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MFAA Prosper : Mortgage and Finance Brief 13
38 Mortgage & Finance brief In the first of a new series, we speak with industry professionals who’ve stood the test of time and made their mark on the sector. To kick us off, Warren nutt recalls how a simple opportunity led to one of the biggest innovations in Australian mortgage lending. Warren Nutt is one of the true pioneers in the Australian mortgage industry. In the late 1970s, he was working for Melbourne stockbroking firm, Randall & Co, as the Partner in Charge at its Sydney office. It was during this time that he, along with business partner Vernon Spencer, identified an opportunity to make residential lending more accessible. At the time, securing a loan from a bank was no mean feat. There were tight liquidity restrictions on the amount the banks could lend, and the average customer had to have a savings account with the bank for sometimes up to five years before a loan would be granted. “As members of the stock exchange, we had contact with a huge array of institutions and investors,” Nutt recalls. “You could count the mor tgage brokers in Sydney at the time on one hand. So there was a massive opportunity to har ness money from outside the banking system.” In 1978, Nutt and Spencer led the firm’s diversification into mortgage lending. The firm instituted the first securitised lending program in Australia. “I assisted Vernon on the program for a few years and had to make several trips to the US to get ideas and assistance before it came to fruition,” he says. “There were a lot of obstacles, particularly with stamp duties and convincing the institutions it was a safe proposition, but we made it across the line. “We had lunch the day the first securitised loan was settled, and discussed how the borrower, a baker by trade, wasn’t aware he had created history.” The securitisation program proved to be very popular with existing clients as well. It was another way for some of these large institutions to make secure and high-yielding investments. In December 1981, Nutt and his Sydney team of nine brokers settled 331 loans, an extraordinary amount by anyone’s measure – especially since funds were still tight. For seven years in the late-70s and early-80s, Randall & Co was the largest mortgage broking business in the country. “We were extremely busy,” he says. “Every cent we got through the door, we lent.” Other companies were watching their success with great interest. One insurance company came to them with the intention of ‘dipping their toe in the water’ with their program. “We were thinking they might invest somewhere between $1-2 million. But when we met with them they announced: ‘Just to start off, we would like to loan $10 million quickly on residential mortgages’. We nearly choked on the spot! “Such was the shortage of funds, we had all of our brokers on the phones to find applications. You have to bear in mind that the average home loan was not much more than $100,000 back then. “The lender wanted to place the funds within a week, which we were able to do. But it was one hell of a busy week!” The difficulty of chasing funds is one of the biggest differences between the modern industry and the way it was in the 70s and 80s. Nutt and his brokers would obtain funds from numerous sources: super funds, insurance companies, people perience factor x byMichael Mills
Mortgage and Finance Brief 12
Mortgage and Finance Brief 14