Comerford said some lenders offer community-based pricing in lieu of a refund, and that this should be made clear to borrowers.

A Genworth spokesperson has also told Australian Broker that because LMI premiums are refunded to lenders, the onus is on the individual lender to pass this refund on to borrowers.

However, FBAA president Peter White, a vocal critic of the current state of LMI, has challenged this assertion, and claims LMI providers and lenders intentionally fail to educate borrowers about the availability of refunds.

“I’ve refinanced my mortgage three times, and I’ve had to pay a new LMI premium each time.

I never got a refund, either,” White said.

White has accused LMI providers of exploiting their position under APRA to keep from disclosing the terms of policies to borrowers.

“I think they’ve been sneaking under the radar. They can sit back and argue how they like. I know it protects the lender, but the consumer is goddamn paying for this, and they’re paying serious money,” he remarked.

However, Comerford said because the product is sold to lenders rather than consumers, no product disclosure statement is required. Furthermore, she stated that few borrowers refinance for the original amount of the loan, with most looking to secure cash or seeing their valuation change. Comerford said the change in circumstances means APRA capital requirements see these refinance situations as new loan facilities requiring a new LMI policy.

“We’re not seeing people switch to go to a loan that’s dollar for dollar. If they want to switch, it’s

Justin Doobov

because they want more money, or the valuation of their property has gone down. There are a number of reasons why their circumstances might have changed. The regulations and APRA say that’s a new loan,” Comerford said.

Nolan, though, claimed that as competition has heated up in the home lending sector, the number of borrowers looking for dollar-todollar refinances is increasing.

“With all the pricing wars currently in the market, we have started to have a run of enquiries from people wanting a better rate elsewhere but who are still in mortgage insurance territory,” he commented.

Likewise, Doobov said many borrowers have been put into the wrong loan facility in the first place, but can be deterred from looking for a better deal because of LMI premiums.

“We get introduced to new clients who have a loan that is not structured correctly and to re-structure it they would have to pay LMI again,” Doobov said.

But LMI portability to aid people in switching could lead to increased premiums, even for those happy in their current facility, Comerford said.

“The unintended consequence is that premiums are affected for

everyone because of a handful of people,” she stated.

White has questioned why portability would necessitate these increased premiums.

“If nothing has changed about the underlying lender, how can there be an increase in premium? Where’s the justification of increasing the premium? It’s bullshit. Tell me how it can go up when the original premium was calculated on a 30-year term. It’s money-grabbing and profiteering,” he said.

Amid the fierce debate, Nolan has predicted full LMI portability could have unintended consequences for brokers as well.

As with DEFs, removing a barrier to switching could lead to a higher degree of churn, Nolan believes.

And, as more borrowers move from loan to loan with greater ease, brokers could find themselves hit by increasing clawbacks.

“Like the abolishment of DEFs, it will be ruined by the majority in my view. Brokers will end up having a greater number of clawbacks which are out of their control,” Nolan said.

Moreover, Comerford has claimed that the current administrative structure is prohibitive of LMI portability.

With each lender carrying a different risk profile, each new loan would require new calculations for premiums. Comerford said the only path to complete portability would be a government repository for mortgages.

“If the government wanted to achieve full account portability it couldn’t just be for LMI, it would have to be for mortgages as well,” she said. “If you want full LMI portability you would need a mortgage repository. When you don’t have a mortgage repository, you have refunds available, or a discount depending on the lender.

In effect, portability is there, but

there’s not a nice, neat little administrative framework.”

However, White believes there is no reason the current administrative framework could not change. He commented that banking regulations in Australia should change to allow for LMI portability, and has accused banks of standing in the way of these changes.

“The only barrier to LMI portability is the banks stopping it. I have spoken with other parties in the insurance game who have portable LMI products and can’t get it to you because APRA has a barrier there at the moment.

There are overseas parties who have tried to bring their products to Australia, and found the APRA conditions too draconian,” he said.

Regardless of the debate, White said he recognises the importance of LMI in helping first homebuyers and borrowers without a large deposit to enter the housing market. He has commented, however, that the way LMI is regulated needs to change.

“It’s an important product that needs to be there, but it needs to be properly disclosed. It needs to be a fair game, not raping and pillaging and profiteering off the consumer.”

Brad Nolan

iSelect enters mortgage market through AFG Insurance comparison business iSelect has moved into the home loan arena after partnering with AFG. The move will see AFG providing iSelect with aggregation services such as loan comparison features and electronic loan lodgement. Under the agreement, iSelect will function as a licensed credit representative of AFG. General manager of home loans for iSelect, Cameron Clemens, said the move into home loans was a natural one for the insurance comparison company.

“We have built a successful business over 10 years by helping people to simplify their purchase

of important but complex household products, like health, life and car insurance. Few products we buy during our lives are as important, or as complex, as a home loan, and we believe our commitment to simplifying things for consumers is perfect for this market,” Clemens said.

Clemens said the company will function as a broker under AFG, and is in the process of receiving its ACL. “We are at the early stages of getting our own licence. We’ll have to take over all of the compliance aspects under our own licence, but nothing will change in terms of the operation of the business,” he said.

In preparing for the move into the home loan market, iSelect has built a home loans team which will include mobile mortgage consultants throughout NSW, Victoria and Queensland.

Clemens said iSelect Home Loans is experiencing strong uptake, and will look to expand its number of home loan consultants in the months ahead. He commented that the company’s consultants come from experienced backgrounds in the mortgage industry.

“We’ve started with a team of 10. What we’re really after and what we’ve so far succeeded in getting is people with a great deal of experience in

lending. A lot of them were in the mortgage broking area, but also a lot have come from people working with lenders, both in lending and approval,” Clemens remarked.

These experienced consultants, Clemens added, will work together in their areas of expertise to help loans reach settlement quickly.

“The customer gets two brains on every deal,” he said. “Every application we have someone who’s really experienced at giving great advice and someone who’s awesome at packaging deals and holding the customer’s hand through settlement. We think this will result in quicker and better deals.”

www.brokernews.com.au

21

Comment VIEWPOINT

Clawbacks are back on the cards, after the Treasury’s triumphal banning of exit fees. We asked our industry insiders what they thought about the new clawback crisis

Sarah Wells

John Mohnacheff

Lisa Claes

Redconcierge

Liberty Financial

ING Direct

On clawbacks: I think it will impact the value of trail books. If you are going to have clawback going out to three or even four years, there could be some issues around how you value your income, whether you need to have a certain amount of that assigned as unearned revenue, or what the balance sheet liability could be going forward when you are looking to sell your trail book.

Secondly, there’s an issue around being able to recruit new talent. If there is the possibility that income will be clawed back at some point, why would people want to transition from other industries into broking? And given that if you want to grow your business and recruit new people into your organisation, how are you going to be able to justify a wage to them or a commission basis when there is that possibility – through no fault of the brokers – of having that income clawed back at two, three or even four years?

On the DEF ban: There will be all sorts of derivatives of clawback – we will defer paying our trail or we will now spread our upfront over first, second, third year – so that the longer the customer stays, the greater the reward to the broker. The obvious ones are that banks or lenders will start lifting their application fees, re-establishing app fees, or rate differentials – depending on loan size. Somewhere, somehow, we have to recoup the cost of establishing a loan. We do not have a definitive answer, and I don’t think anybody else has either.

On Liberty’s structure: Liberty has the very fortunate position of having a rebateable establishment fee, which is quite different to a DEF. So we have had the transparency there, we have always acknowledged that and put that in the loan. We are in a fairly strong position so we can wait to see what the market does and then decide what to do.

