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Associations call out majors for turnaround channel conflict

by Annie Kane10 minute read
Associations call out majors for turnaround channel conflict

The FBAA and MFAA have hit out at the major banks regarding the disparity between “time to yes” for broker-lodged loans and those written through the proprietary channel.

The heads of the Finance Brokers Association of Australia (FBAA) and the Mortgage & Finance Association of Australia (MFAA) have voiced strong concerns regarding the delays impacting mortgages submitted by brokers to the major banks.

Earlier this month, the CEOs of the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Westpac and ANZ told the House of Representatives’ standing committee on economics that turnaround times are currently within one or two days in the proprietary channel but, on average, between 10 and 12 days in the broker channel.

However, industry data shows that turnarounds are slower than those stated. Indeed, Momentum Intelligence’s Broker Pulse survey for March 2021 found that CBA’s average turnaround for broker-lodged loans was 12.7 days; NAB’s was 9.4 days; Westpac’s was 13.7 days; and ANZ’s was 16.4 days. (However, it should be noted that all four have seen their turnaround time improve over the last few months, following long delays in January 2021.)

The issue is not isolated to major banks, however, with some non-major banks also seeing their turnarounds blow out. Recent AFG data shows that the median turnaround time for lenders on its panel was 27.1 days for the quarter ending 31 March (a three-year high), for example.

The heads of the FBAA and MFAA have both stated that they are “seriously concerned” that the blowouts in turnaround times seem to only be impacting broker-lodged loans (and not proprietary loans), adding that brokers are being “unfairly penalised”, which could amount to a competition issue.

Moreover, the two association heads added that the recent commentary from the big four bank CEOs drastically understated the extent of the delays in approving third-party loans and failing to provide clarity around what was causing the issue.

FBAA response

The managing director of the FBAA, Peter White, told The Adviser that the broker association had voiced its concerns to government and was exploring whether it could amount to a competition issue.

“The disparity [in turnaround times between the two channels] is, and always has been, completely unacceptable and the explanations are without any reasonable factual foundation of truth.

“This is an anti-competitive practice that completely disadvantages consumers and only advantages the banks’ proprietary branch networks.”

Mr White told The Adviser that “certain major banks claim that over 60 per cent of loan submissions are incomplete and are pushed back to brokers to fix the issues”, while others had claimed “greater complexities with meeting best interests duty”, he said.

“However, this is BS, as that obligation is on the broker (not the lender), so this is where an anticompetitive environment is creeping in and favouring branch processing times over brokers,” Mr White said.

“We have expressed strong concerns about this to government, and we are currently exploring options of taking action via the ACCC,” he told The Adviser.

Mr White added that the FBAA had been working on the turnaround time issue since last year, “when times blew out through COVID and offshore processing collapsed”.

“We were assured things were being corrected to compensate for this and for time frames to realign. Obviously, as we are now in 2021, this didn’t happen – and we have been researching exactly why.”

Mr White said the FBAA had waited to make public comment on the issue until its research had concluded, saying “it was important to us that we were informed before we made more public comments”.

He continued: “The data from our findings are being discussed at the highest levels in government and public office, as the banks generally were not interested in doing any more than what they were (which was nothing). Keep in mind this is primarily the domain of issues in major banking.”

Mr White concluded that brokers should look at all “options” to ensure they are working in the best interests of their borrowers, including “considering taking their business elsewhere”.

MFAA response

The MFAA has been working on the issue of turnaround time channel conflict for some time, stating earlier this year that “clearly, there is a problem”.

The CEO of the MFAA, Mike Felton, has now said that the industry is confused and concerned by the statements of the CEOs of the major banks at the recent hearings, stating that they were a “gross underestimate of what brokers are experiencing, and [are] in no way supported by the data”.

“We are obviously concerned that the leaders of major lenders are promoting these turnaround times, when most customers applying through brokers – who represent approximately 60 per cent of all Australians seeking a home loan – are experiencing nothing of the sort,” Mr Felton said.

He added that the impact not only affected broker customers, but also consumers who were unwilling or unable to borrow through the branch network of the four largest banks (for example, those with no local bank branch).

The MFAA CEO continued: “Beyond the disadvantage to Australian consumers, when ‘time to yes’ in the branch is one to five days, and around 23 days through a broker, it makes it incredibly difficult for mortgage brokers to compete, which poses risk to the broker channel and competition in the home lending sector.

“And reduced competition inevitably results in higher prices and interest rates for consumers,” Mr Felton said.

