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Brokers have found ways to fight back against clawbacks, even though most support the system or are unconcerned by it.
A recent poll conducted by The Adviser found 44 per cent of respondents think clawbacks are not an issue for their business, while 4.7 per cent see them as a necessary evil and another 4.7 per cent said they improve the lending assessment process.
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However, 38.8 per cent think clawbacks are unfair and another 7.8 per cent think lenders should not claw back commissions on defaults.
Shire First Mortgages principal Neil Massingham said the Sydney firm made clients pay reimbursement in the event of a clawback.
“If we’re clawed back as a result of them repaying their loan early, we have a right to recoup from that. We point that out to each client and they don’t seem to mind it,” he told The Adviser.
Mr Massingham said lenders were justified in clawing back commissions from brokers who practised churning or who failed to stay close to their clients after settlement.
Keypoint Financial Services is currently building a special database to better monitor clients during the clawback period, said director Bud Moses.
“It has to be managed. If you don’t manage it, you’re basically doing business for nothing,” he said.
Mr Moses said lenders were justified in clawing back commissions within the first 12 months. However, he said any subsequent clawbacks had to be managed on a case-by-case basis so “honest” brokers were treated better than “churners”.
Data from aggregator Specialist Finance Group shows clawbacks fall to “almost next to nothing” when brokers contact clients one, five and 11 months after settlement, according to managing director William Lockett.
“Clawbacks are generally an issue for a broker that has a loose relationship with their clients,” he told The Adviser.
“Those mortgage brokers that have got an excellent relationship with their clients and an excellent follow-up, they’re the ones that suffer very little on clawback.”
ME Bank’s national manager of brokers, Stewart Saunders, said the clawback system is generally fair for brokers.
“The clawback represents the financial income that the banks generate and the way that they’re currently structured results in brokers receiving benefits for settling loans up front where the bank only receives the income over the life of the loan,” he said.
Mr Saunders told The Adviser that it was valuable to debate the issue, but that clawbacks had to be discussed in tandem with upfront and trail commissions.
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