On the DEF ban: We have no plans to change our commission structure. That’s not to say that we are blind to what might be happening in the market – but there’s been minimal plays in that space at the moment. I think that as the true impact of DEF settles in the marketplace, we will wait and see what our competitor response is to it. On ING Direct’s distribution model: It comes down to largely our distribution model – we are a branchless bank, so we rely primarily on our third party broker channel – they are our branches if you like. That being so, we don’t have the fixed costs to support, and we like to use the savings we get by having a more efficient distribution network translated back for the customer. And that translates into competitive fees, good products and no DEFs.  Watch The Big Story video at www. brokernews.com.au/tv

FORUM The fee-for-service debate was reignited online by an MFAA panel session for Sydney-based mortgage and finance brokers, where there was heated – and entertaining – debate Why don’t we offer the choice to our clients? They can choose a fee-forservice and/or commission-based remuneration. We can act as a brokerage tool to show them what’s available and then broker the loan application. We could get commission for that. But as soon as we give advice or make recommendations a fee-for-service would kick in. That puts the client in charge and we get paid what we are worth. We need a compromise that all industry players can agree on.

Northerner on 29 Mar 2011 12:31 PM I like the following line in this story (Clash of rhetoric over fee-for-service, published 29/03): “The mortgage industry should work collaboratively to put greater pressure on major banks and lenders to increase their commission offerings”. The lenders don’t care about any pressure while the brokers only submit 40% of the total loans. Get that percentage up to 70–80% and the lenders will listen. It’s simple supply/demand. oldBroker on 29 Mar 2011 12:46 PM

For a start, fee-for-service should be commission free. So if the banks do not give a discounted rate because it’s commission free, then scrub from the lender panel. If clients are getting a better rate, then over the long term they will be better off and less likely to churn. However, most churn comes within the same bank, so if they are getting a wholesale rate the client would be less likely to refi. The only reason why AFG doesn’t like fee-for-service is because they don’t know how to take their cut if the broker is charging the client direct.

Phil on 29 Mar 2011 01:20 PM It’s my business (although, the lenders, aggregators and ‘industry’ commentators would disagree). I will do what I like within the framework of the law. It’s between my clients and I how I am rewarded for what I do.

Ozboy on 30 Mar 2011 09:24 AM

When ASIC permanently banned its first mortgage broker under the NCCP, it caused a rush of interest to our website – read your comments I don’t know why ASIC is blowing its trumpet here. The MFAA have expelled the broker. He will never work in our

Poll: Aggregators and compliance Question: Are aggregators doing enough to support brokers with their compliance obligations?

Yes (23%)

No (60%)

Undecided (11%)

Poll date: 24/03–4/04 To vote in our latest online poll, visit our online home page at www.brokernews.com.au

industry again nor should he. This action would have occurred with or without NCCP. Keith Bridges on 29 Mar 2011 02:35 PM Dear Keith, the MFAA banning would NOT and DID NOT stop him from operating.

In fact, there have been many instances of expelled MFAA members joining the other industry bodies and continuing to operate. At least under ASIC control, these characters will be forced out once and for all.

Pointing out the facts on 29 Mar 2011 02:56 PM ASIC, good work! I want to see more of these lifetime banning activities in our professional sphere. It is time to clean up, and I hope ASIC takes the leading role to start auditing the brokers’ work. Thank you, ASIC. Chen on 29 Mar 2011 05:15 PM

One reader had this to say about an incoming “positive” credit reporting regimen that will make more credit information available to lenders In reality the new positive credit reporting is only going to impact two groups of applicants; the marginal applicants (those either slightly above or slightly below a lender’s risk cut off) and those providing false information in their application (soft frauds).

Lenders will identify a swap set, their current marginal approves with poor repayment history that they’ll now decline and their current marginal declines with good repayment history that they’ll now approve. Any applicant with serious credit information is already being identified through the current reporting regime.

Jason on 31 Mar 2011 12:27 PM

22

www.brokernews.com.au

Analysis

Big brother is watching ASIC has promised to take a close look at aggregators, but are aggregators ready for the attention?

A

s ASIC gears up to bring its full regulatory weight to NCCP regulations, aggregators, lenders and brokers alike are scrambling to ensure compliance systems are in place and their liabilities are minimised. Aggregators in particular have an interesting task ahead, as they work to provide oversight of not only ACL holders but credit reps operating under their licences.

There’s little doubt that ASIC will soon focus more scrutiny upon aggregators, which the watchdog has listed along with payday lenders, debt consolidation services and consumer leases as priority areas of surveillance. ASIC real economy senior executive leader Kathrine MorganWicks has said while the organisation has not focused its gaze on aggregators in the past, the day for increased surveillance is coming soon.

“Certainly aggregators will be [on the list of priority areas for surveillance], because they are the ones setting standards for a large number of participants,” MorganWicks said.

As this surveillance gears up, however, some aggregators have said they still feel largely in the dark about what kind of oversight ASIC will require from them.

“The hardest part is getting a clear understanding of what exactly is or will be required from ASIC,” Connective principal Mark Haron said. “Once this baseline has been established, things will be easier because we will all have something to work to, whereas at the moment it is all down to different interpretations from lenders, aggregators and legal entities.”

Confusion abounds

Major aggregators are not the only ones facing compliance confusion. Smaller aggregators are also experiencing frustration at trying to predict the quality of their compliance systems. The Loan Arranger managing director Steve Marshall commented that he believes many aggregators won’t even know if they’re on the right track until they’re hit with an audit.

“When it comes down to NCCP, no one really knows what’s going on. Until we get feedback from an ASIC audit it’s hard to gauge how hard [compliance] is. One would have to suggest the paperwork and processes are far more onerous and certainly more labour intensive than before,” Marshall remarked.

Marshall commented that the government should have provided consistent guidance to the industry on what the task of compliance will entail and the kind of records companies and individuals will have to keep.

“I think everyone’s finding their way and trying to get a feel for what to do. There should have been a template put out by the government so there could be some consistency in terms of what we’re preparing,” he said.

In particular, aggregators will have to provide keen oversight to their credit reps. As representatives of the aggregator’s ACL, the aggregator can be held legally liable for a credit rep’s actions. Haron has expressed doubt that some major aggregators are providing sufficient oversight or support for their reps.

“We are not sure how much support and surveillance other aggregators are saying they provide. In some discussions with credit reps of other aggregators, we have been told that they have not been contacted or had any files reviewed, which is concerning,” Haron said.

MPA Top 100 Broker Greg Cook from Insight Home Loans has echoed this doubt. Though Cook operates under his own ACL, he said he believes many credit reps have little supervision from their aggregators.

“[There’s] very little [oversight] unless a broker does something wrong, and they then have to wade in and attend to the issue. Not having much contact with our BDM means we are out of the loop,” Cook said.

Over-supervised better than overlooked

Some aggregators, however, do not believe the task of supervision is unclear. Advantedge head of broker platforms Steve Weston said he believes ASIC will take a holistic viewpoint when assessing the level of supervision and support aggregators offer their credit reps.

“We do not believe this matter is overly murky.

Supervision is one of three core requirements for a licensee that authorises credit representatives; the other two being monitoring and training. We think ASIC will look at the overall model when making an assessment as to its effectiveness,” Weston commented.

And when assessing necessary levels of supervision, some aggregators have chosen to make their service offering more robust in order to preclude any chance of falling short of ASIC expectations. Haron said Connective will provide a high level of support and supervision to ensure their credit reps understand the task of compliance, and feel comfortable transitioning into the regime.

“Monthly direct contact is made via a call to the credit representative to offer any support, guidance or training and to check how they are going with the NCCP-required loan documentation. We also review their files to maintain their compliance under the legislation and give feedback or offer support and guidance if required. If any breaches of non-compliance are found, then we coach and monitor on a weekly basis until satisfied that they have a full understanding of NCCP. Each quarter the credit reps are also visited by a Compliance Support Manager for a face-to-face review,” Haron commented.

Likewise, Australian Loan Company general manager Lesley Wood said ALCo’s credit representatives are trained beyond NCCP standards in order to make compliance less onerous.

