Banking giants get tough on mortgage brokers
- Thread starter rugrat
- Start date
A major Point of Difference in consulting an independent mortgage broker is that the broker looks at which lenders the customer may be eligible to apply to, and which lender and loan products may best suit the customer.
If CBA or Westpac or the Bandywallop Credit Union is the most appropriate choice, then the broker is honour bound to put that proposal to the customer.
If the broker shortlists CBA simply to meet volume requirements, then is that broker acting dishonourably?
Brokers are required to present the customer with a list of their lenders and the commissions paid by the lenders. Will we now be required to declare to the customer the volume requirements of the lenders and whether the customer's application is within those requirements? How impartial will the customer then see the proposal to be if they are told that so far this six month period, I have lodged 3 loans with CBA and theirs will be my qualifying 4th?
And by the way, since when does Mortgage Choice 'employ' 600 brokers? To the best of my knowledge, Mortgage Choice does not employ any brokers, who are all franchisees.
Use of words is implication of meaning. Franchisees are not employed by the Franchisor.
And 'independence' of mortgage brokers is fundamental to the provision of a quality service.
Otherwise, we may as well just be Mobile Mortgage Lenders for a single brand name - or go and work in a branch where the customer will be in no doubt of our allegiance and therefore proposal of 'best' loan for them.
Bah! Humbug!
However, with the way the CBA servicing calculator is now configured, fewer customers will be eligible with CBA than previously so CBA may be relieved of a lot of customers simply because they won't qualify, and the non-bank lenders may start to become a real market influence again.
Cheers
Kristine
If CBA or Westpac or the Bandywallop Credit Union is the most appropriate choice, then the broker is honour bound to put that proposal to the customer.
If the broker shortlists CBA simply to meet volume requirements, then is that broker acting dishonourably?
Brokers are required to present the customer with a list of their lenders and the commissions paid by the lenders. Will we now be required to declare to the customer the volume requirements of the lenders and whether the customer's application is within those requirements? How impartial will the customer then see the proposal to be if they are told that so far this six month period, I have lodged 3 loans with CBA and theirs will be my qualifying 4th?
And by the way, since when does Mortgage Choice 'employ' 600 brokers? To the best of my knowledge, Mortgage Choice does not employ any brokers, who are all franchisees.
Use of words is implication of meaning. Franchisees are not employed by the Franchisor.
And 'independence' of mortgage brokers is fundamental to the provision of a quality service.
Otherwise, we may as well just be Mobile Mortgage Lenders for a single brand name - or go and work in a branch where the customer will be in no doubt of our allegiance and therefore proposal of 'best' loan for them.
Bah! Humbug!
However, with the way the CBA servicing calculator is now configured, fewer customers will be eligible with CBA than previously so CBA may be relieved of a lot of customers simply because they won't qualify, and the non-bank lenders may start to become a real market influence again.
Cheers
Kristine
Yes but surely the franchisor does impose these limits on their franchisees in able for them to remain a franchisee? Similarly, McDonalds stores must adhere to the strictest of guidelines as each franchise represents the brand. So essentially they are employed by mortgage choice.
Another thing, with targets like 8-10 loans per month, you would have to question whose interest they are acting in when you approach them for a loan. I guess it's no different from any business really, continuing with the McDonalds comparison, the manager is not going to try to talk someone out of a Big Mac because they are overweight now are they?
And similarly with any business, there are good ones who do provide genuinely good customer focussed service, and these ones will thrive through good references from satisfied clients, but if you walk into mortgage choice off the street and they haven't written up a loan for the month yet, are they focussed on getting what's best for you or getting a signature at any cost?
Just putting it out there.
Another thing, with targets like 8-10 loans per month, you would have to question whose interest they are acting in when you approach them for a loan. I guess it's no different from any business really, continuing with the McDonalds comparison, the manager is not going to try to talk someone out of a Big Mac because they are overweight now are they?
And similarly with any business, there are good ones who do provide genuinely good customer focussed service, and these ones will thrive through good references from satisfied clients, but if you walk into mortgage choice off the street and they haven't written up a loan for the month yet, are they focussed on getting what's best for you or getting a signature at any cost?
Just putting it out there.
There have been volume hurdles in the mortgage industry for quite some time now, so it's nothing new. You will find some brokers, especially now, have narrowed things down to their favorite few lenders - these brokers are typically not interested in the "best" deal for the borrower, but is after a fair and decent deal, and to do so efficiently. And of course, you've got your usual arrangement of sharks out there.
I send out a lot of work to brokers for our clients, and I either enusre that the broker has access to everything and does actually act independantly, or I find more than one broker, and compare the products from different institutions and pick which is best.
Either way, I always advocate research, research, research.
I send out a lot of work to brokers for our clients, and I either enusre that the broker has access to everything and does actually act independantly, or I find more than one broker, and compare the products from different institutions and pick which is best.
Either way, I always advocate research, research, research.
They don't appear to be on paper, but many franchisors treat them as if they were.
The most attractive aspect of being a franchisor is that someone else does the work that employees would normally do, but also takes the risk and lives the fantasy of running his/her own business.
They even quote the the total sale of them as if it were their own.
It also makes CBA an easy target for the brokers to explain why they exclude them from their list.
It also explains why mortgagechoice franchises are selling at what seems very cheap at first sight.
