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ISSUE 7.02 February 2010

RAMS skittles its broker channel  Dual distribution model is currently counter-productive

Amid widespread industry talk of market recovery, RAMS Home Loans sent down just about the perfect wrong ‘un in January when it announced the closure of its broker distribution channel. The specialist home loan lender said that the decision was made in order to align its time and resources to activities that added “the most

Stage set for a solid 2010 Emerging from a tough year, the role of the broker has evolved as the industry adapts and capitalises on market opportunities

value” to its customers. Having different pricing and policies across the two channels was causing conflict and confusion between the two, it said. The move would help to optimise the size and structure of the company in order to “protect the sustainability of the business and the brand”. “Following a review of the options available to manage lending growth, it has become clear that pursuing a dual distribution model in the current environment is not

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Jockeying for position

First hand

This year will see all lenders positioning themselves for the years ahead; they will be doing this on a number of different fronts

RAMS’s decision to exit the broker channel might just retard the market’s return to free competition. AB asked some key aggregator heads if they thought it easily would. I don’t believe that it will have any material effect on the market. Although RAMS offered some competitive products, we will see new competitors move in and take up the opportunity to fill the gap. Choice’s CEO; Brendan O’Donnell

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The loss of competition in this environment is certainly of concern and as the cost of funding moves downwards we’ll see more competition return to the market place. This is just starting to happen now and as business opportunities arise we’ll see some real competition emerge. National Brokers Group’s CEO; Steve Lambert The market is competitive now, and remains so after RAMS’s withdrawal. We have seen increased diversification of lenders over the last six months and we expect this to continue. Funding pressures will continue to constrain growth for everyone, however we remain confident that the market is healthy and growing. PLAN Australia’s CEO; Ray Hair Only minimally; they had made a number of policy and pricing decisions in the lead up (to the announcement) that had already reduced their market share. AFG’s general manager for sales and operations; Mark Hewitt

the best use of our resources,” said RAMS chief executive Melos Sulicich. He added that the RAMS staff, leadership team and the Westpac Group were “fully committed” to continuing to grow and develop the RAMS business. Page 29 cont.


Las Vegas conference

Join the discussion with the heads of the US-based National Association of Mortgage Brokers on the future of the industry Page 24




“Yes, no…maybe” on RMBS comeback

Australia’s aggregators are divided over whether securitisation will make a meaningful comeback in 2010. Australian Broker polled nine aggregators on the subject of RMBS markets, which showed some signs of revival in the last few months of 2009. Choice Aggregation, Ballast Finance, AFG, Loan Market and Loankit were all confident of a turnaround in securitisation, though not to the heights recorded prior to the GFC. However, Connective and Club Financial did not expect a significant recovery, while National Mortgage Brokers expected only a small recovery and PLAN Australia was “somewhat” hopeful of one. Brendan O’Donnell, CEO of Choice, said growing demand for housing credit would result in “a return of a new form of securitisation” built on the

lessons learnt from the GFC and based on a “better weighting of risk and return”. Ballast Finance general manager, Frank Paratore, was confident of a comeback on the “evidence” of successful placements last year from Westpac, Bendigo and Adelaide Bank and Members Equity as well as “growing investor demand”. AFG’s head of sales and operations, Mark Hewitt, expected the securitisation of RMBS to be “more prevalent in 2010”. He said the key stimulants were the reduced “overhang” in the secondary markets resulting in investors starting to look back to primary markets for returns and the forecast of strong economic growth, which “may not be able to be met by the Big 4 solely”. Kym Rampal from Loankit said he “certainly” expected securitisation to continue improving this year. “Several recent securitisation offers have been over-subscribed … This can only be interpreted as a strong sign.” he said. Dean Rushton, COO of Loan Market Group, said conversations with stakeholders around securitisation had changed in the latter part of the year from “if it returns” to “when it returns”. “The 2010 securitisation model may not necessarily look like the model of 2007 but it will be there none the less,” he added.

However, Connective principal Mark Haron said a meaningful recovery was not on the cards, and expected 2010 to remain “a difficult year for the securitisation markets”. “The securitisation markets rely on the confidence of large investment vehicles and we’re not quite there yet,” he said. Furthermore, Haron said new liquidity requirements would restrict those lenders who rely more heavily on the securitisation markets. And Club Financial’s Andrew Clouston said a lack of “sufficient agreement globally on the future form of regulation and control at the sophisticated end of the international banking sector” would hold back a meaningful comeback in the short term. Gerald Foley, managing director of National Mortgage Brokers, predicted only a small improvement throughout the year. “I can’t see significant change in the securitisation markets and certainly no likelihood in the next 3–5 years (if ever) of returning to anything like the volumes we have previously seen. PLAN Australia CEO Ray Hair said securitisation was on the way back “as a part of a prudent funding mix”. However, mirroring Foley, he said he could not see securitisation being the force it was pre-GFC for some years to come, if ever. Publishing director.... Justin Kennedy Managing editor.....George Walmsley Editor........................Larry Schlesinger Journalist.............................Tim Neary Production editor............Carolin Wun Design manager..... Jacqui Alexander Designer...................Jonathan Phillips HR manager.................. Julia Bookallil Marketing manager.........Danielle Tan Marketing coordinator... Jessica Lee Traffic manager............. Stacey Rudd Advertising sales Simon Kerslake t: 02 8437 4786 f: 02 9439 4599 Rajan Khatak t: 02 8437 4772 f: 02 9439 4599 Editorial enquiries Larry Schlesinger t: 02 8437 4790 f: 02 9439 4599 Distribution Australian Broker is available by subscription. E-mail all subscriptions and mailing enquiries to: t: 02 8437 4731 f: 02 8437 4753

Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker can accept no responsibility for loss. © Key Media 2009 Australian Broker is the most often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews. This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

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Big bank popularity slumps – survey The popularity of Australia’s major banks has plunged in recent months according to findings in an Australia-wide survey of more than 2,000 people conducted by non-bank mortgage manager Homeloans Limited. The survey has found that the number of Australians who like the four major Australian banks has fallen by 15% since August last year. And fewer than one in four Australians now say they like the big banks, with another one third who feel they are obligated to deal

Key survey findings • 2,000 people in survey • Bank popularity off by 15% • Less than 25% of Australians fond of bank lenders • 33% feel obligated to support them • 35% avoid banks where possible • Growing trend towards nonbank sector • 60% ambivalent towards lender status

Majors to maintain dominance…for now The major banks are set to maintain their stranglehold on the mortgage market in 2010, but this dominance will not be sustainable, according to participants in a Deloitte Australian lending roundtable. Nine out of ten participants in the roundtable (made up of executives from banks, non-banks, aggregators, mutuals and rating agencies) believed the major banks would maintain market share between 80% and 90%-plus, with only one forecasting it to go under the 80% mark. However, nine out of ten also agreed that the current market dominance of the Big Four was not sustainable in the long term, with 70% of participants expecting their market share to settle back down into a range between 60% and 80%, as was the case before the outbreak of the GFC. The consensus to come out of the roundtable was that RMBS ‘break

even’ levels would emerge during 2010, which would assist competition, though funding would still be an issue. Funding would be a particular challenge for smaller lenders, where demand would exceed supply. The return of RMBS investors to inject new capital and support was seen as crucial to funding for this sector in 2010. FAST CEO Steve Kane foresaw a “real issue in the market in terms of prudential limits and what the major two banks are reaching in terms of asset classes”. “That’s going to create all sorts of problems, not so much around the residential market initially, but certainly in the commercial market at the present time,” he said. Kane said there was a real lack of availability of funding for transactions “north of $10m”. Aussie Home Loans CFO John McDonald said the difference

with them for their banking needs. These results indicated a growing trend towards non-bank financial services providers – particularly in the home loan market, said Will Keall Homeloans’s national marketing manager. He added that since the survey was last conducted (in August 2009) there had been a 35% increase in the number of people who claim to “avoid banks wherever possible”. Keall felt that the dominant position of the Big Four had been enhanced during the GFC as customers returned to more traditional institutions for their financial services needs. “However, consumers have expressed their dissatisfaction with banks since that time, particularly following the recent between the single ‘A’ and ‘AA’ rating meant it would be very hard for those outside the Big Four to be competitive “for quite a while”. Mark Mullington, CFO at ING Direct, said from his perspective it was all about access to funding and, in particular, savings. “For the last few months we’ve had a pretty good story in growth and savings. But at a very high cost; not least of course because our major bank competitors are

Who voted? The roundtable participants were: • Steve Kane, CEO of FAST • Axel Boye-Moller, Westpac • Graham Mott, Deloitte • James Hickey, Deloitte • Mike Lawrence, AMP • John Tancevski, Community First Credit Union • John McDonald, Aussie Home Loans • Arthur Karabatsos, Moody’s • James Sheffield, CBA • Patrick Tuttle, Pepper Home Loans • Mark Mullington, ING Direct

Will Keall

interest rate increases,” he said. While 60% of the respondents said they would consider both banks and non-banks for their lending needs, 70% of those indicated a preference for a non-bank lender. “Clearly these results present an opportunity for non-bank lenders,” Keall said. What do you think will be Big Four’s share of settlements in 2010? 100% 75%

70% 50% 25% 0


10% 70-80%



Share of settlements

What do you perceive is a sustainable level of longer term Big Four’s share of settlements? 100% 75% 50% 25% 0

30% 60-70%

40% 20% 70-80%


10% 90+%

Share of settlements

pursuing multi-brand strategies with multiple pricing points,” he said. Overall, the roundtable agreed that credit conditions would remain challenging with increasing arrears, but also stable losses.