“Our credit reps are required to be adequately trained not just to current ASIC requirements, but also the ALCo’s best practice. During the training programs that our members are involved in, we supervise their learning outcomes in order to ensure that support is delivered if required,” Wood remarked.

Mark Haron

In some discussions with credit reps of other aggregators, we have been told that they have not been contacted or had any files reviewed – Mark Haron, Connective

Compliance fears alleviated

Financial Milestones principal Derek Miles, a credit rep for Connective, said this meticulous attention given to credit reps has made compliance an easier task.

“Compliance is much easier than I had first feared. In fact, I have built compliance into my client offering as a positive thing which actually makes the client feel more comfortable with the service I offer,” Miles said. “I have already had one visit from the compliance department to train and assist with client files already transacted under the new regime.”

Miles said that his status as a credit rep has left him with more time to devote to clients. However, Wood said not every credit rep has had the same experience with their aggregator. She commented that many aggregators have intentionally pushed their brokers toward an ACL model so as to minimise legal liability, and that many credit reps are still left without proper levels of supervision or support.

“It appears that most aggregators have mitigated their risk under the NCCP by having most of their brokers obtain their own licences, and allowed but a few to become credit reps,” Wood commented.

“I don’t believe they have provided the level of direction that is needed for their brokers to remain compliant.”

Greg Cook

There’s very little oversight unless a broker does something wrong – Greg Cook, Insight Home Loans

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Opinion

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Turnarounds need work, but are unlikely to improve In Australian Broker 8.04, Michael Russell (Mortgage Choice CEO) lamented that despite the fact that there is now 100% electronic lodgment of matters and that there have been considerable advancements in electronic gateways, conditional approvals are still taking a considerable time (‘Conditional turnarounds need work: Russell’, page 4) Indeed, there has basically been no improvement in approval times in the past 10 years. In some instances it has become worse.

There was recognition in the article that if mortgage insurance is involved there will be delays.

Mortgage insurers do not want to insure risky loans so there is an inherent delay there. Valuations have been speeded up through such devices as ValEx but valuers have always provided excellent service (times) so they rarely delay a matter, but alas they very much remind me of the predicament dairy farmers are in with Coles.

The majors have squeezed and squeezed so there is not much fat left in that industry.

Australian Broker 8.04 also featured many comments (Viewpoint, page 22) from senior industry participants frustrated by the slow turnaround times of the lenders. The industry is innovative and keen to move to the next level of service but they have always got the turnaround times hovering over them and in reality have no control over them.

I think the issue will always be there, and brokers need to understand the thought process of the lenders. Lenders never introduced electronic lodgment to improve processing times. They introduced it to save money. If the brokers entered the information onto the platform, then the lenders didn’t need inputters. If the system approved some of the loans, the number of underwriters could be reduced. The system does approve a relatively high percentage of loans – the squeaky clean ones and those that don’t need LMI, so all the rest go to a diminished number of underwriters for approval.

Those underwriters remaining have no incentive to be super-efficient because they are aware that the more efficient they get, the higher the chance they have of becoming redundant because their process is closer to becoming electronic.

Peter Heinrich

There is also a natural suspicion that the electronic approvals should be checked ‘just in case’ so there is a hidden brake inbuilt to the system.

The NCCP has also made the lenders more cautious as they don’t want to be the first to be accused of irresponsible lending.

I am not at all surprised that mortgage managers always score highly in the service stakes. Brokers can speak to a real person; even if the answer is no, it happens relatively quickly. The majors on the other hand are achieving their desired result in that they are saving money, and turnaround times are really not part of their equation. The market measures them on share of market, operating expenses, savings and profit. Turnaround times are unfortunately not a market measure so highly unlikely to improve.

Peter Heinrich is managing director of The National Finance Institute

What did Russell say?

Earlier this year, Mortgage Choice CEO Michael Russell hit out at mortgage manufacturers for their long conditional turnaround times. Russell said predictions were made that online lodgments and technology would vastly reduce turnaround times.

However, he lamented that the situation – particularly in regard to conditional approvals – has gone backwards. “Ten years on, with electronic gateways and 100% of our lodgements online, the turnaround times, if anything, have become worse … work still needs to be done in terms of mortgage processing within the manufacturer.”

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The ‘exit fee ban’ is now a reality.

Decision made.

“Consumers” now have “greater freedom to walk down the road if their bank isn’t doing the right thing by them” (Press Release: Hon Wayne Swan, 23/3/11).

Leaving aside the fact that these words ignore other types of lenders, these words are clearly restrictive of greater freedoms.

What happens if ‘consumers’ want to drive, catch the bus or use that most noble form of human transportation, the Razor Scooter, to go down the road to their lender to get a ‘better deal’.

It could be that the government is emphasising their green credentials or is extolling the virtues of aerobic exercise in requiring people to walk down the road in pursuit of their better deal or it could be that they didn’t really mean that they had to walk, literally.

Well, literally, the industry didn’t really mean that a deferred establishment fee was an exit fee either!

They’re still banned though.

The trouble with words is that they cause real trouble. As Lewis Carroll had Humpty Dumpty say in Through the Looking Glass – a word “means just what I choose it to mean… Neither more nor less.”

When is a deferred establishment fee an exit fee? When the government chooses it to be, neither more nor less.

So deal with it.

And deal with it we will.

‘Consumers’ now have a ‘free option’ to repay their mortgage without exit fees.

The problem with these two words is that there is no such thing as a ‘free option’. If there’s an option, someone always pays.

And that someone is probably going to be… the ‘consumer’ – via establishment fees that aren’t deferred or higher interest rates or higher account fees or some other mechanism as yet unthought of.

The issue with ‘greater freedom’ and free will is that there’s always the chance that poor choices can be made.

For the avoidance of poor choices, responsibility is the key word. Responsibility in making choices and having the freedom to make responsible choices.

We have hundreds of thousands of words in the world’s best practice consumer protection legislation that provides a lawful, moral and ethical framework for people to seek compensation

should credit professionals not make responsible choices in their dealings with ‘consumers’.

We now have ‘responsible lending’. We also need ‘responsible borrowing’.

Governments and others, however, seem to believe that individuals are not capable of being responsible, even if they’re being dealt with responsibly, and use ‘banning words’ to make sure that their opportunities to make choices in the exercise of free will are limited.

What then tends to happen is that laws increasingly take the place of individual responsibility and poor choices are no longer the responsibility of the individual, but the ‘fault’ of others.

This phenomena usually manifests itself in two ways – the development of a grievance culture or (and probably and) a restriction in the amount of choices available – both of which come with costs for ‘consumers’, meaning that ‘consumers’ may not end up with ‘better deals’ in the future.

If ‘consumers’ are not perceived to be getting ‘better deals’, what could a future response from government be? Even more ‘bans’ in the quest for ‘better deals’ and ‘greater freedoms’?

‘More bans’ equalling ‘greater freedoms’. We really need to think about that.

I would venture that a future drift from ethics, morality and individual responsibility to law will come with many costs.

Price, availability, features, flexibility to name but a few.

Probably others yet unthought of.

I repeat, we have fantastic consumer protection legislation that provides a legal, moral and ethical context for our industry to operate in.

Let’s not compromise freedom, free will, individual responsibility and choice by having ‘bans’ on legitimate activity within this context.

The true cost of free will is responsibility. Responsible behaviour by credit professionals and ‘consumers’.

Remember: The future isn’t what it used to be.

Kym Dalton

Kym Dalton is a principal of SAKS Consulting and Futurology Pty Ltd – finance industry analysts, consultants and ‘true believers’

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Insight MY WAY

A regular in MPA’s Top 100 Broker list, Andrew Brumby of Develop & Invest in Seaford, Victoria, tells Australian Broker his success has been built on the strength of his referrer and client relationships

Persist, then build relationships Founder of a sales training and consultancy group, Sue Barratt is no stranger to getting past ‘no’, and building great relationships. Here are her tips

Andrew Brumby

What is your greatest business achievement?

