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MFAA Prosper : Mortgage and Finance Brief 09
Case ONE The complaint: It was alleged that a broker member had failed to advise a borrower of a change in the lender's LVR policy. The broker had arranged a 90% LVR portable loan for a property that the borrower intended to buy and subsequently sell. The borrower was advised by the broker that this LVR would remain for any future purchases. Subsequently the borrower received a Conditional Approval letter from the lender indicating that the LVR had been reduced to 80%. When she queried this with the broker, he had advised that it was an error and the 90% LVR still applied. What happened? Shortly after, the borrower sold the property and indicated to the broker she had selected another property to purchase. The borrower was surprised to be told by the broker that he was endeavouring to establish a 90% LVR as the lender had only approved 80%. He allegedly indicated in a later phone conversation with the borrower he had lied about the LVR as he thought he could fix the mistake before she found out. The borrower then committed to the property and approached the lender directly and established an LVR higher than 80% but less than 90%. The broker's case: The broker maintained that he had checked with the lender and had been advised on a number of occasions that the LVR policy was 90%. He denied lying to the borrower and advised he had unsuccessfully sought telephone transcripts of his calls with the lender. The Tribunal's decision: The Tribunal found that the facts did not substantiate the allegation. It was clear that the borrower's matter was mishandled but it was not clear whether the member, the lender or both were at fault. The Tribunal believed that some of the member's conduct was unprofessional and requested him to provide an undertaking in relation to such conduct, which was not forthcoming. The allegation was dismissed but the broker was censured for non-cooperation with the Tribunal. Afairgo--for consumer & broker The lessons lear nt In these cases the old adage, 'never assume, never presume' would have avoided these problems. The broker mentioned in case one presumed that he could 'fix' the approval for an LVR that was less than required. He may have assumed that this was a mistake, but it appears that it was not. Think of the risk that this broker took: • He misled his client into believing that he had obtained the loan terms that he required, when he had not; • The client proceeded to make a financial commitment based on that; • If the client had later been unable to obtain the finance he required and, for example forfeited a deposit, the broker would have been liable to compensate the client for the deposit. Assuming that his relative could be trusted, in Case Two the broker took responsibility for work product over which he had no control. Presuming that all would be well because unconditional approval had been obtained, he allowed an unqualified and unaccredited broker to use his accreditation. Again, think of the risks that this broker took: • By pretending that he had arranged the loan, he misled his lender. This would have been a breach of his lender agreement and could have led to the lender terminating his accreditation; • As he assumed responsibility for the loan, he could potentially have been held responsible to the borrowers had they suffered a loss; and • If this had occurred under the NCCP, if the relative did not hold What issues do this month's Tribunal cases raise, and what lessons can brokers learn? Words Claire Wivell Plater 58 | Mortgage & Finance brief Legal - Tribunal
Mortgage and Finance Brief 08
Mortgage and Finance Brief 10