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MFAA Prosper : Mortgage and Finance Brief 06
commission structures since then.” CBA’s quality metrics include 80% submission quality, 75% conversion and less than 1% arrears at 60 days, and Cummings believes this is paramount to CBA’s business. “A lot of time and resources go into processing a home loan and it is all wasted if an application is not successful,” she says. “Not only that, unsuccessful applications cause delays to other applications.” Meanwhile, General Manager of NAB Broker Distribution, John Flavell, says, “Quality continues to be a focus for us. We launched our Star rating program over two years ago, where we reward brokers for ongoing individual efforts – education, conversion and quality of their portfolio.” Flavell says NA B’s motto is to share marg in where it makes margin, and it encourages brokers to develop long-lasting relationships with customers, “Our ramped trail structure allows us to recognise the energy and effort that goes into maintaining relationships over time and we link the trailing commission to the length of the relationship – not the loan. For example: if an existing 4 Star Broker's customer was to purchase an investment property, they would receive 65 points commission in one year, plus the 30 points trail commission – so 95 in the first year. “ We know that many customers will change or take out different loans over a 10 -15 year period, so rewarding the longevity of the relationship makes sense – it's good for the customer, good for the broker and good for us.” Dean Rushton, chief executive of big broking chain Loan Market Group, says he understands the arg uments about relationships and lenders getting to know brokers. “Almost all major lenders have a quality measure, I don’t have a problem with that part of the new structure,” says Rushton. “A lot of loans don’t fit into the rules exactly or are complicated. Our work is often on a deal-by -deal basis. Brokers like policy clarity from lenders. We get to know how they work and we take the types of loans to them that we expect them to approve. “People who get good conversion rates with St George and Westpac will continue to get good results and use those lenders,” he continues. “I imagine there will be brokers who get a good deal out of this new commission structure, those people who are using them now and getting good results. However, personally, I think they’re risking new business coming their way.” And waiting there with open arms are the non-bank lenders, who are looking to offer finance to customers who now fall just outside the banks’ quality matrices. David Holmes, Chief Operating Officer of Pepper Home Loans, says, “Of course, the brokers who can place customers with the majors w ill continue to do so. However, with some of the major lenders reducing commissions it really opens the market up for non-bank lenders.” Holmes believes that the work brokers now need to do to place a mortgage deser ves to be reflected in their commissions. “For a more complex loan we’re actively considering upping commission structures. If brokers are putting extra effort in then the commission needs to reflect that.” Allan Savins, Chief Operating Officer at Resimac, says, “With banks focusing on A A A applicants, it provides additional opportunities for non-bank lenders. The challenge is less about having an offering for these segments, and more about getting mortgage brokers and borrowers to consider non-bank lenders as a viable alternative to banks.” Of course, more attractive commission trails make for a more attractive proposition for brokers, and with some of the major players altering their commission structures the opportunity is there for non-bank lenders to make their mark. Bernie McIntosh, Managing Director of Victorian Mortgage Group, says he has experienced a lot of growth over recent times with customers who are now falling outside the stricter bank guidelines. “We’re not making any alterations to our commission structure either,” he says. “We pay 0.6% up-front and 0.25% trails,” he says. “We’ve never been busier.” “With some of the major lenders reducing commissions it really opens the market up for non-bank lenders.” Opinion: clawbacks “Clawbacks are simply unfair on brokers,” says Jennifer Schelbert , owner of www. mrsmortgage.com.au, a Melbourne-based Choice Aggregation Ser vices broker. “Why should I get penalised if the borrower gets divorced or decides to sell for an unforeseen reason?” Melbourne-based Schelbert says she has only been clawed back once. “ANZ clawed me back three years ago and that really stung at the time. “The borrowers changed their mind six months after and sold up against my advice. “We have a cash-flow business and we want lenders to understand that and work with us.” 14 | Mor tgage & Finance brief News
Mortgage and Finance Brief 05
Mortgage and Finance Brief 07