Uniform regulation has strong support from the mortgage industry, but key points of the proposed National Finance Broking Bill 2007 – prepared for the Ministerial Council on Consumer Affairs by the NSW-chaired Finance Broking Working Group – could decimate third-party distribution in Australia if passed in its present form.
Of chief concern is Clause 33 of the proposed Bill, which requires brokers to determine a borrower’s capacity to repay a mortgage – a process currently performed by the lender.
New South Wales has drafted a model Bill on behalf of all states and territories which, if approved, would effectively bar brokers from selling low doc, no doc and bridging loans as a declaration from the borrower cannot be relied upon.
Andrew Russell, director of home loans with Virgin Money is looking to the NSW Office of Fair Trading for clarification on this point.
“Verification would be difficult for brokers to determine – and our sales team would be reluctant to sell these products without this clause being clarified,” says Mr Russell.
Mortgage aggregation group AFG, while supporting uniform regulation, has lodged a submission to the NSW Office of Fair Trading highlighting his concerns.
“To duplicate the requirement to assess a borrower’s ability to repay makes no sense from an industry productivity point,” says AFG general manager of sales and operations Mark Hewitt.
Mr Hewitt also emphasises the negative impact this would have on industry standards as well as the increased cost that would need to be passed onto the borrower.
Considering the proposed Bill, PLAN Australia’s director of compliance Julianne McKnight is concerned about the safety of brokers’ incomes as the new regulations could leave them exposed, with no ability to demand a fee unless a borrower is actually provided with finance.
“Being locked out of a vital segment of the market, having no guarantees with fees and shrinking commissions from the banks, would simply force many brokers out,” she says.
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