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Gen Y: Cautious and concerned To sell home loans to Generation Y, you need well-priced products that come with no gimmicks and no fees, according to Jo Parkinson national sales manager at online broker i.Lending. And brokers may need to change their approach to dealing with Gen Y after new research put to rest the common perception that this generation is defined by the need for instant gratification. Research carried out by Retail Finance Intelligence (RFI) has revealed Generation Y – those born between 1974 and 1980 – as the most concerned and cautious generation when dealing with their finances, following the GFC. Alan Shields, research director for RFI, said: “Gen Y is often touted as the ‘instant gratification’ generation but our research shows this perception to be incomplete. This generation is demanding, yet is financially savvy, researchdriven and values the opinions of those with more experience in making financial decisions.” Shields said RFI’s research suggested there were “genuine opportunities” for those institutions which can adapt their products to suit this generation. “Almost three quarters of respondents said they had a savings goal and were futurefocused and not interested in immediate luxuries,” he said. Accordingly, Parkinson said to

Alan Shields

Jo Parkinson

Brett Mansfield

successfully target Gen Y, a broker needs an informative and collaborative sales approach. “What the Gen Y borrower wants from a broker is the bottom-line pros and cons and the confidence in the broker that it can get done, quickly, painlessly and without invading their precious leisure time – whatever option they choose,” he said. Meanwhile, Brett Mansfield general manager at online broker eChoice said that this group was seen as a lucrative market but felt that in the home loan space it made up a fairly immature market at the moment. “But over the next five years I’d see them as making up the customer demographic that will experience the most significant growth,” he said. Mansfield felt that online brokers with a broad product range would be well positioned to take care of Gen Y’s needs as the sector matured.

More than 10,000 respondents were surveyed by RFI about their attitudes towards home loans, transaction accounts, personal loans and credit cards. It found that Gen Y borrowers display higher than average

concern over economic issues, are cautious regarding their spending, are diligent in their savings behaviour, are conscientious in their investments, and desire financial security.

RFI findings on Gen Y specific traits… • Driven to seek the most accurate information from those who have experience and knowledge in areas which they may lack • Largely influenced by recommendations from friends and family • Online accessibility, information and services are becoming increasingly popular • Value feature-packed products to a greater extent than Gen X and Baby Boomers • Innovation and pricing are two influential factors, but service is crucial in building relations

Comment: ASIC gets it wrong again ASIC has suffered a spate of embarrassing courtroom losses of late, but the soon to be credit regulator, appears to be equally out of touch when it comes to the licensing of mortgage brokers. Just before Christmas, ASIC saw its case against mining magnate Andrew Forrest and his Fortescue Metals Group rejected by the federal court following failed actions against AWB and One.Tel a few months prior. Many would argue that it has since suffered a fourth failure; at the same time as the Fortescue court ruling, ASIC revealed that as part of “transition arrangements” it would give brokers up until 30 June 2014 to obtain their Cert IV qualification. The move stunned the MFAA with its CEO Phil Naylor saying no credible organisation would have supported such a timeframe – the MFAA wanted just a-six month transition.

A kick in the teeth

The decision to give such a ridiculous length of time to obtain such a basic qualification is a real kick in the teeth for not only the MFAA (which expelled 1,500 brokers in September for failure to complete their Cert IV by 1 July) but for all brokers expecting licensing to raise the bar and give consumers more confidence in their credentials. How does ASIC propose to keep the rogues out the industry when there is no minimum educational requirement for the first four years of licensing? Its decision makes little sense given that most lenders, aggregators, industry bodies and franchise groups already require brokers to hold Cert IV for membership and accreditation purposes. ASIC...please explain. Comment by Larry Schlesinger, editor, Australian Broker

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News Dismay: ASIC grants Cert IV extension till 2014 The industry has been left stunned by corporate watchdog ASIC’s decision to give brokers until 30 June 2014 to obtain a Certificate IV qualification as part of transition arrangements into the new federal licensing regime. The extension means that brokers who do not have a Certificate IV in Financial Services (Mortgage/Finance Broking), a minimum requirement of most aggregators, industry bodies, lenders and franchise groups, will still be eligible for an

Key points  Brokers can obtain credit licence without Cert IV qualification  Only need to obtain qualification by 30 June 2014  MFAA at a loss to understand ASIC’s actions

Australian Credit Licence (ACL) this year. And once licensed, they will have more than four years to complete the qualification. The transition policy was made clear in a series of guides issued by ASIC in December to help those preparing their credit licence applications. The guide says Certificate IV is a training requirement for both ‘responsible managers’ and their credit representatives, but both have been provided with a transition period until 30 June 2014 to obtain the necessary qualification. In the case of responsible managers (those responsible for the “quality of the credit activities” in the business) ASIC will accept “responsible managers of lenders who can demonstrate five years relevant problem-free experience” and “responsible managers of businesses providing credit

assistance who can demonstrate two years’ relevant problem-free experience” – even if they do not yet hold a Certificate IV. In the case of representatives of mortgage brokers, ASIC simply states that they have until 30 June 2014 to obtain a Certificate IV in Financial Services (Finance/Mortgage Broking). Phil Naylor, CEO of the MFAA, which last September cancelled the memberships of 1,500 brokers for not completing Certificate IV by its 1 July deadline, said he was “at a loss to understand why [ASIC had granted such a long extension]”. He said the MFAA’s submission was that ASIC should give no more than six months to achieve Certificate IV status. “Seeing that all MFAA members already comply (and that is the bulk of the broker sector) it is inane to provide such an inordinately long period. It serves no purpose other than to allow non-qualified people in the industry,” he said. From 1 July 2014, anyone applying for a credit licence or

Phil Naylor

acting as a representative of a licensee will need to hold a Certificate IV. To follow the debate online go to: breaking-news/brokers-givenuntil-mid-2014-to-get-certiv/39377



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Suncorp resurgent after one of its toughest years

Terry Wasmund

It has been a difficult few years for intermediaries required to weather the knock-on effects of the GFC – especially the dramatic increase in the banks’ costs of funding, acknowledged Suncorp Bank executive manager Terry Wasmund. However, he said that Suncorp had now achieved its funding program for 2010 and was eager to re-establish its commitment to the broker channel and increase its share of the residential mortgage market. Confirming that Suncorp had remained a supporter of the broker channel throughout the GFC – around 70% of its mortgage business is currently sourced through intermediaries – Wasmund said the bank was

Key points  Looking to increase market share  2010 funding program achieved  Broker channel delivery improved; new products, commission structure revised  Back office well equipped to handle increased volume

working to improve its broker channel delivery “on a range of fronts”. The bank is set to release a host of new product offers in February and is also in the process of developing a revised commission structure. Wasmund told AB it is expected to contain conversion criteria that would deliver a “mutually beneficial” outcome for both brokers and the bank. “We’ve received a lot of constructive feedback about our measurement methodology and we’ll work to refine that in the coming months,” he said. Furthermore, Wasmund was confident that Suncorp’s back office could maintain leading edge service levels to brokers and their customers – a critical element in good customer service – even in the event of increased business volumes. Also, he said that being a bank lender outside of the Big Four with “one of the best reputations for responsible lending” augured well for both brokers and for their customers. At the end of last year, research group CoreDatabrandmanagement declared the second-tier banking sector “dead” based on its declining share of the residential lending market. At the time, the Big Four held around 61% of the mortgage market by value, and Suncorp just 2.79%. Suncorp’s renewed enthusiasm follows the appointment late last year of Patrick Snowball as the group’s new chief executive officer.

Aggregator value proposition on the rise: Choice survey Key points

Continued tightening of commissions and a litany of disastrous turnaround times has had the effect of seriously depleting broker volumes, according to Choice Aggregation Service’s CEO Brendan O’Donnell. However, in spite of the weakened market conditions, the results of Choice’s 2009 member survey shows that the value proposition of aggregation groups is actually on the rise. The recently conducted survey – which analysed the business habits, needs and opinions of Choice members - revealed that 79% perceived Choice as a key partner in their business. This is a 64% increase on 2008’s figures – and an impressive 71% on 2007’s. O’Donnell said the result affirmed Choice’s recent initiatives to increase its member support. “Our focus has been on expanding our product offering to ensure brokers can embrace

opportunities offered through diversification,” he said. O’Donnell said he felt diversification represented a “slow burning industry shift” towards an expanded broker service offering. “Whereby brokers act as the key point for customers to secure all their financial requirements: not only will this approach deepen broker client relationships, it will be realised by larger broker revenues,” he said. Furthermore, describing it as “imperative” that Choice was at the forefront of the swing toward wider finance broking, he said the survey results indicated that brokers were responsive to Choice’s push to partner them as the industry underwent its transformation. Mortgage broker WHO Finance’s Lee Dittmer endorsed Choice’s assessment of the shifting broker market. “The support from Choice since we launched our business has given us the confidence to grow, knowing that we have access to Choice management – who have years of experience in broking – but also key resources to help us plan our expansion,” she said. Dittmer attributed WHO Finance’s considerable growth, despite recent market challenges, to Choice’s focus on member support through additional and diversified products.

