The move towards uniform national regulation has strong support from the mortgage industry, but there are fears that the proposed National Finance Broking Bill 2007 could decimate third-party distribution in Australia if passed in its present form.
Of chief concern is Clause 33 of the proposed Bill – prepared for the Ministerial Council on Consumer Affairs by the NSW-chaired Finance Broking Working Group – which places an obligation on brokers to determine a borrower’s capacity to repay a mortgage, a process currently performed by the lender.
If passed, the provision would effectively bar brokers from selling low doc, no doc and bridging loans as a declaration from the borrower cannot be relied upon.
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Andrew Russell, director of home loans with Virgin Money, said Virgin was looking to the NSW Office of Fair Trading to clarify the issue.
“Verification would be difficult for brokers to determine – and our sales team would be reluctant to sell these products without this clause being clarified,” Mr Russell said.
PLAN Australia’s director of compliance Julianne McKnight said the Bill’s provisions put brokers’ incomes at risk as they would not be able to demand a fee unless a borrower was 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,” Ms McKnight said.
