MPA 11.3 - Special Edition

COMMEMORATIVE 10-YEAR SUPPLEMENT

CELEBRATING TEN YEARS

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EDITOR’S LETTER

Happy birthday to usHello and welcome to this special commemorative supplement, celebrating the 10th year of publication of the home loan industry’s leading analytical journal, Mortgage Professional Australia. 2011 marks a decade of circulation for MPA and we will be blowing out 10 candles on our birthday cake later in the year on 14 December, 10 years after our first issue landed on your desks.

To kick-start a year of celebrations, we’ve taken a trip down memory lane by revisiting more than 100 back issues to pull out some of the most important stories and issues we’ve covered. We’ve reproduced them here for your perusal and while the third party market in Australia continues to grow, it is also interesting to note how many of the same topics continue to affect and shape the market.

As well as reprinting three major stories from each year, we’ve also collated a selection of headlines, world events, statistics, award and survey winners from each 12-month period, to provide some context. There is also an array of photos from across the years – see if you can spot yourself! Some stories even feature a modern perspective on events, to bring these articles into the modern day.

It is no mean feat for a trade publication to be celebrating its 10th birthday while continuing to go from strength to strength, but it is a milestone we couldn’t have reached without the ongoing support of our loyal circulation base. Thanks to everybody who has read MPA, provided comment or articles, advertised in our pages, attended one of our events, recommended us to a colleague or voted us a leader in our field.

Often imitated but never bettered, we look forward to bringing you another special edition in 10 year’s time.

Barney McCarthy EditorSpecial

Edition A special word from our first publishing director, Richard Curzon… “I recall the overwhelming sense of support that we were so kindly extended by the vast majority of mortgage brokers and the related industry players when MPA launched 10 years ago. It was clear to us from day one that the industry really liked the idea of what the brand had to offer. Launching into such an exciting and supportive industry was both a pleasure and a lot of fun. I’d like to thank all those who supported us in the early days. We couldn’t have done it without you.”

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TIMELINE

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2002 › MPA officially launches

as Australian Mortgage Professional, although the first issue actually lands on desks in December 2001

› House prices hit 12-year high

› AFG exceeds $1bn monthly arrangements

› Aussie launches brokerage

2003 › Government backs regulation of mortgage

industry › Brokers break $10bn monthly home loan

barrier › Council of Mortgage Lenders formed › Home loan affordability hits 7-year low

2004 › Brokers flock to join

Ombudsman scheme › MIAA expels first

mortgage broker › Broker regulation

centre stage in federal election

› GE Money buys Wizard Home Loans

2005 › Draft proposals for

national regulation unveiled

› Liberty launches largest non-conforming securitisation to date

› Virgin Money targets Australian home loan market, Macquarie takes 10% stake

› Non-conforming arrears hit record highs

2006 › CBA acquires remaining 49% stake in

Colonial National Bank › Calls for national mortgage default register › First homebuyers struggle to enter market › GMAC-RFC enters Australian market

2007 › HSBC exits broker market › Half a million Australian households in

mortgage stress › US sub-prime credit crisis begins, leading to

financial crisis › Challenger buys Choice and parts of FAST

and PLAN

2008 › Westpac buys RAMS Home Loans, BankSA

and merges with St.George › CBA acquires 33% stake in Aussie – which

had recently acquired Wizard Home Loans – and buys Bankwest

2009 › Sharpest house price drop in 30 years › Government launches First Home

Owner Grant › ACCC concern at big bank dominance › NAB purchases Challenger’s mortgage

arm for $385m › ANZ acquires Royal Bank of Scotland’s

Asian operations

2010 › Mortgage Choice buys LoanKit › Vow Financial created from merger between

National Brokers Group, The Mortgage Professionals and The Brokerage

› AOFM invests in RMBS › Housing affordability back to pre-GFC levels

ISS

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ebuyers: Ripe for the picking

FIRST HOMEBUYERSRipe for the picking

Mortgage Professional Australia

Should brokers take the plunge?

“GOOD PRODUCT RANGE BUT LET DOWN BY POOR SERVICE/SETTLEMENTS” “NO PERSONAL SERVICE, TOO MANY ASSESSMENT OFFICERS HANDLED OUR DEAL” “SAVAGE, INFLEXIBLE CLAWBACKS” “GREAT PRODUCTS, LOUSY SERVICE” “UNIQUE PRODUCTS BUT REALLY PLACE THEMSELVES OUT OF THEIR MARKET WITH THEIR CREDIT CRITERIA” “WORST PERSONNEL IN THE BUSINESS” “IMPROVING, GOOD ATTITUDE TO WORKING WITH BROKERS” “THINK THEY ARE ‘IT AND A BIT’” “TOO SLOW FOR URGENT DEALS” “NO HELPDESK!” “SMALL RANGE BUT WELL PRICED” “TOO SLOW, POOR RESPONSE TIMES” “LOST US DEALS DUE TO POOR TURNAROUND TIMES” “FAST TURNAROUND, TOP SERVICE” “CREDIT TEAM NOT TOO FRIENDLY” “SLOW PROCESS ESPECIALLY DOCUMENTATION” “MILES AHEAD OF OTHERS” “BACK END IS INCONSISTENT” “THE MOST HOPELESS INSTITUTION I HAVE EVER DEALT WITH” “VERY DIFFICULT TO GET ON THE PHONE” “VERY EFFICIENT” “SLOW AND INFLEXIBLE” “TOO LARGE TO CARE” “EXCELLENT BDM” “VERY DIFFICULT TO GET ON THE PHONE” “VALUERS VERY CONSERVATIVE” “NOT HELPFUL TO COUNTRY AREAS” “VERY PROFIT-ORIENTED / NO CUSTOMER FOCUS’’ “GOOD PRODUCT RANGE BUT LET DOWN BY POOR SERVICE/SETTLEMENTS” “NO PERSONAL SERVICE, TOO MANY ASSESSMENT OFFICERS HANDLED OUR DEAL” “SAVAGE, INFLEXIBLE CLAWBACKS” “GREAT PRODUCTS, LOUSY SERVICE” “UNIQUE PRODUCTS BUT REALLY PLACE THEMSELVES OUT OF THEIR MARKET WITH THEIR CREDIT CRITERIA” “WORST PERSONNEL IN THE BUSINESS” “IMPROVING, GOOD ATTITUDE TO WORKING WITH BROKERS” “THINK THEY ARE ‘IT AND A BIT’” “TOO SLOW FOR URGENT DEALS” “NO HELPDESK!” “SMALL RANGE BUT WELL PRICED” “TOO SLOW, POOR RESPONSE TIMES” “LOST US DEALS DUE TO POOR TURNAROUND TIMES” “FAST TURNAROUND, TOP SERVICE” “CREDIT TEAM NOT TOO

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ISSUE 4.7

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ISSUE 5.4

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BREAKING THE SKILLED BDM SHORTAGE

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IN THE

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++ CALLS FOR NON-CONFORMING SELF-REGULATION ++ MACQUARIE LINKS WITH CHINA CONSTRUCTION BANK ++ MIAA 10TH ANNIVERSARY CONFERENCE HELD

n Brokers are rapidly growing their share of the mortgage market, with an increase of 12% in loans written during the second quarter, according to a new study. Research conducted by the Market Intelligence Strategy Centre (MISC) shows brokers settled more than $7bn in new home loans in the quarter to June 2001.

Brokers wrote 44% of the loans of regional banks, building societies and credit unions, indicating borrowers are increasingly likely to use a broker than approach their bank.

Steve Sampson, general manager of Choice Home Loans, said this trend is likely to continue, as customers want their brokers to shop around for them. He added that business at Choice Home Loans had increased by about 30% during the past six months and the large majority had been home loans for ‘mum and dad’ borrowers. “Who knows where it’s going?” he said.

Jim L’Estrange, Westpac consumer banking manager, said brokers write about 25% of the bank’s mortgage business – and this has

“Things haven’t changed much and brokers account for a similar percentage of the market now, although there have been ups and downs since. It shows that recognition and appreciation of brokers is still up there. There was probably the expectation back when the story was published that the proportion would increase, but maybe it has found its natural level. It’s a pretty good market share when you take into consideration issues such as changes in commissions. There may well be a reduction in broker numbers in the future, but the market share is likely to stay the same.”

Steve Sampson, now head of lending distribution for Provident Capital, speaking in February 2011

BROKERS WRITE RECORD 44% OF LOANS

what they think now…

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increased in the past 2–3 years. “I’m happy with the trend, because the banks are fulfilling a customer service and brokers are an important part of that service,” he said.

“There’s now a myriad of ways to access loans – that’s the nature of the market.”

L’Estrange added that although Westpac intends to keenly promote internal mortgage distribution channels, the company would continue to invest in the broker market.

