Mortgage brokers applaud Fed intervention

A mooted move by the Federal Government to take over regulation of mortgage brokers from the state governments has been welcomed by the mortgage broking industry.

Prime Minister Kevin Rudd will reportedly kick-off a move to bring the regulation of mortgage brokers on to a national footing when he meets with state premiers at tomorrow’s Council of Australian Governments meeting in Adelaide.

The states, led by the NSW Government, had previously made drawn-out efforts to come up with model regulations that would be legislated in each state, but now appear to accept the need for federal regulation.

National mortgage broker franchise Mortgage Choice has been part of a longstanding push to implement a national regulatory regime for the industry.

Managing director Paul Lahiff says recent developments in regard to new national regulations for mortgage brokers are a positive sign.

“Any regulatory move, state or federal, which protects consumers and increases their confidence in the mortgage broking sector has to be embraced, as it will hasten the exit of those rogue brokers who create more harm than good for the industry,” Lahiff says.

A single national system under federal laws will be better for mortgage brokers and consumers, according to Finance Brokers Association of Australia national president Peter White.

“We’ve been lobbying for this since 2003, and the reason is that there is no point in bringing in legislation that could be left fragmented by states and have cut-outs and variations. That can allow for holes in the fence to enable those who want to do the wrong thing to sneak through, and that’s not good for consumers or the industry,” White says.

A key question now will be whether the Federal Government will draft its own laws from scratch or use draft laws prepared late last year by the NSW Government as a template.

White says while he doesn’t object to the NSW law being used as a starting point, it will need changes in certain key respects to be workable.

• Equalisation of disclosure regimes imposed on mortgage brokers and banks.
• Easing of proposed requirement that mortgage brokers conduct credit and background checks that would create additional costs for consumers.

“The NSW law would impose training and paperwork requirements mortgage brokers but the same person could walk into a bank and get a loan with no paperwork and dealing with a untrained clerk,” White says. “And credit checks have been the responsibility of banks, so imposing them on mortgage brokers will have to increase their costs.”