TALKBACK -- Industry comment on www.theadviser.com.au

Everyone has an opinion, and some people feel compelled to speak out. Here are just a few comments prompted by daily news broken on www.theadviser.com.au over the last month.

ON GOVT CRACKS WHIP ON MORTGAGE EXIT FEES...

Don't get me wrong, there are certainly some instances where costs are unreasonable but let's try and stick to the facts. One of which is that if lenders (especially those that are servicing the less than gold plated ones) cannot recover some of their costs from early exit, then it will probably flow through into higher entry fees, higher rates, restricted lending criteria or reduced payments to brokers, which then plays right into the hands of the banks. This is one innovation from ASIC that we should be watching very closely. Ronald Stepnell

Those bodies seeking to reform these fees might do well to understand why they are charged, which is mostly to cover the original costs of setting up the loan (generally recouped over 5 years). If they are truly interested in being fair to all, they should also investigate clawback to brokers, who have no other income other than their commissions. Where a loan is paid out or refinanced by a client, for whatever reason, the broker loses all their income and generally suffers a substantial loss for doing nothing more than what they were directed to do by a client. They should relook at the ‘user pays' principal, where if a borrower chooses to shift from a product that was recommended for good reasons, to another product, then the borrower should pay - not the broker. Diana Nocerino

Although most participants in the mortgage industry will applaud the measures taken by the federal government to clamp down on unconscionable exit fees, one must also be very aware as to the likely commercial consequences. If a lender provides 30 year home loans, but a borrower uses the loan more as a short term financing instrument, then there will be a pricing mismatch evident. No mortgage lender wants to provide mortgage finance to borrowers who may ‘chop and change' whenever there is a 10bp or 20bp interest rate differential in the market. This new measure will however, predominantly impact non-banks as ADI's generally have significantly lower exit fees anyway. So non-bank's will have to reappraise their DEF's and as a consequence, brokers will likely see changes to both non-bank commission structures (down) and clawback measures. Broker in the ‘burbs

Surely this would only be appropriate for new loans? If a customer has signed a contract and was aware of the Early Redemption Penalty (ERP), I could not see it standing up in a court of law that the customer suddenly thought [the fee was] ‘unfair'. Financiers should always get a separate document signed from the client that [indicates] they are aware of the presence of an ERP - most people I know just want the loan and do not pay enough attention to the fine print until they want out. Whatever happened to ‘buyer beware'. Graham Gribble

ON MIXED VIEWS OVER CLIENT OWNERSHIP...

Interesting comments from both sides of the arena. The key to retention is, as Moshe Moses suggests, if you as the loan writing broker provide that extra service and retain that relationship by keeping in front of the borrower you would clearly believe that the client either as a friend or a borrower will retain your services for the next transaction. My concern will always be that no matter how well you provide your after sales service - the next broker/bank to be there ‘on the day at that moment in time' can snap the client away and you have lost the link. I have had that experience where a client and confident/friend had been on my books for over nine years, I had been in constant contact, phoned, emails, coffee, home visits, had the entire family as clients. On the week I was out of town and with no prior warning, I got a note to say the loan package was off to another bank and ‘thanks for everything'. Peter Clothier