During the royal commission into misconduct in the banking and finance sector, it seemed mortgage broking was under the blow torch from the first day to the last. What was established to uncover and deal with banking misconduct quickly became a witch hunt directed at the mortgage broking community, with minimal transparency to show.
Dare I say, some of the banks when they were on the stand and under pressure to protect their good name, did a wonderful job of implicating mortgage brokers in everything that was bad about home lending.
At the culmination of an intense month-long period, many examples of poor conduct were uncovered, with proposals put forward to radically change the way mortgage brokers got paid.
Thankfully, a number of high-profile industry members spoke out publicly and lobbied the government into a separate review.
With the several mortgage broking professionals who spoke out publicly, as well as the greater aggregator network, the Mortgage and Finance Association (MFAA) and the Finance Brokers Association of Australia (FBAA) did a magnificent job of putting forward the reasons why a change would decimate the mortgage industry and importantly reduce competition, hence poorer outcomes for consumers.
Absolutely the correct decision was made based on fact and with the customers’ best interests at the forefront. With the MFAA and FBAA’s aim of improving transparency in the mortgage broking industry, specifically the mortgage broking franchise sector, supporting Australians was at front-of-mind.
Does this mean that the mortgage broker community has completely eradicated misconduct in the industry?
Absolutely not. However, with increased compliance regimes, better lending standards within the banks or funders, and a zero-tolerance policy, the bad eggs are getting caught more frequently and weeded out much quicker.
All the above is positive and a huge step in the right direction. However, something major is still missing. When a mortgage broker is removed for misconduct, we need to establish a visible, regularly updated, and distributed list of terminated mortgage brokers. The Franchise Disclosure Register (FDR) has announced access to a directory of franchised systems available to the public to search, view and compare essential information on franchises.
Both the governing bodies and ASIC (if ACL) need to notify the mortgage broker community that these individuals are a serious threat to our mortgage broking industry and should be banned indefinitely. They are a stain on the industry and still attempt to work through phoenix programs, shadow broking, or try to hide and understate the issue. Shadow broking indicates that mortgage brokers, and the important financial products in the lives of many Australians; the household mortgage; is completely shadowed, making it almost impossible to assess if we are getting a fair deal. This concept of shadow broking criticises the lack of transparency on the prices for mortgages.
Going through the process of onboarding a mortgage broker is arduous and costly. If an onboarding team member goes onto a designated site which it displays every terminated broker; this would save everyone time and money. Hence, professionals of the mortgage broking industry are committed to an effective regulatory framework to address information gaps and unsafe activities of those who are considering entering into the mortgage broking industry.
Most importantly, after all the work that was done post the royal commission, the systems established would also keep the mortgage industry safe from further scrutiny and criticism. In turn, this will promote greater transparency and will protect mortgage broking and the broking industry. Advanced transparency should lead to the good customer outcomes, meaning that mortgage brokers must consider whether a loan is appropriate and meets individual customer needs.
Competition is fierce in Australia’s mortgage broking industry, and when you are in direct competition with your suppliers, do not rule anything out.
Time for more transparency is now!