“We must continue to invest in how we service our broker market and continue to ensure our relationship with the broker market remains strong,” he said.

MISC figures show the broker sector is fragmented, with the top 10 brokers writing 45% of new loans and the top five enjoying a 32% share. The study indicated there was scope for the mortgage broker market to develop, but there is still fierce competition between brokers jostling to protect their business. NSW is still the front-runner, but business in Queensland and Victoria is driving recent growth.

Most of the loans recently written by Mortgage Choice have been through Westpac and Homeside. Sampson said banks would continue to encourage brokers to write their home loans to save money. “It’s purely a cost factor. Banks only pay a fee to us if we’re successful. If we’re not successful, they don’t have to pay anything.”

L’Estrange predicted the market would remain strong until at least March 2002, especially if interest rates are cut again at the start of that year. “We’re going to have continued strength in the mortgage market,” he said. “People will be encouraged to take out mortgages, perhaps buy their first home.”

MISC uses figures from actual settlements, rather than loan approval or submissions data.

MPA_ARCHIVESJANUARY_2002

“ We’re going to have continued strength in the mortgate market

”Jim L’Estrange quoted in 2002

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++ DEPOSIT POWER PREPARES FOR 250,000TH CUSTOMER ++ APRA WARNS BANKS ABOUT RISK MANAGEMENT ++ LIXI LIFTS APPROVAL TIMES 40%

been marred by the practices of unethical individuals.

“We plan to clean up the industry by raising service standards, through proper accreditation, greater transparency and better training of our advisors, many of whom have long experience in the finance industry. We intend to make secret commissions and undisclosed incentives in the industry a thing of the past,” he said.

Mortgage Industry Association Australia chief executive Phil Naylor said he was pleased that Aussie is committed to lifting the standard of mortgage broking in Australia, working with the MIAA for the accreditation of its mortgage advisors.

“The launch of Aussie Mortgage Market will be a great boost for the mortgage industry, as it will raise the bar in the performance standards for all of our members and promote greater

n Australia’s largest non-bank lender, John Symond’s Aussie Group, has launched a new national mortgage broking service, Aussie Mortgage Market, supported by the group’s $12m marketing campaign. It will be backed by an eight-month advertising campaign on TV, radio, press, magazines and outdoors. Symonds said the new service has created 200 new jobs within the group.

“Following a major recruitment and training program, Aussie has deployed more than 300 accredited, full-time mortgage advisors to meet the home loan needs of customers in all capital cities and major regional centres across Australia,” he said.

AUSSIE GOES FOR BROKE

mortgage events• HOUSEPRICESHIT12-YEARHIGH• AFGBECOMESFIRSTAGGREGATORTOEXCEED$1BN ARRANGEMENT IN A MONTH• NEWPRIVACYACTLAUNCHED• HOMELOANAPPROVALSRISEBY25% $219,250

2002 AVERAGE HOME PRICE:PRICE OF BEER:

MPA_ARCHIVESOCTOBER_2002

Aussie’s mortgage advisors will represent 14 home loan brands, including all four major banks, while also offering Aussie Home Loans’ loan products. The Aussie products will be compared with the new panel without being given any advantage.

Symonds said the growth of the mortgage broking industry, which now represents about 30% of new home loans in Australia, has

understanding of the important role mortgage brokers are now playing in Australia,” Naylor said.

The expansion of the Aussie group (which now includes the Aussie Mortgage Market, Aussie Home Loans, Aussie Home Insurance and Aussie Cards) follows extensive consumer research showing that homebuyers and owners want unbiased advice from a specialist home loan provider.

Aussie’s general manager, marketing, Tony Davis, said advisors would use laptop computers with the group’s Mortgage Explorer software to objectively select loans for customers, including ratings provided by independent ratings agency Cannex.

HOUSES PRICE 12 YEAR HIGH

HOME LOAN APPROVALS RISE BY 25%

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RESOUNDING ‘YES’ TO MIAA, FBAA MERGER

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ama winners

MPA_ARCHIVESJUNE_2002

2002++ PLAN/WESTPAC LAUNCH ONLINE APPLICATIONS ++ BORROWERS CALL FOR UPFRONT COMMISSIONS DISCLOSURE ++ ECHOICE WELCOMES AUSSIE COMPETITION

n The MIAA and FBAA should merge to form one organisation representing the interests of the

mortgage community

across Australia, a survey conducted by PLAN Australia

has revealed.

According to the survey, 64% of PLAN

members – incorporating a good cross-section of the

Australian broker community – believe the associations should merge to become one body.

The survey also revealed that 27% of the respondents believe the two organisations should work together on key issues, even if they remain independent. Nine per cent of the respondents had no opinion on the matter, and none thought the MIAA and FBAA should remain separate organisations.

PLAN Australia managing director Alex

+ UPDATE The trade bodies never merged. MIAA later became MFAA.

Moulieris said it was a waste of resources to have two organisations pursuing the same goals. “This is particularly aggravating when both organisations are under-funded and struggling to deliver to their members,” Moulieris said. He added that both organisations benefited the industry immensely, but “if we could only harness the efforts of both… and have them working together, we as a developing industry and profession could get so much further.”

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CELEBRATING 10 YEARS


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++MPA CIRCULATION LEAPS 25% IN FIRST YEAR ++ AFG TOPS FIRST MPA SUPERBROKER POLL ++ FBAA TARGETS NATIONAL BROKER REGISTRATION

n Some commission-driven mortgage and finance brokers are using unfair tactics to charge consumers excessive fees while selling them unsuitable loan products, according to a new report into finance and mortgage broking in Australia.

The report, commissioned by the Australian Securities & Investments Commission and completed by the Consumer Credit Legal Centre (CCLC), reveals how consumers suffer – or even lose their homes – because the law has failed to keep up with the growth of mortgage broking.

It says the fragmented structure of mortgage and finance broking is inhibiting the development and maintenance of professional standards in the industry and that the Mortgage Industry Ombudsman Scheme cannot

2003 • SPACESHUTTLECOLUMBIADISINTEGRATES,KILLINGALL SEVEN ASTRONAUTS ON BOARD• THESECONDGULFWARSTARTS• ENGLANDDEFEATSAUSTRALIA20–17INTHERUGBYUNION WORLD CUP FINAL

world events

deal with all complaints. Continuing, it states that legislation now before the NSW Parliament does not fully tackle industry problems. ASIC’s executive director of consumer protection Peter Kell said it was planning enforcement action against several mortgage industry players in the wake of the report.

He said standards need to improve in order to reduce risks to consumers. “It’s pleasing that there is wide acceptance in the industry that this is the case.”

ASIC commissioned the report after a rise in complaints about brokers to consumer organisations, CCLC co-ordinator Karen Cox said. “Our findings show that, while the broker industry has grown rapidly and many consumers make good use of it, the law is lagging behind.”

The report fires a broadside at unethical fringe players, while recognising that the majority of brokers and industry players are keen to remove poor performers from the industry. It was based on 120 case studies, 166 responses from mortgage brokers and 85 from financial counsellors, community legal centres, welfare bodies and solicitors across Australia.

Kell said he expected the report would spark debate about how state and federal

MPA_ARCHIVESAPRIL_2003

REPORT DAMNS UNETHICAL BROKERS

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governments can work with the industry to improve standards, while Cox urged governments to consult with all the relevant parties to create a more effective regulatory regime for mortgage brokers.

Industry groups, including the Finance Brokers Association of Australia, said many of the report’s recommendations were consistent with

their

objectives for industry regulation. Cox said 39 case studies in the report

showed that some brokers acted with little accountability while targeting consumers who often have no means of redress other than via the courts.

“In some cases, brokers are falsifying loan applications to secure commissions from lenders who offer attractive rewards as they compete for their clients … Lenders are increasingly relying on brokers to initiate loans, and then deny responsibility for the actions of the brokers who market their products.

“To make the situation worse, access to cheap, effective dispute resolution can be limited, or non-existent if a broker is involved,” Cox said. Peter Kell


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GOVERNMENT BACKS REGULATION

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n The federal government has announced that it will strongly back moves to introduce national uniform regulation of the mortgage industry.

Responding to ASIC’s release of a Consumer Credit Legal Centre report into mortgage and finance broking, the Parliamentary

$263,6252003 AVERAGE HOME PRICE:

debate industry issues – including regulation – at the Royal Pines Resort on the Gold Coast.

Senator Campbell, who oversees ASIC, said mortgage broking was a rapidly growing industry in which consumers deserve to have the protection of a high-quality regulatory regime. “This is a matter within the powers of the states and territories to address,” he said. “The Commonwealth is prepared to play a facilitator role though the Ministerial Council on consumer affairs to develop nationally uniform legislation,” Senator Campbell said.

