ASIC acts against Mortgage Choice

[Daniel]

ASIC posted a notice on its website yesterday ( http://www.asic.gov.au/asic/asic_pu...rtgage+choice+advertising+claims?openDocument ) stating it has taken action against Mortgage Choice regarding the claims "unbiased" mortgage selection in its advertising. ASIC alledges that Mortgage Choice only originates loans from which they obtain a commission.

The link above is directly to the article.

I printed a copy and gave it to my mortgage lender contact at ResiMortgage in Brisbane who had quite a chuckle.

 

[Rolf Latham]

Hi Daniel

It was only a matter of time................ This is part of the same ASIC logic that legally forces a broker into not beng allowed to disclose what product may actually be best for a client because it could be construed to be financial advice

In that regard, in my opinion, some non bank lenders that have loud media voices shouldnt throw stones, and believe me, they will once again get lots of free mileage from this one.

While they may have cheap" products the fact they mostly dont have offset accts, their fixed loans are often expensive, their LOCs are an expensive luxury and most of their loans are mortgage insured, akes them not so cheap and often quite inflexible.

BUT, key is that most of them charge a rather stiff, (anti competitve behavious) exit fee that they do NOT include in their advertising, nor in the comparison rate tables, and the first the borrower hears of it is when they read the contract (or more often when they attempt to sell the property of move lenders)

While within the law, I personally see that as a morally marginal practice.

As a broker, or a broker group you can NOT represent every lender, nor should one make that claim, and to my understanding no one ever has.

While I dont have any affiliation with Mortgage Choice, it is clear to me that their "unbiased statement" relates to the lenders on their panel and not to all lenders. I also believe that the any normal reasonable person would see it that way as well.

Enough rant..................


ta
rolf

 

[Aceyducey]

They're looking at a number of other brokers making similar public claims.

'false and misleading advertising'

Cheers,

Aceyducey

 

[Kristine..]

BUT, key is that most of them charge a rather stiff, (anti competitve behavious) exit fee that they do NOT include in their advertising, nor in the comparison rate tables, and the first the borrower hears of it is when they read the contract (or more often when they attempt to sell the property of move lenders)

Hi Rolf

Which is why I always involve my customers in the loan selection process.

My laptop is an 'open book' and it can be quite a lengthy process explaining to a customer the range (1,200 approx) of loan products, the difference between them, opening and reading the lenders' notes, loan descriptions, comparing loans over 30 years, printing out details of the loans, explaining and demonstrating mortgage insurance etc

Prior to assisting the customer with the actual loan application I hand over a 'Commission Declaration' which states in detail the up-front and trailing commission (if any) paid by each lender on my panel to my aggregator / association, Comparison Rate Schedules, and print outs of the specific loan details which the customer may be considering.

This includes any monthly or ongoing fees, redraw fees, 'deferred establishment fees' etc.

This way the customer is making an informed choice from the loans which I have access to from the view point of their current circumstances.

If the customer chooses a product which has deferred establishment fees on the basis that it is their current intention to keep the property, and should circumstances change, then the customer is making an informed choice on the likelihood of that change.

Obviously no broker has access to all loan products. No 'reasonable person' would expect that they had that access. No 'reasonable person' expects that the broker approves the loan or gives undertakings that a lender will approve an application.

However, a 'reasonable person' has every right to expect that the broker will have a good understanding of the lenders which they are accredited with and a good working knowledge of those lenders' loan products and eligibility criteria.

A broker is, after all, merely a 'go-between', an 'introducer', an 'agent' or a 'referrer', depending on the choice of nomeclature. However, it is reasonable to expect that that broker explain to the customer that while there may be hundreds or even thousands of lenders available, this broker holds accreditation with 30 or twelve or five, and therefore can only assist the customer in choosing an appropriate loan product available from those lenders.

The law exists to protect the weak from the strong. It determines that (in this instance) the broker is the 'adult' and the customer the 'child'. As such, the law protects the interests of the child.

Flamboyant advertising using superlatives such as 'best', 'right', 'cheapest' etc are outmoded and emotive terms which impossible to quantify.

Mortgage lending is not buying a loaf of bread, a brand of shampoo or a trip to Dreamworld.

It is easy to overlook that we are talking about significant amounts of money constituting an ongoing financial committment between two parties which is enforceable by law.

I may personally be genetically programmed to encourage other people to try, to give it a go and to venture forwards, but when it comes to brokering, there is no substitute for adopting a conservative attitude and making sure that the customer is informed and understands the working details of the loan products which they may be considering.

Best? Nah! No such thing. I drink coffee, you drink tea, which is best?

Cheers

Kristine

 

[ggumpshots]

Kristine ,
Thank you for an informative and detailed response