Mortgages and Home Loan Industry Articles (3) March 2011

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  • Compliance, ASIC nothing to fear

    As the full weight of licensing and NCCP regulations comes to bear on the broking industry, Gadens Lawyers has assured the industry compliance will be easier than expected.

    Senior partner Jon Denovan told Australian BrokerNews compliance should not be a point of fear for the industry.

    "I think it will be much easier," he commented. "Everyone likes to cry wolf about any new law. I've seen the credit code come in, and everyone said it would be the end of the world. It's a bit like Y2K. People try to drum up business and scare people. In two years' time it will all be second nature to us."

    Likewise, Denovan commented that industry watchdog ASIC will not be taking an adversarial stance toward brokers.

    "ASIC is the friendly giant. They're there to help, and they've said that publicly," he remarked.

    According to Denovan, ASIC will seek to assist brokers and aggregators with compliance for the first two years of the NCCP regime. After this, he said, the regulator may be more stringent in its enforcement.

    "For the first two years, they're there to assist. After that they might be less friendly. They're the nice uncle at the moment, but they could turn into Uncle Scrooge," Denovan said.

    While Denovan said there are still elements of compliance yet to be decided, such as disclosure and point of sale regulations, he has denied that there are grey areas in the legislation.

    "There's stuff that still has to be sorted out, but that's different from a grey area. Lawyers will tell you everything is bloody uncertain, but we're not that kind of firm," he said.

    One area which does contain some uncertainty, Denovan commented, is the supervision licensees must have over their credit representatives.

    "We still don't know what degree of supervision ASIC expects a licensee to have over brokers. The licensee has made the broker their agent, therefore the licensee is at risk. We know that the licensee has to supervise, but we're not clear on what degree of supervision will satisfy ASIC requirements," Denovan commented.

    However, Denovan believes most aggregators already have good systems of supervision in place.

    "You can't be cavalier about it, but I think the big aggregators have good systems in place to randomly - and not so randomly - check their brokers."


  • Cannon, White front banking inquiry

    The final day of the Senate inquiry into banking competition begins today, with key industry groups set to front the Economics Committee.

    FBAA president Peter White will be appearing before the inquiry, and is expected to push for further securitisation measures and the portability of LMI, while criticising the government's proposal to abolish exit fees. In the FBAA submission to the inquiry, the group has argued that banning exit fees will lead to higher up-front costs to consumers, as well as increasing commission clawbacks for brokers.

    FirstMac managing director Kim Cannon is also set to appear before the committee, along with chief financial officer James Austin. In its submission, the non-bank lender has argued the need for greater accessibility of funding for smaller lenders and non-ADIs. It has also called for an end to the government guarantee of ADIs, claiming it provides "for an unlevel playing field both for Funds Management and non-ADI lenders". FirstMac's submission has pointed out that the lender has made moves to acquire an ADI license either through establishing a new start-up license or through a strategic alliance with an existing ADI. The lender has lifted its stake in The Rock Building Society to 8.5%, but legislation precludes it from taking more than a 15% stake in the institution.

    Also fronting the inquiry will be Heritage Building Society CEO John Minz and treasurer Paul Williams. The mutual's submission has recommended for the government's wholesale funding guarantee to be reintroduced for smaller ADIs, and for the risk weighting of mortgages for mutuals be standardised to that applied by large banks.


  • Consumer group pushes exit fee ban

    Consumer group CHOICE has released a 14 point action plan for banking competition, calling upon the abolition of exit fees to ease switching by borrowers.

    The government's unilateral exit fee ban is set to come into effect from 1 July, and has been roundly criticised by industry heads as detrimental to smaller lenders. However, CHOICE's Better Banking campaign director Richard Lloyd has claimed small lenders are more concerned with funding issues than DEFs. Lloyd told Australian BrokerNews the group has had meetings with smaller lenders, and has been told the exit fee ban will not significantly impact them.