ASIC’s director of compliance and campaigns Greg Kirk told a packed audience at the Summit’s Great Mortgage Debate that there was a pressing need for industry regulation before fringe players give others a very bad reputation. “The evening current affairs programs are queuing up to get colourful stories on this industry,” Kirk said.

HOME LOAN AFFORDABILITY HITS SEVEN YEAR LOW

MORTGAGE CHOICE EYES FLOATATION

Secretary to the Treasurer, Senator Ian Campbell, said the Commonwealth strongly backs calls for strong uniform national regulation of mortgage brokers.

The announcement came on the eve of the Australian Mortgage Summit, which drew both mortgage brokers and industry leaders to


ONLINE APPLICATIONS ON THE RISE

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• AFG, MORTGAGE CHOICE AND AUSSIE TOP THREE IN FIRST SUPERBROKER POLL• HOMESIDE,ADELAIDEBANKANDHERITAGETAKETHE PODIUM PLACES IN INAUGURAL BROKERS ON BANKS SURVEY• VISIONLENDING,BMCMORTGAGESANDHOMELOAN CENTRE DOMINATE MAIDEN BROKERS ON NON-BANKS POLL

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++ LENDERS GET COLD FEET OVER 100% LVR LOANS ++ CBAPASSES$100BNHOMELOANMILESTONE++FORGED PROPERTY DEEDS USED TO DEFRAUD LENDERS

n Westpac’s accredited mortgage brokers are continuing their love affair with the bank’s online loan application systems, with 50% of mortgage applications now being processed electronically.

The ease of use of the bank’s new mobile mortgage application system is helping deliver reduced reworks and faster turnarounds, according to Westpac head of broker origination Brad Rockwell.

2003

HOMES WITH COMPUTUERS HOMES WITH INTERNET:MORTGAGE

APPLICATIONS PER MONTH:

66%

78%THEN

NOW

53%

72%THEN

NOW

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++ ASIC PROBES MISLEADING ADVERTISING ++ 2ND AUSTRALIAN MORTGAGE SUMMIT HELD ON THE GOLD COAST ++ BANK OF QUEENSLAND PULLS BACK FROM BROKER MARKET

n Mortgage brokers are unlikely to see nationally consistent regulation of the industry in force until at least late 2006 or early 2007, according to Gadens Lawyers partner Jon Denovan. However, a public consultation process of proposals for regulation of the industry is now expected to start by December this year.

Queensland’s Fair Trading Minister Margaret Keech said that the state is prepared to introduce its own mortgage and finance broker laws if national, state-based laws take too long to implement. The minister’s comments came as the Ministerial Council for Consumer Affairs met to announce that they will release a regulatory impact statement on proposed regulation of the mortgage and finance broking industries.

The discussion paper was expected to be released in August, but has been put back until October. Denovan said the industry can expect to see a consultation process in November/December.

Meanwhile, WA’s Minister for Consumer and Employment Protection John Kobelke said he was concerned about the lack of consistent national regulation for mortgage and finance brokers. “It would be quicker if the Howard government took on the responsibility, but so far it has ignored requests to do so,” Kobelke said.

“Even ASIC has identified that national laws would be the most effective way to protect all Australians from rip-offs by rogue brokers and deal with the borderless financial services market.”

WA, meanwhile, has recently overhauled its mortgage and finance broking legislation because, Kobelke said, the Howard government had shirked its responsibilities.

But Mortgage Industry Association of Australia (MIAA) chief executive Phil Naylor cautioned Keech against going it alone with any new model of regulations affecting mortgage and finance

INDUSTRY REGULATION “AT LEAST TWO YEARS AWAY”

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world events

brokers. “A state government-initiated regulator patchwork of different rules in each state would be disastrous,” Naylor said.

He said he recognised that Queensland had strongly pursued nationally consistent regulation of the industry. “We urge you to maintain pressure on the other states to achieve this end.”

Denovan said it would be terrible if states adopted any regulatory model other than that recently implemented by NSW. “Disclosing the total commission paid by the lender does not answer calls from consumer groups who want to know what payments and other benefits affect the recommendations of the broker – not some aggregator many times removed.”

Denovan said he understood that Victoria and WA are considering the NSW legislative model.

Keech said there was a lack of transparency when brokers are paid commission by lenders, potential losses when the broker’s commission is paid in advance and credit is not obtained, or where excessive fees, commissions and unethical conduct occurs by persuading consumers to borrow more money to drive up commissions.


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“ At the moment there are no competency or probity standards required of brokers

”Margaret Keech, Qld Minister for Fair Trading, quoted in 2004

“The MFAA did a great job in getting the legislation to a point where it was workable, as it certainly wasn’t to start with. We ended up with a situation where ASIC says the current legislation doesn’t require much change for brokers, which is to their and the consumer’s benefit. Back in 2004, we may not have envisaged that it would take so long for licensing to arrive, but a change of government slowed the whole process down. It’s far better for these things to take time and be right – the devil is in the detail.” Jon Denovan, senior partner – banking and finance at

Gadens Lawyers, speaking in February 2011



n GE Money’s $500m buyout of Australian Financial Investments Group (AFIG) will be another driver for further consolidation of the mortgage broker channel, according to one market analyst. Martin North, a consulting director with Fujitsu Australia, said the acquisition was another example of the industry evolving from a fragmented, disparate range of players, into non-bank lenders, brokers and brokerages aligned with much larger groups.

GE Money chief executive Tom Gentile said the company was taking a long-term view of the mortgage sector in Australia. He denied suggestions that the global giant had bought AFIG at

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++ASIC ISSUES REVERSE MORTGAGE WARNING ++ GEMIS BECOMES GENWORTH FINANCIAL ++WIZARD AGREES TO DISCLOSE COMMISSIONS

WIZARD SOLD IN $500M GE MONEY DEAL

mortgage events• BROKERREGULATIONCENTRESTAGEINFEDERALELECTION• ADVISORSFLOCKTOJOINOMBUDSMANSCHEME• NON-CONFORMINGLENDINGCOULDRISETO$80BN• CHALLENGERLAUNCHESTHEMORTGAGEALTERNATIVE• APRATIGHTENSHIGH-RISKLOANSRULE

MPA_ARCHIVESDECEMBER_2004

Wizard Home Loans was sold in February 2009 to Aussie + UPDATE


the peak of the market.“I think the market peaked

last year and went through a very ordinary movement towards a plateau and, in any case, we’re looking at how it will perform over the next 10–15 years,” he said. In closing the deal, GE has bought out the shareholders of AFIG’s former stockholders including ABN Amro, Deutsche Bank, and Publishing & Broadcasting Ltd.

Gentile announced the company’s acquisition of AFIG, Wizard Home Loans and Australian Mortgage Securities for an undisclosed amount – market sources believe to be around $500m. The sale also involved Kerry Packer’s Publishing and Broadcasting Ltd releasing its

25% share of AFIG, realising a $58m after-tax profit.

Wizard’s founder and executive chairman Mark Bouris will remain with the company as a non-executive chairman and assist with the integration of the company into GE Money.

He said Wizard’s brand would continue and will aggressively expand its footprint throughout Australia and New Zealand. Bouris has also managed to cash out near the top of the mortgage market boom, ensuring that the AFIG/Wizard group is well positioned to take advantage of pressures on market rivals.

Gentile said the combined operations would have $30bn of assets and more than 370 branches across Australia and New Zealand, including 117 recently re-branded GE Money outlets.

The chief executive of GE Australia and New Zealand, Steve Bertamini, said the integration of the AFIG and GE operations would start

immediately, with Wizard branches to soon be distributing a range of GE-sourced products including credit cards, personal loans and non-conforming loans.

The move has given GE Capital the largest non-bank branch network in Australia, placing it at about sixth in terms of mortgage market share and making it a serious rival for the major banks.

Bouris said the sale was a good move for Wizard and would allow the company and its operations to move to the next level.

BROKER REGULATION CENTRE STAGE IN FEDERAL ELECTION

APRA TIGHTENS HIGH-RISK LOANS RULE


BROKERS SOON TO BE SUBJECT TO MIAA EXPULSION POWERS

• INDEPENDENTSALESPERSONOFTHEYEARISMALCOLM BARTLEY

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++ BROKERS AMONG NINE CHARGED IN REAL ESTATE FRAUD ++ BLUESTONE BRACES FOR FLOAT ++ AUSSIE, AFG AND MORTGAGE CHOICEIMPLEMENTTRIDENTPROJECT

regime had never been subject to an external review, and that decisions on a member’s conduct made by the tribunal were not automatically publicly available.

