MAKING NEWS

Tue, 27 October 2009
Banking giants get tough on mortgage brokers
THE independence of mortgage brokers may be threatened by the big banks forcing them to write a minimum number of loans or face "reaccreditation" classes costing up to $500.

Commonwealth Bank (cba.ASX:Quote,News) has written to 8000 brokers, telling them they must submit a minimum of four home loan applications and settle a minimum of three loans in a six-month period to remain accredited from July 1, The Australian reports.

At the same time, Westpac (wbc.ASX:Quote,News) is rolling out a scheme that specifes a target of one loan every six months.

Refund Home Loans executive chairman Wayne Ormond told The Australian the conditions would reduce mortgage options for customers.

"It would be valid for consumers to ask: if a broker is recommending a CBA loan, is that the best loan, or is it being recommended so the broker won't lose his accreditation?" he said.

Brokers face re-education if they do not meet these targets.

Westpac will charge brokers $150 to attend a reaccreditation workshop, compared with a $500 fee levied by Commonwealth.

For a long time, the banks have surrendered part of their profit margins in home lending to mortgage brokers, which originate more than 35 per cent of home loans.

The banks have been trying to improve the efficiency of their dealings with brokers, partly by dealing with fewer, high-volume originators.

National Australia Bank (nab.ASX:Quote,News), for its part, has adopted a star system that rates brokers according to a number of factors, including the quality of loans submitted, while ANZ Bank (anz.ASX:Quote,News) has no minimum performance criteria.

On June 29, Refund lodged a complaint with the Australian Competition & Consumer Commission, alleging that Commonwealth had abused its market power, but the ACCC declined to intervene.

Commonwealth, the nation's biggest home lender, has rejected any suggestion it is seeking to increase its market dominance.

A spokesman said tighter broker accreditation was to ensure customers were serviced by brokers who understood the bank's loans.

Not all brokers oppose the changes in principle.

Along with the licensing requirements in the National Consumer Credit Protection Bill, the changes are expected to result in a 20-25 per cent reduction in the number of registered brokers from the current 13,500.

Kristy Sheppard, senior corporate affairs manager for Mortgage Choice, which employs 600 brokers, welcomed Commonwealth's move, saying it would weed out part-time brokers and those with insufficient knowledge of home loan products.

She said Mortgage Choice brokers were required to write 8-10 loans a month, which could be from any of the 23 lenders it represented.

Read more in The Australian

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