Managing mortgages

ASIC defines a mortgage manager as “a credit licensee who manages credit contracts or leases on behalf of a credit provider or lessor (or their agent) under the mortgage manager’s brand”. But that’s not exactly the full picture.

According to Better Mortgage Management (BMM), a Queensland-based mortgage manager, the sector is “responsible for arranging the funds for a loan”. 

“Mortgage managers also look after the ongoing prudent management of the loan through each phase of its existence — from credit assessment to the monitoring of loan repayments, insurance renewals, interest rate adjustments and loan variations,” it explains.

The fact that this cohort of the market can source and actively manage the home loan for their customers comes with its benefits. For example, most mortgage managers have unique offerings or loan products and can tweak their offerings (in consultation with their funders) to ensure that it’s competitive and meeting the required niches. 

For some mortgage managers, like BMM and Mortgage Ezy, the funds for the mortgages come from raising money directly via the securitisation market, while others — for example, Rate Money, partner with existing lenders (like Thinktank, Pepper Money, Firstmac, Suncorp etc), to design and offer loans that might have unique variations or rates. 

It’s a combination of both the convenience and knowledge of a broker, with the authority and flexibility of a lender, that makes it so attractive to borrowers (and brokers). They can offer a high level of personalised service before submission, during approval and after loan settlement. 

But not all managers have the same reach. Some exercise the right to collect repayments, while others prefer to eschew that responsibility. For example, some might only manage credit contracts and the day-to-day relationship with the consumer while others might also administer the loan on behalf of the credit provider by accepting payments, issuing statements, monitoring defaults and responding to consumer inquiries. 

The complexity and range of what exactly mortgage managers really came to bear when the best interests duty came into being at the beginning of this decade. The financial services regulator had to update its regulatory guide on the duty after mortgage managers flagged it wasn’t clear whether or not they would be encapsulated under the new rules.

After the players had much discussion and with the support of both the MFAA and FBAA, provisions were added in that outlined that for the purposes of the best interests duty, a manager was not a mortgage broker [and therefore not subject to the duty] if they performed the obligations, or exercise the rights, of a credit provider in relation to the majority of credit contracts on which they provide credit assistance.  

A resurgence in mortgage management

The ever-changing credit environment has been a boon for the sector, with mortgage management undergoing a resurgence in recent years as more borrowers find themselves being cut out of mainstream lending credit criteria and need some more flexibility.

Brokers have also been flocking to mortgage managers for their unique offerings and flexible solutions — particularly as they know these companies will actively manage and look after their client well.

New players and products have been launching into market thick and fast too. Rate Money set up in July 2019 and surpassed the $1 billion of settlements milestone just 18 months later. More than half of its business is originated through the mortgage broker channel.

And, earlier this year, the team behind Mortgage Ezy announced in February the launch of Source Funding, a new lender that wholesale funds — by way of securitised residential mortgages — residential owner-occupier, investor and SMSF loans are distributed through the broker and direct channels. The mortgage manager built the line to “fill the gap” where Mortgage Ezy’s traditional programs have “stopped short”. For example, it aims to address the gaps in the market to cater to “underserved” borrowers, such as those with overseas income, SMSF and low/alt-doc applicants.

“Source is about common-sense lending, cutting the red tape. It’s tailored and individualistic; it’s never going to be using a credit-scoring approach. It’s more around the way we approach those loans and policy to make sure that those clients that may have slipped through the gaps (for example, those that really get a hard time because maybe they’re not able to be credit scored perfectly) get a fair hearing,” Mortgage Ezy and Source Funding founder and executive chairman Peter James said at the time.

Other mortgage managers have been expanding and releasing new products — with BMM expanding the limits of its Aspire SMSF product to $3 million and removed fees and rate loading for offsets.

Indeed, more visibility and a greater voice have been given to these lenders after the MFAA re-established its National Mortgage Managers Forum in 2020, with 14 businesses working with the MFAA to provide a platform for mortgage managers to review and discuss issues facing the industry and to assist the MFAA in dealing with relevant challenges impacting the sector.

The forum is now being led by Mortgage Mart’s Doug Daniell, who was previously deputy president (taking over from Joanna James of Mortgage Ezy) and Mick Conyngham from Mortgage Ezy was elected as the new deputy president.  

Mr Daniell stated earlier this year: “It is exciting to be a part of an MFAA Forum, comprised of mortgage manager representatives which continues to support the industry we are passionate about and its future.”

With mortgage managers looking to help broker clients, now could be the perfect time to revisit the mortgage management landscape.