    "We've had discussions with smaller lenders, and think that issue comes down to who you believe. The smaller lenders have been really clear that exit fees aren't as significant to them as they are to the big banks," Lloyd said. "I think the bigger concern for smaller lenders is the ability to access enough finance to meet demand. Mutual lending is currently outpacing lending by the major banks. They have high quality capital, but do they have the ability to access enough capital to meet demand? The exit fee argument is the classic argument put forth by major banks, but we've asked the smaller lenders, and they've said exit fees aren't as important to them."

    Lloyd has welcomed recent competitive moves by major banks, saying that they could signal an "extremely interesting point in Australian banking" wherein consumer action would force lenders to compete on price and service. However, he has criticised the stance of the Australian Bankers Association on proposed banking reforms.

    "Although we've had some encouraging discussions with senior bankers, it's discouraging to hear what the ABA has been saying. It's depressing to see the mouthpiece of the industry so backward looking and unwilling to acknowledge that it's swimming against the tide. Winning back the trust of the Australian public is within their reach if they would just put into place the right conditions," Lloyd remarked.

    The CHOICE proposal has also called for greater accountability for bank executives and boards, clearer disclosure statements surrounding bank products, the removal of ATM fees for balance inquiries and the introduction of account number portability. Along with abolishing exit fees, the release also called for a comprehensive review of LMI costs.

    The ABA has responded to CHOICE's proposal, claiming the majority of the changes it calls for are either underway or under review. ABA CEO Steve Munchenberg said reviews of account portability and ATM fees are underway, and has pointed out the ban on exit fees will come into place from 1 July.

  • Get home loan pre-approval - why you should...

    Get pre-approved for your home loan...
  • Industry takes aim at 'inflexible' FHSA

    Treasury has released submissions to its exposure draft on First Home Saver Accounts, with several industry bodies calling for increased flexibility.

    In its submission to the draft, the Australian Bankers Association has criticised the scheme's four year minimum qualifying period. The ABA has claimed the minimum qualifying period is the area of most complaint and confusion among bank customers. Likewise, the REIA has also called for an end to the qualifying period, blaming the stipulation for the scheme's poor uptake.

    The REIA has also proposed the cap on the FHAS be linked to property value movements rather than the CPI. According to the organisation, house price movements have historically outpaced the CPI. The group is further lobbying for first home buyers to be allowed access to their voluntary superannuation contributions in purchasing a home.

    The ABA has warned changes to the scheme could carry unintended consequences for loan products, noting that "making a one-off payment from a FHSA to a home loan with a fixed interest rate/fixed term could have significant implications for customers in relation to prepayment fees and/or termination of contracts". The industry group also pointed out that FHSA payments made into a loan with a redraw facility would subsequently be accessible by borrowers.

    ANZ has also weighed in on the issue, saying uptake of the accounts could be increased if individuals were allowed to close the account on the condition that they forgo any government contribution and tax concession they have received on the account".


  • Exit fee amendment still unclear: Denovan

    Gadens Lawyers senior partner Jon Denovan has said the scope of the proposed ban on exit fees (or DEFs) is still unclear, even days after a deadline for industry responses to the exposure draft amendments to the NCCP has passed.

    While most industry responses have focused on the impact a proposed DEF ban will have on the non-bank sector, the lack of clarity means that many aggregators, mortgage managers, lenders and brokers may have been missing the mark.

    Speaking with Australian BrokerNews, Denovan said it is still unclear if the legislation is meant to apply just to banks, or to all lenders. "If just banks, they can live with it because of big balance sheets," Denovan said.

    Denovan suggested this may present a way out for the Government, if it chooses to apply the amendment to banks only.

    "There is a win-win here. [Federal Treasurer] Swan can keep his promise by banning exit fees for banks, while not banning it for non-banks. It would be best to exclude small banks as well," Denovan said.

    Following the deadline this week, Treasury will consider the submissions received, and suggest amendments to the proposed law, after which recommendations will be made to Treasurer Swan, who may accept some, none or all of the revisions.

    Devnovan reiterated his concern with the proposed amendment. "At the end of the day, banning exit fees is a catchy political idea, but there has been no financial analysis to show that there is an evil that needs correcting, and to demonstrate how industry can hedge against prepayment risk without increasing costs to borrowers," he said.