Brendan O’Donnell

Lee Dittmer

 Aggregator value proposition enhanced  79% perceive Choice as key partner  64% increase on 2008 result  Shift towards expanded service offering  Diversification support for members is key finding


Firstfolio on the march

Listed financial services group Firstfolio kicked off 2010 on the front foot having completed three acquisitions and signed off on a major distribution deal. Two acquisitions – First Chartered Capital (a $3.5bn loan portfolio and 35 retail franchise outlets) and Loan Services Australia ($2bn in mortgage managed loans) – were completed just before Christmas, while the third, that of Xplore Capital’s $400m mortgage-managed book was due to be completed in the early part of 2010.

The settlement of $5.5bn worth of loan acquisitions (First Chartered and LSA) took the fast-expanding group’s mortgagemanaged and aggregation

Key points  Loan book up 30% in 12 months  Valued at $18bn  Deal signed with Medibank Private  Further partnership opportunities in the pipeline

portfolio to $18bn. The First Chartered acquisition gives Firstfolio access to SMEs along the eastern seaboard with franchise owners seeing “an increase in demand for finance”. The successful completion of these transactions meant Firstfolio’s mortgage loan book had grown by more than 30% during 2009. “Our strategy of expanding distribution capability and scale in aggregation is paying off,” said CEO Mark Forsyth, adding that he expected a “smooth integration process for the acquired assets”. Besides expanding its loan book size, Firstfolio also increased its distribution footprint after signing an agreement with private health insurer Medibank Private to provide its members with free home loan health checks and discounts on mortgage products. The deal with the health insurer marks the third financial services partner to sign up to BLOOM, its proprietary B2B

Mark Forsyth

software application, following agreements with AV Jennings and Virgin Money. The BLOOM platform will allow Medibank to offer a customised mortgage and financial services offering to their own customers. Penny Fraser of Medibank Private described the partnership with Firstfolio as an “exciting initiative” for its members. BLOOM had been launched by Firstfolio, following its acquisition of online broker eChoice in 2008 and is a key element of its long-term organicgrowth strategy. Forsyth said Firstfolio was working on a pipeline of further partnership opportunities that should unfold in 2010.



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Oz banking sector outlook “stable”– Moody’s

Australia’s banking sector is one of 12 Asia-Pacific systems to have their ‘outlook’ upgraded by Moody’s from ‘negative’ to ‘stable’. The rating change was made as industry conditions stabilised, on the back of an economic outlook “far more favourable than predicted only six months ago.” “Strong demand for commodities from China and an effective government stimulus program have been important drivers of this outcome,” the rating agency said in a new report. “Australia avoided recession in 2009 and the consensus GDP growth outlook for 2010 is in the order of 2.5% to 3.0%. “Unemployment is still well contained – at 5.7% in November 2009 – and looks like it has peaked well below the 8.5% originally forecast by the government in mid-2009. Recent bank disclosures suggest that credit costs are f lattening off. Corporate sector leverage is generally low. The commercial real estate sector has successfully raised equity during the crisis and supply/ demand conditions remain generally acceptable. While consumer leverage remains

high, it has reduced over the crisis period. Housing conditions have remained strong as the supply shortage worsens on continued net migration and limited housing starts. There has been a gain in house prices over the crisis period,” the report added. Other bank systems with stable outlooks include China, Hong Kong, Indonesia, India, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, and Thailand. Those with negative outlooks include Cambodia, Japan, Mongolia, and Vietnam. “Three factors underpin the generally better outlooks across most of Asia’s banking systems, and they are improving local economic prospects and stabilising global conditions; and improving access to international debt and money markets,” said Deborah Schuler, a Moody’s senior vice president. “The third factor is a continued adequate level of resilience to cope with remaining macro- and microeconomic risks, with the banking systems having suffered only limited damage during the past 30 months of the financial crisis,” she added.

Connective and TMA sign expanded professional development support program The year ahead is set to be a challenging one for brokers; what with licensing obligations, continued lender focus on quality and a host of new diversification hurdles, according to Connective principal Mark Haron. Haron’s sentiment follows his signing of an agreement with Traineeship Management Australia (TMA) recently to sponsor Connective’s 2010 professional development program. The new sponsorship is expected to support Connective in expanding its professional development program – with over 400 training and development sessions already planned for the year ahead. This is up from approximately 160 sessions in 2009. Haron described TMA as “an ideal sponsorship partner” for Connective and said there existed natural synergies between the two organisations. TMA allowed brokers to become compliant and meet ongoing obligations, as well as provide the tools to gain a competitive edge, he added. “With the challenges of 2010 as a backdrop, we are expanding our professional development program to help ensure brokers are equipped with the skills to stay ahead of the competition – and TMA’s support will greatly assist us to facilitate the numerous initiatives we have already planned. “Through the sponsorship arrangement, we can leverage TMA’s programs and provide brokers with the opportunities to continually up-skill professionally. All of their courses are face-to-face and they

Mark Haron

are focused on the education that sits behind a qualification, rather than the qualification itself,” Haron said. TMA managing director Scott Donnelly said the partnership arrangement was a natural fit. He added that both organisations shared the view of the next 12-month period being “defining” for the mortgage broking industry. Last year, Connective was ranked 24th overall on the 2009 BRW Fast 100 list. Of the only four finance and insurance sector companies listed in the top 100, Connective ranked the highest. At the time, Haron attributed the ranking to Connective’s “unique business model as well as the dedication and hard work of the team”.


Brokers attracted to broker-advisor franchise Key points  Wealth Today signs on 16 franchisees  Has its own AFSL licence  Tony Pennells says reaction “extremely positive”  Franchise model built around diversification

Wealth Today’s push to turn brokers into financial advisors appears to have successfully bared fruit after it signed up 16 franchisees to its “end-to-end financial planning business” in just the first three weeks of operating under its own AFSL licence. The financial services group, which Tony Pennells promises brokers an “all-inclusive solution to diversification in the finance industry”, obtained its AFSL licence in mid November. In addition to the 16 franchisees, it said another 41 business owners were also “formally evaluating the opportunity”. “The reaction to this solution by the market place has been extremely positive,” said Wealth Today MD, Tony Pennells. The franchise offering is built around giving brokers a “comprehensive, all-inclusive solution to diversification within the finance industry”. To qualify as advisors, the company provides financial planning training via a “condensed course” (lasting five days), run by its Academy followed by “comprehensive support and solid mentoring”. In 2009, Pennells was forced to defend its training model after finconnect general manager Tanya Sale slammed quick-fire financial planning conversion courses for brokers. Pennells agreed that “cutting people loose on the market” after completing a quick-fire course was not smart, but said the key issue was providing “ongoing support and mentoring to ensure quality advice and service to the client” something he said the Wealth Today Academy provided. Under the Wealth Today franchise model, brokers are able to run their own financial planning business alongside their existing broking operations. According to Pennells, the role of a broker is to help “mum and dad” borrowers “clear non-deductible debt, to pay off their residential mortgages sooner and to begin accumulating wealth”. “This presents a great opportunity for brokers to service an unmet need in the market place by expanding their services to include financial planning,” he said.



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McGurk net draws in former BoQ owner manager Hiba Cornell, a former owner manager of Bank of Queensland’s Bankstown branch, is one of two people facing charges in relation to alleged frauds totalling $5m. Cornell, 43, from Wenke Crescent at Yagoona, along with Mohamed Diab, 36, from Riversdale Avenue at Connells Point, are currently facing a total of 15 charges in relation to the alleged fraud. In a statement, police said it would be alleged the pair was involved in conspiring to defraud a number of financial institutions through fraudulent mortgage applications. Cornell and Diab were arrested on 17 December 2009 followed investigations into the death of murdered businessman Michael McGurk, who was gunned down in Cremorne, Sydney, last year. McGurk is alleged to be a major player in a $150m mortgage fraud currently being investigated by Strike Force Apia, the specialist mortgage fraud squad. Cornell was charged with ten offences including two counts of

conspiracy to cheat and defraud (including one relating to a $3.9m loan), two counts of hindering police investigations and dishonestly damaging or destroying property. Diab was charged with five offences including conspiracy to cheat and defraud in relation to a $3.9m loan, obtaining property by deception and making false and misleading statements. Brett Eurell, lawyer for Cornell, told the Sydney Morning Herald the court process would show that the police case against his client was incorrect. Eleven people have been charged to date, but a further 250 are expected to be arrested over the home loan fraud. Media reports said all big banks and many smaller ones were victims of the scam, which was carried out by inflating the value of properties. At the time of his death, McGurk was listed as director of short-term lending business Bentley Smythe, which used brokers as introducers. At the time of going to press the Bentley Smythe website no longer appeared to be available.