She said: “The ACCC encourages the MIAA to address these concerns, as it considers they would enhance the public benefit flowing from the scheme.”

The MIAA has about 5,700 members.

that the MIAA’s governance regime, which the Disciplinary Rules enforce, is likely to assist member mortgage brokers in acting ethically and professionally in the industry, therefore resulting in a benefit to the public,” she added.

However, Sylvan said that the ACCC had noted the concerns raised by some interested parties that the MIAA governance

Australian Competition and Consumer Commission (ACCC) authorises the association’s Disciplinary Rules.

Such a move would allow the MIAA to discipline and, if necessary, expel mortgage brokers without fear of legal repercussions for alleged anti-competitive behaviour.

And ACCC deputy chairperson Louise Sylvan said the Commission was likely to grant the authorisation. “In its draft determination, the ACCC found that the MIAA’s Disciplinary Rules are unlikely to restrict competition in the mortgage broking industry,” she said.

“The ACCC considers

2004

“ The ACCC found that the MIAA’s Disciplinary Rules are unlikely to restrict competition in the mortgage industry

”Louise Sylvan, ACCC deputy chairperson, quoted in 2004

n Brokers now have to be aware of the fact that they could soon be shown the door by the Mortgage Industry Association of Australia (MIAA), if the

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n Australian mortgage and finance brokers have just over a month to comment on proposals for national uniform regulation of mortgage and

finance brokers. The long-awaited draft

proposals for national regulation were released in early December to start the public consultation process towards new state-based legislation governing the mortgage

and finance broking industries. Industry experts believe that if the

recommendations contained in the report are implemented in full, the mortgage and finance broking industries would undergo a period of consolidation as smaller players join larger groups to take advantage of compliance systems and procedures.

However, the draft proposals have already raised the ire of some sectors of the finance broking industry – particularly chattel and lease brokers – who say that regulation geared for mortgages and other kinds of finance is not suitable for commercial leasing.

Finance Brokers Association of Australia special projects manager Maurie Unwin said up to 50% of the association’s members – who are chattel and lease brokers – could be severely impacted by the proposed regulations, which are geared more to commercial and mortgage lending than leasing finance.

The release of the draft discussion paper is but one step in achieving national state-based regulation of the industry, which industry bodies such as MIAA and FBAA hope will boost the credibility of mortgage and finance brokers in the eyes of consumers – and help industry players

REGULATION WITH TEETH DELIVERS COSTS, BENEFITS

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world events

secure a greater share of their respective markets. NSW Minister for Fair Trading Reba Meagher said the NSW finance broker legislation would form the basis of any disclosure requirements in the national regulations.

Meanwhile, the draft proposals also come with teeth – featuring proposals to allow courts to enforce fines and consumer compensation in cases where brokers cause consumer detriment.

Meagher said the NSW legislation already requires finance brokers to fully disclose any commissions they receive from credit providers, including soft dollar commissions.

“NSW finance broking laws address current marketplace problems and provide a sound starting point for nationally consistent legislation,” Meagher said.

The Ministerial Council of Consumer Affairs National Finance Broking Regulatory Impact Statement Discussion Paper was prepared by a working group chaired by NSW.

Meagher said the finance broking industry is rapidly expanding, with most national operators already working across state borders.

“A nationally consistent framework could provide real benefits for both industry and consumers through a reduction in compliance costs and disputation,” she said.

The report estimates that more than 10,000 people are acting as finance brokers who last financial year brokered $200bn in loans – across mortgages, personal and commercial lending. However, in the last year, the NSW Office of Fair Trading received more than 320 complaints relating to finance broking.

Meagher said any consistent national approach would need to maintain strong consumer protections which are a core feature of the NSW legislation.

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“ A nationally consistent framework could provide real benefits for both industry and consumers through a reduction in compliance costs and disputation

”Reba Meagher NSW Minister for Fair Trading


PRICE OF BEER:

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over the past year with several major mortgage market players with the view to forging an alliance, or alliances, to fund the mortgage operations.

One possible, although unconfirmed, partner believed to be under consideration is Macquarie Bank, which now invests the Virgin superannuation proceeds.

Another possible funding source could be Westpac – on the back of its existing credit card alliance with Virgin Money. However, spokespeople for both banks would not comment on any arrangements or discussions relating to mortgage funding of Virgin products.

Branson and Toll Holdings recently launched a $4.6bn bid for Virgin Blue majority shareholder Patrick Corporation, partly to regain ownership of Virgin Blue.

n Australian mortgage brokers are bracing for even more competition in an already crowded market as one of the world’s most well-known brands prepares to roll out mortgage products into the Australian marketplace.

Virgin group chairman Richard Branson recently announced that he expected Virgin’s fully-owned subsidiary, Virgin Money, to begin distributing mortgages in Australia within the next 12 months. He said the company planned to eventually bundle loans with its recently launched superannuation and credit card products.

Branson said Virgin plans to go head-to-head with rival mortgage market brands, including Wizard and Aussie Home Loans, to secure a significant market share. Aussie Home Loans spokesman Tim Allerton said the company had no comment on the Virgin proposals.

Wizard chairman Mark

VIRGIN PREPARES AUSSIE MORTGAGE ASSAULT

mortgage events• BORROWINGLEAPSDESPITEECONOMICWARNINGS• LIBERTYLAUNCHESLARGESTNON-CONFORMING SECURITISATION TO DATE• ANZDENIESMOVETOHIGHER-RISKLENDINGPRACTICES• INDUSTRYBRACESFORLEGISLATIONCHANGES


Bouris said Virgin had left its entry into the Australian mortgage market too late – coming on the back end of the recent mortgage boom. However, he also said of Virgin’s entry into mortgages: “Bring it on!”

If Branson’s track record in mortgages in the UK is anything to go by, the Australian market looks set for an aggressive new competitor. Virgin launched its first mortgage product, the One Account (which features line-of-credit type facilities) with the Royal Bank of

Scotland in October 1997. The joint venture secured 3% of the UK

mortgage market by 2001.

MPA understands that Virgin has been in discussions


Branson said he wanted to tie the airline’s marketing strategy to a range of associated products, including mortgages.

Virgin Money Australia public relations manager Kirsty Lamont said the company was still to select partners for its mortgage product roll-out. “We have ambitious plans to become a broad-based provider of financial services as we see the Australian market as being nowhere near as competitive as the UK.”

Virgin would not rule out distributing products via third parties such as mortgage brokers, but it expected to follow a direct distribution model in its initial roll out.

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and personal lines of credit coming in the near future. Cannon established FirstMac as the Nationale Group in 1979. The company has now grown to be Australia’s fourth-largest non-bank lender, employing more than 200 people across Australia and managing more than $5bn in home loans.

n Tonto Home Loans has undergone a re-branding under the FirstMac brand to become FirstMac Mortgage Management Limited.

This change covers a number of the companies within the FirstMac Group, including National Limited, Nationale Equity, First Mortgage Company, Queensland State Home Loans and Tonto Home Loans.

FirstMac Mortgage Management Limited chief executive Kim Cannon said the re-branding under one name would give the company substantial power

origination services through the new FirstMac company.

“We are seeing the convergence of brokers and originators, and we want to give both groups the opportunity to substantially expand their businesses,” Cannon said. He also said FirstMac now offers brokers a full package of branded cheque books, debit cards, visa debit cards with fully branded banking products, credit cards, commercial loans

2005

RE-BRANDING MARKS 25 YEARS FOR KEY LENDERMPA_ARCHIVESAPRIL_2005

in the international investment community.

“We sell bonds and negotiate with local and international banks to provide the mortgages for our customers, and also in the Australian home loans market with pricing leverage we can pass on to our customers,” Cannon said.

Brokers from the former Tonto Home Loans will have the opportunity to expand their business into Kim Cannon

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n General Motors Acceptance Corp (GMAC) looks set to open a mortgage funding business in Australia next year.

The company could be setting up shop as soon as the first quarter of 2006 with Neil Sinden, head of GMAC’s mortgage funding business in Australia, telling a recent conference organised by Insto magazine that Australia was one market it had under “consideration”.

However, rumours in the industry point to more than just consideration with plans seemingly more advanced for the company to kick off early in the new year.

If GMAC does enter the mortgage market as a wholesale funder it will be in competition with the likes of GE Money and Macquarie PUMA. Already GMAC manages around US$33bn in mortgages in the US.

One source said: “His [Neil Sinden]presentation alluded to the fact they were putting things together and I wouldn’t be surprised if there is a big announcement made

very soon. They seem to have been watching the market for some time and have now decided it’s the best time to join in.

“It will be an interesting time for the market if it goes ahead and as far as I’m aware they could be hitting the sub-prime market.”