  • Refinancing your home - is it for you?

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  • Bankwest sweetens broker deal

    Bankwest has increased its offering to brokers and borrowers in a bid to grab more home loan business. The bank has offered discounting on loans, as well as commission initiatives and a waiver of application fees to entice brokers and customers to the lender.

    The initiative, which will apply to loans from 2 March to 27 May, includes a nil application fee for all Bankwest products. The bank's head of specialist banking, Ian Rakhit, told Australian BrokerNews the move represented Bankwest entering the mortgage price wars currently at play between the major banks.

    "This is a direct response to moves by the other banks to secure new business flows. It's a great opportunity to drive more activity in the market by taking the fee away for refinancing and new purchases," Rakhit commented.

    The initiative will also see a 10bps up-front bonus given to brokers on loans with an LVR of 75% or less. Rakhit said these loans cost the bank less to process as they do not need a full valuation or LMI, and that this will be passed on to brokers. Rakhit pointed out that the commission increase follows an initiative run by the bank from October to January rewarding brokers with a 10bps bonus based on loan quality.

    "This increase in commission is the second initiative Bankwest has done around commissions. That proved very successful in driving business volumes and rewarding brokers who hit quality benchmarks. We've widened that to include all broker members," he said.

    The bank will also drop the minimum value for its Premium Select Home Loan from $750,000 to $400,000. The loan offers a 7bps discount over the entire life of the mortgage. Rakhit said the discount is expected to draw more home loan business to the bank.

    "Where at the moment, we may have missed out on some of those loans because of price, we're now able to capture a larger market," he commented. "We are expecting an increase in the volume of applications, and we have resourced for that to make sure we maintain our excellent service levels to brokers and broker customers."

    Rakhit has also reiterated the bank's commitment to the third-party channel, saying it is Bankwest's most important source for mortgage business.

    "Bankwest, unlike many of our competitors, doesn't have a large branch network. Therefore, brokers are our key source of mortgage growth. These initiatives are aimed at driving volume and rewarding quality from our broker partners," Rakhit said.

  • AFG calls for exit fee amendment rethink

    Australia's biggest mortgage aggregator Australian Finance Group (AFG) has urged the Government to reconsider its proposed ban on exit fees, which it says will reduce competition even while consumers still bear the cost of a loan.

    In a submission to Treasury on the proposed reforms, AFG's executive director Kevin Matthews writes that the aggregator has "significant reservations" as to the impact the proposed changes will have on the mortgage market.

    Matthews writes that the proposed exit fee amendments will push "more power back to the Big 4 banks and their subsidiaries", by disadvantaging non-bank lenders, who were responsible for creating a whole new level of competition in the 90's.

    "Removing the ability for lenders to charge an exit fee will in turn limit the non-bank lenders' ability to compete with the banks," Matthews writes. "Without the protection of a DEF, a non-bank lender, who has a higher cost of funds in the first place, will have to charge a higher interest rate on the loan so as to remain viable," he said.

    Matthews called this outcome "self-defeating", in that it may remove the opportunity for non-bank lenders to re-enter or enter the market as the impact of the global financial crisis lessens.

    According to AFG, the proposed amendments will also cause the cost of a loan to be front-ended, or reflected in ongoing costs, meaning the consumer will still pay, despite perceptions to the contrary.

    Matthews said this will have multiple effects, such as shutting out buyers - particularly first home owners - due to the initial costs becoming prohibitive. He said the measures would also decrease affordability, as upfront costs may be capitalised into the initial loan amount, resulting in impacts on LVRs and mortgage insurance calculations, while consumers are forced to pay interest on bank fees.

    Matthews said advice from brokers ensures clients are not being unfairly impacted by current DEF structures. "With the average home loan life now sitting at around four years, we see the charging of a DEF within the 4-year term as a reasonable and practicable proposition which invariably is accepted by customers when entering into the mortgage," Matthews wrote. "Any good broker communicates this to their clients, and those who have shorter loan term expectancy are encouraged to consider a different style of mortgage product," he said.