Club launches online television broadcasts Key points  Club launches weekly online TV program  Looking for 50,000 followers  Designed to assist all consumers develop financial know-how  Co-hosted by Tineka Everaardt Innovative mortgage lending and loan broking business Club Financial Services has turned to new-age technology by launching an online television program. The show, set to kick off on 10 February, is called Your Net Prophet and will be screened weekly through a partnership with internet television provider, The launch of the program would affirm Club’s position as a transparent and accessible

lender, said Simon Norris, Club’s director of sales and marketing and host of the show. The idea behind the show is for viewers to have ready access to a useful and interactive resource that would allow them to keep abreast of industry news, he added. Norris told Australian Broker that Club was looking to build a following of 50,000 viewers with the new service. He said that the show’s content would be delivered as a result of consumer feedback; and anticipates it will include such topics as market issues, property value movements, interest rate moves, lending policy and product changes. “There will be content around assisting consumers develop their financial ‘nouse’ to assist people of all ages cope with the ever changing financial

Simon Norris and Tineka Everaardt

landscape,” he said. Seasoned television presenter Tineka Everaardt will support Norris as the program’s co-host – “acting as the voice of the general public, asking questions that viewers themselves will be

asking”. Your Net Prophet will screen live on Wednesdays from 9am to 10am during 2010. Viewers will also be able to view Club Financial Services’ show at any time at www.


A slow start to the year expected Key points  January sales figures expected to be sluggish  Rebound to come in February  AFG records 20% monthly drop in sales figures in December 2009  Result of combination of three rate rises, tighter lending criteria and end of boost

Figures released by AFG revealed that 2009 ended with mortgage sales in steep decline, a trend expected to continue throughout January, before picking up in February. According to the AFG Mortgage Index, December sales slumped 20% compared to the previous month with just $1.9bn worth Mark Hewitt of mortgages being arranged by AFG brokers in the lead up to Christmas. This fall was more than double the drop of 8% recorded in December 2008. By comparison, mortgage sales in September 2009 topped $2.9bn. Mark Hewitt, general manager for sales & operations of AFG, told Australian Broker that January started off quite slowly with most people appearing to take an extended break, only returning to work on 11 January. “We also had a mid-week public holiday late in the month. I would say the market will be down on last year (in January) before it starts to build again in February,” he said. Commenting on the poor figures for December 2009, Hewitt said: “We have been warning for months that three rate rises in a row was overkill for a vulnerable market, and these figures confirm our fears.” He said that when you combine the effects of increasing, out of cycle lending rates and tighter credit criteria with an end to the first home boost, what you got was a combination of factors that constrains confidence. “Property investors, able to take a long-term view, are hoping to ride a new upward cycle in property values, but right now ordinary families are sitting on their hands rather than upgrading,” he said. On a more positive note, the AFG index showed a return of investor confidence in NSW with two out of every five mortgages arranged in NSW in the month for investment properties. The state ended the year with $180m invested in properties in December 2009 – compared to $153m in December 2008 – a 17% increase.





Resi launches new employment model Few will argue against the last two years having been remarkably challenging for the mortgage industry, but many will recognise the excellent opportunities that lie ahead in it now. This is the view of Lisa Montgomery, Resi Mortgage Corporation’s head of consumer

Key points  New recruits continue to earn salary while transitioning to franchisees  Targeted at experienced lending staff  Eastern seaboard initial target  Mutually agreed apprentice period  Encouraging early response

advocacy; and it coincides with the launch of LaunchPad, the non-bank’s unique new employment model. The new career program will offer a leg up to experienced lenders in becoming fullyf ledged franchisees – offering entrepreneurially-minded lending specialists the opportunity to break from being serial top performing employees to being successful business owners, Montgomery said. “This employment model is something we have been working on for quite some time and will certainly appeal to appropriately credentialled lending professionals who have the experience to run their own book – but are not quite ready yet to take the financial leap into owning their own

franchise,” she said. Under this employment model, the new recruits – called mobile lending managers – start off as paid employees in exclusive territories, before graduating to become fully-f ledged franchise owners. “This is set to attract those who have dreamt about having their own business but aren’t in a position to act because of the constraints of being in salaried work,” Montgomery said. She anticipated the apprentice period would vary, being dependant on each individual’s “skill set and capacity to grow” within the business. “So it will be mutually decided between the applicant and Resi,” she told AB. Initially Resi will be looking to recruit in mainly the eastern

Lisa Montgomery

seaboard, but confirmed that “f low-on” into the other states would be welcomed. Indicative of the improving trading conditions, at the time of going to press, Montgomery described the response from the market as “very encouraging”.


industry NEWS IN BRIEF Smaller, older, cheaper properties appeal to FHBs

First homebuyers have changed their home ownership aspirations in the wake of the GFC, according to the latest Bankwest/MFAA Home Finance Index. The report canvassed the opinion of 850 people on a range of issues relating to first homebuyers and found a preference for cheaper and smaller homes located further from city centres in an attempt to break into the housing market. “The financial crisis has changed the aspirations of homebuyers, effectively downsizing the great Australian dream,” said Phil Naylor, CEO, MFAA. According to the survey, 47.9% of first-time buyers are now looking to purchase a cheaper property than otherwise intended. A third are seeking a smaller property and a quarter an older property rather than moving into a new home. Another 31.3% said they are looking for properties further from city centres.

Consumers get better access to ombudsman

It will be easier for consumers to lodge complaints to the Financial Ombudsman Service (FOS) following ASIC approving new terms of reference. The FOS is one of two consumer complaints handling bodies that ASIC has approved as a qualifying EDR scheme for brokers wishing to register and apply for a credit licence. The new terms of reference take effect from 1 January 2010. ASIC said the new terms would “provide a more consistent treatment of consumers and industry members than the currently operating five separate sets of rules and guidance of FOS’ predecessor schemes”. A summary of the changes can be found on the ASIC website.

Successful RMBS return for Westpac

Westpac became the first major bank since the start of the GFC to issue an RMBS transaction. The bank raised $2bn via RMBS, double the size of its initial target. Of the $2bn, $1.84bn was priced to yield 130 basis points more than the one-month bank bill swap rate, Bloomberg reported. The bank did not reveal pricing for the other notes. Stuart Gray, a Sydney-based portfolio manager at Aberdeen Asset Management, told Bloomberg this was not cheap funding for the bank, “but they have so much to do that they need a variety of sources”.

Double digit mortgage growth for CUBS

Credit unions and building societies (CUBS) recorded double digit annual home loan growth, according to APRA figures, a sign that there remain competitive alternatives to the major banks. According to official APRA statistics released this month, total housing loans for credit unions grew by 10.8% to $31.2bn over the year to September. Total housing loans for building societies grew by 10.9% to $15bn. “If you’re looking for genuine competition and choice in the home loan market, you will find it with credit unions and mutual building societies,” said Louise Petschler, CEO of Abacus, the representative body of Australian Mutuals. Housing loans accounted for 83.8% of total gross loans and advances for credit unions, and 87.8% for building societies, as at 30 September 2009.

FirstMac receives rating upgrade

Standard & Poor’s upgraded FirstMac’s residential loan servicer ranking. S&P raised the company from ‘above average’ to the highest possible level of ‘strong’, while its outlook remains ‘stable’. FirstMac CEO Kim Cannon said the upgrade should give borrowers and mortgage managers more confidence in dealing with FirstMac. “Following a rigorous investigation over several months, Standard & Poor’s confirmed that FirstMac has set excellent risk management practices to promote a risk-conscious culture and implemented a well-designed internal audit program,” he said. “We are particularly proud that the above strategies, combined with enhanced collections procedures, have improved arrears performance to below the Standard & Poor’s Mortgage Performance Index.”

Nationwide Lending becomes You Tube convert

Extending its social media reach, Nationwide Lending has made available an instructional video for its online loan calculator via You Tube. The mortgage manager said the move was driven by the consistent number of calls it received from brokers asking about its software. So instead of trying to describe it over the phone we created the short instructional video, said CEO Glen Jones. “Together with our new Facebook page we are embracing online social media and will continue to do so,” he said. Nationwide Lending has a growing number of members online after setting up a Facebook page to connect with its accredited brokers in November.



Stage set for a solid 2010 Choice Aggregation Services’ CEO Brendan O’Donnell offers his insights into how the industry will evolve in the coming months…

Let’s be clear however: the introduction of legislation will not magically boost brokers’ enquiries overnight


he year ahead represents a time of great potential but also significant challenges to the broking industry. We are all now well aware of the huge potential that licensing has for our industry. While the majority of brokers have always approached their business with a high level of professionalism, the recognition that the broking industry will now receive across the consumer market will be of considerable benefit. Let’s be clear however: the introduction of legislation will not magically boost brokers’ enquiries overnight. It is more of an opportunity for them to broaden their appeal and compete more effectively with other advisory professionals, and indeed the bank branch managers. And with licensing also comes the opportunity for brokers to re-think their own positioning. While mortgage products still firmly remain at the core of most brokers’ offering, there has been significant growth in the range of services and product that brokers now provide, and over the coming year I believe that this will continue to strengthen.