It is believed that GMAC had previously explored the idea of entering the market, including an

alleged approach to the owners of Resi Mortgage Corporation

GENERAL MOTORS COULD REV UP FUNDING

earlier in the year about buying the business – although nothing came of it.

There are only a few details going around the industry at the moment and it is understood the company has been working with marketers and hiring staff.

Mosaic CEO Steve Sampson said that from

what he has heard, GMAC will be doing some wholesale funding and then focusing on the non-conforming market.

“I’m not sure how much of an impact this will make in the market as it will depend on how aggressive they are in marketing. The success of their operation will depend on what price they obtain funds for, and what price they give to the market,” said Sampson.

“If they’re competitively priced then the others may have to look at their funding and pricing. The current non-confirming market is product-driven, not price-driven, and GMAC entering the market could change all that.”


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$4.38

++ HOME REPOSSESSION NUMBERS QUESTIONED ++ INVESTOR ABSENCE SOURS HOUSING MARKET ++ NZ RATE WAR ATTRACTS AUSTRALIAN INTEREST

STEVE SAMPSON


GENERAL MOTORS COULD REV UP FUNDING

CALL FOR NATIONAL MORTGAGE DEFAULT REGISTER

In NSW, the number of Supreme Court repossession orders are often used as a guide to the home default situation in the state.

Yet, while the latest figures suggest a surge in defaults – 4,873 cases were lodged in 2005, well up on the 3,061 in 2004 – the granting of a repossession order doesn’t automatically mean the lender sold the house.

NSW Supreme Court spokesperson Sonya Zadel said some lenders may have decided against enforcing the order.

Mendelson, a former commercial lawyer, said the register would be easy to set up and run, with registered

n Mortgage defaults should be recorded on one central, national register to provide a better gauge on economic and housing market conditions, a major debt collection agency said.

Roger Mendelson, CEO of Melbourne-based Prushka, said economic forecasting would be more accurate if a default register was established in Australia. He said the number of house repossessions was rising, although gaining accurate numbers was currently impossible. “There’s a trend, but there’s no measure as to what it is,” he said.

Prushka, which services 30,000 customers nationally,

MPA_ARCHIVESMARCH_2006

witnessed many of these repossessions first-hand, Mendelson said. Lenders often pursued repossessions only after Prushka had lodged bankruptcy proceedings against the home owner, meaning Mendelson’s firm often loses any hope of recovering the debts it is chasing.

A central register could become a barometer of the property market’s health, he said, which would have been useful ahead of Australia’s previous recession in the early 1990s when the media and Reserve Bank took up to 18 months to work out that mortgage defaults were out of control.

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real estate agents reporting all mortgagee or lender-initiated sales to a central organisation. This could include the Real Estate Institute of Australia or the Reserve Bank.

A spokesperson from the REIA said the REIA board would need to consider such a proposal, although she wasn’t convinced a register fit in with the organisation’s role as a representative of the real estate industry.

This view was shared by the central bank, RBA senior information officer Garry Jones said.

Mendelson said his company expected to see an increasing number of mortgage defaults in 2006.

ABN AMRO TAKES 40% SLICE OF BLUESTONE MORTGAGES

Roger Mendelson


the size of the debt exceeds the value of their property.

“With a principal & interest loan, a borrower making scheduled repayments would typically pay off about 10% of the loan’s principal over the first five years, establishing a buffer against a fall in house prices,” the RBA said.

Many opt for interest- only products because larger loans can be purchased for a more affordable monthly repayment scheme.

Yet the RBA said this only serves to encourage already at-risk borrowers to take on more debt.

The report found that interest-only home loans were becoming more popular and available to an increasing number of borrowers. Low-doc borrowers accounted for

RBA WARNS ON INTEREST-ONLY LOANS

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2006++ FITCH EXPRESSES CONCERNS OVER LOWERED CREDIT QUALITY ++ CHOICE PREDICTS BROKER SEGMENTATION ++ VIRGIN MONEY SNUBS BROKERS WITH DIRECT-ONLY LAUNCH

standards. It said there was a boom in business credit, which has risen at its fastest rate since the 1980s.

“This strong growth is being accompanied by a significant increase in competition for business loans, with margins declining and a number of lenders taking steps to expand their business-lending capabilities,” the bank noted.

Margin compression in residential lending was also highlighted, with the report suggesting the challenge for lenders was to avoid “undue erosion of credit standards following 15 consecutive years of economic expansion”.

Another development noted in the RBA report is the fall in the “interest rate premium” being charged on many low-doc loans.

n The Reserve Bank of Australia (RBA) expressed its surprise recently at the rise in the number of borrowers who are choosing interest-only home loans, warning of the possibility of increased negative equity in property markets where prices are continuing to fall.

Interest-only home loans account for almost a third of the loan market, with 60% of investors and 15% of owners not required to repay any of the principal amount for up to 15 years.

In its September 2006 Financial Stability Review, the RBA said borrowers with interest-only home loans were most at risk of falling into the negative equity trap, where

one-quarter of all prime interest-only loan approvals, while one-third of sub-prime loan approvals were interest-only.

Increased competition between banks for market share has loosened the definition of who is considered creditworthy, with those once denied home loans now entering the market.

Not surprisingly, the RBA has found the arrears rate of interest-only loans is higher than that of principal & interest loans, a trend consistent across both owner-occupier borrowers and investors.

The report also noted that while mortgage arrears had increased recently, overall the aggregate arrears rate remained low by both historical and international

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THANKING OUR SUPPORTERS


n The recent sale of HSBC Bank Australia’s $2.26bn broker-originated mortgage book to non-bank lender FirstMac was the result of poorer than expected returns and a desire to built longer-term ties with its customers by selling them a greater array of products, according to a statement from HSBC.

But some aggregators, including FirstMac competitor AFG, said they remain in the dark about who will control their customers after the deal is finalised in February.

“I’m looking for them to give me some details on what happens to these customers if they vary a loan in the future, or switch products,” said Kevin Matthews, director at AFG, which has HSBC on its panel.

“Does that mean they just twist off our book and end up on FirstMac’s? We really need to know what the rules are,” said Matthews.

While Matthews said HSBC had given AFG prior warning about the sale, he believed it was presumptuous for the bank to assume that AFG would deal with fellow mortgage manager and competitor, FirstMac. While such a move could not be ruled out, he said it was wrong for the bank to assume it would happen automatically.

“If one of my customers rings FirstMac and says, ‘I need an extra $20,000, or I want to switch to a fixed rate,’ we would expect that they would put that customer back to our broker,” he told MPA. “Or, at the very least, if they do it in-house, we would continue to get paid on that deal. Because I don’t have a legal, written contact with FirstMac, I’ve got nothing to hold them to. We need some clarification on those issues.”

Gerald Foley, director at National Mortgage Brokers (NMB), which has both HSBC and FirstMac on its panel, said he wasn’t sure whether the borrowers and brokers who introduced the HSBC loans would feel comfortable dealing with a Queensland-based mortgage manager which they

“I suppose there may have been some concern from customers at the time about taking out a loan with a global bank and having it transferred to a non-bank lender, but I don’t know whether many bothered to refinance anyway. 2007 was the beginning of the GFC and there was a lot of consolidation going on, but there wasn’t the total exodus some may have expected. Even out of the players that exited, the brands are still floating around and nothing is stopping them returning. What will be interesting to look at going forward is whether there is further consolidation where one brand has swallowed up a smaller lender.”

Gerald Foley, managing director at National

Mortgage Brokers, speaking in February 2011

HSBC EXITS BROKER MARKET IN FAVOUR OF FIRSTMAC


may not have heard of before. “I expect there will be quite a few loans being refinanced in the near future,” he said.

“Hopefully the brokers involved aren’t disadvantaged and will have the opportunity to contact their clients to determine if they’re comfortable with the new owner of their mortgage.”

FirstMac, which has offered residential mortgages through the broker channel since 1988, announced the transition period for the HSBC acquisition would run until March 2007.

During the transition phase brokers and existing mortgagees will continue to deal with HSBC as FirstMac puts the systems and people in place to ensure a smooth transfer of the business. HSBC will continue to accept new applications from brokers until 16 February. Terms and conditions of existing mortgages will remain the same.

James Austin, FirstMac’s chief financial officer, said he believed the transition period would give the company adequate time to introduce itself to the HSBC aggregators and educate them about the benefits of dealing with FirstMac.

MPA_ARCHIVESFEBRUARY_2007

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$4.63


(AFR) in June. “Seriously, you couldn’t do

it today … someone could try, but it would probably cost them $100m to start it.”

Kinghorn established RAMS in 1991 in an attempt to take on the big

banks and was one of the pioneers in the industry, following in the footsteps of John Symond from Aussie Home Loans.

