Powered by MOMENTUM MEDIA
the adviser logo
Lender

Lack of clarity on loan requirements ‘eating into profitability’

by Tas Bindi6 minute read

Lack of clarity on loan requirements against the backdrop of increased lender and regulatory scrutiny is “eating into the profitability of a deal”, an award-winning mentor has observed.

Speaking to The Adviser, Nancy Youssef, founder of Classic Finance Group and Classic Mentoring & Coaching, agreed that there has been a noticeable difference in the way home loans are assessed and, subsequently, in turnaround times over the last couple of years.  

To continue reading the rest of this article, create a free account
Already have an account? Sign in

She attributed the slower turnaround times on mortgage applications to the increased amount of customer information brokers are required to provide – especially information relating to living and discretionary expenses – but also lack of communication or miscommunication about loan requirements. 

“What I noticed is that policies can change, and that doesn’t always get communicated to the broker. Also, different assessors will look at things differently, as do different banks,” Ms Youssef said. 

Advertisement
Advertisement

“With the increased regulatory [oversight] and everything that’s been happening from an industry perspective, it certainly has blown out assessments.”

She noted that while serviceability assessment rates have decreased in response to the Australian Prudential Regulation Authority’s (APRA) revised home lending guidance, it doesn’t necessarily help the overall credit proposal. 

“I think a lot of brokers are a bit confused about their responsibilities. How much paperwork do we have to collect? How much of that paperwork do we need to really scrutinise?” Ms Youssef said.  

She noted that this is “eating into the profitability of a deal” given the time and effort it takes to prepare an application has increased – a sentiment many brokers have shared. 

“Especially with smaller operations where theyre strapped for staff, or theyre limited by how many people that can put on, theyre looking at it and going: ‘Its not even profitable by the time Ive met the client and put [the application] together and got it approved’,” Ms Youssef added.

According to the award-winning mentor, brokers should not hesitate to ask BDMs for clarity.

“Brokers can shoot themselves in the foot by not putting up their hand and saying: ‘I really need you to come in and talk to my team about what you are looking for?’” she said.

“We dont hesitate sometimes to bring a credit officer in to talk to our team or our mentees to [share] what exactly they need us to do to make loan applications go through a lot faster.”

Ms Youssef, who recently released her new book Fear Money Purpose, said that in the face of uncertainty, brokers first need to decide whether they want to stay in the industry and adapt to change. 

“Its a question Ive even had to ask myself and ask my team. As a business owner, its not something that we can just gloss over and think, ‘Its going to go away.’ Its not,” she said.

“If youre passionate enough that you want to stay, then you need to make changes.”

A good starting point for brokers who are exasperated is to undertake a review of their processes and marketing strategy and identify opportunities in their current databases to capitalise on. 

“Ramp up your marketing; don’t cut it back. And stay in touch with your clients because thats where youre going to find most of the gold,” Ms Youssef said, adding that brokers should invest in professional development. 

A number of brokers have come forth claiming that they’ve noticed a stark difference in the way broker-originated loans are assessed, compared to loans that go directly through a lender’s proprietary channel. 

For example, founder and director of Loan Saver Colin Kidd recently said brokers need to obtain substantial detail about expenditure using bank statements than what customers would be required to provide if they approached the banks directly. 

“A signed budget is in no way acceptable for an expenditure analysis,” he said. 

“If the clients go directly to the lender, they don’t need to do the expenditure analysis [using] bank statements. They’ll accept the client’s statement of position and the loan will go through.”

[Related: Credit scrutiny tougher on broker-originated loans]

Lack of clarity on loan requirements ‘eating into profitability’
nancy youssef ta
TheAdviser logo
nancy youssef ta

Tas Bindi

Tas Bindi

AUTHOR

Tas Bindi is the features editor for The Adviser magazine. 

JOIN THE DISCUSSION

You need to be a member to post comments. Register for free today

MORE FROM THE ADVISER

mark lewis fast ta llosc4

In Memoriam: Mark Lewis, 1963–2022

Mark Lewis passed away on Saturday (13 August). Mr Lewis was a well-known identity in the third-party broker...

READ MORE
anthony waldron mortgage choice ta ithtxm

Broker expertise key for securing right loan: Mortgage Choice

The data, which is derived from a June survey of 1,002 broker customers and conducted by Honeycomb Strategy,...

READ MORE
Mark Bouris new ifa

Brokers need to focus on the ‘value-add’: Mark Bouris

With competition among brokers increasing as the number of brokers rises – coupled with the fact that fewer...

READ MORE
magazine
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more