Embracing evolution

We have now largely transformed from mortgage broking to finance broking as brokers have recognised

Brendan O’Donnell Choice Aggregation Services CEO

the opportunity and responsibility to provide their clients with a full suite of products and services. Making this transition has been key to Choice’s strategy over 2009 and it will remain front and centre to our focus in 2010. As well as offering a broader scope of services through diversification, brokers are increasingly recognising the significant value in the advice they are also able to provide to their clients on the products they are qualified to sell. Moving into the future, one of the key sustainable competitive advantage brokers will have is their unique positioning of providing advice and guidance to their clients. Whether this remains strictly based around specialised mortgage lending – or they move into recommending other complementing products – it is a broker’s expertise, rather than merely their access to products and ability to facilitate a transaction, that will ensure the long-term prosperity of our industry. It is this elevation in the perceived professionalism that will ultimately give brokers the opportunity to protect their clients and also potentially tap into new markets. As the industry adapts and capitalises on market opportunities there will also be further consolidation across the mortgage broking industry as a whole. Tougher requirements and the additional costs associated with operating in a regulated environment will doubtless push the less profitable brokers out of the industry. While there is certainly a place for professional part-time brokers, commercially it will become harder for low-volume individuals to continue to justify the operational costs of running a business, and so I expect a reduction in this segment. As well as a reduction in the number of individual brokers I would also expect to see continued consolidation throughout all sectors of the industry. Without either size and scale – or a true boutique offering – it will become increasingly difficult for aggregation and brokerage groups to operate. Those that are caught in the middle will be driven to look at mergers or strategic associations in order to compete with the major groups.

Emerging from a tough year

In reflection, 2009 was considerably better than most of us could have hoped. Our economy defied the pull of the global recession that sucked in almost every other developed nation. On the back of improved confidence we have seen recovery in most segments of the housing markets over the last 12 months and this has paved the way for a brighter 2010. But the year ahead will bring with it new challenges despite improving market conditions. Funding for all lenders remains a major concern and as demand picks up from consumers and businesses there will be increasing pressure on the short supply of finance that is available. This will mean, for the time being at least, that the major banks will be increasingly selective as to which brokers they partner with as they continue to seek quality over quantity in terms of the loans they write. For brokers there will therefore be considerably more emphasis on meeting the banks’ requirements in terms of quality submissions and so there will be increasing pressure on aggregation groups to deliver the highest levels of support to their members. But while the majors are likely to continue to rationalise distribution to ensure sustainability I am confident that there is solid commitment to the broker channel from all major stakeholders for the long haul. As the majors look to balance their positions I expect to see resurgence in the non-bank and second-tier lending segment over the coming year, which is good news for brokers.


What are your Top Ten Tips? What is your area of expertise? Do you have some top tips you’d like to share with our readers? Send your ‘Top Ten Tips’ on any topic which you feel may be useful to your fellow brokers to Please include a brief biographical note and a hi-res photo of yourself.

top ten tips

…preventing card fraud The Australian Bankers’ Association provides these handy hints to detecting and preventing credit and debit card fraud. Useful tips for yourself or to pass on to your clients

Tip 1: DO guard your PIN and internet banking passwords Don’t tell anyone your PIN or confidential internet banking passwords or logon. Don’t keep a record of the PIN or internet banking passwords anywhere near your credit or debit card. Be aware that there is no reason to provide your PIN or passwords to anyone under any circumstances, including a telephone call purportedly from your bank. Only use the PIN for electronic transactions, don’t use it for other purposes, for example your video store password, which you repeat aloud to the salesperson. Tip 2: DO always check your statements Always check your card statements promptly and reconcile them to your purchase slips. It is important that you immediately advise your bank or card issuer of any unauthorised activity. Tip 3: DO provide your bank with telephone contacts and travel plans It’s important for a bank to have up-to-date phone numbers on their systems in case they need to contact you to discuss fraudulent activity on your account. Inform the bank of changes to your mobile, work or home phone number. Provide the bank with details of your trip plans before you go overseas as well as a contact phone number where bank staff can reach you overseas. Tip 4: DO keep a record of your credit and debit card information in a safe place If your card is lost or stolen, the faster you are able to provide your bank with details of the card the better. Banks provide emergency phone numbers to call to report the loss – keep these numbers handy. Tip 5: DO make sure your card is returned by the salesperson Make it a priority to get your card back after completing a purchase. Sometimes cards are intentionally retained by salespeople in order to later commit fraud.

Tip 6: DO dispose of credit and debit card receipts securely Sometimes receipts disclose your account numbers, particularly EFTPOS receipts. Dispose of receipts securely, such as by shredding, so they cannot be retrieved by anyone. Tip 7: DO secure your card Make sure you know where your card is located at all times. Make sure it is secure to minimise the risk of theft. If you are expecting a card to be delivered in the mail, ensure your letterbox can be locked and that you check your letterbox regularly for the card’s arrival. If your card does not arrive within a reasonable time of you ordering the card or being advised by your bank that a card is being sent to you, advise your bank. Tip 8: DO review your card limit You may wish to lower your credit card limit which would prevent a criminal spending more than the determined amount if the card was ever lost or stolen. You need to balance this decision with ensuring your card limit is appropriate to your spending needs. Tip 9: DO be alert for suspicious activity around ATMs or EFTPOS When entering your PIN at the ATM or EFTPOS machine, look around to see that no-one is watching. ‘Shoulder surfing’ usually happens at ATMs or public phones. Criminals may watch you from a nearby location, or behind you in a queue, as you key in your PIN. They may also listen in on your conversation if you give your credit card number over the phone, for example, when making a hotel reservation or booking a rental car. Be aware if there is a group of individuals around the ATM acting suspiciously. If you see a device that doesn’t look like part of the normal ATM operation do not remove it. Keep a reasonable distance and telephone police. If you are suspicious for any reason, contact your bank or the police and await further instruction. Do not put yourself at risk. Tip 10: DON’T ever let your card out of your sight Card skimming occurs when a fraudster skims your card through a device that records the information stored on that card. The fraudster then downloads that information onto a fake card, and will start using it as a counterfeit card. The safest way to avoid card fraud is to never let your card leave your sight.

If you would like to read more information about protecting your financial identity, go to


News analysis

Jockeying for position  If 2009 was all about survival and recovery, then 2010 will be all about lenders evolving their business models to remain profitable in an era of slower mortgage growth, according to the 2010 Deloitte Australian Mortgage Report


he fifth annual Deloitte Australian Mortgage Report was optimistically subtitled “2010 positioning for opportunity”. It said that while 2009 was dominated by the major banks, 2010 would provide opportunities for the re-emergence of other lenders in the market place, particularly as securitisation markets start to thaw. According to report co-author James Hickey, the good news is that a landscape of renewed hope will emerge this year with all lenders being able to position for the years ahead. This positioning will be crucial, because while monthly mortgage settlements have recovered to preGFC levels (around $23bn to $25bn per month) the era of 10% to 15% system growth is over, with Deloitte predicting subdued growth of around 7.5% for the “foreseeable future”. So just how will lenders position themselves in 2010? According to the Deloitte report (which includes the

findings of its aggregators and lender roundtable) the mortgage industry will evolve on a number of different fronts this year.


Firstly, lenders will differentiate by branding, strategy, pricing and operating models. Brand differentiation is already being led by the Big Four banks, many of whom now run multiple brands as a result of their various acquisitions. According to Hickey, the major banks will “certainly look to keep their brands open as challenger brands” and they will not want to erode the separate consumer propositions contained in each of these brands. In the roundtable discussion this point was brought home by Axel Boye-Moller, head of mortgages at Westpac, who said that within the banking group there were “several brands competing internally”. Speaking from the second-tier perspective, AMP managing director Mike Lawrence said branding would be important when “targeting the mass market” and pointed to the Citi Group/Virgin Money deal as an example of two powerful brands that could have a significant impact on the market. In terms of strategic differentiation, Hickey said certain groups may seek “short-term market share benefits” (analysts say that NAB sticking with the RBA’s 0.25% rate increase in December is a good example of such short-term thinking) while others may seek to get “economic fundamentals

correct in terms of pricing of their mortgage portfolio”. Differentiation is also expected to occur around pricing – something which kicked off with Westpac, CBA, ANZ and NAB passing on different rate increases in December – as well as in terms of different operating models going forward. “We believe that differentiation will continue to pan out in 2010,” Hickey said.


Secondly, competition is expected to return to more active levels throughout this year and not just between banks and non-banks “but within the Big Four themselves”. “Our view is there will be a continuation of competition among the Big Four around these differentiation aspects,” Hickey said. Outside of the Big Four, he said there was the “positive potential for the re-emergence of regional and non-bank lenders as the RMBS market thaws and funding becomes available at some degree of break even level in 2010”. On the issue of competition, Lawrence said it was AMP’s intent to tackle the Big Four. “I think it’s fair to say that funding is working its way back… we are not too far away from securitisation becoming economical again,” he said. Roundtable participant and CFO at Aussie Home Loans, John McDonald, warned though that it would be hard for those with a single A rating to compete with those with a AA rating: “It’s a big gap and it’s going to continue to be a gap…its going to be really hard to be really competitive.” According to Deloitte though, competition may not just come from the usual suspects (second-tier banks and non-banks), but from “left field” due to the country outperforming during the GFC. These left field groups might be those with access to large customer bases such as employer groups or industry funds with the key ingredient being scale and customer service proposition. “I think it would be a reasonably attractive market place relative to other major Western economies and it might encourage interest from overseas or from other groups within Australia with customer bases to leverage off,” Hickey said. However, any new entrants will struggle to compete at the same profit level of the major banks and as a result may seek “more fertile opportunities moving down the credit curve into areas such as low-doc or niche lending”. Pepper Homeloans CFO, Patrick Tuttle said low-doc lending would only re-emerge if funding frees up for the specialist lenders and if LMI providers relax their lending criteria, something


he did not expect to happen any time soon.


