Mortgage Industry In Australia

Mortgage industry in Australia

by

Mark Bona

I read an article recently that suggested that borrowers who use a mortgage broker pay more for their loan than if they go direct to the bank. It is extraordinary when this sort of poorly researched misinformation is published in a magazine.

I have been involved ion the mortgage industry in Australia for over 25 years and during that time I have seen the growth of the mortgage broker market. In the early 1980s a mortgage broker was often affiliated with a stock or share broker. Private clients who had surplus money and wanted to invest it in a mortgage would organise to do so through the mortgage broker in the sharebroking firm. The mortgage broker would advertise that he had mortgage funds available these were on a 3 or 5 year fixed, interest only basis and primarily appealed to investors in the property market. The role of the mortgage broker was to match the investor with the borrower. The mortgage broker would meet with the borrower, take an mortgage application, collate all the necessary financial information and then put a preliminary application tho the investor for approval in principle. Once the mortgage broker had this approval he would organise a valuation for the property and if in order, the investors solicitors would be instructed to prepare the mortgage documents.

Today the mortgage broker fulfils a similar role but as a general rule is not as involved in the loan process. The mortgage broker still generally meets with clients and collates information but now submits the application to a lender who processes the loan and organises the valuation, and instructs the solicitor. The role of the mortgage broker has reduced but it is still a very valuable one. The mortgage broker has become the retail arm of a wide range of lenders. He is out and about looking for business. In the past you did not require any training or qualification to be a mortgage broke whereas today a reputable mortgage broker will have completed a number of course relevant to the mortgage industry and also be a member of the Mortgage Finance Association of Australia or such similar professional body.

The Federal Government has recently undertaken the task of putting national regulations in place for mortgage brokers. To date different States have different regulations. This makes it very difficult for a mortgage broker to do business Australia-wide. A mortgage broker may have a long standing client in NSW who wants to buy in Perth unless the mortgage broker has a licence to operate in WA then he is not permitted to assist that client. In the ACT there are different regulations again so that the cost for a mortgage broker to do business there is higher.

While the mortgage broker industry welcomes regulation that has a national application it is concerned that the cost for licences is not excessive. In the past, the licence fees have been seen as a revenue earner for the States for which they do very little. Mortgage brokers have been able to obtain licences without any problems in the past police checks were not required. Today a mortgage broker who is amember of the Mortgage Finance Association of Australia must present a police check that is not less than 3 months old, if they wish to obtain membership. The mortgage broker is then required to earn so many continuing professional development (CPD) points each year to ensure that he stays up to date with any changing legislation or loan processing requirements. In addition any mortgage broker who is a member of the MFAA must also belong to the Credit Ombudsman Services Limited a company that provides a free and external dispute resolution process to customers of MFAA members.

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