Mortgage Professional Australia magazine Issue 10.3

www.brokernews.com.au issue 10.03

rising stars kers Young bro ve on the mo

GETTING LICENSED WHAT YOU NEED TO KNOW

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STRATEGIC PARTNERSHIPS HOW TO MAKE THEM WORK

BIG FOUR CHALLENGE ING DIRECT’S LISA CLAES

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CBACM1471_B.pdf

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Editor’s letter

Against the odds

issue

10.

03

Mortgage broking is not a profession for the faint-of-heart. It can be a feast or famine endeavour and for many industry professionals the early days are typically the latter.

This issue we’re looking at the ‘rising stars’ of the industry – new brokers that ignored the doom and gloom of the GFC and jumped right into the pool anyway. In a sink or swim world, these professionals are the water babies. Sure, they’ve missed the ‘golden days’ of broking when commissions were 30% higher, loan turnaround times were faster and lending criteria was looser, but they’re still finding ways to succeed.

We’ve profiled their stories in an effort to find out what attracted them to this field (at a time when so many are leaving) and what they can teach others.

Also in this issue, we’re looking at strategic relationships – how to find them, build them and maintain them.

On a personal note, I’ll be vacating my post as editor of MPA to go on maternity leave. It’s been a pleasure learning and writing about this industry and I wish you all the best.

Andrea Cornish Editor

MPA 2.0 Our multimedia edition features on-camera interviews with the industry’s biggest players. Visit Brokernews. com.au/MPA to hear their thoughts on the hottest issues facing mortgage brokers.

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contents

cover story

40 getting licensed the ABCs on getting registered and licensed

26 Rising stars: Despite being pitched into mortgage broking during the height of the GFC, these brokers are proving themselves capable swimmers

Look for extras on Broker News TV. On-camera interviews with: Lisa Montgomery

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Warrick Merry

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03 issue

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EDuCATion

CONFLICT RESOLUTION

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contents

Features 20 Strategic relationships: Tricks to help maximise the benefits of your referral partnerships 24 Column: Networking Do’s & Don’ts 44 Column: Going from team manager to team motivator 48 The magic number: How much choice should you offer your customer?

59 Short-term lenders: Review of the market 62 US slang: get hip with mortgage talk across the pond

MPA LENDER 59

54 News: A review of news in the world of non-bank lending and mortgage management 56 Profile: Resi’s Lisa Montgomery

PROFILES

DIRECTOR Claire Preen

SALES MANAGER Rajan Khatak

REGIONAL MANAGING EDITOR George Walmsley

Account MANAGER Simon Kerslake

EDITOR Andrea Cornish JOURNALIST Tim Neary PRODUCTION EDITORS Carolin Wun Jennifer Cross DESIGN MANAGER Jacqui Alexander

LIFESTYLE

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 MPA magazine can accept no responsibility for loss

64 My favourite things: Peter Hayward

REGULARS 6 News review 10 News analysis 47 Book excerpt: Six Pixels of Separation by Mitch Joel

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DESIGNER Paul Mansfield

14 Leaders: ING Direct’s Lisa Claes 18 Broker: Kobi Chillman

10.

03 issue

PUBLISHER Justin Kennedy

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

HR MANAGER Julia Bookallil MARKETING MANAGER Danielle Tan TRAFFIC MANAGER Stacey Rudd

Subscriptions tel (02) 8437 4731 fax (02) 8437 4753 subscriptions@keymedia.com.au Advertising enquiries tel (02) 8437 4772 rajan.khatak@keymedia.com.au tel (02) 8437 4786 simon.kerslake@keymedia.com.au Editorial enquiries tel (02) 8437 4790 fax (02) 9439 4599 larry.schlesinger@keymedia.com.au Key Media Pty Ltd Level 10, 1 Chandos Street St Leonards, NSW 2065 www.brokernews.com.au

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News

Government & Regulation

Moody’s upgrades Australia to ‘stable’

2.7% The World Bank upgraded its forecast for global growth up from 2% to 2.7% in its annual report

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. 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,” the rating agency said in a new report.

“Recent bank disclosures suggest that credit costs are flattening 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,” the report added.

Other systems with stable outlooks are 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.

Bernanke to bat again Ben Bernanke has been confirmed for a second term as head of the United States Federal Reserve.

The Senate voted 70-30 in late January to leave Bernanke at the helm of the central bank for another four-year term.

The confirmation came minutes after senators voted to end a debate in which critics excoriated the central bank’s handling of the financial crisis.

Bernanke’s confirmation was a victory for President Obama, who had called him “a critical leader” in the nation’s recovery from recession.

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Beware double-dip risk The world economy is recovering more briskly than expected from the deepest recession since WWII, according to the World Bank’s annual report.

But it warns there is a risk of a double-dip slowdown.

The bank said it expected global growth to reach 2.7% this year, up from an earlier prediction of 2%, but it painted a sobering picture of the dangers lurking as credit conditions remain tight and governments start to withdraw extraordinary support measures.

The report added that policymakers were faced with a difficult task: to keep the stimulus in place long enough for private demand to catch up, without creating unsustainable debt loads or new asset bubbles. “Governments should focus on measures that can actually increase productivity in economies, because that is the way the world economy will actually grow again,” said Hans Timmer, director of the World Bank Prospects Group. He said it was too soon for policymakers to withdraw the stimulus.

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NAB cuts fees to small business NAB abolished overdraft fees to small business

customers, including the bank’s $60 fee for dishonoured cheques and the $50 charge for having insufficient funds for recurring scheduled payments.

Business customers will also be able to overdraw their account by $1,000 with no fee.

The fee ban, which was announced in January, follows a move made earlier this year

by NAB to abolish overdrawn fees to personal accounts.

Cutting out overdrawn fees to small business customers will cost the bank $40m in revenue, as NAB estimates that 65% of overdraft fees are charged to small business customers. Some 500,000 customers will be affected by the changes.

The bank said that the decision to cut fees was motivated by NAB’s desire to enhance its reputation in the eyes of customers.

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CBA cashes up Bankwest as WA lender enjoys regional growth

400,000,000

Banks & Brokers

$

News

CBA injects $400m into Bankwest Fast-paced lending growth sparked by a strong recovery in Western Australia moved CBA to cash up Bankwest’s balance sheet last month, reported the SMH. A CBA spokesperson confirmed the lender injected $400m into Bankwest in December, which brings its capital base to $3.8bn.

“The injection brings Bankwest’s capital more in line with the group’s average, has no impact on the group’s capital position and was also required partly due to the growth in the Bankwest business,” said the spokesperson.

Smartline launches new offering Smartline Personal Mortgage Advisers has launched a new finance leasing offering to its franchise owners. The new service gives Smartline franchisees access to a broader range of income streams, said Smartline’s national operations manager Jayson Billings.

“It further strengthens and reinforces our ‘smart advice’ offering to clients and means we can provide a seamless service,” he said.

ABA elects new CEO The Australian Bankers’ Association announced today that Steven Munchenberg will replace David Bell as the organisation’s CEO. Munchenberg comes to the role with more than 20 years’ experience in public policy in the private, public and not-for-profit sectors. He is currently head of Government Affairs & Public Policy for NAB, a role he has held for the past three years. He will start his new role on 8 March. Bell will remain as the ABA CEO until then.

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Brokers gain first homebuyers’ approval

73%

A clear majority of respondents polled in the MFAA/Bankwest Home Finance Index expect house prices to rise

While direct is the most popular channel,

mortgage brokers are gaining ground with first homebuyers, according to the latest Bankwest/ MFAA Home Finance Index.

The index found 26.2% of respondents use mortgage brokers for their first loan, but this figure increased to 44.8% among respondents below the age of 30. “This may be due to a variety of factors, such as less established relationships with banks among young people,” said Phil Naylor, CEO of MFAA. The index polled 850 people on a variety of issues relating to the economy and the housing market. It found that while there is strong competition between the direct and third party channels, banks are narrowing the gap when it comes to customer satisfaction.

“Banks have adopted some of the strategies of mortgage brokers, and have placed a greater emphasis on personalised service and customer relationships,” Naylor said. He added that the trend of banks adopting broker-style customer service sent a message to the broking industry that complacency is not an option.

Satisfaction with mortgage brokers is now at 7.4 out of 10, with banks rating 7.1. Building societies continue to enjoy high levels of satisfaction with a ranking of 8.9, followed by credit unions on 7.9.

When asked about the benefits of using a mortgage broker, respondents had a variety of reasons, including: * they do all the leg work for you (74.2%) * they are experts in a range of mortgages from numerous lenders (69.2%) * they have a wider loan range (68.8%) Head of mortgages at Bankwest Dean Gillespie also said that “respondents increasingly think it is important to discover whether a mortgage broker is a member of an industry body before using them to arrange a loan (85.8%), continuing an upward trend from 72.3% in April 2008.”

House prices are tipped to rise Renewed consumer confidence will likely cause Australian house prices to rise by as much as 10%, according to Australian Property Monitors.

The latest APM report revealed that median house prices rose 12.1% in 2009 - the biggest increase seen since 2003.

Apartment prices rose 9.8%. APM economist Matthew Bell said activity at the top end of the market has driven the extraordinary result for 2009.

“In the December quarter alone, the price growth for the top end almost doubled the growth seen by the remainder of the market.”

Job security, a rebounding stock market and increased confidence in the economy all contribute to the gains, he added.

News

Property

What GFC? The GFC is now a “distant memory for most Australians” according to the latest MFAA/Bankwest Home Finance Index.

Having canvassed the opinions of 850 people on a range of issues relating to the economy and housing market, it found that nearly three quarters (73%) expect house prices to rise.

Phil Naylor, CEO of the MFAA, called the result surprising and said it was the “highest proportion for more than three years”.

“Confidence in the housing market is not only pre-GFC – it’s back where it was during the height of the housing boom,” Naylor said.

“But there are still some clouds on the horizon, with recent interest rate increases negatively impacting households,” he said.

The survey found that 15.9% of respondents are struggling to meet repayments -up from only 11.7% in May 2009 with the highest proportion (25%) of strugglers in WA. The least number of people struggling to meet repayments were in NSW (20.6%).

Commercial property sales set to rise Analysts are predicting that the next 12 months will be an improvement on poor commercial property sales volumes seen in 2009. While the numbers for 2009 were dismal, there were signs towards the end of the year that activity in the sector was picking up.

According to CB Richard Ellis, transactions for commercial office buildings, hotels and retail facilities totalled $7.2bn in 2009, down from $9.7bn in the previous year. Sales in NSW were particularly slow, with activity down 54% in 2009.

Last year, foreign investors accounted for 22% of turnover, which is expected to wane in 2010.

Correction In our Top 100 issue 10.01 we incorrectly said that Club Financial Services was established in 2008. It was actually established in 2002 by four directors: Andrew Clouston, Simon Norris, David Garner and Meredith Adam, and it then became a franchised business in 2007. brokernews.com.au

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News analysis

Property values up in 2009 In this new series on property values and rental returns, MPA reviews national results Key statistics + National dwelling values down 0.3% in December 2009 + National dwelling values up 11.5% in 2009 calendar year Capital growth values + Sydney: + 11.4% + Melbourne: +15.6% + Brisbane: +7.3% + Adelaide: + 6.2% + Perth: +7.1% + Darwin: +16.6% + Canberra: +14.7% + Hobart: +12.4% + Best performing: Darwin + Poorest performing: Adelaide + Highest rental yield: Darwin + Lowest rental yield: Melbourne

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A

ustralian home values recorded a 0.3% fall in December 2009 as the seasonal effect of the summer slow-down combined with rising interest rates and fading first-time buyers put a dampener on what had otherwise been a very strong year for Australian real estate.

The latest RP Data-Rismark National Home Value Index results show that while capital growth across all homes in the December quarter was the weakest of the year, values around the country were still up an impressive 2.1% overall.

Property values All capital cities recorded strong capital gains during 2009. The most spectacular increases were in the Darwin and Melbourne markets, where home loans were up 16.6% and 15.6% respectively.

Adelaide proved to be the poorest performing market during the year, where values rose only 6.2%. Brisbane was slightly better at 7.3% growth.

In Perth, whose property market recovery has arguably been one of the most interesting stories of 2009, values increased by 7.1% – after cumulative losses of 7.9% since as far back as September 2007.

With market drivers changing considerably during the year, the strongest gains were recorded early with national home values up 3.1% over the first quarter, according to Tim Lawless, rpdata. com’s head of research.

“The market was being led by first homebuyers and consequently the most affordable end of the market saw a 3.9% lift in values. Over the second and third quarters it was upgraders in the middle and top ends of the market that generated the strongest gains … The top 20% of Australia’s most expensive postcodes increased in value by 9.5% over the last three quarters of the year compared to 4.1% growth in the cheapest 20% of postcodes,” Lawless said.

Christopher Joye, managing director at Rismark International, predicts a cooling in the housing market during the course of 2010, along with the normalising of mortgage rates. This implies that capital growth rates will fall back to single digit levels – consistent with expected changes in the incomes of prospective buyers. “It pays to remember that the price of Australian

homes is only around 4.1 times disposable household incomes, which has been unchanged since September 2003. This tells us that over the last six years Australian house prices have very closely tracked changes in household incomes.

Contrary to popular myth, Australia’s house price-to-income ratio is not unusually high, nor has it risen in recent times,” Joye said.

Rental market The RP Data-Rismark data shows that rental markets around the country have failed to keep pace with the rapid growth in home values in 2009, resulting in lower rental yields across every capital city.

Nationally, rental rates were down about 2.5% in December which has resulted in annual rental yields being eroded.