The GFC allowed the major banks to re-establish their footprint on distribution, in particular third party distribution via acquisition and equity investments. According to Hickey, this is likely to continue in 2010 and indeed pick up pace particularly in the consolidation of brokers groups as “genuine financial strain” starts to impact on them. However, the report said M&A activity would not be restricted to the major banks, with “large financial planner groups and private equity consortiums” likely to see the potential benefit of “owning” the front end of the distribution chain.


Delivery channel innovation is likely to be a big factor in how lenders position themselves and their products. The Deloitte report predicted an increased focus on investment in online mortgage lending despite the challenges around legislation, customer verification and responsible lending. Hickey said there has been a “spattering of discussions around the online channel” and how viable an ongoing channel it can be. Speaking at the roundtable, Steve Kane, CEO of FAST, said there was still a “huge need” for “face-to-face fulfilment” and called online lending a “minefield with all the different state legislation around conveyancing, etc.” However, ING Direct CFO Mark Mullington said its online lending business, though small, had grown very strongly throughout 2009, doubling in volume. With legislation coming up, he agreed it would be harder in the online space, but said he would still be part of the mix. Other areas of innovation, according to Deloitte will be around product design and operating efficiency going forward in 2010. Hickey said large overseas banks were moving towards differentially pricing mortgages based on demand or price responsiveness at a customer segment level. When participants were asked their thoughts on the benefits in leverage data to make pricing decisions, ING’s Mullington said the bank was moving down a more sophisticated modelling route. “We are turning the science we are getting from that data into how to price our products better.” Tuttle said that all of Pepper’s product pricing was risk-based and heavily influenced by behavioural data from its back book. “This information then helps drive new product design and pricing.”



Fear and optimism in Las Vegas

 Though membership has slid from 27,000 to just

under 10,000, and loans originated through brokers have slumped from around 65% to 25%, the US-based National Association of Mortgage Brokers (NAMB) remains bullish about the year ahead and a possible move to federal licensing. Simon Parker caught up with its president, Jim Pair, and CEO Roy DeLoach at the NAMB annual conference in Las Vegas for their assessment of 2009 and what lies ahead in 2010


ow would you evaluate the role of US mortgage brokers in today’s economic environment? JP: There is still a need for the mortgage broker. The consumers have always relied upon mortgage brokers… we’ve developed relationships with the consumer, and most of our business comes from referrals. If we don’t do a good job for the customer, they’re certainly not going to go out and refer us to their family and friends. I think the role of the mortgage broker is definitely needed, and will continue to be needed to better serve the consumer. We’re 24-7, they can call us on a Saturday night if they’ve got a question. The retail lenders aren’t like that; they’re strictly 8 to 5-type operations. They don’t tend to service the consumer in the same way that we do, because they have big deposits and a lot of depositors, and a lot of business can come from that and they don’t have to do the things that we do. Was there ever a threat to mortgage broking in the US? Were they being overly blamed for what was happening? RD: Our job was to explain to the media and Congress the mortgage process. We had to teach everybody we could about what our role was. Once it came out that we were basically giving the information to lenders, they

were running through the automated underwriting systems, and they were collecting the data. [The lender’s] job was to… check the data and underwrite. That’s come out now, and we’ve been vindicated. One thing our members do need to know more about, because of all of this, is the chain from Main Street to Wall Street, [particularly] if the pull through [high efficiency ratio] doesn’t happen. We’re committed to teaching brokers why the pull through rate is very important, and [how] in the future it’s going to count against you if you can’t make sure you close the deal. The success of the broker is dependent on understanding all the information he or she has from the borrower and the chosen lender. Given all this, the probability of closing is pretty high. That’s the new value-add for mortgage brokers. JP: Five years ago, mortgage brokers and wholesale lenders were guilty of this; the market was that good, the wholesale lenders were not that concerned about pull through rates. They knew there was so much business out there, and they were going to get it, that they could take the risk of [low] pricing. We all need to recognise that you can’t shop that loan. We’ve got to select one, and we’ve got to stay with that one. How tough is it now for US mortgage brokers running their businesses? JP: The major problem brokers have right now is that underwriting has become so strict, that so many people cannot qualify for loans. It makes it very difficult. With the mortgage insurance companies, where in the past you were able to do high-ratio loans up to 95%, and get them insured, they’re struggling and [now] they have raised their requirements before they’ll even think about insuring a high-ratio loan. It’s harder for the consumer to understand that they cannot get the 95% [LTV] conventional loan. That’s the reason the Federal Housing Agency’s (FHA) role has increased from around 8–10% five years ago to almost 40% of total originations now because it has a minimum down payment of 3.5% … More and more of the loans are going to the FHA as we cannot service the consumers with the high-ratio loans unless we do it through the FHA. Is the mortgage broker market at the bottom of the cycle? For instance, are you expecting more members to join NAMB next year? JP: I think so. One of the good things happening right now is that there is something we’ve advocated for a number of years - national licensing of all [mortgage] originators. We were not able to get the banks included but mortgage bankers were. We’re going through a period now where [mortgage originators] have to have 20 hours of education and take a test, so education has become a key recruiter, you might say, for NAMB. RD: You’ve got the five distribution channels out there – the banks, the credit unions, the federally-chartered entities, state lenders and the mortgage brokers. For the lenders and the mortgage brokers, they’re going to be tested, they will be educated and have background checks. Now… you have one channel – the banks – that don’t do that. It’s actually a very good competitive advantage – is there a risk going to a bank where that person didn’t pass a test, they don’t have the educational requirements,or they didn’t have to submit their fingerprints for an FBI background check? Why would you want to go there when there are other channels that have all these protections for you? Your conference had a strong marketing and selling focus. What do you hope brokers take from your conference? JP: It comes back to my philosophy that brokers are now going back to the things that we [once] did. We had to be innovative and creative, and we had to learn how to market. We’ve kind of forgotten some of this. What we

hear from the members is that we need help in relearning some of this, and getting back so we can be more creative. You included a ‘speed dating’ session with lenders. What is product knowledge like among US brokers? JP: Speed dating is something we started in Texas. Some of the [NAMB] chapter heads did these three or four years ago, and they went over [well]. And it’s just a matter of having face-to-face with different lenders. Maybe taking a file you have and getting their input on what’s going to be the best way of making it work out. You can do stuff like that. It gives the lender and the broker the opportunity to have a lot of good face time together, and create a relationship that will go beyond this conference. We’re sitting here in 12 months’ time: what would you hope you’ve achieved as an organisation? JP: That we’ve been able to protect our industry, and make sure that there are not laws or regulations that are overreaching and force us out of business. Two, I think we’re going to see membership increase. The people that are remaining right now are truly professional brokers – we’ve survived the last two years, and if we can survive one more year there’s going to be a great opportunity. Real estate and mortgages will be back; there’s going to be fewer brokers than there was about five years ago.


SAFE Mortgage Licensing Act According to the US Department of Housing and Urban Development (HUD) website, the SAFE Act forms part of the Housing and Economic Recovery Act of 2008 (HERA), which was signed into law on 30 July 2008. The law sees the federal government enter what was once solely a state government preserve – mortgage originator (broker) licensing. “The SAFE Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators and for the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a nationwide mortgage licensing system and registry for the residential mortgage industry,” it says. “If HUD determines that a state’s mortgage loan originator licensing standards do not meet the minimum requirements of the Act, HUD must implement and administer a licensing system for that state,” the department says. “A loan originator in such a state would have to comply with the requirements of HUD’s SAFE Act-compliant licensing system for that state as well as with any applicable state requirements.”

There is still a need for the broker

Survival marketing What quickly became apparent during the NAMB conference and expo is how much business was once handed to mortgage brokers on a platter. How times have changed. Asked what she took from the marketing-focused seminars – which included an online focus on social networking and producing videos – New Orleans-based Karen Woods, of NewLine Mortgage, said they helped in teaching her how to get new business in what is a new environment for her. “In the past we would deal with referrals,” she said. “But at this point, we have to be out there more directly with the client.” Steve Higa, senior executive loan officer at Honolulu-based Point Financial, was upbeat about the year ahead. “I’ve learnt that we’re here to stay, and we’re not giving up,” he said. “You can see we’ve got a pretty good show considering the economic times that we’re in.” Both mortgage brokers were particularly interested in the idea of posting videos online. Frank Garay, co-creator of Think Big Work Small, was responsible for this presentation. The California-based company gives real estate agents and mortgage brokers assistance with using videos as a means of communicating with their database. When it comes to creating a video, Garay gave these tips to mortgage brokers: • Don’t waste people’s lives with a video resume about yourself – while still useful, it’s boring and belongs under the ‘About Us’ section of your website • For clients, provide ‘value’ (information they can actually use in their day-to-day life) • Industry news shows are only good for people that work in or close to your industry (ie, potential referrers) • Be yourself – the reality of seeing you behind a webcam in your office is great • Use a script, otherwise you’ll ramble • Always ask for the sale in every video For more information, see

The ones that are here are truly professional brokers, and will be able to take advantage. If you could pinpoint what makes for a ‘good’ broker, what are some of the traits they would have? RD: I think going forward, the value-add for a broker now is going to be stepping back and asking, what are the advantages for the consumer in using a broker versus taking a crap shot at whatever bank to get a loan. The problem for the consumer is, they don’t know for sure if bank ‘A’ has a program that the consumer will fit into… the broker’s value is to send you to the lender that one time that’s going to close that deal. Mortgage brokers are going to be more valuable in the future because of all the things the entire market has gone through. A broker will have more expertise, so when that loan file is ready to go, it goes to the right bank the first time. JP: Brokers are very patient. It takes time to find out what the consumer needs, and to put the package together for that lender so it can get through. We’re willing to take the time to work with our customers, go through the steps, and tell them you need to do this, this and this in order to be here. And you don’t find that through other channels of [loan] distribution. RD: The value-add for brokers for the entire market is that lenders are able to tap into a lower-cost distribution [channel]. It’s like they can turn the valve up on that channel to handle the increased demand. If you did the maths and said, you know what, let’s get rid of the mortgage broker channel, that would be OK for maybe six months but as soon as there’s any kind of up-tick in the market on refinances or purchases, the capacity of the banks wouldn’t cope… all the distribution channels know you have to have the mortgage broker.



