The Mortgage & Finance Association of Australia this week expressed its concern about Treasury’s latest proposed changes to the ASIC Industry Funding Model.
According to the association, the proposed changes would see licensed mortgage brokers and broker groups paying up to seven times the amount for each dollar of credit facilitated compared to lenders.
“This has occurred despite the fact that brokers and broker groups hold inherently lower levels of risk than lenders,” MFAA chair Cynthia Grisbrook said.
“We believe that this equates to a ‘tax’ on brokers. Unlike lenders, brokers are – in most cases – unable to pass this additional cost on down the value chain,” she said.
According to the MFAA, under ASIC’s current proposal licensed brokers and broker groups (credit assistance providers) will face a levy rate of $1,000 plus $1.14 per $10,000 on credit intermediated greater than $100 million, compared to $2,000 plus $0.15 per $10,000 facilitated for lenders on credit provided greater than $100 million.
“On ASIC’s current calculations, this could leave licensed brokers and aggregators (where applicable) each out of pocket in the amount of $39.90 on an average $350,000 mortgage, given that the levy is charged at multiple points in the value chain. Lenders would be levied $5.25 on the same average $350,000 transaction,” Ms Grisbrook explained.
“These amounts are only payable when a relevant party has reached the $100 million threshold, which may not affect a number of brokers directly, however aggregators will be impacted and it is possible they will want brokers to participate in carrying a portion of this cost.”
The MFAA argued that the model currently under consideration is “inequitable, anti-competitive and unnecessarily complex to administer”.
Ms Grisbrook said it also favours balance sheet lending over securitisation, disadvantaging the vast majority of smaller lenders.
“It could also have many unintended consequences, including the consolidation of licensing. Many individually licensed brokers may hand back their licence and join broker groups to avoid these disproportionate new licensing costs, which would reduce industry competition.”
The MFAA is currently working with members and other industry participants to develop an alternative model.
[Related: MFAA slams proposed single EDR scheme]