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MFAA Prosper : Mortgage and Finance Brief 13
18 Mortgage & Finance brief news Commercial finance Bronko kozel Managing Director, First In Finance The commercial sector still hasn’t entirely recovered from the GFC. However, there are certainly some signs of life – clients are dipping their toes back in the water. It’s not only refinancing either, there are some new deals coming online. The major banks are still quite shy – mainly in the property development area – so it has been somewhat difficult to get loans approved. But we are starting to have more favourable discussions than we were 18 months ago. A lot of the experienced commercial bankers have left the industry in recent years, so the expertise is out there in the broker world. It’s smart business for the banks to align themselves with good commercial brokers. Furthermore, commercial brokers should also align themselves with banks that are prepared to work with them. The non-bank lenders are playing a great role. I’ve done a number of transactions with non-bank lenders and they’ve been very good to deal with. A lot of the old experienced heads are now working in the non-bank space. They really know their commercial stuff. Generally, the non-banks are very streamlined and very keen to look at a business. When they do investigate a business, they do so objectively. That doesn’t mean they are dropping their gu a rd on credit standards, they are just looking at it commercially. Good brokers can do what they have always done: get close to their clients and explain the issues transparently. It’s important to be upfront with them so they have realistic expectations of what can and can’t be done in the current environment. Clients need to know the banks are seeking a lot more information now. We must all be more pragmatic to get loans approved. Depending on what happens with the global economy, it’s going to be more important than ever this year that brokers work closely with the banks. A lot of businesses were sandbagging their resources last year to see what was going to happen. We will start to see a bit more confidence coming back this year. Asset finance is going to play a big part in 2012, so that area will be a huge opportunity for brokers. Finance in Focus Our experts outline the latest developments and opportunities in their sectors. Loan protection insurance rAY HAIr Chief Executive Officer, ALI Group The performance of the overall mortgage market is the main driver of the loan protection sector. Our product is designed to be sold at the time of a loan, providing insurance to borrowers in the event of death, terminal or critical illness. Therefore, we won’t receive a policy application unless the broker writes a loan application. Our market is also closely aligned to the first homebuyers market and mum and dad investors, rather than high net worth individuals. These markets were rather subdued throughout 2011 and our sales activity reflects such. Australia’s chronic underinsurance is the biggest issue facing the mortgage and insurance sectors. We all know it is logical that borrowers need insurance to protect themselves against life’s unexpected events, but according to IFSA/TNS Research, only 4% of Australian families have adequate life insurance. In fact, research into the underinsurance gap shows that 60% of Australian families with dependents living at home don’t have enough insurance to cover basic household expenses for a year if the main breadwinner were to die – let alone support a lifestyle. If we are going to seriously improve the levels of insurance, the primary requirement is to raise education and awareness at the borrower and broker levels. There are various protection and insurance models out there for brokers to offer. It comes down to understanding what will work for each of their businesses. Brokers need to consider the offer of protection as an enhancement to their value proposition. Responsible lending will be the big opportunity this year. Brokers must assess a borrower’s capacity to service a loan under NCCP and, in doing so, should also discuss what contingencies the borrower has in place should one of life’s many unforseen events occur. Simple, af fordable loan protection is then a logical extension of the loan application process. Integrating loan protection into the responsible lending processes will address the moral duty of care brokers have to ensure borrowers are protected. By communicating the compliance requirements of NCCP to the customer as a virtue rather than an onerous obligation, the broker is positioned as the thorough, caring professional. ••• A lot of the old, experienced heads are now working in the non-bank space. They really know their commercial stuff. 60% of Australians with dependents living at home don’t have enough insurance to cover basic household expenses for a year.
Mortgage and Finance Brief 12
Mortgage and Finance Brief 14