Key industry figures have launched a passionate defence of brokers after the mainstream media linked the third-party model to the US subprime crisis.
MFAA chief executive Siobhan Hayden told The Adviser in a statement that the journalist, Andrew Main, was guilty of “careless journalism” and a “failure to report the facts correctly”.
AFG’s general manager of sales and operations, Mark Hewitt, said there is no evidence to support Mr Main’s argument that broker-introduced loans are riskier than direct lending.
“The lenders on our panel consistently tell us that the loss rates on broker loans are almost identical, if not better, than the loss rates on loans they originate directly,” Mr Hewitt said.
“He fails to recognise that the reputation of our industry is everything to the 99.99 per cent of brokers who are honest and act in the best interests of their clients every day, and they have every incentive to ensure that the loans they introduce are repaid.”
Mr Hewitt also said it was “sensationalist reporting” to link the recent mortgage fraud case with the US subprime scandal.
“There is no evidence whatsoever that lenders are any less vigilant when it comes to assessing and checking third-party-introduced loans or that any of the factors that led to the US subprime issues are at play here,” he said.
Firstfolio chief executive Peter Andronicos said brokers, banks and borrowers all have a role to play in ensuring that responsible lending practices are followed.
“Responsible lending conduct obligations have actually improved what is deemed to be the broker’s role,” he told The Adviser.
“They are required by law not to recommend loans that are unsuitable to their clients. This legislation did not exist when the GFC hit the fan.”
Mr Andronicos noted that there is legislation designed to stamp out the use of false documents, although he added that technology is making fraud more sophisticated and difficult to detect.
MFAA president Tim Brown said the association has made it harder for undesirables to enter the industry by lifting the minimum education standards and requiring both a clean police record and clear credit file.
“What Andrew [Main] failed to tell the readers was that the biggest frauds actually occur internally within the banking industry, where 30 cases of more than $1 million were reported in the last 13 years with an average loss of over $6 million,” Mr Brown said.
“For a journalist to suggest that the broking sector is full of fraud and incompetence only goes to show his lack of knowledge of an industry that has done more to help the consumer save significant amounts of money through increased competition and now originates 51.5 per cent of all mortgages written in Australia.”