POINTBLANK -- Making the grade

Kathy Cummings, Commonwealth Bank’s executive general manager of third-party banking, explains the lender’s recent changes to re-accreditation policies and LVR requirements.

CBA has recently changed its policy with regards to minimum volume requirements for brokers, with re-accreditation for those who fall short – what were the reasons for these changes?

We have re-instated our previous requirement of at least two years home lending experience. The bank is also strengthening its commitment to providing broker service excellence by introducing a minimum of four loans lodged and a minimum of three loans settled in a six-month period, to maintain accreditation.

A review of our complaints has revealed that one in four are generated by brokers that have little or no previous financial background and who submit very low volumes. Because they are not familiar with our products and policies they risk misleading the customer. Brokers need to have a sound knowledge of our home loan products and that is why we require them to attend a re-accreditation workshop, where we take them through our products, credit policies and processes. These workshops are aimed at improving customer service levels and broker businesses’ efficiencies.

Now more than ever, customers expect mortgage brokers to be knowledgeable about the lender they recommend. Our revised accreditation requirements are aimed at improving the efficiency and long-term sustainability of the mortgage broking industry and to elevate the professionalism of mortgage brokers through the submission of quality, error-free applications. Quality is increasingly important as it will drive efficiency within the industry which will be a win for banks, brokers and customers.

First home buyers have accounted for a large share of overall loan volumes in the first period of 2009. Do you expect this to continue and which other borrower segments do you believe offer potential to brokers over the coming months?

While the urgency has been taken out of the first home buyer market there’s still considerable demand from this segment. Currently about 25 per cent of our applications are accompanied with a FHOG application. With interest rates at their current levels I’d expect to see investor activity pick up at some stage. In terms of refinancing, it will depend on how long interest rates stay low; switching or refinancing tends to pick up once interest rates start heading up and borrowers look to lock into a fixed rate that they can afford.

Most of the majors have struggled to maintain servicing levels in recent months; what has caused the blowout in turnaround times and what has CBA done to tackle the issue?

Over the first half of 2009 we faced an absolutely unique environment. The sharp increase in volumes was compounded by the high level of re-works that have been required – as much as 90 per cent of applications need some level of rework. To support brokers we have conducted extensive workshops on quality and FHOG application errors. We have also increased our resources and our processing centres nationally by up to around 150, and we’ve increased the number of credit managers in our risk area by at least 20 per cent.

From 1 July we are also requiring brokers to lodge their applications electronically. The electronic lodgement process ensures the integrity of data and allows brokers to improve the accuracy of their applications before submission. This will drive an increase in processing efficiency and will benefit the customer, broker and the lender.

CBA has recently reduced its maximum lvrs in line with most other lenders – are brokers likely to see further cuts to LVRs in the future?

We know that higher LVR portfolios are more vulnerable to changes in economic conditions and we will continue to monitor our policy to ensure we adopt responsible lending practices, which protect borrowers from over-committing and the lower LVRs support this. We also need to be aware that property prices have stagnated or have been inflated by the boost to the first home owners grant, which may not be sustainable post December 2009.