Could this happen? Mortgage broking

Mortgage Broker Salad Days Are Over

 

About time. It's a shame coalition managed to scuttle the bigger problem of fraud (xyz makes 30K but manages to get a loan of 400K and there is no fraud). All the more reason for a Royal commission into finance.

 

Would be interesting to see the effect it has on the broking industry.

 

Nah its less important than one into Islam

 

I think mortgage brokers are actually paid fairly poorly so to take away trail would be disastrous to the industry which would then have a flow on effect to lenders, mostly smaller ones who rely on broker business (Who is walking into pepper??).

What I do think should happen is brokers forming closer relationships with their clients as opposed to "Here is your home loan, speak to you in 2 years when my chance of claw-back is gone for a refinance and a fresh up-front". I have no doubt all the brokers on here would already be doing this and having ongoing relationships but I am sure many are not.

How this would be "policed" I am unsure. Perhaps some kind of check from the lender that the broker assigned to the loan is doing X, Y and Z. I imagine brokers could probably get around this via automation so I am not sure exactly how it would look.

 

I have no idea what you are on about.

Edit: Some links to highlight the problem
You don’t need a “good job” to get a mortgage if your loan documents bump up your salary by $288,000.
ASIC investigates Chinese mortgage application fraud | The New Daily

 

Not too bad of a problem to have considering

"...the repayment performance of the fraudulent borrowers is better than both banks' average home loan, as is their equity or security coverage.

Our delinquency rate on foreign income loans is lower than the portfolio average, and a large proportion of these loans are ahead on repayments", Mr Lording said. "Overseas borrowers are also well-secured with the [starting] loan-to-value ratios (LVRs) on these loans 70 per cent.".

ANZ's Mr Edwards said loans backed by fraudulent income documents were "performing better than the portfolio average".

 

The problems emerge when the tide goes out. Moranbah / mining towns are very good examples.
Let the investigation be over to know the extent of problem. I am disinclined to accept banks statements at face value. From the link in OP: Data published by the Australian Prudential Regulation Authority has found that default rates are higher on loans written by mortgage brokers.

As far as the trailing commissions go, there is nothing extraordinary (the course itself takes a few days) in pure brokerage to deserve 300 million a year. Loan comparison websites are getting better and provide advise free from commissions, so IMHO more worthy of trust.

A few exceptions are there (and here) who provide services and advise beyond brokerage but that is financial advise I guess.

 

Huh ?

 

All good.

 

Nothing to see here Um... Islam! Stop the boats! Jobs and Growth!

Fraud rife in banking system, with lending practices threatening financial system stability, economists say - ABC News (Australian Broadcasting Corporation)

Broker gets four years’ jail for low-doc fraud

Sydney broker sentenced for $7m mortgage fraud

http://asic.gov.au/about-asic/media...dmits-to-charges-relating-to-home-loan-fraud/

Mortgage broker caught up in bikie fraud

 

Fraud exists in the banks as well. I have seen one case who didn't service with bank X and then go out and get a loan approved with bank X after I have told them it won't work.

Also there are plenty of rumours of bank staff who will approve loans for a fee - personal loans mainly.

 

That's the reason the whole sector needs a RC....after the RC into Islam of course.

 

Sadly, you rarely see people doing the right thing in the news.

 

Of course, while a problem clearly exists the links weren't supposed to suggest that all brokers are acting dishonestly. I'd still like to believe that most brokers are getting loans across the line by knowing the lenders and process inside out rather than fudging the numbers.

On the banks, I've never had to pay a "fee" and even post APRA I can still borrow far more than I would ever be comfortable servicing based on our relationship with the bank manager. Which bank.

 

It would be a shame to see a decline in the MB industry but from all accounts, it's only getting bigger. Obviously a change in fee structure would dampen this.

For my part, I believe a good broker is paramount to the success of portfolio building. The amount of clients I've had come to me who have sourced loans direct from the bank where they have cross-collateralised loans and other impediments to their portfolio growth (that were in the interest of the bank and not the investor) is reason enough.

Obviously there are your stock standard "get someone any loan as fast as you can" brokers but the good ones will always take into account your goals and future purchases, not just the one you're making now. As with any product, the market ebbs and flows so going direct to the bank is the same as walking into X-brand car dealership and expecting to be sold another brand. It just might not be the best deal out there right now but you'll never know it!

Having someone working for you, constantly reviewing the market and being prepared act on your behalf even for the smallest things, is a great addition to your team...and any successful investor builds a team around them.

 

Hopefully the bad brokers of the bunch won't ruin it for the everyone else, but I can see it happening.

I'm not entirely sold on a royal commission being the answer - it seems to be declared the solution to every problem nowadays.