Melbourne’s dramatic rate of capital growth together with a modest fall in weekly rents saw rental yields decrease. Melbourne’s gross rental yield for houses is now the lowest of any capital city at just 3.7%.

However, Darwin’s rental yields remain the highest in the nation despite the consistently strong increases in property values. Rental rates in Darwin are up by more than 8% over the year, providing a gross rental yield of 5.7% for houses and 5.9% for units.

Units outperform houses During 2009, Australian unit values increased by 13.5%; in contrast to house values which were up only by 10.4%. This trend was consistent across every major capital city.

The higher gains in the unit market are a deviation from normal performances, according to Lawless. “Historically houses have tended to outperform units. The recent reversal in fortunes has occurred … because they have a more affordable price tag and are often located in more strategic locations in relation to transport and amenities,” he said.

Other factors may also include changing housing preferences, particularly among Baby Boomers, and more highly targeted unit developments being delivered to the market. MPA

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News analysis

Liquidity rules on hold There are arguments for and against the proposed liquidity rules

B

anks have one more year to plead their case with Australian Prudential Regulation Authority over proposed liquidity rules.

APRA announced it would delay the introduction of tough new rules for local lenders as it waits for proposals made by the Basel Committee on Banking Supervision.

The Basel Committee, which is made up of the world’s central bankers and head of banking supervision met earlier this year at the Bank for International Settlements in Basel, Switzerland to discuss rules that would ensure banks carried enough capital buffers to safeguard against a future liquidity crisis.

They are scheduled to release a full set of regulatory proposals by the end of 2010, and implement them in 2012.

APRA had originally planned to have its own liquidity standards in place for local banks by 2011. The rules discussed by the Basel Committee appeared to be less stringent than those proposed

by APRA. In a letter to the banks, APRA general manager of policy Charles Littrell stated that the Basel Committee had reaffirmed the “basic principle” that liquid assets should have private market liquidity, even when markets are under stress.

“APRA envisages adopting this operational definition which will, among other things, allow for semi-government securities to be included as high quality liquid assets.’’

The Basel proposals call for the retention of tier-one capital made up of common shares and retained earnings. The rules exclude the use of more than 15% of hybrid shares in tier-one assets.

Littrell also stated that APRA will continue to consult banks on liquidity rules that are appropriate for Australia but consistent with the global framework that is being developed.

Banks have been outspoken in their opposition to the liquidity rules, arguing that new

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requirements would force them to set aside billions of dollars that could otherwise be lent. The measures would hurt profitability and ultimately drive up the cost of lending to borrowers.

While APRA maintains the new rules will add five basis points to standard variable rates on home loans, banks are saying the cost of compliance will drive rates up by between four and 35 bps.

CBA chief executive Ralph Norris told the AAP in December that the new liquidity rules would result in a 7bps hike for its borrowers.

In an interview with the SMH in December, Norris also said that the rules would constrain credit growth. ‘‘We have to raise more funding and more liquid instruments,’’ he said. ‘‘There’s a limitation on the appetite in international wholesale markets for the amount of additional funding that we would have to acquire in order to meet those new liquidity requirements.’’

Banks have also argued that the measures, which require them to hold onto more government bonds, is not possible in Australia given the size of its sovereign bond market.

The use of semi-government bonds, however, would expand the pool of bonds available.

In contrast to Australia’s major banks, Fitch Ratings has publicly supported the adoption of the proposed liquidity rules, as they would improve the quality of liquid asset portfolios and provide a more consistent and conservative approach to liquidity requirements.

“A standardised reporting framework would provide APRA with better comparability across institutions, while enhanced governance requirements should result in better executive understanding of liquidity risks,” Fitch said.

But the ratings agency warned that the new rules need to be carefully managed so as to limit their impact on credit availability. mpa

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Profile leader

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left-field leader

profile leader

ING Direct sits just outside the Big Four, but isn’t content with the scraps from the majors. Executive director of mortgages Lisa Claes explains its plan to take back market share

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report released by Deloitte in December last year forecasted a rise in competition in 2010 between the Big Four, regional and non-bank lenders and other ‘left-field’ industry players.

As Australia’s fifth largest bank on both the savings and lending sides, perhaps ING Direct is the ‘left-field’ player who is most likely to fulfil this forecast.

Steering that growth is Lisa Claes, executive director of mortgages. Her prime duties are to manage the portfolios and distribution channels of ING Direct’s mortgage book, which includes the broker channel, wholesale mortgage management and a small direct book.

“And I’m responsible for setting and overseeing strategy for those three different businesses but also responsible for profitability and all that entails – product mix, distribution, marketing, risk, costs direct and indirect, service and the whole end-to-end business,” she says, detailing what sounds like an exhausting list.

While she’s just one year in the job, Claes says she’s satisfied with the lender’s performance over the last 12 months.

“I’m really happy with the way the year has gone. All our indices and performance measures and KPIs are very rosy, all things being considered,” she says.

Claes started in the position at the height of GFC doom and gloom, and she admits it was a challenging environment to step into. “Not so much because of the role but more because of

Fact file: Lisa Claes + Professional goal: “I have goals around the product penetration and the portfolio and the broker channel that I’d like to achieve. And a number of goals around operational efficiency.

Also would like to get the risk return balance right. We’ve all constrained our risk appetite, but I want to look at that again to see where and when it makes sense to take some more risks.” + Education: University of Sydney – Law + Status: married, three children – 17, 12 and 11 + Home town: Brisbane + Hobbies: Movie clubs, book clubs, running + Last great read: Disgrace, by JM Coetzee

the external forces we had to confront and manage.

The focus changed very quickly and we were quick to [make changes to our business] which has put us in a great position now.”

Like other lenders, ING Direct shifted its emphasis from attracting quantity to quality business. The challenge in this, Claes says, was getting that message through to all of ING Direct’s partners.

“To bring everyone together and get them to understand the reasons why we’re doing things this way was the hard part,” she says.

But working with brokers and mortgage managers is one of the perks of the job, she says.

“Mortgages is definitely a people business. I love the diversity of the channel distribution.

There are a lot of people in the touch points in the production chain, and I enjoy getting to know them and learning from them, and I respect their expertise. I just love the way it all fits together to produce a great business outcome.”

Claes hasn’t always been in banking. In fact, she started her banking career as a lawyer. She moved from the bar in Brisbane almost 20 years ago to work in Sydney with ING Australia as their group general consul. Apart from acting as senior consul for ING Australia, Claes held a couple of executive director roles in life insurance, financial planning and customer service.

In 2003, she joined ING Direct as its senior consul. At the time, the bank was growing rapidly and it wanted to establish an independent risk

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Profile leader

management compliance and legal platform independent of ING Australia. It was the perfect opportunity for Claes, who wanted to work in banking. Shortly after joining ING Direct she was moved into a business role as the head of sales and operations for the savings division. Then in January 2009 she was moved to her present position as executive director of mortgages, replacing Brett Morgan who was made executive director of savings.

Despite being a new industry, Claes insists there is a lot of similarity between what she does now, her previous role in savings and in the financial planning side at ING Australia.

“It’s a new industry with new facts sheets, but once you get on top of those it’s not wildly different – just different enough to be challenging.”

Growing market share The flight to brand quality has certainly impacted ING Direct.

“The banks have had enormous inflows in the last year and that’s been largely due to the psychological output of the GFC; people have behaved slightly differently,” Claes says.

But she adds that there is an opportunity for ING Direct to wrest market share going forward.

“We believe and know that we are a true alternative due to the simplicity of our product offering, our fair deal in regard to rates and our outstanding customer service. There is a big demand out there for our products.”

ING Direct took a cautious approach last year and tightened credit policies which constrained volumes, but Claes says they have a brand new offset product that was launched in late 2009 which should get people interested in ING Direct.

In addition, the bank plans to “pull levers of price, product, and potentially risk, as is prudent and appropriate when the time comes,” Claes says.

“We’re very happy to date with our volumes, but

“ We’re very happy … with our volumes, but we also realise that to stay in the game we need to keep doing what we’re doing and … increase our profile ”

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we also realise that to stay in the game we need to keep doing what we’re doing and plan to increase our profile going into 2010.”

Part of the plan to increase volumes involves increasing service to brokers as well.

“I’d say generally our service has been good, but it would be dishonest to say that it was perfect throughout last year. Like all other banks, with the first homebuyers particularly in the second quarter of the year, we were inundated. There was a massive glut as people wanted to get into the market and take advantage of the subsidy.”

ING Direct has a couple of large IT projects in the pipeline to be unrolled this year which are designed to alleviate the scale issue.

“One of my visions is to make our shop immune to the ebbs and flows of the volumes,” Claes says.

“I do think it is a challenge for the industry and we pride ourselves on our outstanding customer service and are very alive to the fact that that’s part of it; we have to be able to turn deals around for brokers and their clients very quickly if we are to remain in the favourite spot.”

Mortgage managers Claes is optimistic that securitisation markets will re-open in 2010, bringing with it the resurgence of non-bank lenders and mortgage managers.

As for ING Direct, she says, it will look at expanding funding to mortgage managers in the coming months.

Claes maintains that there is a place in the market for mortgage managers going forward.

“I think the mortgage manager’s core proposition is service – that’s not to say other channels don’t hold that as dear. I don’t think their day has gone. I think they need to as well, like any other mortgage intermediary, ensure that they remain competitive and have a proposition that is unique to that channel.

“From a mortgage manager’s perspective they’ll need to ensure that their service remains top dollar. I certainly don’t see the channel waning – I see it growing. It’s another form of healthy competition. And there’s an appetite there – it’s not for everyone – but there is an appetite out there for that channel. And as securitisation opens up there will be more funding for them.” MPA

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Profile broker

West Perth’s Kobi Chillman made an outstanding debut on the MPA Top 100 list in 2009 – ranking 31st with a settlement figure of $58m

eye on the prize 18

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profile broker

K

obi Chillman is a living and breathing example to her clients.

Only 29 years of age, she’s on track to purchase 10 properties in 10 years with the final goal being retirement at age 40.

“I’d like to retire by the time I’m 40 and I’d like to do that through property investments because that’s what we specialise in,” she says. “I’ve already got one, so I’m not doing too bad.”

Chillman’s personal success is matched by her professional achievements. She recently joined MPA’s Top 100 list – earning 31st place with a settlement figure of $58m.

Despite the impressive figure, Chillman says it was a tough year and she’s hoping to put in an even better effort in 2009/10.

“We’re hoping to quadruple the business, both in sales and size of staff,” she says, adding that as director of Members Alliance Home Loans that will be her biggest challenge yet.

Becoming a mortgage broker was a natural progression for Chillman, who fell straight in to work after graduating from high school. A series of roles working for the University Building Society, Keystart, BGC/JCorp and ANZ Bank helped provide her with the skills necessary to be a broker. She says it was a natural career choice because she’s always loved maths.

Chillman initially started doing loans for first homebuyers but eventually advanced to investors.

It’s been a positive transition for her; however, as she says working with first homebuyers was a greater challenge because of the paperwork. That

Fact file: Kobi Chillman + Location: West Perth, WA + Years as a broker: 7 + Hobbies: Reading, music and karate + Goal: Retire at age 40 + If I wasn’t a broker I’d be… a criminal lawyer

said, the gratification one receives from working with first-time buyers is hard to match.

“When I was working with first homebuyers every deal was good. Every deal was like ‘yay’ it’s been approved.”

Located in West Perth, Chillman says the majority of her clients are ‘mum and dad’ investors who work in government or mining. Last year was particularly busy for the company, which experienced an influx of clients perhaps spurred on by low interest rates. Chillman says she expects to see even greater volumes in 2010, as investors take advantage of the gap left in the market by dwindling numbers of first homebuyers.

Chillman employs one assistant to help her process the loans, but Members Alliance has a staff of 10. They put in a six-day work week, but Chillman says she makes sure her hours each day are strictly nine-to-five.

The keys to successful management, she says, is regular training and communication. She’s also helping her assistant further her own goals, by training her to be a broker.

While the last few years have been tough for mortgage brokers, Chillman is optimistic about the future, noting that loan turnaround times are improving and everything is “coming back to a more realistic level”.

“Everybody has stopped being scared of nothing,” she says.

With that kind of positive attitude, the smart money would be on Chillman to improve her ranking in the 2010 Top 100. MPA

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Warm introductions Building your network of strategic partnerships can seem like a lot of work for little return, but these tricks will help maximise the benefits of your referral partnerships

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uild it and they will come. It’s a promising mantra for anyone looking to create strong referral partnerships to help them increase business. But unfortunately good intentions don’t always equate with success. Creating a valuable referral network takes time and tactics. They don’t call them ‘strategic’ relationships for nothing.

MPA spoke to brokers and experts alike to glean the best tips.

Picking the right partners Some professions naturally complement mortgage broking. Real estate agents, solicitors, accountants, conveyancers – these are all people that borrowers

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might encounter on their journey to home ownership. It’s not rocket science to include these professionals on a list of priority strategic partnerships. SELCAS lawyer and reverse mortgage broker Craig Swan says that once trust has been established, financial planners, accountants and solicitors prefer to ‘outsource’ specialist work, since it makes sense commercially.

“I use these professionals as my lead generators, since these professionals are seen by the public as centres of information, knowledge and trust,” he says.

Jeremy Fisher, who placed third on MPA’s Top 100 list and settled $102m in 2008/09, says he’s built strong alliances with local real estate offices. “These relationships are mutually beneficial as I am able to gain access to their clients early in the home-buying process, keep their agents up-to-date with the mortgage market and assist their clients to be in a position in which they are ready to purchase properties.”