Before founding RAMS, Kinghorn’s own

finance group, Allco – which he started in 1979 – was busy securitising big ticket government assets and aircraft leases. He started RAMS while he was still at Allco after seeing the market potential. “Home loans are absolutely a triple-A security, with [a] 4% [margin] in those days, so I thought, ‘what the hell am I frigging around with aircraft receivables for?’ ” Kinghorn said.

Today, RAMS has a $13bn loan book with almost zero capital tied up in the business, a point Kinghorn told the AFR he was particularly proud of.

Kinghorn said his decision to sell the business was “pragmatic”, as he was more suited to building businesses than running

n RAMS founder John Kinghorn said he had plenty of fun building up the non-bank, but he said it would cost someone at least $100m to do the same thing in today’s more competitive market.

RAMS, which was due to list on the Australian Stock Exchange (ASX) in late July for around $885m, began operating at a time when margins were large enough for Kinghorn to make mistakes.

“When you’ve got a 4% spread, you can be awfully inefficient,” Kinghorn said in an interview with The Australian Financial Review

FAT MARGINS MADE IT FUN: RAMS CHIEF

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PRICE OF BEER:

them. “I’m a lousy manager, so there comes a point where the best thing I can do is to get the hell out of there and let the right people manage the business,” he said. At the time of the writing, Kinghorn was expected to retain a 20% stake in the listed company, down from 94%, and will continue as the company’s chairman.

The very private 66-year-old also announced that he would create a $300m charitable organisation called the Kinghorn Foundation that would benefit students and sport.

Although the company was listed for private sale last year – a lengthy process that included offers from private equity firm Kohlberg Kravis Roberts & Co, Macquarie Bank and GE Money – it failed to deliver the initial $1bn price tag sought by Kinghorn.

Kinghorn emphasised how the process of building RAMS had been an enjoyable part of his life.

“The fun is the doing and we’ve had a lot of fun building RAMS. We had so much fun building Allco and to me having fun and making money are the two aims,” Kinghorn told the AFR.

“Making money is fun.”


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ABSP

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Marketing to stand out

Managing a mortgage Local lenders discuss US sub-prime debacle

Mortgage franchises – Part 2

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The gettingDebating broker training

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MPA_ARCHIVESAUGUST_2007

KINGHORN SAYS HE ALWAYS WANTED TO HAVE FUN


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2007++ HOUSE OF REP ECONOMICS COMMITTEE CALLS FOR REGULATION ++ RAY WHITE FS BECOMES LOAN MARKET

n Mortgage sizes declined for the first time in 12 months in October, dropping below $300,000, according to aggregation group AFG.

The AFG Mortgage Index showed national mortgage sizes fell from an average $307,000 in September to $299,000 in October. The last time the average mortgage was under $300,000 was six months ago, in April 2006.

AFG reported that the 2.6% fall in the national average reflected falls in the average loan amount of 9% in Victoria and 8% in Western Australia. The average mortgage in WA in October was $314,000, down sharply from the September figure of $341,000.

“Worries about rate rises are eroding the confidence of buyers across the country, and for the first time we’re even seeing signals of caution in WA,” said Malcolm Watkins, executive director of AFG.

“When you see WA slow just on the threat of one rate rise, it makes me even more concerned about the

potential impact in other states.”The AFG Mortgage Index also

showed a high of 20.5% of property buyers opting for fixed rate mortgages, up from 18.8% in July. A national average of 28.9% of new mortgages

were sold to investors, although this figure fell to 22.8% when WA was excluded from the calculation.

Across the country, month-on-month sales slowed in Victoria by 13% and South Australia by 14%.

The average loan size in NSW was $384,000, in Victoria $267,000, in Queensland $282,000, SA $228,000 and nationally $299,000. The average national LVR was 68%, led by Victoria on 75%.

September 2006..................

October 2006.......................

$299,700

$307,400Average Australian mortgage size

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n Six years in the making, federal regulation in the mortgage broking industry is – relatively speaking – just around the corner.

When MPA’s Tim Neary caught up with Phil Naylor, CEO of the MFAA, at the end of June, the closing date (1 July) for submissions on the Commonwealth government’s Green Paper on Financial Services and Credit Reform was imminent.

Naylor expects, since most of the work has already been done by the NSW government in its draft Bill released in November last year, that the content of the legislation will be complete by 2009 – a good thing for the industry, he believes, since it will increase consumer and lender confidence in the broker industry.

One caveat, though – the MFAA is against overregulation of the industry, and where proposed legislation might impede the broking business, the association is unafraid to oppose it.

These are not empty promises. Already the MFAA is opposed to two clauses in the draft legislation, and has made its submission in this regard.

Its first objection is that the legal onus should be on brokers to determine consumer repayment capacity; its second that consumers be given the option to effect a stay of enforcement in an intended repossession action, if the suitability of the loan is in dispute.

MFAA READY TO TAKE STAND ON OVER-REGULATION

their own members as far back as 2002, and at the time promoted federally administered regulation.

However, the previous government’s preference was for state regulation instead. “Six states and two territories each doing different things would have been problematic for the efficiency of the industry,” he said.

Still, the MFAA encouraged each to work in unison, while at the same time produced its own regulatory code of practice.

Naylor believes that the resultant MFAA code is robust and has a disciplinary process with teeth enough to expel members who step out of line.

In addition, the association originally established the credit industry ombudsman, which is ASIC-approved, free for consumers and independent. Through it, consumers who feel poorly done by are able to resolve disputes and, where applicable, receive compensation.

Many, though, would argue the MFAA code does not go far enough. It cannot stop expelled members practising their trade, nor can it prevent them from signing up with a rival organisation, such as the FBAA.

The implementation of federal regulation should put an end to this problem and, most likely, strengthen the hand of the MFAA.

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Both are discriminatory, the MFAA feels. Determining affordability is the responsibility of the lender. Brokers do not have the tools to do so, nor is it their role in the transaction chain. “They can, and should, recommend affordability – but that’s all,” Naylor said. The repossession dispute clause is equally problematic. “And it would see brokers having to carry the burden of higher personal indemnity insurance,” he said.

That the new regulations should cover all credit products, not simply mortgage credit, is also an issue the MFAA wants the federal government to reconsider. Some brokers’ businesses cover a broader spectrum of the lending market than simply mortgage lending.

According to Naylor, the MFAA has always been committed to regulating its members. But it will only support workable models.

This is an issue the MFAA is clear on, hence its stance against overbearing regulations. It is also the reason why it is opposed to mortgage brokers being regulated in the same way as financial planners, since they operate on different sides of the balance sheet.

“Money flows in opposite directions in each, so the risk is different and it should be regulated differently,” Naylor said.

Overall, though, the MFAA remains confident that industry regulation will indeed come to fruition under a federal model.

Naylor said the MFAA recognised the benefits associated with regulating

Phil Naylor


AUSSIE/CBA DEAL “AN EROSION OF CHOICE”

n Refund Home Loans boss Wayne Ormond has expressed dismay at Commonwealth Bank’s acquisition of a 33% stake in Aussie Home Loans.

Ormond said in a press release that it was regrettable to see the recent demise of a number of smaller mortgage brokers, and more so for a market leading broker to lose its independence and join those controlled by the banks.

“John Symond was a pioneer in providing greater choice of funding for homebuyers and it is to be hoped that this move does not represent a further erosion of the choice available to homebuyers,” Ormond said.

“…homebuyers should realise that there are many other home loan products available on the market…”

Both Refund and Aussie offer CBA products.

++ CBA AXES FIRST-YEAR TRAIL COMMISSION ++ WESTPAC IN DISPUTE WITH RAMS FRANCHISEES ++ BROKER NEWS WEBSITE LAUNCHED

mortgage events• WESTPACTAKESOVERST.GEORGE• BANKSRAISERATESTOCOVERFUNDINGINCREASES• HOMELENDINGFIGURESFLAT• GMAC-RFC,SEIZACAPITALPULLBACKFROMMARKET• CBABUYSBANKWEST

PRICE OF BEER:

Wayne Ormond


www.mortgagemagazine.com.au

3

Issue 8.2

Steep learning curve

WINNER



ABSP

2006BELL

AWARDS

FINALIST



ABSP

2006BELL

AWARDS

PLUS

Draft broker rulesIndustry experts weigh up the proposalTarget marketsTapping into Australia’s melting pot

Veki Brdjanin and that $94m deal

Profile:

Brokers on non-banks

Front cover.indd 3

31/01/2008 3:24:54 PM

MPA_ARCHIVESNOVEMBER_2008 CBA MERGERS:

1989 Acquired 75% of ASB Bank in New Zealand

1991 Acquired the failing Victorian government-owned State Bank of Victoria

1994 Sold its shares in National Bank of Solomon Islands

- Took a 50% share in PT Bank International Indonesia

2000 Commonwealth Bank and Colonial Limited announce merger, included Colonial’s stake in Colonial National Bank, the former National Bank of Fiji

- Also acquired remaining 25% of ASB Bank

- Acquired full ownership of PT Bank International Indonesia

2006 Acquired remaining 49% in Colonial National Bank

2008 Acquired Bankwest

- Purchased 33% stake in Aussie, which had recently acquired Wizard Home Loans


n Property group Raine & Horne has warned that large numbers of Australian homeowners face the prospect of 50% increases in their mortgage repayments in 2008.

