Legal
March/April 2003
What
is the deal with Mortgage
Brokers?
By Tom Williams, Solicitor
om Williams, Solicitor, checks out the service offered
by mortgage brokers and finds this an effective way of sourcing finance.
All of us at some time need to borrow
money - to buy a home or to fund a business. Traditionally, this involved
a visit to the bank manager who usually wore a cardigan and had a very
conservative view on life. Nonetheless, if we wanted the finance we
had to take an interest in that manager and what he told us.
Increasingly, as banks continue to
close down branch offices, mortgage brokers are replacing the bank managers.
In essence, these brokers introduce the customer to the bank. Approximately
25% of all residential home loans are introduced to the banks and financial
institutions through mortgage brokers. Commercial loans are also increasingly
the domain of mortgage brokers. And, in the United States almost half
of all loans are written or referred to the bank through brokers, so
the trend is already set.
Utilising the services of a mortgage
broker is an effective way of finding the right finance. But, with so
many different operators, the selection of a broker is a maze in itself.
Essentially, the industry is self-regulated and there would appear to
be a number of backyard operators.
The peak industry body is the Mortgage
Industry Association of Australia (MIAA) whose mission is to ensure
the orderly and ethical working of the industry in Australia and New
Zealand.
Its key objectives
are:
- to be the recognised authority in Australia on all
aspects of the mortgage industry;
- to maintain quality standards within the industry;
- to offer training for members and their staff; … To
support the development and range of mortgage products available to
the public;
- To embrace best practice customer services;
- To develop the mortgage industry in Australia and
New Zealand;
- To elevate the role of mortgage intermediaries to a
profession.
Established in 1982, the MIAA works closely with the financial services
sector, the Federal Government and all State Governments to set the
direction and standard for Australasia's mortgage industry.
With membership ranging from small organisations to international banks,
the MIAA seeks to provide infrastructure and back-up support to assist
industry participants in achieving their common goals. In so doing,
the MIAA seeks to raise the industry profile, foster high standards,
and ethical growth and development of the industry.
The MIAA deals with industry issues on behalf of its members - providing
a united voice where and when required. It is also the backstop for
borrower concerns and provides an ombudsman scheme to facilitate resolution
of disputes. Members of the MIAA include mortgage managers, mortgage
brokers, mortgage marketers, banks, credit unions, building societies,
legal firms, mortgage insurers, trustees, fund managers, valuers, and
real estate related industries.
All members are bound by a strict code of ethics to ensure the highest
levels of service, integrity and professionalism.
Accordingly, the first question you should ask of any
mortgage broker is whether the broker is an accredited member of the
MIAA.
Accreditation is the first step to ensuring that you
are dealing with a mortgage industry specialist who has a commitment
to best industry practice and fair dealing.
Some of the things that you will be able to expect from
your MIAA accredited broker will include the following:
- An appropriate level of experience and/or education
and an ongoing commitment to relevant professional development. In
respect of banks and financial institutions, in order to sell a loan
product, a broker is required to attend in-house accreditation and
update courses of that financial institution.
- The holding of professional indemnity insurance of
at least $1million. (This will protect you in the event of loss due
to some act or default by the broker).
- Compliance with the Trade Practices Act and other
relevant Laws and Regulations.
- Efficient management of administrative processes and
regular updates on the status of your loan application.
There are also other considerations that you should make
when selecting your broker. According to industry specialist Simon Foy
of Blue Sky Lending, one of the crucial things you need to do is ensure
that the service will be unbiased:
"If your broker owns their own financial products
or is not paid the same commission for all lending options, they may
favour selling some products which aren't in your best interests.
At Blue Sky, our mortgage consultants can be truly impartial as we
don't own any products, and they are paid the same commission rate
regardless of which loan option you select "
In addition, Simon suggests you check that the mortgage broker you select
meets the following criteria:
- Takes the time to discuss your individual needs and
requirements;
- Is available to meet with you at a location and time
that is convenient for you;
- Service is Free of Charge;
- Has access to a wide range of products. In some cases,
mortgage brokers may offer a limited choice of home loan products.
This will mean that you aren't guaranteed access to the
best alternatives for your specific needs:
"At Blue Sky we work with 30 Lenders," says Simon.
"The group encompasses all leading banks, building societies, and
credit unions. This ensures that our customers have access to a wide
range of home finance options."
As you can see, there are certainly some important considerations
to make when selecting a mortgage professional to assist you. Taking
some care to ensure you are dealing with an accredited professional
will help to ensure you get the best possible advice.
If you need a professional mortgage broker, please
call Simon Foy at Blue Sky Lending on 9560 3168 or 0425 225
151.