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For Cube Home Loans Scott Beattie the best referral partnerships are with accountants.

“People contact their accountants because they need their financials to discuss how to do a lease, or conduct a transaction, and if the accountant is on your side they are more likely to encourage the customer to give you a call.”

Beattie has an advantage with accountants in that his aggregator Australian Loan Co. helps facilitate those relationships, and he has a background and familiarity with accountancy.

That could explain the difference between his experience and that of Darren Murphy, who recently set up his own brokerage Bellevue Finance Partners. Murphy, who formerly managed 30 active strategic relationships and 130 casual partnerships for Loan Management Centre, said accountants were always hard professionals for him to crack. “I’ve found in the last couple years, they’re difficult to get in and see – and a lot of them have had bad experiences with brokers, so they have key relationships with banks.”

But sometimes the best relationships are formed with professionals outside the lending chain. Intelligent Finance’s Justin Doobov, who placed eighth on the MPA Top 100 list last year says that for a while there his best source of referrals came from a chiropractor. “He’d spend an hour sitting with a client, massaging them and the clients would be telling him their stresses – he was a very good referrer,” he says.

Home ownership is stressful and there are a lot of service providers who are on the front lines of stress management. A person can share a lot of information with their hairdresser when sitting through a three-hour appointment. Swan says he’s experimented with a wide variety of professionals – including home care providers, incinerator installers and funeral bond providers – all to varying degrees of success.

Not only can these professionals be good lead generators for your business, but chances are they

aren’t working with a number of different mortgage brokers. Other possibilities are local sporting clubs or charities. Fisher says he supports a few groups through sponsorship and donations.

However, while he receives good exposure from these avenues, he says that there is not always a strong follow-on effect in terms of gaining new clients. And lastly, look for people you like. It sounds so basic, but as Murphy says, life’s too short to deal with people you don’t like personally.

How to find them Beattie engages solicitors and real estate agents by posting them a thank-you letter with a scratch and win. While he admits they don’t get a lot of business that way, it’s very small expenditure in terms of time and money. For Fisher, research is the key. “I am always on the lookout for new strategic partners with whom I can enter into a new alliance. Once I have decided that the alliance can be mutually beneficial, I will contact them to arrange a meeting and discuss the opportunities that are available.”

Underlying Fisher’s comment is the need to look for other professionals that you respect. If you’re going to build a referral partnership with them, you want to ensure that they will do equally as good a job of looking after your clients when you refer to them. It’s important to be confident that they can provide good service – after all, it’s about building clients, not losing them.

And if you’re lucky, or your services are in high demand like Doobov, the referrals partners will come to you. “It sort of works the reverse to how

“ They actually want to refer their clients to us, because they want their clients to experience the service levels and the expertise that we have ”

Friendly competition Some of the best sources of referrals can come from the competition. Look for referral partners in your broking circle. Occasionally brokers have too much on their plate (it does happen!) and would rather pass a client on than give them a bad experience. Or you have a particular expertise in commercial property or equipment leasing and can handle deals they don’t have the right accreditations for.

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most mortgage brokers do it. It’s not us pushing ourselves onto partners saying ‘we want to do business with you, can you refer all your clients to us?’ They actually want to refer their clients to us, because they want their clients to experience the service levels and the expertise that we have.”

Cultivating relationships Like any relationships, referral partnerships grow over time. Make the effort to meet for lunch or a coffee and explain your business philosophy, your areas of expertise and your service commitment.

Beattie says that one should be in contact with their referrers on a monthly basis if not more regularly. Fisher says he is making a concerted effort to enhance his strategic partnerships in 2010. “I always feel that I would like to spend more time cultivating these relationships as I have seen their positive impact on my business.

Currently I spend one morning each week meeting with my referral partners as well as several evenings throughout the month,” he says.

To enhance his alliance with real estate agents, Fisher says he attends many of their weekly sales meetings in which they go through different homeloan scenarios. He also provides agents with product guides and marketing material to offer to their clients. He attends regular estate auction nights to answer questions from property buyers.

Regular communication is about more than just keeping your business top of mind for partners. Brokers need to keep referral partners in the loop about their clients, so they know they’re in good hands. “The biggest complaint I hear is that once the referral partner starts giving clients out to a broker they don’t get regular feedback,” Murphy says. “I keep them updated throughout the loan process about what the client is up to.”

in roundabouts – “if they refer to us, then we’ll refer to them. And then a lot of companies that refer business to us want their client to be looked after in the best possible way, so they’re not directly looking at the dollars and cents, saying ‘I’ll earn $500’; it’s worth more than $500 to them if their client is looked after.”

Other brokers take a mixed approach to compensation. Beattie says it really depends on the business, but as a rule he’ll go up to 25% upfront and trail. “But you don’t want to necessarily go in with that. What we’d more likely do is go in and say ‘here’s some upfront and let’s review it again in three or six months and if it’s working then let’s add trail into it’.

“It’s also incentive for them to keep referring – as opposed to just giving you one loan, which is sort of a pain to set up. It’s almost like putting a KPI in and saying ‘yeah, we’ll put trail in if you can give us one loan a month or every six months’.

So there’s an incentive for a service provider to go above and beyond.”

But Beattie’s approach is reflective of the interaction he has with partners, with coaching an absolute must to see value from the relationship.

“If you don’t, they don’t really understand how to do it. Our aggregator has a presentation which they actually do in conjunction with us and with the client. And they show us what opportunities to look out for. A lot of people will just assume you’re looking for a home loan and they don’t realise what other opportunities there are.”

Fisher also takes a mixed approach to offering referral fees. But he adds that all alliances are fully transparent in that the partnership arrangement is fully disclosed and clearly identified to new clients in the initial meeting and in the privacy agreement.

Kickbacks There are no set guidelines for referral fees or payments. In some cases, no money is exchanged.

Swan says he likes to keep the relationship simple.

“Some of my longest lasting and most valuable strategic partners have never asked for a dollar – nor have I offered it – and I have never asked them for anything when I’ve referred to them.”

His philosophy is “you give your best service, and get paid for it, and they earn their income from what they do best. This keeps it professional, simple and uncomplicated”.

For many brokers, there’s a certain karma to referrals. Doobov says that in most cases, it swings

Value But how much business can you expect to gain from your referral partners? Like anything you get back what you put into it. Beattie says that realistically only 10% of his business comes from referral partners. Having said that, he says most of the deals that do come through are quite big, which drives up the overall ROI. Fisher sees a slightly higher percentage of return from his referral partners and says about 20% of new clients are from these sources. Doobov gets 30–40% of his leads from referral partners, which is perhaps reflective of the number of years (10) he’s been in the business. MPA

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“ I am always on the lookout for new strategic partners with whom I can enter into a new alliance ”

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column networking

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t’s important to think about networking now as the start of the year is the best time to build on relationships and create new ones.

Your clients and potential clients will be thinking about growth and change. Your colleagues and alliances will be thinking about their targets, plans and activities for the year ahead. This is the perfect condition for mortgage brokers to start creating opportunities and attracting more clients. The question is ‘how?’

First, get out of the office and go to networking events, auctions, industry events and anywhere your ideal clients would go, such as property investment seminars, share trading seminars and personal development programs. These events will give you extra knowledge and personal insight as well as put you among your ideal clients. When you are at these events, be yourself and be interested in others. Don’t start selling your services from the moment you meet someone new.

Just listen to others and understand their world and issues. Once you do this and identify that you could help them, invite them to meet with you after the seminar or on another day to talk about their situation and how you could be of assistance.

Second, meet key alliances and contacts for coffee or lunch. Get to know them and find out what they are looking for. Being interested in others and helping them get what they want is essential for networking. You are not building the relationship to compete; you want to complement each other in your efforts to attract clients and refer to each other. You may have to give first to get the ball rolling. I suggest giving your alliance or peer a referral that is ‘spot on’ for letting you know what they were looking for. This immediately builds trust and momentum for creating a great working relationship.

Third, know what an opportunity looks, sounds and feels like. Your ideal opportunity could be a couple in their mid-30s, no children, wanting to buy their first investment property. What does this

opportunity look like? Well dressed younger couple, driving nice cars, wanting to meet with you after work at a cool bar or coffee shop. What does this opportunity sound like? One of the couple calls you on your mobile, they have got your number from a friend and wants to ‘chat’, they haven’t got much time now, how does next Tuesday after work at Cafe Z sound? What does this opportunity feel like? A bit rushed, a bit stand off-ish, direct, motivated, high energy. If you know this, then your radar will be alert to all of these qualities. For example, any time you see a 30-something person get out of a really nice car when you arrive at a

“ Being interested in others and helping them get what they want is essential for networking ”

networking n It’s time to make your mark in 2010. Consultant Jen Harwood shares her best advice

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networking event, or when you talk to a woman in a queue for the ATM and she tells you she doesn’t have children, or you are at a social BBQ and you overhear a group of 30-something couples talking about a property seminar … you would get into the conversation to find out more.

Get out there now and start meeting people.

Take business cards with you wherever you go and be open to opportunity. Now is a good time to make 2010 your best year ever. mpa Article contributed by Jen Harwood, International business speaker and author

How to prepare for networking events Your diary is full of meetings and activities and tonight you are going to another ‘networking event’. You used to enjoy these when they were new to you; however, you’re not too keen to go to this one, as you’ve already had a few big weeks and the last thing you want is to be asked “so, what do you do?” for the millionth time!

Sound familiar? Networking events such as cocktails, formal dinners, charity auctions, speed networking and industry conferences can become painful if you don’t have a strategy for making them work for you every time. The strategy I use is called Network ABC. It is a simple and effective plan that I invented a few years ago that reminds me of what I’m doing and why I’m doing it, and inspires me on how to implement it before, during and after the event.

A

B

C

Your attitude and state of mind is crucial to achieve great results. If you show up because you have to, talk to people because you’re there and hang around, ‘because you’ve gotta be there’, the results you will create will be poor to ordinary.

Nobody likes to be around a sorry sook – so snap out of it! Your attitude and state of mind must be positive and energised with ‘I’m here to build my business, build my brand, create interest in what I do, be interested in others and have a fantastic time.’

If you focus on these thoughts, your results will be great. I get excited when people ask me, “so, what do you do?” because I can then promote myself and my business. For me, every question leads to opportunities and thus creates results. What ideal results would spark you on to have a fabulous attitude for networking?

Take that attitude into the event, and watch your results.

Ask yourself: ‘Will attending this event build my business, brand, career, team or me personally? If you answer yes to any of these, then think about how you want this event to build for you.

Are there certain people that you want to meet, such as a sponsor, speaker or industry person? Call the organisers and ask about the specific people you would like to meet and see if you can be seated on their table. You may also want to invite clients to specific events such as golf days, charity and sporting events as a way of building relationships in a more relaxed environment. Networking skills also call on you to build up others. I really enjoy building others’ businesses and careers wherever I go, and if I can create opportunities and connections for others at a networking event, then I am adding value. This not only feels good, it builds your own network and relationships.

You must commit to the event with your mind, body and soul. While it sounds, corny I know, however, if you have a great attitude and reason to build, committing is not really that hard to do. But if you find yourself feeling not totally committed to going, and giving the event your 100% effort, go back and check your attitude and reason to build. Your time, money and energy are valuable resources and at the end of the day, the most precious thing you will not be able to recover is your time.

So make sure you are committed 100% to being there. Be open to getting maximum value from the event before you go and, again, just before you get there, and again during the event and finally just before the end. Make sure you keep your commitment at 100% throughout the entire event and you will create outstanding results.

Attitude

g now

Build

Commit

Happy networking!

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rising stars kers Young bro ve on the mo

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New brokers quickly learn that it’s not easy being green. But these industry newcomers have earned rookie hotshot status. MPA’s Andrea Cornish looks at who they are, how they did it and what the new kids can teach the old pros

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veryone agrees increased educational standards and mentoring guidelines are a good thing for the industry, but the raised bar coupled with tougher economic times can make it difficult for those just starting out to earn a crust.

MFAA CEO Phil Naylor estimates that about 30-40% of new brokers drop out within the first 12 months. And while the MFAA recorded 1,400 new members in 2009, Naylor says the number of new entrants is slightly below other years.

So what does it take to become a good broker in those critical start-up years? MPA scoured the industry to identify some successful rookies and get their stories. Some common themes emerged – new brokers spoke of their willingness to work long hours (sometimes

with little reward initially), the need to drown out the doom and gloom that pervaded the last two years and the necessity of maintaining a dogged attitude to get deals across the line.

The brokers were chosen upon recommendation of their aggregator, or because they received prior recognition through industry accolades.

Their settlement numbers were secondary to the impression they’re making in the industry, however, we’re hoping to see many of these faces one day on MPA’s Top 100 list.

It is by no means an exhaustive list of successful new brokers and the magazine wishes to hear from other industry professionals who believe they know of a deserving rookie that should be profiled next year.

We hope you enjoy reading their stories.

“ Some common themes emerged. New brokers spoke of their willingness to work long hours (sometimes with little reward initially) … ” brokernews.com.au

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Hany Pham Company: Central Choice Location: Footscray, Vic The start of Hany Pham’s career as a mortgage broker coincided with the first night of the Beijing Olympics – August 8, 2008 (08/08/08) – but Pham isn’t sure if his early success can be attributed solely to the auspicious date. “It may be that, or it may just be hard work,” the 25-year-old says.

Only one year into the job, Pham was awarded the Young Gun of the Year (independent) by the Australian Mortgage Awards in 2009.