I guess in view of what has happened over the last couple of years, it’s just to be in business. On top of this, to go through the licence process and still maintain volume levels has been satisfying.

What’s the key to getting business through the door?

When I started, there was no doubt that having a really strong referrer relationship was the key. Having a referrer whose recommendation was strong enough that the customer was on board from the time of the referral makes a huge difference. As time goes on, this then becomes a mix of maintaining the existing customer base and still continuing the relationship with key people. I don’t believe in having lots of introducers, it’s just about have a few key ones.

What goal/s have got you to where you are?

Initially the goal was to have a go and see where it went.

As the business grows, I tend to look at smaller goals that tend to just keep me on track.

Who has helped you the most, and how?

No doubt the people within our own group. We have three other brokers who have banded together and this allows us to bounce things off each other and assist each other, especially if anyone needs holidays, which is very hard to do in a one-man band.

What character trait do you most value in yourself?

Very hard question. If I look at my portfolio I have a lot of long-term clients, so I hope that means I have the ability to manage these relationships well and have really strong ties to my clients.

How do you stand out from the crowd/competition?

We’re all about personal service – that’s it. We don’t advertise or have a shopfront; it’s all referral and delivery.

What do you tell yourself when the going gets tough?

Things do go wrong in this business and I have always maintained that you are better off being upfront at all times as this always clears the air.

What do you want to improve in your business?

It’s always a struggle to keep up with technology and this needs to be a focus area to drive efficiency.

What advice would you give an ambitious broker?

The right referrer relationship is king.

What’s your next greatest ambition?

Within the work environment, to drive some further process efficiency (not to use reams and reams of paper every week as we do today) and get the work-life balance better.

D

id you know that over 50% of salespeople give up at first contact if they get a ‘no’ from the prospect and never to go back to that prospect again?

Did you know that at the fifth contact, only 7% of sales people are left to speak with the prospect to see if they can do business together? Did you know that at the eighth contact research shows there is only one sales person left to work with the prospect? No? Well, hopefully that salesperson is you.

Many salespeople, especially those new to sales, often take it personally when a prospect says ‘no’. Many fail to persist and often fail to favourably position themselves to ‘leave the door open’ for future contact, thus limiting their sales opportunities even further.

Now I understand there can be a fine line drawn between persistence and harassment; however, we need to ensure that we have a regular mix of prospecting activities happening on a daily basis.

Sometimes we will strike viable and interested prospects and other times we come across viable but not interested prospects. Don’t burn those viable and not interested prospects as they may become viable and interested in the future. But you will never know if you don’t go back!

Here are some handy hints to make sure you can go back to these prospects in the future:

Don’t take it personally

If a prospect doesn’t commit to seeing you, it could be due to a number of reasons:

• They do not have a need right now • They do not fit your target market • They do not perceive having a need right now • They have other associations or relationships • They are not convinced they need to see you

Honourable retreat

Don’t give up. Whenever you make contact with someone make sure you always leave a favourable impression. Make sure they felt it was worthwhile to speak to you, even if they don’t fit your target market – you never know who they might know.

Allow for the honourable retreat if they cannot meet with you now and: • Seek permission to send some information for their review • Seek permission to follow up in the future • Seek permission to keep in touch in case their current suppliers cannot support them in the future • Ask for a referral

Follow up with persistent daily effort

Choosing your state of mind, your attitude, is critical when prospecting and selling, too. Successful salespeople know that prospecting doesn’t happen by chance; it requires a consistent and persistent effort.

Successful salespeople do the following: • Diarise follow-up calls • Use a CRM to track activity • Keep a number of activities on the go • Prioritise • Persist

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Relationships

Once you get past ‘no’, it’s all about relationships.

If you are in business for the long haul then you know the value of building your business relationships on solid foundations. Too many times people have fallen foul of the broken promises and pipe dreams offered by those people whose only intention is to make money at your expense. I can recall a few incidents where I have given people the benefit of the doubt, only to be let down and ripped off.

In business we meet people every day and need to be able to size up and make quick judgments about their bona fides. Are they a viable prospect? Can they afford this product or service? The promises they make – can they keep them? The stories about forthcoming funding – can they produce evidence of its existence? Will they keep their word?

I admit it is in my nature to see the best in people. However, that positive expectation can be sorely tested when people do not follow through. Some people have the ability to say the right things but you are somehow left feeling uneasy. Something is not quite right.

You doubt the existence of any real substance behind their claims.

Over the years I have become more wary and cautious about people’s claims and promises. I have taken to being more discerning and tend to question people more thoroughly about the substance of their offering.

I prefer my relationships to be built on solid foundations, which includes substance (having something of real value to offer) and trust (knowing I can rely on that person). Substance and trust underpin everything in relationships.

Here is a checklist for how to build trust and manage relationships. It may seem straightforward but not everyone practises it: • Be predictable. Be consistent and reliable • Do what you say. Your words should match what you do • Trust others’ instinct. They may have different views, perspectives or experiences you haven’t seen before. Be open to exploring them and check for facts. However, sometimes you do need to trust another person’s judgment. Just verify their claims at some point. If you can’t, then trust your judgment and move on

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• Don’t lie by omission. Don’t lie or keep secrets from people • People are not mind readers. Tell people what you want or need, clearly and promptly • Be willing to say ‘no’. It’s okay for people to ask. You don’t have to say ‘yes’ to everything • Continue to grow relationships. A relationship is a living and breathing thing. It takes conscious effort and daily work to grow a fulfilling relationship. Don’t be afraid to deal with crisis, emotions and questions. You should embrace them and look for solutions • Check intentions. Are your or the other person’s intentions clear and honourable?

Always check your intentions and ask yourself “is this healthy and helpful to me and the others involved?”

Relationships are with us every day in some shape or form. Are the relationships you are currently forming worthwhile to you and the other people involved? Are you all better off for having met each other? Or do some of your relationships feel a bit one-sided either in favour of you or them? Relationships work best when they are open, fair and equitable.

EXECUTIVE COUNSEL Liberty Financial’s John Mohnacheff is one of the mortgage industry’s most wellknown characters.

Australian Broker finds out more about his passion and success

determination for continual improvement through ongoing education.

Is success due to talent, hard work, or luck?

Most people would say that throughout their careers they’ve experienced the impact of all of these elements, and I’ve had the great fortune to have experienced all three.

John Mohnacheff

Name a business leader you admire.

Why do you admire them?

John Symond – he revolutionised the home lending landscape and continues to be a leading voice and driving force in the finance industry.

What main goal got you to where you are?

I’ve always had a passion for sales, so I have followed this inner drive with a

What character trait has helped you the most in business?

I believe that it’s my – some may say overly – positive and passionate approach to life. I enjoy working and being with people; it’s a natural fit.

What is the key to great business relationships?

Sincerity and integrity. I’m a true believer in the Covey Principles which for me clearly communicate the fundamentals for successful relationships.

What’s the first thing to look at when growing a business?

Know and understand your market, formulate a strategy and have a clear plan on what you want to achieve.

What’s the best piece of advice you’ve ever received?

Focus on what matters most, act only on what you can influence and don’t be distracted by things that don’t concern you.

What trend are you currently watching?

I love the stock market, so I am watching with great interest the recovery of the Australian market.

What is your next big ambition?

Build my new cellar… Oh and finish hanging up and painting my pelmets!

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www.brokernews.com.au

Market talk

State of the state: Queensland After suffering through devastating flooding, South East Queensland is picking up the pieces. Adam Smith finds out how the Sunshine State’s recovery is coming along

R

ecord flooding throughout South East Queensland has had a tremendous economic as well as human impact on the state. With Queensland already trending downward even before the disaster, the short-term outlook for the region’s economy and property market remains weak.