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

However, while we found some juicy stuff on nutrition and furniture and got rather excited over an article titled ‘Renovating – the marriage tester’ we could not find a sniff of industry scandal, gossip, rumour or innuendo. And we have to say, we’re pretty pleased about that. After all, we’d hate to have been beaten at our own game!

‘Elvis’ broker steps on King’s blue suede shoes (again)


Will poker star show broking hand?


ormer world poker champion and one-time mortgage broker, Joe Hachem’s dreams of becoming a silver screen star may have hit a snag, ironically over financing. Hachem is due to make his big screen debut in the Aussie horror flick Prey as a poker-loving motel operator alongside the likes of soapie star Natalie Bassingthwaighte and Jesse Johnson (the son of Miami Vice’s Don Johnson!). However, a report in the Herald Sun said Top Cat Films, the company set up to handle the film’s premieres in Melbourne, Sydney and Las Vegas, had gone bust with debts of over $1m. But Insider reckons it could be a touch of good fortune for the producers that Hachem used to arrange loans for a living. He may have given up his broking days after winning millions at poker, but there could well be a job for Joe in getting the film’s finances back on track! (For those keen to catch Joe Hachem’s big screen debut, Prey is set to open in Australia in May.)

Something to smile about…


rokers feeling a little down about poor January sales may be able to cheer themselves up somewhat at the news that their banking rivals rated extremely poorly in a UK report on jobs that contribute to society.

The report, titled A bit rich, and put together by the New Economics Foundation, found that jobs such as hospital cleaners and waste recyclers are more valuable to society than bankers – a finding perhaps not at all surprising in the wake of the GFC. Indeed, the research found that bankers effectively take £7 from the general public for every £1 they earn, not something to be especially proud of. By comparison, hospital cleaners, who are poorly paid, generate £10 in value for every £1 they are paid. Furthermore, the think tank all but dispelled the

traditional view of bankers creating wealth that trickled down to others. Rather, the actions of high-earning investment bankers have had “damaging social effects” it said. Just something to put a smile back on your face until the market picks up again (and perhaps worthy of a mention when potential clients consider using a bank branch rather than your services).

The real insider?


nsider was a little bit surprised to find an e-mail newsletter from the Loan Market Group’s Sam White, titled… ‘The Insider’. While Insider considers it a form of flattery to have its moniker picked up by a leading industry player, we have until now enjoyed our protected species status. Nonetheless, we duly had a quick look through ‘The Insider’ to see what hot gossip we’d missed out on.

eaders may recall the estate of Elvis Presley getting all shook up at Gold Coast mortgage broker Elvis Jelcic last year after he successfully trademarked the name ElvisFINANCE. Having managed to silence ‘the King’ and his merry legal men, reports in the Sydney Morning Herald revealed Jelcic was looking to push the ElvisFINANCE brand even further. Having learnt that Elvis Presley credit cards are already available in the US, lawyers for Jelcic, who successfully got Elvis Inc to back down on the first trademark, said the broker expected to be equally successful with his attempt to register an ElvisFINANCE credit card trademark as well. The paper reported that a quick-thinking Jelcic was due to lodge documents that would demonstrate he was developing an ElvisFINANCE credit card business before Elvis Inc made its own application, and thus deserves its own trademark. “‘They want to dominate everything, so I expect them to take me to court,’’ Jelcic told the Sydney Morning Herald. And…one for the money… two for the show…


Larry Schlesinger is editor of Australian Broker. He can be contacted on


The place where the industry comes to meet


Aussie set to poach Advantedge brokers

The Qantas/Jetstar model looms… All signs point to a return of competition in the market place this year. But it’s likely to be a new kind of mortgage competition which is in fact more illusory than real, writes Larry Schlesinger Recently, at a lunch with an executive from a well-established mortgage manager, we got to talking about what Advantedge’s wholesale funding plans might mean for his business and the sector as a whole. The executive was excited about the prospect of better quality funding being provided by Advantedge (owned by NAB) and optimistic about business prospects for the year. Talk then turned to how this mortgage manager, armed with better funding, would be able to take on the major banks, which of course begged the question: would this include being able to take on NAB? The response was not that surprising: “Oh no…we cannot say anything bad about NAB.” That sentence, shared over a bottle of wine just before Christmas, seemed to sum up the type of competitive environment we are more than likely going to be heading into over the next 12 to 18 months. Put simply: consumers and brokers will undoubtedly see a wider choice of mortgage brands and products on offer, but behind the scenes, the strings to these brands will continue to be pulled by those that have a stranglehold over the market. The Qantas/Jetstar model Very much like the Qantas/Jetstar arrangement, as one journalist put it to the authors of the 2010 Deloitte Australia Mortgage Report, when he was asked: “Are we seeing a Qantas/Jetstar model [operating in mortgage lending] where Qantas pulls all the strings… and real competition is in fact illusory?” The question was asked on the back of the Deloitte report predicting a gradual return of regional and non-bank lenders and possibly “left field” and “large foreign banking groups” re-entering the market. The response was “yes”, more independent lenders (those with no funding ties to the major banks) would return this year. However, at the same time, the expectation was that the major banks would look to build on the separate consumer propositions contained in each of the individual brands they now own (RAMS, Bankwest, St.George, etc) to “ensure that the value of these brands is not eroded”. In short, the banks will try to sell to consumers the ‘illusion’ that each of these brands is a separate, independent entity and they will continue to push brokers in which ever direction they see fit. Parental pressure A great example of this was Bankwest’s decision to offer its relaunched Rate tracker mortgage exclusively via its stores (accompanied by a high profile advertising campaign), ignoring a channel that had done such a great job selling the product first time round. Such parental pressure may also have been behind the decision by RAMS to restrict access to its higher LVR loan to franchisees, before ditching brokers altogether. In both cases, these decisions have dismayed brokers, but there may be more to come as banks figure out how to ‘competitively’ position their different brands. This so-called competition among the major banks and their subsidiary brands is something the likes of CBA boss Ralph Norris would regard as competition in its truest sense. Speaking at the end of 2009, he remarked: “I think it’s probably the first time in a long time where we’ve seen such a range of pricing differences between the majors, individually between each other, and also the second-tier banks.” In Norris’ view, competition in lending is principally about the four major banks and the second-tier banks (two of which are owned by the CBA and Westpac). Non-bank lenders, which prior to the GFC held 20% of the market, don’t even get a mention. Let’s hope the horizon expands a little further than Norris’ definition this year.

» See it here FIRST

By BN | 01 Feb 2010

A number of brokers operating under NAB’s Advantedge group have approached Aussie Home Loans about a possible move across, according to founder John Symond ...



» Give us an opinion others will want to read and win a $10,000 media package

» The 18-part Coaching Series continues Next: Developing key contacts for your business

Doug Mathlin, Frontrunner Consulting Group, speaks about the importance of brokers having key contacts to qualify more leads. He gives a detailed step-by-step guide on how to approach and seal the deal with key contacts, including: » How to identify which contacts can be beneficial to approach » Getting your initial message across to these contacts » The first meeting, how to set it up, how to build a rapport and what to talk about in order to determine whether to start doing business with them » Why it’s important not to rush into the relationship » How to formalise the agreement to recommend each others business


» General market news & views

Home values flat in December BN | 29 Jan 2010

Australian home values recorded a 0.3% fall in December 2009 according to the latest index supplied by RP Data and Rismark. ...