“It gives us true validation of the work that we have been doing. We get a lot of feedback from clients who say they are happy with our service – but to be recognised by the industry is absolutely an honour.” It’s not the first time Pham was recognised for his

Advice for new brokers from the ‘rising stars’ Never cross any ‘grey lines’ Put your clients first and the rest will follow Focus on meeting a client’s needs rather than selling them a product If you’re starting off with your own business, have enough capital to see you through those first few lean months Be persistent and patient Do the right thing by your client Return phone calls Be accessible Cherish your referrers Go the extra mile Start with savings

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achievement. Shortly after joining Loan Market Group he was awarded Rookie of the Month for two consecutive months – January and February 2009.

It’s not a bad start for someone who entered the mortgage broking industry with zero experience. It seems that what Pham lacked in prior knowledge, he made up for in energy and enthusiasm. And while he’s not a threat to MPA Top 100 brokers yet, he’s laying down the trackwork to take a spot in the ranking in the years ahead. Pham opened up his business with not just one, but two shopfronts – both in the Western suburbs of Melbourne.

“I’ve always had an ambition to have a strong retail presence, because if you’ve got a recognisable brand it adds value to your business.” It’s been a busy year for Pham who also recently completed his law degree coupled with a Bachelor of Property and Construction at the University of Melbourne.

While he’s hoping his education will give him a leg up on the competition, Pham says he tries to remember this motto when it comes to broking: “I once heard this saying, ‘they don’t care how much you know, until they know how much you care’ – so that comes foremost.”

“ I’ve always had an ambition to have a strong retail presence, because if you’ve got a recognisable brand it adds value to your business ”

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Paul Bieg Company: Club Financial Services Location: Norwood, SA Paul Bieg is busy. While most brokerages face an annual slow-down after Christmas, Bieg says the phones have been ringing off the hook. It’s music to the young brokers’ ears, who got his start in the industry just two short years ago.

Bieg was introduced to mortgage broking by a family member who was in the profession. He decided to make the switch from working as the state manager for a telecommunications brokerage when he found that market was becoming too saturated.

He started at Assured Home Loans, but moved to Club Financial Services after a friend (David Wagner) purchased the franchise in Norwood. Wagner sweetened the move by offering Bieg his Investor Club client base. It was the perfect opportunity for Bieg who was just getting into property investment himself.

“David really put me into the right place at the right time with the Investors Club, [it’s] a national property investors group and they go out and research property for their clients and work with a network of brokers in Australia. So I got involved with them by attending their meetings and running some of the seminars for them, and I actually work with members all over Australia, so it’s been a fantastic time.”

Although Bieg joined the industry at probably its lowest point in history, he says he saw a gap in the market that he was hoping he could fill.

“I looked at it from this perspective: ‘well, there are a lot of brokers leaving’. And if you’re learning a new craft during a time that’s quite difficult, then when things get back to normal it’s going to be easier because you’ve already gone through the hardest part. So I saw it as an opportunity more than anything else.”

That said, he admits the first six months were the biggest challenge for him. In his first year, Bieg settled $21m, but he’s already surpassed that figure for 2009/10 and is on track to settle $50m.

Although only 25 years old, Bieg says as a younger broker and someone newer to the industry, he does have one advantage. “I think, with property investors, I have an edge because a lot of the older brokers that are ex-bankers don’t understand the way that people are

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now structuring finance for investment – leveraging themselves as high as they can; and that’s the new-age of property investment.

Property investment has gotten really, really popular over the last five to 10 years. I think someone who’s been in the industry for a longer time might not run with that sort of strategy.”

His advice for new brokers entering the industry is to start with some savings “because it takes a few months to get your commission anyway, even if you do manage to write a loan in your first month.”

The other recommendation he has for new brokers is to gather as much mortgage-related information as they can.

“Anyone can write a loan, but you need to educate your clients. So really make sure that you understand not only the products, but the industry and the market that you’re working in.”

Industry accolades: + AMA Young Gun of the Year – Franchise 2009 + Bieg was number one in the country for submissions for Club Financial in December 2009

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Christian Steinbacher Company: Oasis Home Loans Location: Canberra, ACT Christian Steinbacher may be new to broking, but he did have an edge over other rookies. In late 2005, Steinbacher worked as a mortgage manager for Challenger, while prior to that he worked in insurance, specialising in risk management.

His business focused on debt reduction – Steinbacher was specifically keen to help people who had suffered credit impairment issues or defaults on their mortgages.

But in 2007, he switched to broking – a move that was sparked by the economic crisis and the difficulties it presented for mortgage managers. “And the type of clients I was dealing with – they were difficult loans to get approved. I came to the conclusion that I was not happy that I was devoting a lot of time to people’s situations, and finding it was becoming increasingly difficult to help them. As I wasn’t getting satisfaction from my job, I chose to re-model the business a little bit.”

Now operating strictly as a mortgage broker, Steinbacher’s core business is first homebuyers and borrowers looking to refinance.

The market in Canberra has been fairly immune to negative effects of the crisis, and while there’s been a slight downturn, Steinbacher says business has picked up as of late and it’s getting better. Last year he wrote $22m and he’s hoping to grow that figure by taking advantage of AFG’s Flex program.

“My cashflow has become quite steady in my business and it’s increasing on a daily basis. I’m with a good aggregator and that is a huge highlight – having an

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aggregator that has market power and that assists us in terms of having a bit of bargaining power and a voice within the industry.”

But like other brokers across the country, lengthy loan turnaround times have hurt his business with some clients. “One particular lender is at 27 days before they even look at the application. I find they are terrible in terms of service. Being a big organisation you wouldn’t think it would be hard to employ some more people to do their job. But I guess the attitude they have is ‘we set the rules and you dance to our tune’.”

Steinbacher also believes some accreditation policies are unfair. “I think those types of policies are predatory in that they are forcing someone to use them as a lender or put some sort of business through them just to keep their accreditation in place.”

Other issues affecting the industry that are of concern to brokers is tightened credit policies and the disappearance of non-bank lenders, he says.

Biggest challenge + Changes to mortgage insurance policies

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Industry Accolade: + Presented with Business Excellence Award at the Mortgage Choice national conference in January 2009

David Thurmond Company: Mortgage Choice Location: Berwick, Vic David Thurmond has been a mortgage broker on both sides of the Pacific. He started broking in the US 10 years ago, but decided to pull up stakes and move to Australia to play Aussie rules football in 2004. His first job ‘down under’ was with CBA working as a branch lender. He did that for a year-and-a-half then moved to mobile lending.

After 12 months in that role, he says that he felt he could do it better on his own.

He joined Mortgage Choice about two-and-a-half years ago. Despite having some experience with mortgage broking in the US, he says there are some vast differences between how brokers operate in Australia compared to the States. “It’s a lot better here in Australia because in the US it’s all done over the phone. You work in a big call centre with 300 other people and it’s very impersonal. Whereas in Australia clients come to your office or you go to their house and you can explain things face-to-face. So I much prefer it this way. It lends more to the sales aspect of it. People have to like you if they’re going to do business with you face-to-face. Whereas over the phone you could be a jerk, but as long as you’re getting the work done, they’re fine with it.”

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When Thurmond joined Mortgage Choice, it appeared to be the end of the golden years in the Australian broking industry. “I came in when things were starting to go pear-shaped,” he says. The GFC was just starting to rear its ugly head and banks were cutting commissions.

In the latter case, Thurmond actually counts himself lucky. “It takes about six months from when you start to set up your pipeline and get a decent income from this job and by the time I started making a decent income from it, the commission cuts started taking place. So I never really did get to experience commissions as they were prior … So all I know is the system that we’ve got now, and if you don’t know any better then it doesn’t hurt you as much.”

His biggest challenge, he says, has been dealing with changing bank policies. Thurmond thought coming into the industry with a banking background would help him out. However, in many ways he says it proved to be a hindrance. “I think it actually hurt me because I would assume that other banks work like CBA. So then you have to learn that every bank has their own little nuances and ways of doing things.”

Despite having a background in mortgage broking, albeit overseas, and some banking experience, he doesn’t regret choosing to sign with Mortgage Choice. “If I had it all over to do again, I would still go the franchise route.”

Last year he settled $37m and so far he’s on track to settle $50m–$60m next year.

“ It’s a lot better here in Australia because in the US it’s all done over the phone.

You work in a big call centre with 300 other people and it’s very impersonal ”

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September 24, 2010 The Westin Hotel, Sydney

Official event partner

Online nominations open in April 2010

www.australianmortgageawards.com.au

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Sonia Rohlf Industry Accolades:

Company: Choice Home Loans Location: Berwick, Vic Sonia Rohlf spent 10 years working in mortgages for ANZ. But after taking time out to have her two children (now four and three years old), she decided it was time for a change.

In 2007, she spotted an ad from Choice Home Loans.

After a three-hour interview she was convinced it was the right career move for her. “Going from a full-time job to going to a commission job was quite daunting for someone who’s never done it before.”

However, she says the sales manager’s approach to the interview really helped allay her own fears about making the leap and she realised his approach to her was very similar to how he treated his clients. It was a model she wanted to emulate as a loan writer.

“I was quite successful from the start because I’m very results driven and really motivated, and I’ve always believed that you should find someone who’s really good within the organisation and let them mentor you. My sales manager was one of the best writers in the company and so I asked him lots of questions, dragged him around to a lot of my interviews and went to a lot of his interviews as well.”

Rohlf deals with residential mortgages – 95% of which are in construction lending.

It’s a challenging area, she says, because the waiting period is much longer than regular residential loans – in some cases stretching out for a year.

“We have clients signing up today for land that is not settling for another 12 months. So it’s a longer time to manage relationships with clients and it’s a longer time to decipher policies that change within that period.”

+ AMA 2009 finalist – Young Gun of the Year (independent) + Finalist of MFAA Excellence awards While she started her career as a mortgage broker at the height of the GFC, Rohlf says she wasn’t phased by the economic downturn. “I’m not a doom and gloom person. I just think whatever will be, will be. Clients will ask us what we think will happen, but at the end of the day you can’t base what you’re doing on what’s happening in the market. You have to do what’s right for your own family.”

Last year, Rohlf lodged close to $40m in deals.

While she admits she’s guilty of working long hours, she says the fact that you get out of the job what you put into it is one of the biggest perks about being a mortgage broker.

Online edge What do new brokers have that old salts of the industry lack? Some argue they have a technological advantage – at least those joining the industry at a younger age. While not all new brokers are Gen Y and X, those that are tend to be more technologically savvy than their counterparts and more ready to embrace new social networking tools such as Facebook, Twitter and blogging.

“The mortgage broking industry is always changing – bank policies, procedures, technology. Obviously online social networking is also becoming increasingly important. These are all things I’m actively engaging in.

And clients can expect a faster turnaround,” says Gordon Yau, last year’s number one writer in Queensland for LJ Hooker and young gun.

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Haley North Company: Smartmove Location: Neutral Bay, NSW Haley North was lured from her banking job to Smartmove in 2007. She started in a support role but officially became a broker in January 2008 and hasn’t looked back since.

In just a short time, North has gained wide industry recognition for her achievements as a broker. At a recent AFG function she was named Rising Star of the Year for AFG and she was also nominated as a finalist for the Australian Mortgage Award’s Young Gun of the Year.

Last year, North settled $26m and so far this year she’s on track to settle $36m. “It’s a good start. Once you get the ball rolling it just gets easier. But working for a great company, where all the business is referral-based helps. You don’t need to rely on advertising or clients that aren’t as warm.”

She might have started her career after the ‘golden era’ of broking, but North says becoming a broker during the financial crisis was potentially an advantage.

“Although it made it quite difficult at times – bank turnaround times were a challenge and consumers are a lot more cautious and need more hand holding – but if you can build the trust with someone, people will stick with you.”

North’s goal this year is to create greater efficiencies in her systems and approaches so she can increase her volumes without sacrificing the time she spends with her clients. But she says the best reward is always when she gets a client on the end of the phone that is screaming with joy because she’s helped them secure a property.

Industry Accolades: + AMA Finalist for Young Gun of the Year 2009 + AFG’s Rising star of the year 2009

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Biggest advantage of joining a franchise: “The support that I get from other franchisees in Adelaide – their willingness to help out when you ask has been huge for me and has given me momentum to go forward”

Trent Winstanley Company: Mortgage Choice Location: Adelaide CBD and North Eastern, SA Prior to joining Mortgage Choice, Trent Winstanley worked in sales. But a passion for finance and real estate combined with his need for a change led him to a career in mortgage broking. Winstanley joined the broker group halfway through 2007 and describes that first year as being “a very steep learning curve”.

“You have to learn about policies and procedures and how to win business and do your own marketing techniques. Once you get through that first six to 12 months it gets a lot easier.”

Winstanley started his business just before the GFC really reared its head in Australia. “It was a bit nerveracking because I started just before, when times were still ‘normal’, but not long after that everything changed.

I was a little bit worried, but now I’m really positive about the economic situation. If we can get through this, then we can get through anything.”

Despite the challenges of starting a new profession, Winstanley says learning how to become a broker through the Mortgage Choice franchise was an advantage. “With a franchise it’s all set up and you’ve got so many people to help you. To start on your own without the experience and knowledge would be a fairly hefty step to take.”

While Mortgage Choice helps with marketing, the biggest challenge has been getting the cash flow going and working with a small client base. Last year his settlement figure was $14m and this year he’s hoping to hit $20m. While still on his own, he hopes to employ an administration assistant in the next 12–18 months.