    He concluded by saying AFG was "surprised" such an amendment could be introduced at a time when the impact on the Australian economy has yet to be fully validated, and when significant positive legislative reforms already provide a significant level of protection to the consumer.

    The deadline for submissions on the exposure draft of the amendment to the NCCP Act closed on 1 March.

  • Vow seeks growth through recruitment

    Vow Financial is seeking "substantial" growth above industry average growth rates, and plans to do this through new programs targeted at recruiting fresh blood into the industry, as well as potential joint ventures and alliances.

    Vow Financial CEO Tim Brown said the group is seeking growth above market levels of about 6% - 7%. However, he said this requires new approaches, rather than just going into other aggregator groups and recruiting their brokers.

    "If you want to grow substantially or exponentially, then you need to do something different. And doing what the industry is doing isn't going to give us that result," he said.

    Brown said Vow will launch a recruitment program to its top brokers at the end of March, which will help them recruit quality new entrants into the industry and assist with succession planning for their businesses as they retire. He said these new brokers could potentially take on books from retiring brokers within the network, or become acquires of their books over time.

    "We feel this is where aggregators do need to get involved for their brokers, helping them identify when they are ready to go, and when they are ready to go, if we've got some influence in helping them sell it, we can also influence the people they bring in to buy their business," Brown explained.

    "So we want to make sure the books they've established are moved to brokers within our network, and then adding to that, if someone new comes into mortgage broking, they've potentially got an established book they can take over, which will give them a better start than trying to start their own portfolio," he said.

    Brown said he expects succession planning to become a growing area in the mortgage industry.

    "The industry is starting to get a bit of maturity, and there is people who got into this industry in the late 80's and early 90's that are now 55-plus and are looking to retire," he said. "We want to be able to help them do that and get maximum value for their book, while at the same time get the right people to replace them."

    Brown said this benefitted clients, as well as brokers. "You want to be able to hand your clients over to someone you can trust. And someone that you have trained and potentially developed. You don't want to hand them to any old person who may not have the same level of service and integrity that you've got," he said.

    However, Vow hasn't ruled out future a qui sit ions. "We'll always acquire where it makes sense. If we can a quire for right money and the right value and it makes strategic sense then we'll do the deal," Brown said.

  • Credit reports could save brokers $18,000

    Mortgage brokers could potentially earn $18,000 more per year through higher conversion rates if they use credit reporting services as a part of their business process, according to provider Veda Advantage.

    In modelling conducted by the credit reporting agency from January to December last year, it found a mortgage broker writing 30 loans per annum using credit reports could save enough time in pre qualifying individuals to write an additional seven loans a year - equating to an extra $18 000.

    This was a result of mortgage brokers being 5.4 times more likely to detect adverse credit information on consumer credit reports - including defaults, court actions and bankruptcies - than other financial lenders. According to Veda, credit reports submitted to financial lenders had a 4.3% chance of containing adverse information, but the likelihood of finding adverse information increased to 22.8% in credit files submitted to mortgage brokers.

    Veda Advantage head of consumer risk Angus Luffman said poor credit history is a major cause for mortgage application rejection and an applicant’s adverse credit history is a strong predictor of future payment behaviour. "Ordering a credit report early in the loans process allows brokers to focus on high quality business rather than wasting time on loans that may not progress,” Luffman said.

    According to Luffman, credit reporting services also help brokers comply with NCCP regulation. “Under the NCCP Act’s responsible lending obligations, credit licensees will need to be satisfied that the credit contract is not unsuitable for the consumer. This includes making reasonable enquiries about the consumer’s financial situation,” Luffman said.

    Meanwhile, brokers and aggregators are coming under increasing pressure from lenders to tighten prequalification procedures, according to Luffman. "Making sure applicants’ credit application details are correct and up-to-date prior to contacting lenders will help brokers lift conversion rates. We also believe that financial lenders are showing preference towards mortgage brokers who are providing more accurate credit information during the prequalification stage of applications,” he added.

  • Industry content with RBA rate hold

    The mortgage industry has praised the RBA's decision to hold the cash rate unchanged at 4.75% yesterday.

