The corporate watchdog has confirmed that its surveillance of mortgage broker remuneration is not over, with a fresh report on consumer outcomes to be released next year.
ASIC this week released details of a handful of surveillance operations it is currently carrying out across the mortgage market.
ASIC’s Corporate Plan 2017–18 to 2020–21 has a major focus on credit, with interest-only mortgages, reverse mortgages and broker remuneration all under investigation.
The regulator said that its surveillance of mortgage broker remuneration is a “continuing project” from 2015–16 and that its focus moving forward will be to identify the effect of remuneration structures on the quality of consumer outcomes in the mortgage broking market.
“This builds on our findings in Report 516 Review of mortgage broker remuneration and including a shadow shop of brokers. We will release a public report in 2018,” the regulator said.
Interest-only home loans are also on the agenda. ASIC will release a report by the end of this year based on its review of responsible lending practices among brokers and lenders with a high proportion of interest-only loans.
Speaking to The Adviser, Michael Saadat, ASIC’s senior executive leader for deposit takers, insurers & credit services, elaborated that while the regulator believes that brokers are having the appropriate discussions with consumers about the reasons for taking out IO loans, the record keeping on loan files has not been of a high standard.
He revealed: “In the past, I’d say we have seen pretty poor record keeping on that front, where there has been very little on the loan file which tells you why the consumer got that product.
“In general, when we have looked at loan files in the past, we have seen [responses to the question]: ‘What were the consumers’ requirements and objectives?’ In many cases, we see things like: ‘To buy a house.’ That is pretty implicit, but it really doesn’t tell you too many things about what type of product, what type of loan, what type of rate, etc.
“So, our view is that although these discussions are happening… brokers are having these discussions, but they’re not recording the outcomes of those discussions. And it’s hard to prove that you’re meeting your obligations if you don’t have something on a file that shows why you have recommended a particular loan.”
One of ASIC’s new projects will focus on reverse mortgages, with a public report to be released in the first few months of next year.
The regulator said that it will look into reverse mortgage selling practices to older Australians and those approaching retirement, including testing compliance with responsible lending obligations and measuring consumer understanding of the products.