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rising stars

Gordon Yau Company: LJ Hooker Financial Services Location: Brisbane, Qld Gordon Yau made the transition from banking to broking in 2007. Prior to joining LJ Hooker, Yau worked for ANZ as a branch manager – a position that he says gave him some valuable insight into running his own business.

“Even though you’re within a major company it was similar to running your own company.” Yau left the bank after seven years to work as a loan writer for a high school friend who was a LJ Hooker franchise owner.

Within one year he stepped up to become partners with his friend and they expanded their territory.

“He already had an established business which was a bonus and we’ve just taken it to the next level. Now we’ve quadrupled our team since I graduated,” Yau says.

Yau says the transition from banking to broking was made easier by the fact that many of the relationships he made at the bank continued after he left. “When I started I was able to hit the ground running from my existing client base. I had a very good first year and then the financial crisis and bank commissions were reduced.

Lucky for us we were going through a growth stage.”

Impressive numbers

Yau and his partner now manage a team of eight loan writers and are looking to add another four. In his first year he settled about $35m, while last year he settled $40m. “Last year I got the top loan writer title in the state from LJ Hooker and this year – fingers crossed – I’m tracking as number one in the country.”

His secret? “A lot of hard work,” he says, adding that he treats every client with respect, regardless of the loan amount. “Because you never know who they have access to. You might do a $50,000 loan for somebody and they’ve got relatives that can bring in millions. But if you treat them like it’s only a small loan, then you could miss out on opportunities.”

Last year Yau was the number one LJ Hooker loan writer for Queensland and so far this year he’s on track to be LJ Hooker’s number one in the country

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circle of success Glen Austen, director TAG Finance Australia Mount Pleasant, WA TAG Finance director Glen Austen has made the transition from being a new broker to mentoring others into the industry.

Austen started his career four years ago when a friend who worked as a contractor for Westate Property group introduced him to the profession. While Austen had a background in sales, mortgage broking was a completely new venture for him. His friend, Andrew Browne, employed him as a writer and mentored him into the industry.

A year later they joined forces with one other professional, Tony Herbert, to form TAG Finance Australia.

Austen says the segue into mortgage broking was made easier by the backing of his fiancée, Kim Webster, who supported him right from the beginning.

The business has now grown to include two contractors, two back-end loan processors and two administration staff. Austen and Herbert are the key loan writers while Browne has now moved into the GM role for the business. The company also includes TAG Wealth Solutions which is the financial planning arm of the business.

Getting the right staff in place has been key to the company’s success, Austen says.

“ If you’re going … in as an employee then you’ll earn a little bit of money as you learn, and it’s going to work ” Glen Austen and Sam Gawenda

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The focus is not on employing people to just do their job, but on getting people that want to advance in the industry. For example, Austen recently employed an assistant, Sam Gawenda, to handle the back office work, but he is training him to become a broker in his own right.

In this way TAG Finance has created its own circle of success. “Initially I was mentored into the industry by my partner, who was the number one writer for Westate – now I’m the top writer for our company,” Austen says, adding that he was also recently recognised in PLAN Australia’s Top 100 list.

Austen is paying it forward by acting as a mentor to his assistant.

“It is a tough industry. If you’re going to go in as an employee then you’ll earn a little bit of money as you learn, and it’s going to work for you. If you’re going to do it like I did it, where I quit my job and had a little bit of savings, then it’s very difficult and you either sink or swim.”

He advises all new brokers to build as many relationships as possible through networking.

“Most of my clients come through relationships and referrals,” he says. “When I was starting out I tried everything – I was walking through neighbourhoods, dropping off flyers in letterboxes on weekends and just trying to get my name and brand out there – and to be honest, none of that really worked. One thing that did help though was getting involved in BNI (Business Networking International). That really helped me grow the business very quickly. Also we’ve got good relationships with accounting firms and financial planners and we work very hard on maintaining those to keep that side as well.”

His second piece of advice to new brokers is to not rely on other people to hold your hand to get information. He encourages his own assistant to try and decipher problems on his own, and use him as a last resource for information. In that way, his assistant can become self-reliant much more quickly.

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Alex Nochar Company: Oxygen Home Loans Location: Neutral Bay, NSW Oxygen Home Loans broker Alex Nochar only started in October 2009, but he’s already clearing $5m a month.

Nochar, who previously worked in the motoring industry handling finance and insurance for six years, decided to switch to broking because he was looking for more flexibility.

“I worked a lot of weekends and I had quite a lot of staff under me but as enjoyable as the role was, I just wanted something more flexible and this seemed like a good industry.”

Nochar chose to join Oxygen partly because he knew someone in the McGrath organisation and partly because he wanted to guarantee a source of leads.

“When you’re starting out in this industry it’s quite hard because you have to fund yourself for some time while you wait for those leads to come through, and that’s the critical part really.”

With the leads taken care of, the biggest challenge so far for Nochar has been learning the different lenders’ products and policies. While friends and family questioned his career move, given the uncertain economic times, Nochar remains confident.

“Ultimately if you’re passionate and driven about what you do then you’re always going to do well.”

His goal this year is to continue writing $5m a month.

“ When you’re starting out … it’s quite hard because you have to fund yourself for some time while you wait for those leads ”

Angelique Glasson Company: Territory Loans Location: Alice Springs, NT After two decades working for NAB, Angelique Glasson was finally convinced two years ago to become a broker

by Territory Loans owner Richard Black.

She had resisted his earlier attempts to get her to switch careers, mostly because as a bank employee she had seen her share of both good and bad brokers come through. But a desire to have more flexibility proved to be the dealmaker.

Having a banking background was definitely helpful in the beginning, as she was quite familiar with the loan process, but getting to know other banks’ policies and products proved more difficult.

That said, her biggest challenge has been getting banks to respond with timely answers.

“Banks just don’t seem to care about helping customers as much as we do.”

Glasson’s mortgage career highlight was winning the PLAN CEO Award for SA/NT for excellence in customer

service. As a broker in a regional centre, customer service is paramount.

“People in Alice Springs tend to be a loyal bunch,” she says. With that in mind, her goal this year is not monetarily focused. “I’m just hoping to help as many clients as I can this year.” MPA

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getting licensed

Legitimate concerns M

ortgage and finance brokers need to prepare for the transitioning to the national credit regime in the coming months, following the enactment of the National Consumer Credit Protection Act 2009 under the supervision of ASIC from 1 July 2010.

Whether you have an existing mortgage broking business, or you are contemplating setting up your own business, you must have a good understanding of the licensing requirements because failure to comply will lead to regulatory enforcement action and/or interruption to your business.

If a person engages in credit activities on and from 1 July 2010, the person needs to be either licensed or authorised, or be exempt from such requirement. Prior to that, existing participants must apply for registration between 1 April and 30 June 2010 to allow a smooth transition to the new regime.

Only credit that is covered by the National Credit Code is regulated under the National Credit Act. Generally speaking, this includes credit that is provided to a natural person or strata corporation, that is wholly or predominantly for personal, household or domestic purposes or residential investment. Certain credit products such as margin loans, employee loans, bill facilities and certain short-term credits are excluded from the credit regime.

A further requirement that must be met for the Act to apply is that the service must be provided to a consumer in the course of, as part of, or incidental to, a business carried on in this jurisdiction by the provider. For the purpose of this

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Changes to the National Consumer Credit Protection Act mean brokers will have to take the necessary steps to become licensed, or risk losing business.

Su-King Hii walks you through the process

article, it is assumed that the threshold requirements are met.

Typical mortgage broker activities constitute the provision of ‘credit assistance’ (which is a form of credit service) under sec 8 of the Act. ‘Credit assistance’ is provided if a broker suggests that the consumer apply for a particular credit contract with a particular credit provider, or apply for an increase, or similar.

Furthermore, the broker will also be acting as an intermediary where it secures the provision of credit for the consumer under a credit contract with the credit provider.

What do you need to do?

If you determine that you need to obtain a credit licence, you should make early preparations.

Firstly, you will need to become registered as a ‘registered person’ with ASIC between 1 April 2010

Mark your calendar 1 April 2010 – registration with ASIC begins 18 June 2010 – applicants who apply for registration with ASIC before this date will be processed. Those who apply after are given no guarantees 30 June 2010 – registration period ends 1 July 2010 - if a person engages in credit activities on and from

1 July 2010, the person needs to be either licensed or authorised, or be exempt from such requirement.

30 June 2012 – in a transitional arrangement, ASIC will allow people who are currently being mentored according to the MFAA mentoring guidelines to be responsible managers

on the basis they will successfully complete their mentoring up to this date 30 June 2014 - an existing participant who wants to participate in a responsible manager capacity may still be accepted by ASIC, even if they don’t meet the qualification requirements.

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s and 30 June 2010, and then apply for a credit licence within six months after 30 June, or become a representative of a registered person or licensee.

Registration allows you to temporarily engage in credit activities until your licensing status is resolved. Even though 30 June 2010 is the deadline for registration, ASIC has stated that if registration is applied for by 18 June 2010, it will be able to make a decision by the end of June to ensure there will be no delay, post 30 June.

Applicants who apply after 18 June and before 30 June will risk having their applications not being decided by the deadline.

To make the registration process easier, brokers must first apply to become a member of an ASIC-approved external dispute resolution scheme, such as the Financial Ombudsman Service or Credit Ombudsman Service Limited.

They must undertake the relevant background checks, such as criminal history check, bankruptcy check and credit check, for the people responsible for the credit activities, such as the directors,

“ Registration allows you to temporarily engage in credit activities until your licensing status is resolved ”

company secretaries, trustees, partners and senior managers. These are known as the ‘fit and proper people’ – meaning that the relevant people must be competent to operate a credit business, have the attributes of good character, honesty and integrity, are not disqualified by law from performing their role in the credit business, and not having the performance of their duties adversely affected by conflicts of interest (see ASIC’s RG 204.193).

Secondly, like the AFS licensing regime, applicants are required to demonstrate the organisational competency before a licence can be granted (sec 47(1)(f) of the Act). This is done by nominating at least one fit and proper person who has the necessary qualifications, skills and experience in the provision of credit service (also known as the ‘responsible manager’).

The number of responsible managers that you will need to appoint will largely depend on the size, structure and diversity of your operation, the number of representatives and the number of clients that you have.

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It is, therefore, critically important for you to identify, from the group of fit and proper people, at least one person who possesses at least two years of relevant problem-free experience (that is, not marred by significant non-compliance issues) and either a credit industry qualification to at least the Certificate IV level, or another general relevant higher level qualification, such as diploma or university degree. Where mortgage broking services are involved, the responsible manager is also expected to have completed at least a Certificate IV in Financial Services (finance/ mortgage broking).

During the transition period, until 30 June 2014, an existing participant who wants to participate in a responsible manager capacity may still be accepted by ASIC even if they do not meet the qualification requirements. This will give the participants time to acquire the necessary qualifications and experience.

In RG 206.46, ASIC expressed the view that “ideally, experience should be gained in a licensed business engaging in similar credit activities to those for which the applicant wishes to be licensed.

This may be done by working as a representative of a credit licensee business or as a support person

“ The number of responsible managers that you will need to employ will largely depend on the size, structure and diversity of your operation ”

Educational requirements Under transition arrangements released

by ASIC, brokers and their representatives now have until 30 June 2014 to obtain a Certificate IV qualification. This was made clear in a series of guides issued by ASIC to help those who are preparing their credit licence applications.

While Certificate IV in Financial Services (mortgage/finance broking) is a training requirement for both ‘responsible managers’ and their credit representatives, 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

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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).

From 1 July 2014, anyone applying for a credit licence or acting as a representative of a licensee will need to hold a Certificate IV. As a general rule, ASIC expects “responsible managers to have at least two years’ relevant experience and a relevant qualification at the Certificate IV level or above”.

Details about Certificate IV requirements were included in Regulatory Guide 206 Credit Licensing: Competence and Training, along with a series of guides to help those preparing their credit licence applications.

in the licensed business with sufficient exposure to the credit activities of the business.”

This requirement may present a real challenge to some mortgage brokers who need a credit licence to provide credit assistance because in some parts of the industry, the main providers of credit activities are sole traders with no employees – so the opportunities to gain relevant experience is limited. ASIC recognises this problem and “will allow people who are currently being mentored according to the MFAA mentoring guidelines to be responsible managers on the basis they will successfully complete their mentoring.”

This mentoring arrangement will be a transitional arrangement until 30 June 2012 (see RG 206.50). Therefore, it is strongly advisable for brokers who wish to apply for a credit licence to review the nature and scope of their business, assess the suitability and competency of their staff, and undertake the necessary recruitment exercises or training now.

Finally, applicants are required to demonstrate that they have, or will have, compliance arrangements, conflict management arrangements, supervisory arrangements, adequate financial resources, risk management, training programs for their representatives, and compensation arrangements in place.

Responsible managers are also expected to undergo 20 hours of continuing professional development (CPD) each year and maintain records of the CPD activities.

Early preparation Mortgage and finance brokers should be mindful of the application of the National Credit Act to their activities. The licensing and compliance requirements can be complex and difficult to handle. Early preparation is the key here as there are a number of preliminary steps that need to be completed, background checks to perform, and various documentation to be prepared. mpa

Su-King Hii is the principal of Innoinvest Consulting, established to assist financial services and credit industry participants to apply for, and maintain their licences.

Comments are welcome and can be sent to info@innoinvest.com.au

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team motivation

T

he desire to be one’s own boss has motivated plenty to start their own business. However, many forget that this usually means being the boss of someone else. And while you may be great as a broker, those same skills don’t automatically make you management material.