    Following the decision, the Housing Industry Association, mortgage broker's Loan Market and Mortgage Choice, all voiced their support for the decision, which they argue give homeowners a break and give the housing market a breather.

    Housing Industry Association senior economist Andrew Harvey said Australia's new home building market needs an extended period of interest rate stability to create an environment where confidence and activity have the opportunity to improve.

    "It is appropriate that the Reserve Bank is signalling, through a consistent message, such a period of steady rates," he said.

    Loan Market chief operating officer Dean Rushton said borrowers were still adjusting to the central banks November rate rise, and that another rate rise would have severely damaged consumer confidence.

    "The November rate increase accompanied by the banks additional rate increases has had a significant influence on consumer sentiment and many elements of the economy, particularly the home finance market and the retail sector, are still struggling as a result," Rushton stated.

    The RBA's apparent holding pattern on rates also presents an opportunity for new entrants to the market and those looking to refinance, Mortgage Choice spokesperson Kristy Sheppard said. Sheppard pointed to recent competitive moves by the big four to grab a larger piece of the mortgage market share.

    "Banks and other lenders are falling over each other with interest rate discounts, fee cuts, maximum loan to value ratio increases and other special offers. Several have signaled their intention to grow their share of the home loan market. Borrowers should get proactive and take advantage of this," Sheppard commented.

    Though rates are tipped to remain on hold for the first half of the year, many economists are tipping a rise between 25 and 75 basis points by year's end. Rushton has urged the RBA to remain on the sidelines through the entirety of 2011 in order to allow the market to rebound.

    "Interest rates look like staying on hold for some months and most economists are now forecasting that this year there may only be one more quarter percentage point increase," Rushton said. "We would like to see the RBA stay its hand for the remainder of 2011 to allow consumer confidence to return and to take undue pressure of household budgets."

  • MPA celebrates 10 years with special supplement

    The longest established mortgage magazine in Australia is celebrating reaching its 10th year of publication with a special edition to mark the occasion.

    Set to become a collector’s item, MPA’s commemorative supplement is a definitive record of the past decade in the Australian mortgage market. It pulls together some of the biggest stories from the last 10 years and combines them with major world events, house price statistics, Australian Mortgage Award winners and MPA survey winners to become an invaluable resource. 

    MPA first landed on desks way back in 2001 and more than 100 issues have followed since. It has covered all the most important mortgage events of the last decade and shared the highs and lows with its readers. Its annual surveys are the most comprehensive and well-respected of their kind, with many companies using the results as an internal KPI measure.

    Barney McCarthy, editor of MPA, said: “Reaching such an impressive milestone is a weighty achievement that is testament to the hard work and expertise of my predecessors and the unwavering support of the thousands of brokers, lenders and providers who read the magazine on a monthly basis.

    “I would like to take this opportunity to thank our readers and partners for their backing and we look forward to covering the most important mortgage issues for the next 10 years and beyond.”

    Look out for the supplement which will accompany issue 11.3 of MPA.

  • Intouch takes aim at GE Money

    Intouch Home Loans CEO Paul Ryan has lashed out at GE Money's mortgage business, calling recent moves by the business "putting the sword to customers".

    GE Money Home Lending recently issued a letter to borrowers through its subsidiary AMS Mortgage Services, informing them they would have their redraw facility frozen if they had missed a payment any time in the past 12 months. Ryan told Australian BrokerNews the policy is going too far.

    "I think all lenders have these types of things in their contracts, but I've never seen it as definitive as this one," he said. "It's also retrospective in terms of the last 12 months."

    However, a GE Capital spokesperson told Australian BrokerNews the policy has always been in the lender's loan contracts, and that the letter was sent to borrowers after a recent operational audit showed some customers had been able to access redraws despite their loans being in arrears.

    Ryan has rubbished the policy, though, saying it is another instance of a "global giant" mistreating customers.

    "Things happen throughout the term of a loan. They're saying if you a have a situation where a husband or wife falls ill and you forget to put the payment through one day you could be going into default, which would freeze your redraws for 12 months," he said.

