AFG managing director Brett McKeon took to LinkedIn to defend the industry, writing, “I cannot begin to express how disappointed I am with fact that one of the country’s leading ‘serious’ newspapers, the Australian Financial Review would fall for the PR spin from a hedge fund manager shorting the market and an economist trying to sell his book.”
“For those who haven’t read Wednesday’s inflammatory piece, the article details how the pair posed as a gay couple on a modest income looking for a home loan in outer suburban Sydney.
“The AFR reported that ‘mortgage brokers were advising them to lie on loan application documents about the deposit for a house and about income’. Their back page continued the hysteria and ran a piece stating ‘Mortgage broking is one of the last bastions of unethical sales practices’ and that ‘there are incentives to sign up customers and encourage them to pay as much as possible for a property’.
Mr McKeon questioned the incentive the report was alluding to.
“The difference between placement of a mortgage with one lender paying X over another paying Y is insignificant,” he said.
“Mortgage brokers generally also face a 100 per cent ‘claw back’ of their commission over the first 12 months, and 50 per cent over 18 months, of a settled loan’s life if they are dissatisfied and refinance.”
Mr McKeon added that the abolition of exit fees gave customers a simple exit strategy if they were unhappy with the lending solution a broker helped them acquire.
“What better performance based measure is there than that?” he wrote in a LinkedIn post.
More than half of all Australians taking out a mortgage do so with the help of a mortgage broker – a clear indication consumers want and need this help, Mr McKeon noted.
“The mortgage broking sector is highly regulated, and justifiably so. All broker-introduced mortgages are placed under tough scrutiny, and brokers are heavily regulated by ASIC and the National Consumer Credit Protection (NCCP) Act,” he said.
“Loans from brokers face a range of checks, including the requirements under NCCP, industry body MFAA’s procedural requirements, the requirements of their aggregator and the lender’s own requirements. And Australia’s regulatory system is leading the world in having mortgage brokers conduct a preliminary assessment.”
Mr McKeon said all evidence suggested the performance of any mortgage starts and ends with credit assessment standards, driven by the risk appetite of the lender, not the mortgage broker.
“Our own AFG Securities book has written $2 billion worth of home loans, 100 per cent broker-introduced, and the overall performance of these loans has been exemplary,” he said.
“And this performance is a direct reflection of our credit assessment procedures and our risk appetite. Some of the world’s leading financial institutions hold our securities based upon this performance.”
Mr McKeon said he was hopeful Australian credit standards “never drop to the level that the AFR has” with its recent coverage.
[Related: In defence of mortgage broking]