The Get More Guy Warwick Merry has a few ideas on how to turn a sluggish team into a lean and mean mortgage business machine:

Has your team’s get up and go, got up and gone? Warwick Merry, The Get More Guy, has some ideas on how to fire them up

busy even though they seem to be cruising. You get a little angry and think, “if they don’t fire up, I’m going to fire them!”

It’s a law of physics regarding entropy (the second law of thermodynamics, actually).

Essentially, energy has to be applied to keep the work going. Without the application of additional energy, a moving body will ultimately stop. To apply energy, the team has to be motivated. US motivational speaker Zig Ziglar famously quoted, “People often say that motivation doesn’t last. Well, neither does bathing… that’s why I recommend it daily.”

! m a e t o g What’s my motivation?

You know what it’s like. You walk through the office and you can see your team rushing to look

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!

column

Team motivation

Why motivate your team?

We need some kind of motivation on a daily basis to get the work done to achieve our goals. That doesn’t mean you have to run around all day firing up the troops, but some kind of motivational process is required. I have heard many managers say, “but that takes a lot of effort and distracts me from my real job.” The reality is that this is a significant part of your job. Keeping the team motivated contributes greatly to the team culture.

Part of what we need to do is build an Employer of Choice work environment. Motivation is attractive. People want to work for an organisation that helps them achieve their personal goals (be they financial, social or career oriented). Building this team culture of motivation will keep your best employees, That alone is a cost saving as staff turnover has a severe impact on the bottom line. What this will also do is build momentum. You will find that if you have a

“ … if you have a motivated team, you won’t need to spend as much time motivating them. They will … motivate each other ”

motivated team, you won’t need to spend as much time motivating them. They will start to motivate each other and all you will need to do is keep the ball rolling. This momentum also contributes to your corporate culture. It builds a “that’s how things are done around here” ethos. You will find that the team members will start to not tolerate poor performance as well.

So how do you think it would feel to work for a fired up and supportive team? You would find that absenteeism reduces, recruitment expenses are reduced as team members refer their friends, or prospects come to you directly. All of a sudden, team members are surprising themselves with the results they are achieving. Success attracts further success, as well as a commitment to excellence.

What motivates your team?

In life, there are only two things that will motivate a person – pleasure or pain. International speaker Anthony Robbins states that 80% of people are motivated by pain, leaving 20% motivated by pleasure. Of the two, pleasure is a more sustainable motivator. To be motivated by pain is to want to move away from something, whereas with pleasure one wants to move towards something. Moving away has a limit, but moving towards something does not. For example, if your motivation is “I don’t want to be less than 80% of target”, once you get to 80% you are satisfied.

Eighty-five per cent does not satisfy that motivation any more than 80% does. Compare that to being motivated by “I want at least 80% of target”. Eighty per cent satisfies the motivation but 85% continues it.

Make sure the motivation you set for your team is pleasure based. This would mean that it is expressed in a positive manner.

top tips to stay motivated Motivate towards pleasure, not away from pain Express motivation in positive, foward terms Customise the motivation to the individual Visualise how you would feel having reached your goal Enrol others in your goal/vision Lavish your team with attention Provide unexpected rewards Words of praise work better than a raise

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team motivation

What de-motivates?

We humans are funny creatures. Even in the workplace one of the things we crave the most is attention and confirmation we are on the right track. So the easiest way to de-motivate us is to starve us of this. Too often targets and objectives are set at the start of the year and then that is it.

Meanwhile, the team members are operating in a vacuum. They don’t know how things are going for themselves, their team or the company.

Clients of mine have often said that they are managed mushroom style – kept in the dark and fed bullshit. So if you want to de-motivate the team, tell them nothing (or worse, tell them lies), don’t let them know if you care about them, keep them in isolation and take them and their efforts for granted.

How to keep your team motivated As you would expect, one of the best ways to motivate the team is to communicate with them.

It needs to be meaningful communication though.

Many of us have been to a meeting that provides no valuable information, which everyone hates, and it’s being held just to keep the boss happy. So communicate information of value.

The best way to motivate your team is to be authentic. If you are genuine, you will earn a great deal more respect and loyalty.

Money is a good motivator, but not the best.

Much research has shown that the positive impact of a pay rise lasts only four to six weeks. An increasing commission rate on increasing sales works well, but money alone is not enough.

Offering continuing education, training and

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“ The best way to motivate … is to be authentic.

If you are genuine, you will earn a great deal more respect and loyalty ”

support shows your team that you believe in them and are working towards the mutual success of the team and you.

Frequently, the best motivators are ‘surprises’ – unexpected events or items that appear out of the blue. They can be as simple as movie tickets, words of praise, team dinners or book vouchers – awarded not just based on performance, but on other actions that you wish to encourage. Best customer recovery, most creative idea (regardless of whether it works or not), best comment when answering the phone – whatever you can think of. This way, all of your members can earn rewards at any time for anything – not just the high performers who may get sales commissions anyway.

Individuals are motivated differently. Ask people what motivates them, and it will also give you ideas for others in your team. When you set KPIs, have the individual responsible for them assist you in setting the reward for it. That will increase their commitment to the KPI as they are setting their own motivational goals.

The key thing is communication. If you continue to communicate with your team, let them know what you want them to be achieving, how they are tracking, what issues have arisen, how much you value them, their efforts and their contribution, you are well on your way to building a culture of excellence and a motivated team. mpa Warwick Merry, The Get More Guy, is a motivational speaker based in Melbourne. For more information on his services visit www.warwickmerry.com

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book excerpt

your website sucks Mitch Joel is not afraid to tell readers where they’re going wrong in his entertaining and informative book Six Pixels of Separation

Excerpt from ‘Six Pixels of Separation’ by Mitch Joel, RRP: $35, published by Headline.

M

ortgage brokers who continue to ignore their online marketing are wasting valuable time when it comes to building their personal brand. Written by Mitch Joel, president of Twist Image, reading Six Pixels of Separation is a painless way to learn about this new world of marketing. Not only is the writing entertaining, but the book comes packed with case studies and offers a complete set of tools, tactics and insights on how to reach your audience. The following excerpt is a great example of what readers can expect to learn: Your website sucks (mostly because it was an afterthought and now it’s the main calling card for your business). The intersection of growing your business, understanding the power of your personal brand, and how the digital channels can help make everything connect is all fine and dandy, but unless you have somewhere to bring your newfound customers and community members back to, all is lost and forgotten.

All too often people look at the results from an online marketing campaign and frown. They’re not sure why it was not effective. More often than not, the reason is staring them (and everyone else) in the face: Their website is not all that good.

You need to have an amazing website. It’s not a luxury. It’s not a marketing afterthought. More and more people’s first interaction with a brand is happening at the search box. Whatever they see after that first click needs to be in line with their expectations.

It’s not just the design (although that could well be a part of it); a website has many moving parts, of which the design phase is only a small (but important) one. The entire process of building a corporate website has traditionally fallen into the hands of two types of companies: 1. Web-design shops: I have nothing against Web designers. In fact, some of my best friends are Web designers. But Web design is only a small fraction of what it takes to strategise, design, create the content, develop the technology, and market the website. Most Web-design shops turn out great websites, but they don’t build engaging online environments

that embody the strategic goals of the company and how it relates to successful marketing campaigns and findability in the search engines.

Having the prettiest website is not the goal – having the most functional one, with great creative flair, is.

2. Technology companies: As a general rule, you should never have a technology company build your website. That’s like asking the mailman to design your direct marketing package. The mailman’s job is to deliver the finished product, not create it. In the same sense, technology is the mailman. The reason technology companies (or IT departments) have held and controlled most websites to date is because entrepreneurs have a lot in common with your average marketer: they are both scared of technology. As we discussed earlier, don’t let the technology part wig you out.

Who should build your site? I lean toward a full-service digital marketing and communications shop (also known as an interactive agency). I would not be much of an entrepreneur myself if I didn’t slant in that direction. Ultimately, your budget will decide the type of resources you can patch together to make it work, but always keep in mind that a great website should be: Clean Easy to navigate Appealing to the type of consumers who will visit your website Written in the language that your consumers use to find your products and services Filled with engaging media beyond the text (this includes images, video and audio) Positioned with several ‘calls to action’ that move consumers to do something Tied to the other social channels where people can connect to you Search-engine friendly Built to link (both internally and externally) Easy to update Constantly refreshed and refocused Tied to some kind of analytics tool Measurable through marketing and overall business goals. mpa

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the magic number

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ne of the reasons why borrowers come to mortgage brokers is for choice.

The latest research from the Bankwest/MFAA Home Finance Index revealed 69.2% of survey respondents who use mortgage brokers do so because “they are experts in a range of mortgages from numerous lenders”. Another 68.8% agreed that an added benefit of using a broker is they have a wider loan range.

Choice is therefore a very important point of difference between the direct and third party channel. But how much choice do mortgage brokers really provide?

Outside forces The field of lenders has distinctly narrowed over the last two years. The GFC sent a number of non-bank lenders into hibernation and virtually wiped out a number of mortgage managers who weren’t able to source funding. There has also been

Th m gc num er Are some brokers taking the onesize-fits-all approach to customers?

MPA investigates how many products brokers are offering their clients and if it’s enough

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increased consolidation among players. (Although, in saying that, there has been a distinct effort to maintain separate brands, as is the case with Westpac/St.George and CBA/Bankwest).

The number of loan products on offer has also decreased over the last two years. Higher risk products have been eliminated and a number of low-doc loans have been taken off the table.

Lenders have also tightened lending criteria – lowering LVRs and demanding genuine savings.

Customers who were being courted two years ago by lenders are suddenly no longer prime loan candidates. So the number of products suited to their situation has become smaller.

These outside factors have all put limitations on the choice brokers can offer customers. But what about the restrictions on choice that are instituted by brokers themselves?

Broker forces A mystery shop conducted by the MFAA in 2007 found that 24% of the brokers involved only recommended one product to their customer. Why? Are some brokers motivated by the commission they receive from certain lenders? Are they trying to fulfil an accreditation requirement? Or was there truly only one product that was applicable to the customer’s situation?

Fujitsu Consulting’s own research suggests brokers work effectively with two to three lenders.

According to managing consulting director Martin North the main reason is familiarity.

“People tend to know how to navigate one or two lenders better than others,” he says.

“I don’t believe we have many brokers in Australia who are truly what I call ‘whole of market’ brokers. In other words, they know every single permutation of every single product. Even those who use the online systems are restricted by the information that the online systems represent.

“And I know in theory they have access to over 35 different lenders, but in practice they’ll narrow it down quite quickly.”

If offering one or two products to your customer isn’t enough, what should the magic number be?

MPA talked to brokers for their opinions.

What brokers say Paul Bieg, a Club Financial Services broker in Norwood, SA, says his initial interview with the

“ People tend to know how to navigate one or two lenders better than others ”

client is thorough enough that he can distil their needs succinctly, and offers his clients two choices.

The most important question, he says, is finding out what lenders the client doesn’t like.

“Because, say, the best product may be from CBA, but then they’ll come back and say ‘well, we dealt with CBA five years ago and they were terrible’. Unless you find out that information initially, you can be presenting the wrong products for them in their eyes.”

Bieg says he likes to balance his recommendations across lenders, but isn’t always in a position to do so.

“I like to present a bank and a non-bank product, but more recently sometimes you can’t even present any two. For example, if a client is borrowing in a low-doc scenario and the pool of low docs has dried up significantly, you don’t have the option of offering them another choice.”

Overall, it’s a system that has worked well for his clients. “I’ve never had clients ask to see more.

I’ll generally present two products and give my recommendation and nine times out of 10 they’ll go for the one I recommend.”

Christian Steinbacher, on the other hand, takes a completely different approach. The Oasis Home Loans broker from Canberra says he also

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likes to do a fact-find first. But from there he goes through every single lender on his panel.

“Obviously if you’re only recommending five or six lenders it doesn’t narrow down what exists out there in the market. What I’ll typically do is go through five lenders that have really good rates. Then I’ll go through five lenders that have really good support policies or other functions – phone banking, internet banking, repayment holidays, etc. I’ll also look at lenders that are cost effective to get into and get out of – if there’s an investment strategy involving an exit in the next one to three years.”

Steinbacher uses AFG’s FLEX system which assists him in showing a client what exactly is out there in the market.

“A lot of brokers focus their business around the four majors, and by doing that they rule out a lot of other factors, such as ongoing fees, etc. I like to take a holistic approach for my clients. I also look at other risk management strategies that exist and see if there’s an opportunity for the client to do a bit of wealth creation.”

South Australia’s Mortgage Choice broker Trent Winstanley prides himself on knowing as many lenders as possible. And while he’ll look at seven or eight lenders for each customer, he usually gives them a choice of three or four options and he mixes it up between the Big Four and second-tier banks.

“I think three is a happy medium. It gives them some choice. They can always ask for more – I always give them the option to check out different lenders if they’re interested. They generally trust me with the three I’m offering.”

“ I think three is a happy medium. It gives them some choice.

They can always ask for more ”

Mortgage Choice on choice Mortgage Choice’s senior corporate affairs manager Kristy Sheppard weighs in on the number of products brokers should offer clients…

MPA: Does Mortgage Choice advise brokers on the minimum number of products to offer their clients? And if so, why was this benchmark chosen?

Kristy Sheppard: We have 24 lenders on our panel so our database has hundreds of home loan products for customers to choose from.

We don’t have a ‘magic number’ of products.

What we want our brokers to be able to offer is a wide range of quality, competitive products in which they are confident of their knowledge. Our brokers are working with the 24 lenders on our panel, where possible, to offer each customer a solution tailored to their financial circumstances and lifestyle.