I can see a lot of brokers loosing their CBA accreditation because of this and not because they don't get enough business.
At the moment, I don't see that the CBA has a significant point of difference in the marketplace. There are plenty of lenders that are just as secure which in most cases can meet consumers needs more effectively. The main reason I've found for recommending the CBA recently is the client is an existing customer and it's not cost effective to move elsewhere.
The CBA is introducing this stating that it's good for the quality of submissions but I fail to see the correlation between high volume targets and quality. Don't even get me started on the number of mistakes made at the bank's end which inevitably cost brokers time and money to fix.
I'm fairly sure I'll meet their targets between now and Christmas, but I can see that unless brokers act in the banks interests and not the clients, sooner or later most will to have to pay the re-accreditation fee.
At the moment, I don't see that the CBA has a significant point of difference in the marketplace. There are plenty of lenders that are just as secure which in most cases can meet consumers needs more effectively. The main reason I've found for recommending the CBA recently is the client is an existing customer and it's not cost effective to move elsewhere.
The CBA is introducing this stating that it's good for the quality of submissions but I fail to see the correlation between high volume targets and quality. Don't even get me started on the number of mistakes made at the bank's end which inevitably cost brokers time and money to fix.
I'm fairly sure I'll meet their targets between now and Christmas, but I can see that unless brokers act in the banks interests and not the clients, sooner or later most will to have to pay the re-accreditation fee.
This is the heart of the problem. How can a broker recommend the best product if he/she knows that by not strongly recommending CBA, they will lose their accreditation? This poses a conflict of interests.
I would say, if CBA products are not competitive..there will be alot of honest brokers out there losing their accreditation with CBA.
Yea.....right...
Regards JO
Josko the conflict of interest is this:
The broker get's paid a commission to recommend a loan.
It's the same as:
A financial planner get's paid a commission to recommend a fund
So there is always and always has been a conflict of interests.
Unless the CBA comes out with a clearly better product, it's a field day for brokers to shut them out.
I alos noticed some smart ones don't deal with them anyways.
The broker get's paid a commission to recommend a loan.
It's the same as:
A financial planner get's paid a commission to recommend a fund
So there is always and always has been a conflict of interests.
Unless the CBA comes out with a clearly better product, it's a field day for brokers to shut them out.
I alos noticed some smart ones don't deal with them anyways.
This is just another example of the big four throwing their weight around. Their percentage of business has gone up dramatically since the smaller lenders left the market, however brokers share of how the business is introduced has not changed. They have reduced commissions, and CBA and Westpac have introduced minimum levels to keep accreditation. nab/homesdie have intorduced similar barriers. The squeeze by the big four will continue until their are again more alternatives in the market place.
It puts brokers in a bit of a bind, but large agregators like Mortgage choice have some market power themselves, they may be able to force the minimum volumes to be for the agregator as a whole, rather than individually. Certainly businesses with more than one broker routinely channel deals to those accredited as 'gold status' or similar with one or another of the lenders so as to receive better service etc. And franchisees use their relationships with other franchisees in the area for the same purpose. We have had to do a similar thing with business from WA for quite a while now.
When and if the market for smaller lenders returns, the big four will have to follow the market. when they do, Brokers will have a field day as the media and governments continue to bash the big banks.
It puts brokers in a bit of a bind, but large agregators like Mortgage choice have some market power themselves, they may be able to force the minimum volumes to be for the agregator as a whole, rather than individually. Certainly businesses with more than one broker routinely channel deals to those accredited as 'gold status' or similar with one or another of the lenders so as to receive better service etc. And franchisees use their relationships with other franchisees in the area for the same purpose. We have had to do a similar thing with business from WA for quite a while now.
When and if the market for smaller lenders returns, the big four will have to follow the market. when they do, Brokers will have a field day as the media and governments continue to bash the big banks.
Which Bank ??????????????????
I do a bit with them and wesuck and NAB, and its no skin off our nose.............BUT for the consumer its sucks.
The reality is that such volume hurdles FORCE the smaller volume brokers into a corner of HAVING to write such business.
This clearly is not so much a conflict of interest as it is a legalised version of reducing competition in quite a srong manner. The ACCC says such volume hurdles are not a breach in themselves, however the nett effect will be that small volume brokers will be forced to deal with. Seeing that the majority of brokers are SMALL fry and dont write 10 to 20 loans a month, the hurdles will force a shift in market behavious to those lenders.
I wont bother going into what constitutes " the best" deal, because for almost every loan we write there is a "different soft data" need that can not be transferred to a financial cost.
I would have expected the frans to come out with support of this rubbish because its good for them.
ta
rolf
I do a bit with them and wesuck and NAB, and its no skin off our nose.............BUT for the consumer its sucks.
The reality is that such volume hurdles FORCE the smaller volume brokers into a corner of HAVING to write such business.
This clearly is not so much a conflict of interest as it is a legalised version of reducing competition in quite a srong manner. The ACCC says such volume hurdles are not a breach in themselves, however the nett effect will be that small volume brokers will be forced to deal with. Seeing that the majority of brokers are SMALL fry and dont write 10 to 20 loans a month, the hurdles will force a shift in market behavious to those lenders.
I wont bother going into what constitutes " the best" deal, because for almost every loan we write there is a "different soft data" need that can not be transferred to a financial cost.
I would have expected the frans to come out with support of this rubbish because its good for them.
ta
rolf