“The Reserve Bank has increased interest rates eight times since 2005, of which

MORTGAGE REPAYMENTS TO JUMP BY 50%

• KATHERINDERMANISNAMEDYOUNGGUNOFTHEYEAR• ELIZABETHWILSONWINSINDEPENDENTEQUIVALENT• JOSHUAEGANLANDSFRANCHISEBROKEROFTHEYEARTITLE• DANIELO’BRIENISINDEPENDENTBROKEROFTHEYEAR• KATHYCUMMINGSRECOGNISEDFORLIFETIMEACHIEVEMENT

• GREGSTERLAND,WENDYHIGGINSANDGERARDTIFFENNAMED TOP DEALMAKERS

• NMCTOPSTHEBROKERSONNON-BANKSPOLL• THEBROKERAGEVOTEDNUMBERONEAGGREGATOR• ING,ANZANDCBAVOTEDASTOPBANKS

ama winners years best brokers2008++ FEDERAL TREASURY REFUSES TO REGULATE EXIT FEES ++ BROKERS LAMENT NON-BANK DEPARTURES ++ BANK FEESCLIMB8%IN2007:REPORT

borrowers locked into fixed rate loans have been immune to until now,” said Angus Raine, CEO of Raine & Horne.

“However, this year, 30% of Australians with mortgages will shift from fixed interest rates at around 6% to standard variable interest

rates nudging 9%.“They’ll basically face the

prospect of three years’ worth of interest rate hikes, and this will rock many household budgets,” he said.

Gary Lees, general manager of Raine & Horne Financial Services – the mortgage broking arm of Raine & Horne – agreed. “On a 25-year interest-only mortgage of $350,000 at 6%, a homeowner will be making monthly repayments of around $1,750. If the rate jumps to 9%, the monthly repayment will be $2,625. This is a significant increase of $875 or 50%.”

MPA_ARCHIVES_JUNE_2008

http://www.mkmcapital.com.au


http://www.planaustralia.com.au


http://www.resi.com.au


n Growing concentration in the banking sector has raised concerns with the Australian Competition & Consumer Commission boss.

A new report has shown that the Big Four may now be overshadowed by the Big Two.

Research by Brandmanagement found that CBA/Bankwest and Westpac/St.George Bank took a

combined 85% of the mortgage growth in the March quarter.

CBA/Bankwest raked in $22.7bn of the $26.6bn growth in mortgage books, or 56% of the mortgage pie for that quarter. Westpac/St.George took $7.7bn of the growth.

The combined growth of ANZ and NAB for that quarter was less than 15%.

ACCC CONCERN AT BIG BANK DOMINANCE

The ACCC expressed regret over its decision to consent to the CBA/Bankwest merger in October last year. ACCC boss Graeme Samuel admitted the merger was “not one we had been very happy about”.

Since then, the ACCC has indicated that future mergers between major banks and other lenders would not be approved.

“Any potential mergers between members of the Big Four and non-bank financial institutions or regional banks will be examined very rigorously and with intense scrutiny,” said Samuel.

The Big Four have dominated in the wake of a severely crippled non-bank sector. They now hold 72% of the outstanding mortgages, worth $730bn, compared to last year’s figure of 57% that was worth $539bn.

“We are increasingly concerned about the potential for a less than intensely competitive structure developing among the banks and the non-bank financial institutions as we emerge from the global financial crisis,” Samuel told The Australian.

MPA_ARCHIVESAUGUST_2009

++ MFAA SETS REGULATION STANDARDS HIGH ++ GE MONEY DITCHED THIRD PARTY MORTGAGES ++ CREDIT UNIONS WELCOME LICENSING

2009 PRICE OF BEER:

$5.19world events• BARACKOBAMABECOMESFIRSTAFRICAN-AMERICAN

PRESIDENT OF THE US• MICHAELJACKSONDIES• G20SUMMITMEETSINLONDON• SLUMDOG MILLIONAIRE IS BEST PICTURE AT THE OSCARS


home loans under the belt within three months of the settlement date.

Previous to the acquisition, he said, Aussie had 580 loan writers and was writing about $750m a month.

Symond added that the merger, which will make Aussie the largest branded retailer of financial services products outside of the major banks, would also see the business gain incremental market share.

At the time of going to press, Aussie Home Loans had not confirmed whether the Wizard brand name would disappear altogether, as was reported in The Australian Financial Review in late January.

n Aussie Home Loans has revealed ambitious plans for the merged entity formed following the Wizard deal.

The acquisition deal, which comes into effect on 1 March 2009, leaves Aussie Home Loans in possession of the Wizard brand as well as a 166-branch strong distribution network.

Aussie’s executive director James Symond has set out a string of ambitious targets for the new entity.

The first order of business, he said, would be to align the businesses by using Aussie as the ‘umbrella brand’ for the whole group. This, according

AUSSIE HAS AMBITIOUS PLANS FOR WIZARD

+


to Symond, would be a relatively smooth transition.

“The most challenging area [of a merger] is always the culture, but our fit is extraordinarily good. The Wizard culture is quite similar to Aussie – avant garde, entrepreneurial, professional and fun,” he said.

“We’re going to have our challenges, but at the end of the day we know our business. We have the right intentions, and we will ensure that we build upon the successes that the Wizard franchisees have built already.”

He told MPA sister publication AB that while there would be some turnover in the process, he expected to have in excess of 150 shop fronts across urban and regional Australia, “well in excess” of 800 staff and $1bn a month in new residential

mortgage events• ABS:SHARPESTHOUSEPRICEDROPIN30YEARS• AOFMRULESRESTRICTNON-BANKS• GOVERNMENTBOOSTSHARDSHIPASSISTANCE• FHOGEXTENDED• FEDERALGOVERNMENTREJECTSCALLSFOR‘PEOPLE’SBANK’

PRICE OF BEER:

James Symond


++ NAB RESTRICTS POOR-QUALITY BROKERS ++ MACQUARIE SETS AGGREGATION PLANS IN MOTION

middlemenAggregators talk back

more than just

www.brokernews.com.auiSSue 9.5

TRAIL PAYMeNTsAre we heAding down A diFFerent PAth?PROFILeDPretty SMArt: Joe SiriAnni

ReAL VALueAvoiding the vAluAtion guillotineOFC.indd 2

20/04/2009 6:04:36 PM

“ The Wizard culture is quite similar to Aussie – avant garde, entrepreneurial, professional and fun

”


n In the major banks’ race to gain control over the mortgage market, NAB has gained a considerable advantage.

In late August, NAB secured Challenger Financial Group’s mortgage business for $385m.

The transaction included the aggregation platforms of Choice, PLAN and FAST (which Challenger acquired two years ago) and $110bn in mortgage under administration.

The deal also included multi-brand lending using white label mortgage product capabilities and relationships with distributions associates such as Homeloans Ltd.

As a result, NAB will have ownership of a network of 5,700 loan writers and 400 mortgage managers. The deal excluded any interest in non-conforming and commercial loan business as well as an $11bn backbook of residential mortgages. In the past two years, the majors have stepped up their mergers and acquisitions

NAB PURCHASES CHALLENGER’S MORTGAGE ARM

• PAULBIEGNAMEDFRANCHISEYOUNGGUNOFTHEYEAR• HANYPHAMWINSINDEPENDENTEQUIVALENT• JOSHUAEGANAWARDEDFRANCHISEBROKEROFTHEYEAR• JOESIRIANNIRECOGNISEDFORLIFETIMEACHIEVEMENT• DAVIDBRELLISINDEPENDENTBROKEROFTHEYEAR

• AMP,INGANDCITIBANKTOPBROKERSONBANKSSURVEY• AFGANDMORTGAGECHOICEBIGGESTSUPERBROKERSBY

LOAN BOOK• DANNYMASRINAMEDBESTCOMMERCIALBROKER• WENDYHIGGINS,LINDAWEIJINGLINANDJEREMYFISHER

TOP THREE BROKERS



2009++ RAFT OF LENDERS DROP 100% LVR PRODUCTS ++ RMBS MARKET STALLS ++ ST. GEORGE SEGMENTS BROKERS

activity. Westpac bought RAMS and merged with St.George Bank. CBA acquired Bankwest and 33% of Aussie Home Loans (which acquired Wizard from GE Money).