    Ryan has called for greater competition in the lending sector as a means of protecting borrowers.

    "The question is, who's looking after consumers? This is further evidence the government needs to enhance competition. The only way they can do this is to guarantee non-banks like they have guaranteed banks for the past three years," he commented.

    A GE spokesperson told Australian BrokerNews the lender would take extenuating circumstances into account before choosing to freeze a borrower's redraw facility. He said the process change will impact only a minority of the company's customers.

  • Majors continue satisfaction slide

    Major banks continue to draw consumer ire, according to January's Roy Morgan Bank Customer Satisfaction Survey.

    The survey shows that customer satisfaction continued to fall amongst the big four, with ANZ dropping 1.2% and Commonwealth Bank suffering a 0.8% decline. Westpac saw a small decline of 0.2%, while NAB saw its satisfaction rating creep up 0.1%.

    Roy Morgan communications director Norman Morris said in spite of NAB only showing marginal improvement, the bank may soon see its customer satisfaction rise above the bottom of the pile.

    "The NAB remains the poorest performer amongst the major banks but with the declining position of the CBA and the recent marketing moves by the NAB, it is likely that they may outperform the CBA in the near future," Morris said.

    According to Morris, Commonwealth continues to suffer from its decision to move first in increasing rates above the RBA. The bank's home loan customer satisfaction has fallen 7.5% since October.

    Morris also pointed out that smaller players such as second tiers and mutuals continue to outperform the majors.

    "With so much competition and strategic manoeuvring amongst the four majors in relation to the home loan market, it is worth noting that all four are currently well behind the satisfaction levels of the smaller players in the market," he commented.

    Morris said the best performing among the majors was ANZ with 75.2% satisfaction, but this fell well below Bendigo Bank with 92.6%, credit unions with 89.8% and building societies with 88.1%. St George, at 76.9%, has continued to beat parent company Westpac, currently sitting at 69.5% satisfaction.

  • Aussie property outlook plummets

    Australians are significantly less upbeat on property prices than they were a year ago, according to new research.

    The latest results from the Bankwest/MFAA Home Finance Index show only 38% of Australians expect property prices to rise during the coming quarter, which is down on the  79% that expected imminent price rises in March 2010.

    Queenslanders had the gloomiest outlook for property price rises, with only 22% expecting increases. This contrasted with Victoria, where 46% had a positive outlook for property, and South Australia's similarly positive 45%.

    Bankwest head of specialist banking Ian Rakhit said in a statement that part of the more pessimistic capital growth expectations were being driven by expectations of higher interest rates in 2011.

    MFAA CEO Phil Naylor said the results also showed that households no longer see their financial situation going backwards, and that this would provide a "solid base for activity in the next 12 months".

    He suggested that a large number of investors see now as "a good time to buy", which would also assist the housing market.

    “We are seeing savvy investors come back into the market as a long term investment strategy that’s underpinned by expectations of income growth,” Naylor said.

  • PLAN CEO to recruit members

    Trevor Scott will join PLAN Australia as its new CEO, following success in growing Advantedge's white label products.

    Previously Advantedge's head of distribution for PLAN Lending, Choice Lend and FAST Lend, Scott will replace outgoing Ray Hair as CEO of PLAN, and has been charged with selling the business in an effort to spur recruitment of new members.

    Scott has had a long-standing relationship with the broker market, being one of the founders of Bluestone Mortgages.

    Advantedge general manager of broker platforms, Steve Weston, said Scott is "a bit of a legend" in the market. "He is very relationship and sales focused, and probably knows more individual brokers in Australia than anyone else I can recall."

    Weston said Scott's sales skills will be core to his success, due to a desire to grow the PLAN business in 2011.

    "It's always been our intention to commence recruiting in the early part of 2011," he said.

    "We have always been priced on the premium side of the market and that will certainly continue, but the support services that we offer also lead the market, and we think that justifies our premium price," he said.

    He pointed to the group's newly built IT infrastructure, which it is rolling out, as well as its licensing support model, debt insurance product, and other support services that he says are designed to help brokers build more valuable businesses.