Residex data has shown a 12-month decline in property values in Brisbane for the year to 2010, with median prices falling by 10%. This, of course, was before the impact of the floods.

According to real estate firm CB Richard Ellis’ latest SEQ Residential MarketView report, flood-affected properties in Queensland have seen 30–40% drops in price as sales volumes plummet in the state’s south-east.

Sales volumes have fallen in all price segments across South East Queensland as the area struggles to recover.

CBRE regional director of mortgage valuations Tom Edwards said fringe suburbs around Brisbane have seen on oversupply of stock.

“Conditions have deteriorated for entry level properties in fringe suburbs that benefited from the First Home Owner Grant. Increasing interest rates in particular have impacted on this segment of the market and lower sales volumes have created an oversupply of listed properties in these fringe areas,” Edwards commented.

The problems have not been isolated to flood-affected regions of South East Queensland. The Gold Coast and Sunshine Coast have both seen values in decline. Median home values for Sunshine Coast properties fell 2.4% in the year to December 2010, following a 4.2% decrease the year before. Likewise, unit values on the Gold Coast have seen a 1.8% decline, and Residex is predicting the next eight years to see growth of just 1% per annum on the Gold Coast.

Access Economics has pointed to signs that the market in South East Queensland may be a long way from recovery, even after the effects of the floods have passed.

New home construction saw a moderate increase of 16.1% in 2010. While housing starts are expected to grow by 14.5% in 2011 according to Access Economics, it will not erase the sharp drop-off that new construction saw in 2009. New housing starts declined by 26.8% in 2009, and the next four years are forecast to generate only 4.8% average growth in construction starts.

The resources sector has been the main driver of growth in Queensland, picking up the slack for a lagging tourism industry and poor construction performance.

Even with growth in the sector, the short-term forecast for real output growth is a fairly subdued 3.2%.

However, MPA Top 100 Broker Paul Taylor of Toowoomba Home Loans has expressed optimism that, in spite of some of the dire numbers, confidence is returning to South East Queensland.

“From January and February to early March it was definitely flat, but enquiries have been picking up quite well over the last couple weeks, and volumes are getting back to normal levels,” Taylor said.

Taylor said though prices in Toowoomba have remained flat, the market has not seen significant discounting of flood-affected properties.

“We didn’t see prices plummet. There’s been no heavy discounting, but we have seen property prices steadily retreat. In the foreseeable future I think we’ll see a return to normal volumes. I still think property prices in the area will stay flat for the rest of the year, but I see potential for good growth in the next two to three years,” he commented.

And in the midst of all the bad news, Taylor still sees positives for the Toowoomba market. “The positive side is we won’t have a water problem for the next decade or so.

In all the farming communities, the water reserves are at maximum. Being a part of a rural community, that’s a big plus,” he remarked.

Access Economics forecasts have supported Taylor’s claims that it’s not all bad news for the Sunshine State.

Forecasts for the 2011–2014 period put average output growth at around 4%, on par with resource-rich Western Australia and ahead of the rest of the nation. Moreover, a tightening of the rental market could see yields begin to turn around. Brisbane is currently equal with Perth in holding the dubious record of the highest vacancy rates for a capital city, but increased demand for rental property due to the floods could see this vacancy rate begin to fall.

Recovery may be on the way for South East Queensland’s property market, but the region still has a difficult road ahead, Edwards indicated. “The affect of the floods on the Queensland tourism industry has combined with the Australian dollar to make the shortterm outlook for local residential markets very subdued.”

I still think property prices in the area will stay flat for the rest of the year

– Paul Taylor, Toowoomba Home Loans

Percentage change in median home values in South East Queensland 30% 25% 20% 15% 10% 5% 0% -5%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

www.brokernews.com.au

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NUMBER CRUNCHING Increases in dwelling commencements over 2010 50% 50%

40% 40%

30% 30%

20% 20%

10% 10%

0% 0%

NSW NSW

Vic Vic

Qld Qld

SA SA

WA WA

Tas Tas

NT NT

ACT ACT

Source: RP Data

Capital city vacancy rates Sydney Sydney Melbourne Melbourne Brisbane Brisbane Feb Feb 10 10 Jan 11 Jan 11

Canberra Canberra Adelaide Adelaide

Feb Feb 11 11

Perth Perth Darwin Darwin Hobart Hobart National National 0.5% 0.5%

1.0% 1.0%

1.5% 1.5%

2.0% 2.0%

2.5% 2.5%

3.0% 3.0%

Source: SQM Research

At a glance‌

$24.1bn

The net profit after tax Commonwealth Bank has projected for the Big Four in 2011

3.5% 3.5%

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Feature 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 Issue: Australian Broker issue 7.7 Headline: Advantedge brokers to buy and sell at will (Cover) What we reported:

What’s happened since?

Advantedge has pledged to provide Choice, FAST and PLAN brokers a platform that would facilitate the buying and selling of mortgage portfolios by the end of the year. The management team aims to have the buy/sell option to its brokers by the time that full regulation comes into effect on 1 January to allow those brokers deciding to leave the industry an easy way to sell their business.

The buy/sell platform will be one of a number of features of Advantedge’s new Advantedge Financial Solutions service, which will also help brokers increase the value of their businesses by expanding beyond mortgage products.

“Ultimately any broker or small business owner is looking to make money on the way through and build an asset that is worth something at the end of that,” said Advantedge general manager of distribution Steve Weston. “What we’re now working on is a buy/ sell service that will value your business and facilitate the buying and selling of broker portfolios.”

Advantedge’s buy/sell facility went live on 15 November of last year, with the aggregator guaranteeing the purchase of trail books based on its valuation model. The group also announced a cash flow funding measure to assist brokers in buying trail books.

Speaking to Australian Broker in January, Advantedge general manager of distribution Steve Weston said the group had seen keen interest from buyers, with fewer sellers than expected.

“There are about four times as many buyers registered as there are sellers,” Weston said. “There are clearly a number of brokers who want to beef up their businesses, so that will be an interesting one to watch in terms of traction this year,” he said.

Weston put buyers outnumbering sellers down to the likelihood that potential candidates had not given much thought to selling their trail books to date. “We will ramp up as we go through and have a look at the brokers who have decided to exit the industry – so not become licensed – and be more targeted in our communications to them, asking what their intentions are.”

Headline: Second-tier lenders face funding disadvantages (page 2) What we reported: What’s happened since?

In a recent review of funding, Australia’s fifth-largest lender, ING Direct, has found that second-tier banks continue to face longterm structural disadvantages compared to the Big Four.

With true competition being held back due to higher funding costs and lower margins on home lending for second-tier lenders, Mark Mullington, ING Direct’s chief financial officer, believes that the lack of choice in the market is negatively affecting the broker proposition.

“Part of the broker proposition is being able to offer choice and give the customer comfort that they’re going to look around for the best deal,” said Mullington. “Always coming up with one of the major banks will affect the broker proposition.”

Funding costs continue to plague second-tier lenders, putting them at a disadvantage to the majors. Suncorp CEO David Foster told the Senate banking inquiry in February that the cost of funds for second-tiers remained dramatically higher following the GFC. “Pre-GFC, our costs of funds were only 10–15 basis points greater than the major banks. It is now up to 80 basis points more than what the major banks pay,” Foster said.

Meanwhile, National Mortgage Brokers general manager Gerald Foley told Australian Broker the return of second-tiers was the key to spurring competition in the lending sector.

“I will be far more comfortable when I see ING, Bendigo and Adelaide and maybe even Citi grabbing some ground,” he said.

Headline: Brokers urged to register sooner rather than later (page 6) What we reported: What’s happened since?

Brokers are now eligible to register for an Australian Credit Licence (ACL), which is a major requirement under the new National Consumer Credit Protection Regime.

Those looking to obtain an ACL must register with ASIC to comply with the new obligations that accompany the new regulations.

