The chief executive of a non-bank lender has said that any reduction in broker remuneration will have an impact on the quality of deals they submit, arguing that a broker must be paid “as a professional”.
Mortgage Ezy CEO Peter James told The Adviser that, in his experience, the most qualified people to help customers obtain a home loan are mortgage brokers and that any reduction in their commissions will cost both lenders and consumers.
“There has been a huge amount of talk around how brokers should be paid, whether they are being paid too much and if the commission model is the right one,” Mr James said.
“The fact is, to get quality brokers, you have to pay them a reasonable sum of money for quality work.
“As a mortgage provider, we expect an application to be delivered to us with a high quality and with the service provided to the customer. We feel that a broker is the best person to provide that. If you cut a broker’s payments, it will only result in a decline in the quality of loans delivered. That doesn’t serve any of us in the industry.
“For brokers to be across so many lenders, and all the changes, to keep up with their PD days and deliver quality service, they need to be paid like a professional, not have their incomes cut.”
Mr James’ comments come as brokers fear a negative outcome from Treasury, which will hand down the final verdict on the future of commission payments early next year.
A recent survey by The Adviser asked readers if they believe the responses to Treasury's consultation on remuneration will positively impact broker commissions. An overwhelming majority of brokers (71 per cent) believe that Treasury’s consultation will negatively impact commissions. Just over 20 per cent of brokers said that they won’t change commissions and only 9 per cent of them believe that the outcome will be positive for commissions.
Mortgage Ezy is not alone in its focus on loan quality. Other lenders, including some of Australia’s biggest banks, have faced turnaround blowouts as a result of reworks and poorly submitted applications. Bank platforms have also been burdened by an onslaught of applications.
In August, ING head of distribution Mark Woolnough apologised to brokers for the “hiccups and challenges” of the bank’s mortgage turnaround process, but warned about the “quality component” of submitted deals.
According to ING, 74 per cent of broker applications over the month of July had a problem, including missing financial information or no verification of identity.
"There is also the quality component ensuing that the right information is included at submission," Mr Woolnough said.
"We have some brokers who file an application because of the backlog and then think they can call us when they have the rest just because they want to be in the queue. It’s frustrating for us. So, we aim to try and stop that from happening."
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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