Sedgewick, Banks and Navigating Moral/Ethical Hazards

Discussion in 'Loans & Mortgage Brokers' started by Rolf Latham, 18th Dec, 2018.

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  1. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    With all the fluff noise and mixed conflicts of various , the borrowers real interest can often be relegated to "who really cares".

    Previously it could be perceived we didnt care about your real needs Mr and Mrs, borrower.

    Today, we have well meaning but poorly informed consumer groups and Large Bank funded reports DRIVING this message to the media.

    You, the majority general public are stoopid and cant be trusted to make a judgement in whom should represent them in obtaining a mortgage, AND how those service providers should be remunerated.

    This came across my table yesterday from one of mentees whose client was very emotionally distressed, and understandably so.

    A lender, who shall at this stage remain nameless came back on a lending decision and said, your client should not be paying this larger LMI, and they should be borrowing less money, reducing their personal risk buffer from 100 k to 20 k. My interpretation is , you are looking to get higher commission, and thats not compliant with the new Sedgewick rules

    Clients credit is strong, services at > 4000 a mth, its a vanilla deal any day of the week with 98 % of lenders.

    Im fine for lenders to lend money on their terms, its their decision who they do business with.

    Im fine with credit decisions - Oh its with the Head of Credit for review - this isnt a credit decision though, its an ethical one.

    What isnt ok is the over reach that we are starting to see where we are having to fight for the borrowers right to maintain a risk management buffer.

    This is a good example of what can and will happen, when perceptions of what in theory looks like good governance is in fact transferring credit risk to borrowers, so that media risk is maintained.

    This too will pass.

    ta
    rolf
     
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  2. miximitosis

    miximitosis Well-Known Member

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    That is incredible. Ignoring the fact the lender recommended the borrower place most of their safety buffer into loan, did they actually accuse the broker of merely increasing the loan amount to increase comms? I thought the introduction of comms net of offset/redraw was justified to remove this potential conflict?
     
  3. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    but the broker wouldn't get higher commission if the excess funds were left in the offset account.
     
  4. miximitosis

    miximitosis Well-Known Member

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    Exactly my thought process!
     
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  5. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    I stopped listening to banks, Reserve Bank included, when I realised some years ago that their people did not own, or even want to own, as many properties as I did.
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    yes but ......... credit interpretation can sometimes be core silly.

    In any case, brokers and bankers " should" no longer allow clients to have significant buffers.

    If its deemed unethical to be paid for the service, then its unethical to implement same...............just my view...........its not like the lenders are giving that commission difference to the client or a charity, its going to their pockets


    ta

    rolf
     
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