    Weston said it would have been difficult to go on a "recruiting binge" two years ago, before it had proved the value of this service. He suggested that then the market was driven on price, but "less and less" that will be the case.

    PLAN, along with many aggregators, lost approximately 20% of its members through the licensing transition process.

    Since the launch of PLAN, Choice and FAST white label products, Scott has grown distribution to over 5% through each aggregator. Both he and Ray Hair will attend a series of PLAN PD days in March.

  • Non-bank cuts low-doc DEFs

    Ahead of the proposed 1 July ban on exit fees, non-bank lender Pepper has announced the removal of DEFs from its products. Any new applications for its Flexi Advantage or Self-Employed Advantage products will not have applicable DEFs.

    In addition to cutting DEFs, the lender has also spruiked a one-year introductory discount rate, knocking 1% off its products. The discount is applicable to loans from 28 February which are unconditionally approved by 20 June. Loans of up to 60% LVR will carry a one-year introductory rate of 7.99%, while loans between 80% and 85% LVR will have an introductory rate of 8.79%.

    Though deferred establishment fees on the products have been cut, the loans still carry a $995 establishment fee and $250 discharge fee.

  • FOS compares lenders' dispute performance

    The Financial Ombudsman Service has released its annual review, showing how lenders performed in terms of disputes brought to the service.

    As part of new ASIC regulations, the FOS has published comparative tables showing the disputes performance of major financial service providers for the second half of the 2009-2010 financial year.

    The comparative tables indicate the chances of a dispute against a provider coming before the FOS, ranking each provider with a number relative to the size of the provider's business. Out of the major banks, Westpac fared the best in the tables, with 11.56 disputes per 100,000.>NAB had the highest number, at 31.69. Among non-banks, Resimac performed well with 26.67 disputes, while RHG Mortgage Corporation - formerly RAMS - saw 106.55 disputes per 100,000. The median for lenders was 26.58.

    Chief Ombudsman Colin Neave said the tables would provide customers with a valuable tool in assessing financial service providers.

    “We believe that by publishing this detailed information we will be encouraging financial services providers to direct more resources to the right areas so as to create the greatest benefit for consumers who have encountered problems with the products they have bought,” Neave said.

    The resolution scheme implemented a new dispute resolution process over the year. It was also subject to new terms of reference, setting out rules for which disputes the FOS can consider.

    The FOS also reported it saw a 6% increase in the number of disputes for the year, and a 27% increase in resolved disputes. The scheme also identified and resolved 58 systemic issues, which resulted in 36,500 customers being paid out more than $17.5m.

  • Economists unanimous on rate hold

    Ahead of tomorrow's meeting by the Reserve Bank, a survey of 11 economists has predicted rates will stay on hold.

    The AAP survey yielded a unanimous response, with economists indicating the RBA would wait to fully assess the impact of floods earlier this year. Nomura Australia chief economist Stephen Roberts has told the Sydney Morning Herald the floods mean the RBA will hold off on lifting rates in the near term.

    "It is too close after the flood events and natural disaster events. It's a little too soon to be raising rates," he said.

    The market is currently not pricing in any chance of a rate rise following tomorrow's meeting, and Roberts said inflationary data backs up this assessment.

    "The inflation rates were very benign. Some the other data has been firmer, but it doesn't outweigh the (inflation rate) yet," Roberts commented.

    While a rate move tomorrow is unlikely, many economists believe the RBA will lift rates this year as strong labour data continues to put pressure on inflation.

    "There's definitely hints that more rate hikes are coming, but it's the timing of those hikes," Roberts said.

    The survey comes as today's TD Securities - Melbourne Institute Monthly Inflation Gauge shows a 0.2% rise in inflation for February. This follows a 0.4% rise for January and a 0.2% rise in December. The upward movement represents a 3.6% rise in the 12 months to February, making February the sixth consecutive month inflation tracked at the upper limit of the RBA's target zone. However, TD Securities head of Asia Pacific research Annette Beacher said the group still expects the RBA to remain on the sidelines when it meets tomorrow.

