Mortgage brokers have called out bank branches for failing to comply with NCCP rules and using “loose” lending standards to get deals across the line.
A recent The Adviser survey of 766 brokers asked respondents, under anonymity, to comment on instances of channel conflict.
A number of brokers suggested that less stringent policies at branches, compared to the broker channel, are making it easier for borrowers to get loans approved by going direct to the lender.
“My concern is the branches being able to approve things that we (as brokers) are not able to due to the level of scrutiny that broker applications are subject to (or the lack of scrutiny the branches are subject to),” said one broker.
Another broker said that they were “concerned with bank branches not complying with lender policies as brokers are required to do. Also, majors are delaying assessments for brokers vs branch”.
Yet another commented that “lenders at the branch always have better pricing and offers for the client. More importantly, they have the power to approve loans, which means their assessment is loose”.
The primary concerns from brokers centred on living expenses, responsible lending requirements and turnaround times. As one broker said: “My concern is that the direct channel seems to not play by the same NCCP rules that we do i.e. confirmation of income and expenses isn't at the same level in some instances. [A major bank] approved a loan the same day that client went into the branch and verbally told them their income and expenses. Can't compete with that.”
The Adviser survey asked brokers 14 questions to determine the current sentiment towards channel conflict, which lender segments they had experienced issues with and whether they had actually lost a client as a result of channel conflict.
“Channel conflict is more than the questions you have asked in this survey,” one broker said. “The largest channel conflict you haven't addressed, and that is strategic poor service by the majors to the broker channel to make their retail channel more attractive.
“Lead times of over 20 days to pick up files when branches can get approvals the same day have been consistent now for over 12 months with [one major bank] in particular.”
While the survey found that 89 per cent of brokers were more concerned about channel conflict than they were 12 months ago, some believe it has yet to become a pressing issue. “I do not see channel conflict as a major issue as yet but I do believe it will increase as the banks strive to maintain high profits and look to squeeze brokers on commissions, clawbacks and rewriting loans off brokers books,” one broker said.
Others suggested that educating the client about what to expect is one way of mitigating the risk of channel conflict.
“We educate our clients that the lenders may try this, especially around the time they open bank accounts, have to sign up loan docs and depositing/withdrawing from accounts," a broker said.
“Clients have a distrust of banks and we just advise them to remember at all times, that the bank staff are not aware of our long-term plans, that they can only recommend one product and that they have not been party to our conversations. We also have a clawback policy which is clearly explained to customers at application.
“We are also very proactive in having a face-to-face with any branch staff that may approach our clients inappropriately, and we get the BDM involved in this situation. BDM's are usually happy to help as the loss of the loan affects them as well.”
When asked which lender segments had directly approached their clients to refinance within the last 12 months, 84 per cent of brokers said the major banks and their subsidiaries.
From there the instances of channel conflict fell off significantly, with only 2 per cent of brokers claiming non-major banks had approached their clients.
Only one broker said a non-bank had approached their client, two brokers said foreign-owned banks and no brokers reported instances at the mutuals.
Just over 13 per cent of brokers said their clients hadn’t been approached.