It’s been a long time coming but Queensland Property Analyst and Developer Chris Anderson says he’s pleased to see a mortgage industry that has finally began to stir from its slumber and get tough with rogue operators.
His comments follow claims from the Mortgage & Finance Association of Australia which this week called for a new approach for its members that demonstrates the industry’s ability to self-regulate and improve transparency.
Mr Anderson says it is way too little too late from an industry desperate to keep regulators at bay.
“I am a critic of the way the banks collude and tap into the confidence brokers gain from their clients to advise them to take loans and conditions that are not in their (borrowers) best interests. Brokers are not limited to the professional standards expected and required of banks.”
Mr Anderson says he remains concerned at the ‘social/professional’ crossover environment some Brokers work hard to foster.
“Through different social events and techniques, they gain the confidence of clients in an almost quasi “friendship”. Once the confidence of the client is gained by the brokers they exploit the trust and sometimes “friendship obligation” that develops to infiltrate their financial affairs-dipping into their loans, super, insurance, investments and accounting affairs.”
“Pretty quickly a naïve or trusting customer is shafted on all levels. The key component of a rip off merchant’s success is acquiring the trust or confidence of their target-hence the term “con-artist”.
Mr Anderson says examples abound and AFT sees it all too often.
“One of our personal encounters was a local broker in 2013/14 pressuring our mutual customers into “fixing” their interest rates for 3 years, despite being in a declining rate environment.”
“What the trusting or obligation bound customers were not told was that the broker was doing this to secure her upfront fee of several thousand dollars.”
Mr Anderson says the borrower’s attention was not drawn to the fine print which outlines it is a common for broker commissions paid from banks that the fee paid to the broker must be repaid by them if the client pays out or otherwise “moves” the loan within a 3-year period of being set up.
“We have found with many of our buyers that can be a fact left out of the discussion, most often, when the broker is locking clients’ into to a 3-year contract.”
“The ultimate result was that whilst the broker secured her one off $2000+ payment from the bank the trusting clients forked out many tens of thousands of dollars extra in interest.
“Enough to pay private school tuition, overseas holidays or other savings options. To say, “Caveat emptor” is just not good enough.”
Mr Anderson says these latest comments from the industry body seems to show that at least they seem to be getting the message that the underqualified greed seekers within their ranks must be weeded out.
“The average home buyer depends on the professionalism of advisors and brokers to do the right thing. Sadly, the recent ASIC Reports demonstrates, clearly, this has to date, not been an industry that takes regulation and behavior of members seriously and they’ve been allowed to shop commissions for themselves as the key priority of any deal.”
‘The industry itself now understands that change is in the wind and are working to try and convince members that the days of the snout in the pig trough waltz are over.”
MFAA CEO Mike Felton own comments this week that “maintenance of the status quo is not an option” is speaking volumes, Mr Anderson says.
“You’d have to call that a strange comment really. Is he saying that perhaps the industry itself has failed to act with vigor in the past?”
Mr Anderson says the Fenton comments this week send a clear message to anyone looking to borrow for housing.
‘If you are dealing with a broker, check to make sure that there has been no history of industry imposed sanctions against that broker, check and demand to know of past complaints against them and check to see if they have copped a fine or reprimand in the past. This is not a body that lets people know of their rogue operators.”
Mr Anderson says it is time that broker remuneration undergo FOFA-style reforms and for mortgages to be reclassified as financial products in the Corporations Act.
“What we need to see now is law that insists on a degree of integrity within the Broker themselves but ASIC now needs to rid the industry of unrealistic commissions, huge trailings and set some firm principles that work for borrowers not brokers.”