He continued: “For brokers and their customers, this is not a level playing field, and the evident prioritising of customers who come through their own branch network is having a massive competitive impact. 

“In today’s extremely competitive housing market, waiting more than three weeks to be approved is a nightmare for customers who are trying to bid on a home and secure finance,” the CEO added.

While acknowledging that record volumes of home loan applications had impacted turnaround times, Mr Felton added that “the data suggests that mortgage broker customers have consistently borne the brunt of any resource shortages”.

“We understand that absolute turnaround times may vary with volume, and that processes between channel may differ, but this incredible differential between the major lenders’ approval times in the branches versus their approval time for the broker channel is significantly undermining the mortgage broker offering,” Mr Felton said. 

According to the head of the broker association, the group has been in “regular contact” with the major lenders and was “calling on lenders to meaningfully and permanently address the differential between branch and broker turnarounds as a matter of urgency”.

Brokers assist 60 per cent of all new mortgage customers – customers who should not be disadvantaged by the banks. Mortgage brokers must be allowed to compete fairly with the bank branch, or competition in the entire home lending market faces significant risk.

“We will continue to raise the issue with lenders and other key stakeholders until it is resolved,” Mr Felton said.

Find out more about the turnaround time issue in The Adviser’s short explainer video, below.

[Related: ]

 

peter white and mike felton fbaa mfaa

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AUTHOR

Annie Kane is the managing editor of Momentum's mortgage broking title, The Adviser.

As well as leading the editorial strategy, Annie writes news and features about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape.

She is also the host of the Elite Broker, New Broker, Mortgage & Finance Leader, Women in Finance and In Focus podcasts and The Adviser Live webcasts. 

Annie regularly emcees industry events and awards, such as the Better Business Summit, the Women in Finance Summit as well as other industry events.

Prior to joining The Adviser in 2016, Annie wrote for The Guardian Australia and had a speciality in sustainability.

She has also had her work published in several leading consumer titles, including Elle (Australia) magazine, BBC Music, BBC History and Homes & Antiques magazines.  

Comments (32)

  • get ACCC on it, enough is enough. On a different note a refinance from CBA is taking 40 business days now correct me if I'm wrong I though lenders must complete discharges 14 to 21 days?
    0
    • Perhaps they can get the clawback teams to deal with discharges , they always work at lightening speed!
      1
  • Go hard M/F - you both have excellent points around anti-competitive behaviors.
    0
  • The easiest way to fix the problem is stop sending deals to the majors and those whose service levels are poor. Best interest duty is not just about rate. Best interest includes time critical approval. In most cases Best interest would rule out the big 4 on rate alone. Cut off supply and watch service levels get fixed in miraculous time
    1
  • SLA = Service Level Assessment or Service Level Announcement...Should be SLE service level expectation
    0
  • There still seems to be some confusion with regards to Best Interests Duty. Any third party / lender in the home loan application process is effected by BID and is by proxy accepting distribution obligations to that Broker acting their client's best interests, through simply dealing with that Broker / client. BID is non-prescriptive so applies to any and all situations, with all stakeholders in the Broker's distribution chain being interrelated to achieving that end!
    0
  • Please stop referring to SLAs - there are no agreements in place with lenders in relation to service levels. Let's use SLs, or in most cases LSLs (lack of service levels).
    1
    • @ Tim Donahoo - I think SLA means Submission to Loan Approval, not Service Level Agreement
      0
  • I tend not to recommend lenders that have long SLA's unless they can't be avoided because of BID and the customer's decision to go with them; however, surely what these banks are doing is anti-competitive and as such against some appropriate laws?! If not, perhaps we need to lobby our MP's to introduce such a law to help stop this kind of anti-competitive behaviour and bullying by the big 4...
    1
    • Spot on - I bet if the CEO KPI's were linked to Broker SLA's they would be fixed once for all , and swiftly!
      2
  • STOP FEEDING THE CROCODILES! ... do your job - there is almost always a better alternative to these corporate bullies.
    2
  • Banks should be penalized for late turnaround. All the loans are processed centrally and how can be delay for approvals even if submitted by Branch ? It is deliberate and bank are blaming APRA , RLO and many more. many new comers in all the banks .
    More trouble is caused by Real estate agents and the rules in contracts. To protect the consumers , in RE contracts they should mention any delays in loan approval etc, and financial loss should be bore by the bank an Government.
    1
  • The most recent loan I lodged with ANZ this month (April 2021) came back with a notification it would be over a month before they even looked at it. I'd hardly call that an improvement.
    So obviously anti-competitive behavior.
    0
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