However, even those looking to operate as credit representatives under their aggregator will need to register to be able to help homebuyers after 1 July. ASIC said that brokers should register by 18 June to make sure the registration is finalised in time but Advantedge CEO Drew Hall suggests that brokers register even earlier than that.

“It’s not a big deal to register,” Hall said. “You should really register, no matter what your ultimate intentions are, by the end of May so that there’s time to get that registration with all the lenders on the panel.”

With registration now complete, ASIC has reported it saw in excess of 14,700 brokers and businesses register for their ACL. Of those, 7,000 turned in completed applications by the 1 January deadline. At last count, ASIC had issued 5,600 ACLs, and had seen around 900 applications withdrawn. ASIC’s senior executive for the ‘Real Economy’ team, Kathrine Morgan-Wicks told Australian Broker in January that the regulator had not formally refused a licence application, but some applications had been withdrawn after follow-up questions were asked.

In addition, ASIC has seen 22,365 applications for authorised credit representatives. According to ASIC senior manager Dominic Bilbie, the application and registration process was, for the most part, a smooth one.

“Both registration and licensing have been reasonably well received,” he said. Bilbie said ASIC was able to work out kinks in the process following its experience in licensing financial planners.

“The application process has been far less onerous than it was for the FSR,” he commented.

Headline: Westpac and CBA losing their grip (page 8) What we reported:

What’s happened since?

Westpac and CBA are losing their vice-like grip on the domestic mortgage market with ANZ becoming the fastest growing home lender in February having missed out on last year’s market share grab by its two rivals.

In February, banks lent an extra $8.5bn to homebuyers with Westpac and St.George accounting for 30% or $2.6bn. CBA and Bankwest sold $2.2bn of home loans, while ANZ lent $1.54bn.

NAB, which is also playing catch-up on Westpac and CBA, boosted its level of home lending to $1.3bn.

Executive GM for third party banking at the CBA, Kathy Cummings, said the bank was happy with its share of market, and that ANZ and NAB had to be aggressive to win customers because they failed to take advantage of market conditions last year.

With competition between the Big Four heating up in the home loan market, NAB has been the front-runner for market share growth.

With its ‘Breakup letter’ ad campaign and offer to pay exit fees for CBA and Westpac customers, NAB managed to grow its loan book at a pace which put it ahead of the other majors.

APRA figures show the bank succeeded in growing its book by 0.9% in the month of January, which beat its major bank competitors ANZ, Westpac and CBA. ANZ managed the next-fastest growth at 0.6%, followed by Westpac (0.4%) and CBA (0.2%).

Westpac and CBA have since responded to NAB’s competitive moves, launching their own home loan discounting campaigns. After winding back lending in 2010, both banks have moved to grow their mortgage books in 2011.

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Review Smartline pitches for low incomes Smartline is encouraging low income investors to dive into the property market, arguing that it isn’t necessary Chris Acret to be wealthy to get into the market. In a media statement from the mortgage broking franchise, Smartline managing director Chris Acret said those on low incomes have the scope to invest by “doing their homework and thinking creatively”. “The key is not to let a low income deter you from investing,” Acret said. “The best type of properties for the low income investor will be those that are at the lower end of the scale in price but with high rental returns,” he explained. “This will probably mean looking to the outlying suburbs of the major capital cities and to regional areas, such as mining towns. You should probably be looking at properties that are priced at $250,000 or less.” Acret suggested a neutrally or positively geared investment strategy, and that these investors should be looking for an 8–9% yield – or $380 per week rent on a $250,000 property. “While that is a big ask, it’s certainly not impossible, particularly in areas such as mining towns,” he said.

Acret said there was now more opportunity for these investors, due to lenders offering higher LVRs of 95%.

Gadens asks ASIC to go softer The ban on DEFs may not be as far-reaching as previously thought, it has been claimed.

Gadens Lawyers senior partner Jon Denovan said he has met with ASIC to discuss the scope of the exit fee ban. “We have asked for sensible class orders so that the ban on exit fees does not unintentionally prohibit payments that are appropriate and are not intended to be

Missed something? Australian Broker’s industry news in brief will make sure you are up to date on the latest from our leading news portal, www.brokernews.com.au covered by the ban.” Denovan said he believes the DEF ban was not intended to catch certain fees, including capital appreciation payments on shared equity loans, recoupment of capitalised LMI or the recoupment of the cost of providing honeymoon rates.

Gadens Lawyers has previously advised that these fees would be covered under the ban.

DEF ban worth $140m In an equities analysis, Commonwealth Bank has claimed the ban on DEFs, set to come into effect from 1 July, will represent $140m in lost fee income across the four majors. The report also suggested the competitive impact of the DEF ban was questionable.

“Smaller lenders have warned that the new regulation will have a mixed impact on competition,” the report stated. “Exit fees were first introduced by non-bank lenders to recover costs associated with lower interest rates on mortgages, and by banning exit fees, smaller lenders may be forced to raise rates in order to remain profitable.” However, the lost revenue from the removal of the fees is not expected to have a drastic impact on the major banks’ bottom lines.

GE to shed loan book GE Money is looking to offload its remaining $5bn loan book.

The lender, which retreated from mortgage lending during the GFC, will seek to sell off its remaining mortgages, the Sydney Morning Herald reported. Among those believed to be interested in the deal are Commonwealth Bank, a NABbacked consortium and several non-bank lenders. Contacted

by Australian Broker about the sale, a GE Capital spokesperson declined to comment.

Commonwealth Bank already purchased assets from GE’s Wizard Home Loans in 2008, walking away from the deal with a $2bn loan book.

BMM enters discounting fray Mortgage manager Better Mortgage Management has cut rates across a range of its products in response to pricing competition in the lending market.

The company has reduced rates across its low-doc range, with rates on its Credit Power Pack product now starting at 7.34%.

It has also introduced a new Credit Gold product starting at a basic variable rate of 6.88%.

The loan includes an optional line of credit, and is for LVRs up to 90%. It will pay brokers 0.60% upfront commission and 0.10% trail commission. Managing director Murray Cowan said brokers and borrowers are being provided a legitimate alternative to the major lenders.

ASIC mulls new exit fee guidance Credit watchdog ASIC is likely to issue an update to its guidance on “unconscionable” exit fees, following the government’s ‘victory’ in passing the ban. The ban implies that ASIC’s previous guidance on the issue (Regulatory Guide 220), is now outdated.

When contacted by Australian Broker, ASIC confirmed it is “contemplating an update” to its guidance, following the passing of the exit fee ban into law. RG 220 was developed after a full round of industry consultation, which culminated in providing definitions of what constituted “unconscionable fees” and “unfair contract terms”. As part of the guidance, ASIC had given the green light to DEFs, as long as they reflected loan costs.

Banks balance risk with reward Banks are under pressure to lower their lending standards to maintain continued growth, according to the RBA, though the NCCP is expected to keep this in check. The Reserve Bank’s recently released Financial Stability Review said that credit growth is unlikely

to return to pre-crisis levels, as this growth was based on a one-time adjustment to financial deregulation and the shift to low inflation. The RBA said this meant that banks’ domestic growth opportunities are likely to be “more limited in the future”.

The RBA suggested that if industry participants attempt to sustain earlier rates of domestic credit growth, they “could be induced to take risks that may subsequently be difficult to manage”.

Competition heat is an opportunity: Macquarie Renewed vigour in lending competition provides new opportunity for all, according to Macquarie’s Doug Lee head of brokers sales Doug Lee. Speaking with Australian Broker after only months in the top broker sales role, Lee said the current state of competition in the mortgage market provides lenders a chance to differentiate their offerings from other competitors, and achieve growth in targeted areas.