As long as there is no objection from the ACCC, the deal is expected to be completed in late 2009.

“I think there were expectations there would be

fundamental changes, which hasn’t been the case

at all. The feedback has been very positive and

from my point of view, NAB’s ownership has

allowed Advantedge and the aggregator brands to

offer more to their members. The Advantedge

business simply wouldn’t have been able to invest

in technology to the extent we have, in licensing

to the extent we have and even in the financial

solutions arm. We simply wouldn’t have been able

to invest in that without the support of NAB.”

Stephen Moore, CEO of Choice,

speaking in December 2010


http://www.interimfinance.com.au


http://www.sintex.com.au


http://www.specialistmortgage.com.au


++MAJORBANKS LOSE MFAA BOARD INFLUENCE ++ FIRSTFOLIO ACQUIRES LEASECHOICE ++ HEMISPHERE SPEARHEADS NON-BANK RESURGENCE

n Flagging a renewed demand for the services of brokers, a report has shown the home price-to-income ratio has returned to pre-GFC levels.

Rismark’s latest Australian housing affordability index estimates that home prices are 4.6 times higher than disposable household income. This is only slightly higher than the March 2003 figure of 4.4 times.

“During the GFC, Australia’s average home price-to-income ratio fell to a low of 3.9 as dwelling prices declined while household incomes remained surprisingly stable,” Rismark managing director Christopher Joye said. “However, growth in dwelling prices since the start of 2009 has seen the ratio of prices-to-incomes restored.”

HOUSING AFFORDABILITY BACK TO PRE-GFC LEVELS


2010 • ADEVASTATINGEARTHQUAKEINHAITIKILLSTHOUSANDS• JULIAGILLARDREPLACESKEVINRUDDASPRIMEMINISTER• MARYMACKILLOPBECOMESAUSTRALIA’SFIRSTSAINT• PIKERIVERCOALMINEEXPLOSIONKILLS29INNEWZEALAND• THE HURT LOCKER WINS BEST PICTURE AT THE OSCARS


$5.45

Joye added the findings dismissed claims of the home prices-to-income ratio being up as high as eight times. They implied too that house prices are not as unaffordable as is commonly presumed.

“Given there’s around $1trn of mortgage debt outstanding in Australia, which is secured against $3.5trn of residential property, the gearing is actually less than 30%,” he said.

CHRISTOPHER JOYE

“ During the GFC, Australia’s average home price-to-income ratio fell to a low of 3.9

”


n The Mortgage Professionals (TMP), National Brokers Group (NBG) and The Brokerage (TB) have signed an agreement in principle to form a new aggregator.

The new merged entity will bring together a national network of more than 900 mortgage brokers that collectively have loans under management of about $16bn (as at November 2009). “The deal is expected to be finalised early next year provided all relevant conditions, precedents and approvals are met. The new business will

MACQUARIE’S NEW SUPER GROUP

MPA_ARCHIVESFEBRUARY_2010

IN NUMBERS:

then be officially launched with its new name and brand,” the three aggregators said in a statement.

Currently, it has the project name ‘Wonderland’.

Besides the three aggregators, two other signatories to the agreement are Macquarie Bank, which

helped to facilitate the merger, and Jeffrey Zulman, the proposed CEO.

“This is an exciting development. The new business offers all the advantages of size while losing none of the traditional broker-focused values of these

three aggregators. The business model we’ve devised is creating interest in the marketplace,” Zulman said.

NBG chairman Rod Lange said the merger could not have come at a better time for brokers, while TMP CEO Michael Nicholson said

merging the three businesses

++ REIA BURSTS HOUSING BUBBLE ++ AUSSIE BANKS SAFE FROM SHOCK ++ PEPPER EXERCISES RMBS CALL OPTION

mortgage events• NABUNVEILSADVANTEDGEBRAND• RAMSEXITSBROKERCHANNEL• CBAINJECTS$400MINTOBANKWEST• AOFMINVESTS$3.4BNINRMBS• AUSTRALIAAHEADOFTHECURVE:IMF

PRICE OF BEER:

$482,3752010 AVERAGE HOME PRICE: www.brokernews.com.au

issue 10.02

ONLINe BROKING MaKing FrienDs nOt FOes OF COMPutersCOuRAGe DriVe Fear Out OF Business

NeW CHALLeNGes JOHn FlaVell PrOFileD

nakedCompetition stripped down

OFC_SPINE_final.indd 4

25/01/2010 3:34:39 PM

would achieve “economies of scale that will underpin our brokers in every aspect of their business”.

TB chairman Geoff Smith said: “There’s no doubt brokers are doing it tough right now, and this new merged entity aims to give control and power back to them.”

AMOUNT OF LOANS UNDER MANAGEMENT

900

$16bn

MORTGAGE BROKERS BROUGHT TOGETHER IN NEW NETWORK


date sub-aggregated through Connective.

The acquisition marks Mortgage Choice’s first step into aggregation via its fully-owned subsidiary, Beagle Finance Pty Ltd, which will launch in the first quarter of 2010.

Further “acquisitions and alliances” are planned in the future to “help boost the national company’s rate

MORTGAGE CHOICE BUYS LOANKIT

• TERRYAZZOPARDIWINSFRANCHISEYOUNGGUNAWARD• CAMERONWILESLANDSROOKIEOFTHEYEARCATEGORY• JEFFFALCONERNAMEDINDEPENDENTBROKEROFTHEYEAR• STEVEWESTONRECOGNISEDFORLIFETIMEACHIEVEMENT• DEBBIENEALESCOOPSBDMOFTHEYEARTROPHY

• ANZ,ING,CBAVOTEDBYBROKERSASTOPTHREEBANKS• RANJITTHAMBYRAJAHNAMEDBESTCOMMERCIALBROKER• WENDYHIGGINS,JUSTINDOOBOVANDCOLINLAMBARETHE

NATION’STOPTHREEBROKERS• AFM,HOMELOANSLTDANDLIBERTYARETOPNON-BANKS



20 10++ MFAA BACKS DEFS ++ DELINQUENCIES LEVEL OFF ++ HIA SLAMS BUILDING STARTS STATISTICS

acquisitions and alliances were “necessary to strengthen Mortgage Choice’s growth.”

LoanKit owner Kym Rampal said, “I am very pleased that the aggregation business that I and my brokers worked so hard to build is being sold to a company with clear vision, exciting strategies and a future full of potential.”

n Mortgage Choice has followed up on hints made in 2009 that it would be looking to make acquisitions, and bought aggregator LoanKit.

The ASX-listed business has bought “selective LoanKit assets including its information technology platforms, loan book and contracts with 50 mortgage brokers”. LoanKit has to

of loan volume growth.” CEO Michael Russell said, “our expansion to date has been solely organic but as the housing finance market evolves, acquisitions provide a means to take advantage of growth opportunities and maintain our position as an industry leader.”

He said alongside diversification and franchise recruitment,

COVER YOUR ASS7.36%

Rates quoted are effective from 21st February 2011 and subject to change. ^Comparison rate 7.51%. *At end of initial 2 year period rates will be subject to normal market fluctuations. Comparison rate based upon a loan of $300,000 for term of 25 years. This comparison rate applies only to the example given and different amounts or terms will result in different comparison rates. Other terms, fees or conditions may apply.

Ezy Quit Line 1800 TOO EZY (866 399) Ezy Quit Email [email protected] Quit Web www.mezy.com.au

90% LVR

Upfront & Trail included

100% Offset Account

every bank deal is doing your business damage

2 Year Rate Guarantee

Owner Occupied or Investment

No Ongoing Fees

7.49% *

Kym RampalMichael Russell

http://www.loankit.com.au


COVER YOUR ASS7.36%

Rates quoted are effective from 21st February 2011 and subject to change. ^Comparison rate 7.51%. *At end of initial 2 year period rates will be subject to normal market fluctuations. Comparison rate based upon a loan of $300,000 for term of 25 years. This comparison rate applies only to the example given and different amounts or terms will result in different comparison rates. Other terms, fees or conditions may apply.

Ezy Quit Line 1800 TOO EZY (866 399) Ezy Quit Email [email protected] Quit Web www.mezy.com.au

90% LVR

Upfront & Trail included

100% Offset Account

every bank deal is doing your business damage

2 Year Rate Guarantee

Owner Occupied or Investment

No Ongoing Fees

7.49% *

http://www.mezy.com.au


http://www.macquarie.com.au/mortgagesolutions

http://www.vow.com.au/join

MPA 11.3 - Special Edition

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Transcript of MPA 11.3 - Special Edition