Simple as that.

MPA: Do you feel the majority of brokers are meeting these targets?

KS: Our brokers are diligent in maintaining a professional standard of knowledge and industry-leading skills to best conduct their important

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role in the property purchase process. They know that they are one of the most valuable service providers, if not the most valuable, that a borrower will deal with.

I am sure there are brokers who are not industrious and timely in keeping their skill-set and knowledge up to standard. This is detrimental not just to their business but to the industry overall. We should all be working hard to strengthen the reputation of mortgage brokers so more Australians have the confidence to enlist our services.

Customers visit brokers to reduce the hassle and stress of applying for a loan, and possibly save money. By offering too much information, a broker can easily confuse and deter their customers. It’s a fine line and it comes down to the personality type of the customer, their needs, and the skill-set of the mortgage broker.

MPA: Is there any concern that some brokers are “lazy” (as some non-banks have accused) in that they only offer a select few products?

MPA: Is there a risk of bogging clients down KS: There is a serious danger of some brokers with too much information? becoming lazy and exploring for their KS: It is a delicate balance for any customers only a very limited number of loan broker to provide their customers with products despite there being many more relevant, up-to-date information on the available from their lender panel. The ‘cookie wide range, and intricacies, of the cutter’ method – where a broker suggests the products available – all the while same product type and/or lender over and maintaining a solid knowledge of over without exploring other options that may their entire offering. It’s a difficult be more suitable – is usually not the best way task for the most motivated and forward for a customer. Brokers have a very determined broker. important role – assisting someone who is Regardless, a great broker will be making what is often their biggest financial able to match their customer’s commitment. A professional broker will have a financial situation, needs and good knowledge of all the lenders and loan lifestyle to the best of each suitable products within their offering, keeping product type that is available from themselves up to date with industry, lender their panel of lenders – cutting and product changes so they are the best through the clutter. fount of knowledge for their customer base.

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Brokers responsible for competition?

The dominance of major banks hit epic proportions during the GFC. At one point last year, the big four were writing 90 cents of every dollar lent. It was a tough climate for non-banks to compete in, but some argued brokers were effectively lazy – offering only one or two major bank products to their customers.

On the other side of the equation are brokers and aggregators. Fearful that bank dominance could have a negative impact on the broker channel, many industry professionals called for increased awareness of non-bank products in the hope that they would offer those products to their customers, who in turn would opt for an alternative to the major banks.

Is it a broker’s responsibility to ensure there is healthy competition? Brokernews.com.au asked its readers.

Comment by Broker MC: I always think ‘if I was writing a loan for myself, or my sister, or best mate and his wife, would I recommend little-known Lender X, or one of the big banks with ATMs all over, a known brand… and I realise the only reason I’d write small Lender X is ‘to widen the range’ of lenders I lodge with, not because it’s a better option (and I do write Lender Xs when it’s the best option). If I wouldn’t write Lender X as first choice for myself, why would I do it for my client?

Comment by Rod Peart, Jim’s Finance Professionals: It all depends on the type of client. If for instance, the client is very vague and not truly understanding of what would be the ideal product to suit their needs, then offering them one loan as long as it is done ethically and without regard for the commission can be seen as acting in a professional manner. Other

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clients would appreciate having a choice of several products. The client is using the broker’s skills and experience to help them in their decision making, and I do believe the broker should be guiding the client to the most suitable product where possible.

Comment by Ian Jervis, Paradime Home Finance: Providing enough information but not bogging them down will be different for each customer. With the changes in legislation and the coming of a time where brokers will be called on to provide information in a similar style to financial planners, it will be up to the individual broker to be able to justify the position they took if called upon to do so. The need to provide this information will hopefully drive the aggregators to produce software that makes this task easy for brokers. In all, these steps will help to raise the professionalism of the industry both from within and also from the public perspective which can only help those brokers who are still here in a few years’ time.

Comment by Deborah: Most of my clients are regional. When the non-banks start offering a product that will work for my clients, I’ll consider offering their product. I’m sick of mortgage managers and non-banks who come knocking at my door, promising the world and that they can offer a great loan for my clients, only to be let down badly. I like to keep an open mind, but even for my city clients, there are only a couple of non-banks I place loans with now – these are the ones who have kept their promise and can actually deliver.

Comment by Mac Johnson: MC’s view has some validity, but only to a very small point. Almost invariably, the smaller, friendly Lender X delivers better, more courteous service at competitive or better interest rates. The ATM thing is not an issue for the ‘mum and dad’ market, as loans and banking can, and often are, separate. Thus, it is a no-brainer that smaller, friendly Lender X

sit, only the FBAA and AIPB fit that bill.

Comment by Tony: When looking at a product for a client, I look at everything including deferred establishment fees, just in case the client needs to move for some reason – say a lender doesn’t reduce rates and becomes very uncompetitive, or a client has to move lenders to purchase an

“ People want service. That’s why they use brokers. Smaller, friendly Lender Xs offer better service, as a general rule ” can be recommended. Sure there are exceptions where a client requests ‘big unfriendly bank’, or prima facie reasons preclude smaller, friendly Lender X. People want service. That’s why they use brokers. Smaller, friendly Lender Xs offer better service, as a general rule. Look at the rise and rise of Bendigo. It’s not cheaper, it just offers friendly service. Smaller, friendly Lender X creates competition which is good for the whole economy. When smaller, friendly Lender X then raises funds, say with RMBS, investors are happy as they may have a secure investment with good returns. You can see how brokers’ recommendations have a large ripple effect that can be good for clients, brokers, investors and the economy. Why do you think the big banks have gone to such extraordinary lengths to control brokers?

Because they see the profound power and effect brokers can have.

Brokers must coalesce into an entity with back bone that truly represents brokers’ interests. From where I

investment property.

When the non-bank lenders start being competitive with fees, they will start getting business, but until then, doing the right thing by the client often means placing them with a major bank.

Comment by Dave: I agree with Mac Johnson. My first mission is to find the best product to suit my clients’ needs now and for the next few years. One-stop shopping with a single lender is irrelevant to me as the mortgage doesn’t need to be linked to other products and services most of the time. In fact, the client’s best form of one-stop shopping is a good broker who can access all products. This should be the broking industry’s message to the community. The only things which limit what I offer clients are my product knowledge and what’s on offer in the market place. So my biggest duty is to stay across what’s on offer and to be able to access it. Currently the professional peak body is not providing strong advocacy for brokers or promoting competition amongst lenders. It’s time for this to change.

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contents 54 News: A review of news in the world of non-bank lending and mortgage management 56 In profile: resi mortgage corporation’s lisa montgomery

AOFM invests $3.4bn in RMBS The Australian Office of Financial Management announced in late January it will invest up to $3.4bn in RMBS to five issuers.

The investment is part of the government’s $8bn extension to the AOFM’s RMBS program last year, which doubled its original investment made in 2008.

The recipients of the investment include Resimac, Liberty Financial, Members Equity Bank, Firstmac and AMP Bank. They will receive “pipeline” funding, which means each issuer will have AOFM support for RMBS issuances until 15 December.

It is understood that the latest investment will be slightly different from last year, in that the participation of the AOFM will be reduced as outside investor participation is expected to pick up in 2010.

“The announcement provides more funding security for these smaller lenders and will allow them to keep lending,” said Treasurer Wayne Swan. “This will place more competition on the big banks, helping to put downward pressure on mortgage rates over time.”

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Mortgage managers back in favour: Wilson National Mortgage manager Wilson National has noticed three trends which indicate brokers are moving away from banks in favour of mortgage managers.

“Firstly, there has been a significant increase in the number of Wilson National home loans processed in comparison to bank loans amongst our group,” the company said in a statement.

“Secondly, there has been an overwhelming response to the Wilson National Local Area Manager (LAM) program, and finally, there has been a sharp rise in the number of inquiries from brokers looking to white label their own product,” the company added.

Wilson National MD Geoff Wilson said there were “clear signs” major banks “are looking to squeeze brokers out of existence”.

“Many brokers are realising the resourcing, effort and time to get a bank loan over the line is becoming unsustainable from a business point of view with increasingly high processing costs,” Wilson said.

“At the moment many brokers are really struggling to make a profit, and many are looking to find a reliable alternative which will take their business into the future,” he added.

Over the next six months Wilson National will be expanding its business through its LAM program. Wilson said a number of brokers had put in applications for the program.

Size of the government extension on investment in RMBS by the Australian Office of Financial Management

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FirstMac product addresses worries FirstMac released the FightBack II home loan in late January, which is a capped rate loan product aimed at borrowers looking for security as rates move higher.

The product includes both a capped option and a pro-pack option. It comes with a 6.19% pa variable interest rate capped for 2 years at 7.49% pa, so if interest rates fall, the product rate will also fall. However if rates rise, the product rate won’t go above the 7.49% capped rate during the capped rate period. At the end of the capped period the rate rolls over to a variable rate (currently 5.89% pa).

Borrowers can choose to split their loan and enjoy the benefits of both the professional pack and the capped option.

FirstMac managing director Kim Cannon said “we are picking up on a rising level of concern from borrowers about the potential for interest rate increases this year and the FightBack II capped rate product should come into its own as the year progresses.”

FightBack II follows FightBack which was launched in November 2008 with a 1-year fixed rate mortgage of 2.99%.

Google launches mortgage search service Google is rolling out a new search function allowing consumers to shop and compare mortgage offerings from around 15 participating lenders. The service, called AdWords Comparison Ads, will be fully deployed over the next few days, according to mortgage-technology.com.

The rates will be visible in specific states where there is matching mortgage coverage from participating lenders.

With Google’s new offering, potential borrowers can view live rate quotes from mortgage professionals in a consistent manner. The feature was designed to make the lending process more transparent, allowing applicants to access rate quotes instantly. Clicking on the link takes the borrower to a page where they can view a variety of related mortgage offerings from lenders in that geographic area.

AMP issue up double The first Australian RMBS of 2010 received strong investor interest, pricing at $1bn – almost twice the expected $543.5m.

Significantly, it did so without the government acting as a cornerstone investor in Class A Notes. The AOFM co-participated with private investment in Class AB Notes, purchasing $36m.

AMP’s Progress 2010-1 Trust RMBS involved 18 investors with 40% of notes sold to European investors. Deutsche Bank Head of New Issue, Credit Solutions Group, John Claudianos said: “We are seeing a significant move towards normality in RMBS primary issuance with more investors and confidence building.

The Progress transaction is a significant step in the development of the RMBS market for 2010.”

SANDSTONE Special Report

mpa lender news

The secrets to a successful lending transformation program In previous articles we have looked at the reasons why you should think about transforming your lending process and the benefits that transformation may bring. It is now time to examine the factors that contribute to a successful lending transformation program and how technology can be used to help you achieve your transformation objectives.

Lenders embark on a Lending Transformation Program with us because they need to improve their end-to-end lending processes to enhance their customers’ experience, improve operational control and efficiency and build compliance into the process. They are aware that streamlining and automating their processes will significantly improve ‘time to cash’ and their overall customer service. All lenders are constantly looking at ways to eliminate manual processing and rework wherever possible and to establish a controlled process to reduce risk and enforce compliance.

Typically, short sharp transformation programs that can use existing best-practice components and know-how are more successful and impose less organisational effort, cost, risk and stress than those that run over long periods and start from a blank piece of paper.

A lending transformation program will help you achieve a step change in your lending processes, not just an evolution of gradual improvement and optimisation of current processes and work practices. A new approach is needed, where necessary breaking away from past procedures and limitations and taking full advantage of new thinking and emerging technology opportunities.

As with all major process change programs of this type, rebuilding complex operational processes from within the organisation while continuing to operate the day-to-day business is an almost insurmountable challenge. Such programs are usually difficult to get started, require a high amount of constant management drive and leadership and tend to lose energy and default to the ‘old way of doing things’ when people tire of driving the changes or the management focus moves on to new strategic initiatives. Typically, the longer a project runs, the higher the cost and also the risk of it completing successfully as planned.

For these reasons, and to bring an objective external view to the program, lenders usually engage the services of an external organisation with deep specialist knowledge and experience from transforming lending processes across many previous programs.

By starting with an existing, defined and optimised target process, the specialist solution provider can start the process off with a suggested target “to be” model that can be finetuned for the specific lender. Ideally the target model can be delivered in a fully automated system solution that has already been proven in previous similar implementations in the Australian lending environment.

By starting with a proven process and automated system solution this approach removes enormous time, effort and cost from the transformation program. More importantly though, it removes substantial risk of program failure to deliver and realise the business outcomes that justify such a significant investment of time and resources.

Martyn Beer, GM – Lending Solutions, Sandstone Technology

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Broker Profile lender

Resilient

Dedicated to providing a fair-go for home loan borrowers, Resi Mortgage Corporation’s Lisa Montgomery is living testimony that in the mortgage market a little polish goes a long way.

Tim Neary caught up with her in Sydney, at her trendy Ultimo office

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he describes herself as a workaholic with “an appetite for French Champagne and singing in the shower”, but with the assiduous non-bank sector set to make a welcome comeback Resi’s head of marketing and consumer advocacy Lisa Montgomery hasn’t room in her schedule for taking long lunches.

Montgomery started out as a retail banker in her hometown of Newcastle. After cutting her teeth primarily in the lending space, she found herself being head hunted and took on the role of product manager for the BankChoice division of public company Infochoice.