“There’s a whole lot of competitive forces at play at the moment in the market,” Lee said. “Lenders do different things according to whether they are trying to market to a particular niche, or they are trying to attract a particular client type, so we are seeing a lot of movement in that space at the moment. From our point of view, what it provides us with is the opportunity to continue to elaborate to the brokers what our proposition is. It creates a very good opportunity for us,” he said. While Lee said growth in the market is not as buoyant as it has been, the subdued market conditions also created opportunity. “I believe there is room for focused growth in specific areas,” he said.

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People Bendigo and Adelaide still planning big What do three boys and a chicken, a group of drama students, a playground and an inspirational book have in common? The answer is Bendigo and Adelaide’s PlanBig initiative.

Launched over a year ago by the regional player, PlanBig – which is an online resource aimed at connecting like-minded individuals to bring ideas and plans into reality – has already seen successes achieved through the site and has touched many people’s lives.

Some of these are the ‘three boys and a chicken’ – who are well on their way to raising a million dollars for charity – the drama students – who got to go to the theatre for the first time, despite being from a disadvantaged community in Queensland – the playground – which is now being built for children in Western Australia – and the inspirational book – which has gone to print, and deals with families touched by kidney disease.

Essentially, the site draws on the strengths of the bourgeoning social networking phenomenon to enable people to share information, build partnerships and support each other to make their plans become reality. Plans are searchable by type and location, to inspire planners and provide insights on how to achieve the best results for their ideas.

Speaking on the success of the site, Jeanette Miller, head of online engagement at Bendigo and Adelaide Bank, said it has been “amazing to see these plans blossom and grow with the help of PlanBiggers.”

“The response and support from the community for the site has been overwhelming and we’re thrilled to be part of the journey,” Miller said.

Bendigo and Adelaide Bank said its PlanBig initiative is a 21st century iteration of the roots, which stem back to its former guise as a building society: listen, collaborate and sometimes become part of a community outcome. “Community engagement has always been at the heart of Bendigo and Adelaide Bank,” Miller said.

“For more than 150 years we have

Jeanette Miller

endeavoured to support the evolving needs of our customers and their communities.”

The group sought to capitalise on the proliferation of online media and web 2.0 to leverage technology and reinforce the bank’s commitment to positive outcomes for communities.

The bank was recently awarded the Financial Insights Innovation Award (FIIA) for Excellence in Banking 2.0. The award recognises the achievements of financial institutions across the Asia-Pacific region in the area of innovation in supporting business objectives.

“We are proud of what has been achieved via PlanBig over the last year and continue to be excited by the achievements yet to come. We can’t wait to see what else is in store,” Miller said.

We have endeavoured to support the evolving needs of our customers and communities

Ballast enjoys golf gathering The ninth annual Ballast golf day was recently held at the Glen Iris golf course in Perth, where the fine weather reportedly encouraged “a strong contingent” from the local financial services industry out of their offices and onto the green.

Ballast general manager Frank Paratore says the golf day – in a similar way to the past eight years – provides an excellent opportunity for its brokers, business development managers and advisors to strengthen their business networks and build relationships. “The Ballast golf day has become a significant and much anticipated event for our representatives, allowing them to get

together and discuss business – with a round of golf,” Paratore said.

National Australia Bank’s senior relationship manager Hugh Miller said the event was very well run, allowing him to continue to build relationships between the organisations.

“The support that Ballast is providing to us is just great,” Miller said. “The quality of the brokers is of the highest standard. They really know what they are doing.”

This year the event was supported and sponsored by Bankwest, Blaze Conveyancing, Angas Securities, Praemium, Tangibility, NAB and AFM.

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People

Call of duty When Queensland’s flood disaster hit in January, Ipswich-based Mortgage Choice broker Nick Cook went above and beyond his duty to ease the hardship faced by his clients. Ben Abbott reports

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or Nick Cook, going out of his way for his clients has been how he has approached his broking business since opening a Mortgage Choice franchise in 2001.

“We try and help them with everything we do,” Cook says. “We adopt the attitude that we are there to help them. Our reputation is all about word of mouth, and we try and help people out whether we get paid or not – and it comes back in spades usually.”

Based in Queensland’s urban centre of Ipswich, Cook has faced some of the worst effects of the devastation wrought by flooding in January, with a total of 43 of his clients affected.

The flooding saw $10m of Cook’s business – or 4.1% of his loan book – go under water, which was a similar ratio to Commonwealth Bank’s 4.4% in flood-affected post codes.

However, for Cook, the response to the crisis – which is still ongoing – has been all about his clients. “Some of those affected have been long-term clients. You get paid trail sometimes up to 10 years, so it’s nice to give something back when they need it,” he explains.

Eye of the storm

When the floods hit, Cook realised a large number of clients were located in flood-affected areas.

To establish which customers, he enlisted his office team of four, to match their customer database against the list of flooded streets received from the local council.

They also used aerial photos on www.nearmap.com, where Cook says it was possible to determine who was affected by viewing street addresses where the “flood line was up to the roof”.

Cook then put his database administrator Helen Trembath to work getting in contact with affected clients, which he said at times took days due to power outages. A database-wide email was also sent to ensure all those clients who were in trouble were accounted for.

Cook says the next step was talking to lenders involved, which in the majority of cases turned out to be CBA, ANZ and ING Direct.

While he did the expected –

talking to lender reps, and monitoring lender updates to ensure his clients were aware of offered payment holidays – Cook did not stop there. Moved personally by the crisis and the state his clients were in, he boarded a plane to Sydney and went to CBA’s head office to personally meet with the bank’s head of third party, Kathy Cummings, Sam Boer and others to discuss the situation.

Cleaning up the mess

Though the flood waters have receded, Cook says the situation is still “traumatic”. “To give you an idea, imagine going into somebody’s house, where they just have one simple power point, they have only a gas cooker and no lining on the walls,” he says. “It’s pretty hard going. All you can do is lend an ear and as much of a hand as you have the power to.”

It is lending a hand that has been a priority for Cook right through the flood aftermath. To date, Cook has been out to visit ‘on the ground’ 90% of the clients that were flooded during January, to see how they are going – as well as to see if there is anything he can do to help.

One of the ways he has eased the pressure on his clients is dedicating a team member to matching up people’s immediate needs – such as household goods – with a register of suppliers catering to victims. The franchise has even gone so far as to buy and deliver a bed.

However, it is in the more technical aspects of clients’ situations that the business has been of real use to clients. With many unused to dealing with the day-to-day administration of institutions – including insurance companies – Cook has taken charge. “We have a fully identified database of flood-affected clients, and what insurers have done,” Cook says.

Of his 43 flooded clients, only seven were covered by flood insurance, with Cook assisting in these interactions – particularly as many clients no longer had their computers.

In one case, Cook was able to save a client from an insurance battle. “We helped out one client,

who in the first month was told they were covered, and what to do, then the next month that changed and they were told they weren’t covered, but only after they’d already thrown out their stuff,” he says. “We had recorded the results of that conversation – so we had evidence of that – and we managed to get that overturned,” he says.

Cook has also monitored local, state and federal flood assistance measures for his clients, though due to a problem with the means testing criteria, only one of his clients was eligible for help – the client with the strongest equity position, and lowest mortgage. To assist these public relief efforts, Cook has supplied his data – with customer permission – to authorities, so they were clearer about what people were actually facing on the ground.

Business as usual

For the Ipswich Mortgage Choice franchise, things are “fairly back to normal” in April, says Cook.

February is normally the slowest time of the year for the office, and Cook says the business was halved due to the impact of flooding.

However, March was stronger, with one loan writer settling $4m, and Cook himself finalising $120,000 in “little top-ups”.

However, as flood victims are still under pressure as other people get

back to normal, Cook wanted to do more. So the group organised a free dinner and drinks event at the town’s rebuilt Hogs Breath Café – which was itself flooded up to its roof in January, and only reopened in early April – for all their flood-affected customers.

Cook says the event aimed to “try to put as best an outlook on it as possible”. “It will be nice to get out of their houses and have a night out and away from it all,” he says. Senior CBA and Mortgage Choice representatives will be in attendance, as well as the town’s Mayor.