    "If the March quarter CPI report is again benign, released late April, we plan to remove our May RBA tightening, and instead forecast 75 basis points of tightening this year, concentrated into the back months of 2011,” Beacher said.

  • NAB acts to improve broker service

    NAB is in the process of simplifying its mortgage documentation and increasing the number of outbound calls it makes at "key milestones" during the loan application and approval process, in an effort to enhance the competitiveness of its service for brokers.

    Speaking with Australian BrokerNews, NAB general manager of broker distribution, John Flavell, said the bank is currently looking to improve its mortgage documentation, by providing its loan offer document and mortgage document as part of one pack. These have to date been provided separately.

    "We've received a lot of feedback in terms of brokers saying it needs to be one pack as a start, and that is something that we are focused on doing. We make it difficult for brokers and their customers with those two document packs," Flavell said.

    Flavell said NAB has also made changes to its internal processes, to increase the number of outbound calls being made to brokers in the event clarifications need to be made on mortgage applications.

    He said the shift had placed "more rigour" on calling brokers direct, rather than relying on emails and SMS messaging for communication, which had more emphasis in the past.

    "If you are a broker and you lodge an application now, then, typically we are going to have that initially assessed within a couple of business days, and if there is anything we need clarified, then we'll pick the phone up and have a conversation," Flavell explained. "Our approach is that if we have got a question or we have got a query, then let's pick up the telephone and have a discussion with a broker."

    Flavell said broker feedback on the increased outbound call rate is that it is providing noticeable improvements in dialogue, which is delivering increased efficiency benefits for brokers.

    Flavell said brokers can expect a constant stream of improvements to its broker offering. "We've made good ground in terms of the service we deliver to brokers and their customers, but we are very very focused on improving more, and we've got a dedicated stream of initiatives that we'll deliver to the market," he said.

  • The Big Story: Mortgage industry reels as exit fee shock wave spreads

    “Destabilising”. “An absolute nonsense”. “Wildly unfair”. It’s been called many things, but one thing is for certain - the Government’s proposed wholesale ban on exit fees has caused shock waves throughout the mortgage industry, particularly among non-banks, mortgage managers and brokers. Today, Mortgage Choice CEO Michael Russell, Gadens Lawyers senior partner Jon Denovan and Provident Capital Steve Sampson speak candidly with BrokerNews TV, explaining what the fallout of the imminent exit fee ban could be. Is this the end of non-bank competition in Australia? Do consumers usually pay exit fees, and will they bear the brunt of the proposed policy? And - as Michael Russell claims - is now a time for the industry to come together to “lobby, lobby hard”? Find out on The Big Story, on BrokerNews TV, the industry’s home for news, opinion and analysis.

  • DEF ban could be 'disastrous': Foley

    National Mortgage Brokers managing director Gerald Foley has said a proposed DEF ban could have "disastrous" consequences for consumers, who will be more heavily saddled with debt.

    Writing to the group's brokers this morning, Foley said his greatest concern with the regulations is the negative impact they could ultimately have on some borrowers, especially with the "increasing levels of debt many Australians are carrying".

    "These regulations will no doubt allow, in a rising property market, borrowers to refinance their loans more (too!) easily," Foley wrote today. "This will only encourage some borrowers (arguably the most vulnerable) to seek the refinance opportunity to tap into any newly gained equity. This refinance is often used to acquire short life-span consumer goods," he wrote.

    There will also be a "double impact", according to Foley, due to the loan term starting again (for up to another 30 years), and the amount of long term debt increased for consumer goods.

    "Given early years of a loan are really only covering interest, this can result in very little principal reductions for many years with a large debt remaining approaching retirement," Foley argues. "I know responsible lending probably should address this but can we rely on that alone to protect this group of borrowers?

    More generally, Foley said there is no doubt the regulations as drafted will have a serious impact on the ability of the smaller banks and non-bank lenders to compete with Australia's big four banks.

    "This can hardly be a desirable outcome for competition into the future and I hope there will be some significant change to the current form," Foley wrote.

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