Today, she recognises that leaving “a safe and secure” job of 18 years to move to Sydney – and into the unknown – was absolutely the greatest risk she ever took. But the faster big city pace suited her style, and after a brief settling in period she began working the corporate ladder – all the way to the top. Until, in the position of its chief executive officer, she brought the then ailing Infochoice back to profitability.

With that notch in her belt it is no surprise that she was head hunted again; this time for the role of head of customer experience and advocacy at Wizard Home Loans.

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Lisa Montgomery: Up close and personal + Family: Married Drew Dickson on 20 Feb 2010 + Favourite band: Fleetwood Mac – front row at their December concert – brilliant! + Favourite sports: Watching Ben (Drew’s son) play soccer on chilly Saturday afternoons. + If not in the mortgage industry: Probably working in television or radio. Or running a restaurant, vineyard or amateur theatre company. + If the house was burning and the family was safe, what would you grab: My 1998 CONDA award – something special from my acting days.

And these days – in a tidy example of the end reward being worth the earlier risk – Montgomery can be found relentlessly raising the profile of Resi Mortgage Corporation. “I always said if my move to Sydney lasted six months that would be great.

Now it’s been almost 11 years,” she laughs.

Building blocks Montgomery says her early years in retail banking and later at Infochoice and Wizard served as the “perfect foundation” for her career. “I’ve learnt valuable skills from each of my roles, and certainly running Infochoice provided me with quite targeted management experience,” she says.

Montgomery acquired a great deal of knowledge as the Infochoice chief executive and upon reflection feels it is the ability of managers to value and empower their employees that gives a business its competitive edge. “Successful businesses are built around successful and engaged individuals.”

In addition, she says good managers should be looking to introduce new initiatives to drive their businesses forward. Good ideas are fine, but without buy-in they seldom progress any further than the whiteboard. And it’s not by chance, she

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“ Reward your people for their contribution, and recognise them for it – during the task and on completion of it ”

Lisa Montgomery

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says, that people buy into fresh proposals. It’s a mark of leadership quality. Says Montgomery: “You do it through engagement; by illustrating value, and by providing stakeholders with responsibility and ownership.”

“Reward your people for their contribution, and recognise them for it – during the task and on completion of it,” she adds.

Although it was a “magic place to work and had brilliant energy”, Montgomery remembers her time at Infochoice as being one of the toughest periods in her career.

“Turning it around was a combination of managing the profit and loss, and downsizing the business at the same time. The challenges involved in that revolved around the redundancy of a lot of folk. Nobody enjoys delivering bad news, but as time went on we didn’t have too many choices left.”

While Montgomery remembers the process as being a struggle, she is also mindful of the business rule that requires you to separate the emotional from the practical. “One of the things that I learned as part of that role was that you really must be focused and have a clear and developed business plan.”

Another professional difficulty has been watching the non-bank sector erode in the wake of the GFC. “From it being so strong and making so significant an impact on the market. It was a tough job keeping Resi afloat and in business while the market was imploding around me,” she says.

That Resi was a firmly established business at the time, with a strong loan book and seasoned network, stood it in good stead for the tribulations that lay ahead. At the time, Montgomery, along with founders Peter James and Jim Christie, realised that it was better to look ahead for new opportunities than to retreat. “They said there would be certain things we’d have to do, but we had to focus on growth,” she says.

Over the last 12 months, for example, Resi has built on its brand and sales proposition, and even brought on a new sales manager to introduce improved processes and procedures.

And although Resi is a well-known brand as a result of that strategy, Montgomery says she’s not finished yet. Not until she’s achieved an “unaided brand awareness” for Resi, which lies with her being able to regularly touch consumers with the core information they need to make solid home loan decisions.

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“ One of the things that I learned … was that you really must be focused and have a clear and developed business plan ” Different playing field Montgomery says the GFC has left the industry a vastly different space now than it was before.

Most affected has been the non-bank sector, of course. The majority of its funding comes by way of the Big Four these days; and the borrower flight to quality has lanced much of its original target market. Not that the grass is necessarily greener for them under the major bank lenders, she points out, as evidenced by “some of the Big Four looking to increase profit by increasing rates above the RBA”.

No surprises then that Montgomery sees competition (or the lack of it) as being the biggest issue facing the mortgage industry today. “Driven by the drying up of the securitisation market, it provides the Big Four with the ability to drive consumer pricing,” she says.

And although there are tangible signs that the market is beginning to recover, Montgomery describes it as being “still fragile”.

She expects further consolidation of lenders in the period ahead, but also – ever the optimist – that the non-bank sector will rebound enough so that “in 10 years from now, borrowers will have access to proper competition.” MPA

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fallingfrom the

trees

In these changing market conditions, the short-term industry can provide savvy brokers with a handy additional income stream. Here are a few tips from the top to help budding new entrants get a head start

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n this next series of co-sponsored features we take a closer look at what the short-term finance industry offers brokers. We ask three of its leading lights to point out a few of the industry’s lesser known nuances and quiz them on the likely impact that regulation will make.

Appropriate solution Short-term loans are appropriate when both the purpose of the loan is suitable and the exit strategy is defined.

So says MKM Capital’s Michael Watson, and he points to both of the following scenarios as examples of when a short-term loan will be the correct solution for the borrower:

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“ … the borrower needs to show how they are actually involved in the business or investment venture ” Merrick Malouf

The first is when a borrower has lost their job, and has taken some time to find another one.

Here, typically, their home loan will have fallen into arrears and their lender will continue pushing for repossession – despite the new job. “As the applicant can now demonstrate serviceability, once they have history in the new job they will qualify for a mainstream lend within six to 12 months,” he says.

Then there is another borrower who may have sold a property, but has not yet settled. They’ll be a candidate for additional funds; for a subsequent purchase or for any other reasonable purpose. Says Watson: “The settlement is pending and the requirement is urgent.”

A typical unsuitable situation is where a customer may be under threat of repossession from their lender but shows no improvement in income.

A refinancing application may have been submitted to some lenders already, with the homeowner wanting to secure a refinance deal to save their property, but with no success as there is still no improvement in income. “In this situation, refinancing may only serve to strip equity off borrowers who will end up losing their property anyway,” says Watson.

Merrick Malouf, director at Prime Finance, concurs with Watson’s sentiments and notes that for a short-term loan to be an appropriate solution it should meet four criteria: it should be required for 12 months or less, and needs to be arranged and settled in less than four weeks.

Also, if not successful in arranging the loan, the borrower would suffer a ‘significant’ financial or opportunity loss. And finally, that the borrower would have an achievable and verifiable strategy for exiting the loan.

Meanwhile, HomeSec Finance Express’ Paul Stone says that it is a common misconception that

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these loans are only for desperate people whose businesses are going down the drain. But this is not the case, he says, rather short-term loans are a life-line to business people. “Without them their business could fail, or they could miss great opportunities,” he says.

Many borrowers are in fact very successful and want to use the equity in their real estate as a way to “borrow money to make money”. So borrowers should be guided by a simple cost/benefit analysis.

“If the benefit outweighs the cost, then it is a no-brainer – go the for loan,” Stone says.

Hurdles All of our experts agreed that there are only a few reasons a loan will not make it across the line.

The first is an over-estimation of the value of its underlying security. “Doing a little research on the client’s estimate of their property’s value by checking out what’s on the market locally often uncovers big variations which can save the hassle of submitting an application,” says Watson.

The second is an unrealistic exit strategy.

Short term, or caveat loans, are an emergency funding facility, so by nature (and definition) have a short shelf life. Therefore, there must always be a viable exit strategy attached to the loan, says Stone. “It doesn’t mean the exit has to be in place, but the genuine intention has to be there, along with the ability to deliver,” he explains.

Malouf says another deal breaker is an inappropriate reason for doing the transaction. For instance, since the loan must be for a business or investment purpose to qualify as being appropriate, the borrower needs to demonstrate how they will derive a benefit from it.

“In other words, the borrower needs to show how they are actually involved in the business or

“ It doesn’t mean the exit has to be in place, but the genuine intention has to be there, along with the ability to deliver ” Paul Stone

investment venture,” he says. MKM Capital only lends against residential property within approved locations. “Where an exit strategy is linked to a subsequent property, when possible we will seek a charge via first or second mortgage – to ensure we are actively involved in the exit strategy,” says Watson.

Stone says that HomeSec will accept any real estate as security as long as it has suitable equity; although LVRs might vary in tandem with the type of property and its location.

Meanwhile, Malouf says Prime Finance will accept either commercial or residential property – but insists on it being Australian real estate only.

“Vacant land or development sites are okay, but specialised security – like hotels, motels or service stations – is not,” he adds.

Regulation The impending regulation is set to change the face of the broking industry, which includes the short-term market.

Watson believes it will force a further duty on both brokers and lenders, to ensure the lending solution is a suitable product for the borrower.

“This promotes a larger degree of care in the application process, especially verifying suitability, purpose, capacity and exit strategies,” he says.

In addition, he warns brokers to research the practices likely to be required of them under the proposed regulations, and that they should already move their procedures in that direction to stay ahead of the game.

For Stone, the new laws mean brokers will need to be fitting square pegs into square holes.

“If a client comes to a broker and urgently needs $200,000 in a day or so to buy more stock, offering them a refinance or personal loan would be like going to a GP with a swollen knee and being offered cough syrup,” he says.

And Malouf anticipates the incoming credit legislation will allow “better service and protection for consumers” as it will reduce the incidents of predatory lending. “When lenders or brokers arrange loans for borrowers who are experiencing financial hardship, without ensuring that an achievable exit strategy is in place, they may be contributing to the borrowers’ difficulties,” he says.

After all, professional brokers will always ensure that borrowers benefit from any loan that they arrange. mpa

brokernews.com.au

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column us slang

American mortgage talk MPA’s Canadian sister publication CMP recently visited the Mortgage Bankers Association (MBA) conference in San Diego and brought back some key acronyms that are in vogue south of the border

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cronyms can be a curse when you’re trying to make sense of something. What makes it tougher is when a spate of new acronyms (or old ones back in favour) burst forth into popular circulation. This is the case in the US mortgage space lately following the recent push for more regulation of the mortgage sector. Here’s a quick run down of the latest terms: MBA (Mortgage Bankers Association). Represents real estate finance professionals in the US. HVCC (Home Valuation Code of Conduct). This code aims to ensure home appraisers are given the independence they need to provide accurate and unbiased property valuations. One of the key changes involves a lender’s loan production staff.

They are banned from being involved in the selection of appraisers, and the code limits the degree and basis of communication the two parties can have.

RESPA (Real Estate Settlement Procedures Act). A consumer protection statute introduced in 1974, it has been updated with new rules which came into effect in January. One such rule relates to changes to the ‘Good Faith Estimate’ (GFE).

GFE (Good Faith Estimate). This provides borrowers with an estimate of what their settlement charges and loan terms will be.

GSE (Government-Sponsored Enterprise). This includes organisations such as Fannie Mae and Freddie Mac, both of which have been hit hard since the crisis started. These organisations were originally set up by Congress to help ensure the supply of money for home ownership.

MIRA (Mortgage Improvement and Regulation Act).

This is how the MBA would like to see regulation of the mortgage industry handled in the US. The proposal aims to remove the patchwork of state and federal rules relating to mortgage lending.

CFPA (Consumer Financial Protection Agency Act).

This is the bill the MBA has some concerns about,

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hence its MIRA proposal. The final version of the bill was approved by the House Financial Services Committee on 22 October last year, with President Obama’s support. The bill’s next stop was the full House for a vote after which, if passed, it would proceed to the Senate.

HUD (Department of Housing and Urban Development). It’s the country’s housing agency, a body dedicated to sustaining home ownership, creating affordable housing opportunities for low-income Americans, not to mention supporting the homeless, elderly, people with disabilities and people living with AIDS. HUD is also responsible for the Making Home Affordable program, a plan which the department says aims at stabilising the US housing market by enabling an estimated seven to nine million people to reduce their monthly mortgage payments to more affordable levels.

FHA (Federal Housing Administration). Part of HUD, the FHA provides mortgage insurance on loans for single-family and multi-family mortgages made by FHA-approved lenders in the US. REO (Real Estate Owned). This is a property that a lender has failed to offload at a foreclosure auction, and remains on their books as a non-performing asset.

OMG (yes, it’s Oh My Goodness). But this isn’t to do with the plethora of acronyms that abound in the US mortgage industry. It’s the foreclosure numbers that have prompted this response. Take the number of workout plans, where borrowers have received assistance in order to avoid foreclosure, that have been implemented since July 2007 – more than 5.2 million.

Recent changes to the Freddie Mac Relief Refinance Mortgage program (part of HARP), which includes an increase in the maximum allowable loan-to-value ratio up to 125% and the ability to refinance through any servicer, is likely to see many more people qualify for help, and illustrates the depth of the problems that lie south of the border of Canada. mpa

brokernews.com.au

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lifestyle favourites

Vacation spot New Zealand – Plenty to do and see (you can’t take the Kiwi out of me)

Peter Hayward, + head of distribution and marketing + Citibank

Favourite things Food Medium eye fillet on the barbie Hobby Home renovating. I’m a closet builder – dad’s trade rubbed off

Drink Anything that is social partial to a good low-carb beer though

Sport Rugby, cricket, AFL (Go the Swannies!)

Place to be With the family on a warm summer’s day around the pool – not a worry in the world

Movie Gran Torino

Book Parky: My Autobiography – The life and times of Michael Parkinson (full of very interesting people and the stories behind them)

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Star People that make a difference and challenge the status quo – too many to list

Music/band Jamie Cullen, Eskimo Joe, U2, Grinspoon, Joe Jackson - a bit of everything

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