One year on What a difference 12 months can make … or maybe not. Australian Broker reflects on the stories that made headlines in the magazine one year ago

Issue: Australian Broker issue 6.2 Headline: “Wizardry: Aussie aims for $1bn a month” (Page 4) What we reported: With one month to go until the settlement of the Wizard purchase, Aussie executive director James Symond told AB of ambitious plans for the new acquisition. First up was aligning the new business under the Aussie umbrella, something he expected would be a “relatively smooth transition” due to the cultural fit between the two organisations. Following that, Symond expected Aussie to expand to 150 shopfronts, increase staff numbers to more than 800 and write $1bn a month in new loans within three months of settling the deal. What has happened since? While like every other acquisition,

James Symond

there were teething problems, Aussie got what it wanted out of the Wizard deal and more. One year on and with the last shingle painted, Aussie now has 154 shopfronts, nearly 1,000 brokers and loan writers and has a settlement forecast of $12bn to $14bn for 2010 (so, more than $1bn a month). The Wizard name has been consigned to history and according to Symond all the former Wizard franchisees who took the Aussie deal are thriving under the new “umbrella”. Headline: “New industry body to right the balance” (Page 6) What we reported: The Australian Institute of Professional Brokers (AIPB) opened its doors on 23 January 2009, promising a “stronger collective voice for brokers”. Led by Maria Rigoni, its top priority for the year was to get the AIPB logo and values “readily recognised and respected in the market place”. At the time Rigoni told AB 100 brokers across Australia were seeking information and application forms for membership. What has happened since? The AIPB was hoping to benefit from disillusionment among MFAA and FBAA members, but has to date failed to make a significant dent on the incumbent industry bodies, a fact acknowledged by Rigoni herself in a recent interview with AB (In addition, the AIPB members section on its website was still

AIPB founding committee

“under development” when we last checked). To her credit, Rigoni has continued to agitate, calling on the FBAA, MFAA and ABA to take part in a discussion about the way lenders have been treating brokers. Unfortunately, none of these organisations appeared interested in engaging on the subject. The FBAA was the only one that responded to the request (to decline the invitation), which only resulted in an ugly spat between Rigoni and FBAA president Peter White. Headline: “CBA: Inactive brokers a ‘potential risk’ ” (page 10) What we reported: CBA executive GM for third party banking Kathy Cummings defended the bank’s policy of requiring brokers to submit one loan every six months, saying it was “good business practice” and essential to the bank in order to “re-evaluate accredited brokers to ensure they have the knowledge to deliver a good customer experience”. Cummings denied that the policy was about “meeting a target”, but rather about “risk mitigation”. Among those who slammed the policy was Refund Home Loans boss Wayne Ormond, who issued a media release labelling the CBA move “an attack on brokers’ integrity”. What has happened since? One year on and Cummings continues to defend the bank’s accreditation policy. Not surprising at all when

you consider that the new requirement for brokers to remain accredited with the bank has been bumped up to four loans every six months (or one every six weeks), compared to nearest rival Westpac which expects just one every six months, while ANZ and NAB have no such quotas. However, Cummings has refused to concede any ground, maintaining the argument that the policy is in place for quality reasons – not to push up volume from brokers. Late last year she compared the policy to a mechanic who serviced BMWs saying the mechanic needed to service a certain number of vehicles to remain competent.


off the cuff Brett Mansfield

eChoice’s general manager What was the last book you read? The Slap by Christos Tsiolkas If you did not live in Melbourne, Australia, where would you like to live? Manhattan, New York – my wife Michele and I have recently spent some time there and found it an amazing city. If you could sit down to lunch with anyone you like, who would it be? The Socceroos in the lead up to the World Cup. What was the first job you ever had? As a school-age boy picking fruit south of Hobart in Tasmania. What do you do to unwind? I love road cycling, running and most sorts of outdoor activity. What’s the most extravagant gift you ever bought yourself? My road bike. What CD is currently playing in your car stereo? The current Powderfinger album.

Have a flexible plan which you can change as the market dictates, and surround yourself with good people. If I was not working in the mortgage industry, I would like to be…? A rock star of course! Where was the last place you went on holiday? New York What is the one thing most people would not know about you? I spent two years in the 1980s travelling around Australia in a Kombi van.

If you could give anyone starting out in business one piece of advice, what would it be?

cont. from cover


Brendan O’Donnell CEO at Choice Aggregation Services was unfazed by the announcement, saying the move was unlikely to have any material effect on broker businesses. “While it is disappointing to see it pull out of the broker channel, there are a range of products on par with those offered by RAMS – many of which are from non-bank lenders,” he told AB. National Brokers Group CEO Steve Lambert said the move would have little effect on the greater business. In fact, he felt it would “open up” the market for some of the current players. Meanwhile, Ray Hair, PLAN Australia’s CEO, said the withdrawal of RAMS from the broker channel might be disappointing – but it was hardly a fatal event.

“We expect other lenders will see the opportunity and move to take advantage of it, on an appropriate price for risk basis,” Hair told Australian Broker. And Mark Hewitt GM for sales and operations at AFG said the move would only have “a minimal effect” on AFG’s business. “They had made a number of policy and pricing decisions in the lead up that had reduced their market share with us,” he said. While many market commentators were quick to suggest that a sinisterly motivated Westpac was the hand in the glove behind the move, these aggregator heads held an altogether more judicious opinion. O’Donnell told AB that Westpac had re-emphasised to him their ongoing support to the broker channel, but pointed out that a

question mark hung over it, making “the LVR announcement and the RAMS announcement in such quick succession”. (A day before the RAMS announcement Westpac told brokers that it was lowering its LVRs for new customers on standard variable mortgages from 92% to 87%.) “Clearly, as anticipated, there is funding pressure among all banks which may be the trigger on the decision made,” O’Donnell said. And while Lambert felt, in spite of Westpac claiming not to be “pulling any levers in this area”, he said it did not go unnoticed that RAMS’ withdrawal from the broker channel would assist in reducing competition for both Westpac and St.George in the same vacated space. Meanwhile, Hair said given RAMS’ position as a wholly-owned

subsidiary of Westpac, one could assume there was “a wider group strategy” at play here. However, he believed there was no malice involved: “I’d suggest the decision was predicated on funding the RAMS franchise model to improve productivity and profitability rather than any wider group strategy to not support the broker channel.” Hewitt’s assessment, however, was more pointed: “As owner of the RAMS brand I think it is fair to assume that this was a Westpac decision.” The change becomes effective from the close of business on Friday 26 February. New applications between now and then will be accepted and all pipeline deals will go through the normal course of business, a RAMS spokesperson said.

Brendan O’Donnell

Mark Hewitt

Melos Sulicich

Ray Hair


Caught on camera Aggregator AFG celebrated the achievements of its best brokers with an awards night held as part of its NSW & Qld AFG Christmas & Awards event on Hamilton Island on Saturday 6 December 2009

2 1





8 7


Photo 1: (left to right) John Rowlands – Mortgage Success; Katrina Rowlands – Mortgage Success; Malcolm Watkins – AFG Director; Peter Kerr – AFG Photo 2: (left to right) Mark Hewitt – AFG general manager; Mark Harris – Home Loan Connexion, Champion Broker Qld; Beccy Ras – AFG state manager Qld; Ian Cain – Home Loan Connexion,Champion Broker Qld Photo 3: (left to right) Scott Colless – Century 21; Beccy Ras – AFG state manager Qld; Mark Hewitt – AFG general manager Photo 4: Dan Heylbut, MC and AFG national account manager Photo 5: David Brell, Champion Broker NSW/ACT – Smart Move Home Loans Photo 6: (left to right) Scott Bradford – QSA Financial Services; Beccy Ras – AFG state manager Qld; Mark Hewitt – AFG general manager; Dean Bradford – QSA Financial Services Photo 7: (left to right) Sandra Keating – RFS Finance; Steve Carlton – RFS Finance; Beccy Ras – AFG state manager Qld; Mark Hewitt – AFG general manager; Michael Kelly – RFS Finance Photo 8: (left to right) Kelly Ruddick – JR Home Loans; Michaela McDonald – BCP Group Lending; Hilal Aydemir – Citibank; Amelia Kahila – Evolution Mortgage Planners Photo 9: (left to right) Tina Kitchingham – ANZ Qld; Mina Sun – ANZ Qld; Tim Carroll – state manager NSW & Qld ANZ; Lana Moy


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AGGREGATOR / WHOLESALE BROKER Choice Aggregation 1300 135 389 page 19

MORTGAGE MANAGER / NON-BANK Mango Media 02 9555 7073 page 1

Mortgage House Aggregation Services 1300 664 774 pages 16 & 17

Resi Mortgage Corporation 136 126 page 32

PLAN Australia 1300 78 78 14 page 5

NON-CONFORMING Liberty Financial 13 11 80 page 7

Banks St. George Bank 1300 137 532 page 3

Pepper Homeloans 1800 737 737 page 12

LENDER Eurofinance 02 9252 8311 page 15 Homeloans Ltd 1300 787 866 page 18 MKM Capital 1300 762 151 page 8 RAMS Home Loans 1300 130 769 page 13

31 The House Price Information People

RP Data page 23 Trailerhomes 0417 392 132 page 28 SHORT TERM LENDER Crown & Gleeson 1800 735 626 page 2 Interim Finance 02 9971 6650 page 4 NCF Financial Services Pty Ltd 1300 550 707 page 11

OTHER SERVICES North Shore Mortgages (02) 8060 1825 page 6

Prime Finance Pty Ltd 1300 130 538 page 10

Pulch Photography 0432 710 970 page 31

Wholesale Advantedge Financial Services Pty Ltd 03 8616 1600 page 9

Residex 1300 139 775 page 25

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Australian Broker magazine Issue 7.2  

The no. 1 news magazine for Australian brokers.