Mortgage Choice has commended Cook’s efforts, saying they represent a “great example of what a passionate broker can achieve outside the norm for his/ her customers if their heart is in the right place”.

Our reputation is all about word of mouth, and we try and help people out whether we get paid or not

Clients Kevin and Julie Brown with Mortgage Choice’s Nick Cook

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Caught on camera Fresh from its bank ‘break-up’, NAB invited brokers to Sydney’s Hilton Hotel at the end of March as part of its national NAB Broker roundtable. Fronted by John Flavell, the event garnered a huge turnout of over 300 professionals

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Paul Swatridge and Paul Heffernan (FAST) Broker attendee with Michelle Reinisch (Homeside) Adrian Cunningham (NAB Broker) talks to attendees John Flavell (NAB Broker) Chris Carn (NAB Broker) Rohan Bandaranayake (FAST) with Haitham El Hassan (HM Finance) Kevin Tredmick, Phillip Patterson, David Ward, Clair Steenson and Michelle Eave (Genworth Financial) Bret Lucas (Lucas Property & Asset Finance), Justine Tills (Outsource Financial), Nancy Papos (Outsource Financial) and Daryl Arnall (Financial Tailoring) Leah Hodgetts and Carmel McKay (McKay Property & Finance) Siobhan Bourke and Erin Williams (NAB Broker) NAB Broker Roundtable Brokers assemble for NAB Broker Roundtable Nathan Fulton and John Kelly (Aussie)

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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

(breakfast, lunch and dinner).

About $1 each per meal?” the broker rightly exclaimed. “Sounds like the ‘new two-minute noodle diet’ to me, and virtually impossible to achieve.”

As it turned out, the problem was primarily caused by the way their debt – and particularly car debt – was structured. The broker was flabbergasted. “I’m increasingly concerned about the lack of understanding ordinary people have about the subject of money – very few people have any ‘financial education’.” Indeed. Insider could add that there are also more people who have any common sense!

$1 meal madness A

Enter the dragon

I

t seems we Australians are a little confused about debt, and how high we should put it on the priority list, when it includes those other common demands on our money – feeding the family, for instance? Insider recently received an email from one mortgage franchise owner, who had a family referred to his business after their accountant reportedly found they were “struggling to survive” – pretty dire circumstances indeed. The mortgage broker reported that their problems were all to do with their debt situation, which included a pricey car purchase – not just their home loan. In more detail, their circumstances were the following: A combined annual household income of $170k, two parents and three kids all under five years of age… Oh, and the family had two cars, and a $400k mortgage against a $700k house. The broker said because of all the “spending traps” they – and no doubt your clients as well – face, this family were somehow living on just $150 per week for all of their groceries and they were trying to get down to $100 per week. Calculations ensued. “$100 a week in order to feed five mouths x 21 times a week

s someone with a keen interest in the property market, Insider likes to keep abreast of all the latest analyses by research firms. As a result, he subscribes to a lot of newsletters. One favourite comes from the August SQM Research. It always provides industry-leading insight on the stock on market, etc. However, Insider has always been a bit perplexed by something else it offers: esoteric quotes from someone called ‘Black Dragon’, accompanied by an awkwardly placed JPEG of a dragon that looks like it was scanned off the cover of a cut-rate fantasy novel. As much as SQM’s expert analysis offers Insider keen insight, he has yet to learn anything useful from Black Dragon, who offers nuggets of wisdom such as: “If you believe in light, it’s because of obscurity. If you believe in happiness, it’s because of unhappiness. If you believe in God, then you have to believe in the Devil.” Does that mean we also have to believe in an equally cringeworthy White Dragon? Insider has to wonder how Black Dragon finds the time for all that property research what with his busy online roleplaying schedule.

Johnny-come-lately

A

s one might imagine, Insider receives his fair share of press releases. Press releases

are a very peculiar animal, with companies packaging self-praise that would make Kanye West blush as ready-for-print news, so they always have to be read with a grain of salt. However, they’re at least usually broadly factual.

Usually. You see, Insider recently received a press release from a non-bank lender trumpeting its almighty achievement at being the first non-ADI to cut DEFs since the beginning of the so-called mortgage war. There’s only one problem with that: they weren’t. You see, Pepper Homeloans took that particular brass ring about a month before the lender in question put out their release. Oh, well. Second place is still pretty good, right?

Unfortunately, that distinction goes to mortgage manager Better Mortgage Management, who announced the move a mere day before the non-bank in question. It appears our hapless lender has been spending so much time calculating the cost of removing those pesky DEFs that they missed two industry players beating them to the punch.

There’s no need for embarrassment, though. There are plenty of records still waiting to be set, such as: • First person to walk on the moon • First person to run a fourminute mile • First Jamaican bobsled team to compete in the Olympics • First test-tube baby • First female Prime Minister of Australia So when they’re crafting their next press release, Insider humbly suggests this lender shoots for one of these as-yet unaccomplished feats.

Not just water

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t’s probably been a while since you’ve been for a job interview, right? Yes, Insider thought so.

With the mortgage market ‘golden goose’ having laid very lucrative eggs for business-owning brokers in recent years, there hasn’t really been any need. However, everywhere Insider goes, it seems there is another industry pundit claiming that following commission

cuts, brokers are living on bread and water, and would be better off in a bank branch. So – have you thought about it? If so – here’s an interview crash course. According to the majority of employers in financial services (45%), the biggest mistake a candidate can make in a job interview is to give vague answers (hmm, that’s a good way of describing just about any bank’s communications with Australian Broker, particularly our favourite banking behemoth, Westpac), followed by arriving late (though Insider has heard recent murmurings concerning one major aggregator falling behind on commission payments).

If you are looking to impress, 47% of employers believe answering questions concisely is the best thing a candidate can do (no, you’ll have to keep those verbose, meandering mortgage sales pitches you are used to at home), followed by asking intelligent questions (no doubt the NCCP is giving you good practice at that). But then again, according to these figures from recruiter Robert Walters, only 30% of candidates rated salary and bonuses as their number one consideration when making a career move. Perhaps that means diehard passion for the mortgage industry will see brokers on bread and water a while longer?

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Services

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at www.brokernews.com.au AGGREGATOR/WHOLESALE BROKER Ballast Finance 1300 270 942 www.ballast.com.au Page 9 LoanKit 1800 466 085 www.loankit.com.au Page 10 PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 13 COMMERCIAL Acuity Funding 02 9484 0609 www.acuityfunding.com Page 6 Banksia Financial Group 1800 333 114 www.banksiagroup.com.au Page 7 FINANCIAL PLANNING SOLUTIONS Wealth Today Pty Ltd 08 9207 1433 www.wealthtoday.com.au Page 15 LENDER Citibank Mortgages 1300 652 059 www.mortgagebroker.citibank.com.au Page 16, 17 Liberty Financial 13 23 88 www.liberty.com.au Page 3

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OTHER SERVICES Trailerhomes 0417 392 132 Page 30

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 2 Provident Capital 1800 668 008 www.providentcapital.com.au Page 4

www.residex.com.au The House Price Information People

Residex 1300 139 775 www.residex.com.au Page 35

SHORT TERM LENDER Interim Finance 02 9971 6650 www.interimfinance.com.au Page 34

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

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NCF Financial Services Pty Ltd 1300 550 707 www.ncf1.com.au Page 8 Quantum credit 08 9325 6255 www.quantumcredit.com.au page 19 Rapid Capital 07 5562 2485 www.rapidcapital.com.au Page 12 MORTGAGE MANAGER / NONBANK National Finance Club 1300 327 600 www.nationalfinanceclub.com.au Page 14

WHOLESALE Advantedge Financial services Pty Ltd 03 8616 1600 www.advantege.com.au Page 5 Resimac 1300 764 447 www.resimac.com.au Page 11

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