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The MFAA has demanded that APRA back down from its claim that third-party loans are riskier than loans from other sources.
APRA stated in the draft version of its prudential guide on mortgage lending that upfront commissions “tend to encourage less rigorous attention to loan application quality”.
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The MFAA has now responded with an official submission that calls for APRA to withdraw such comments from its final version of the guide.
The association’s submission said there was no evidence to support the allegation that broker loans are of lower quality.
“Throughout the [APRA] document there seems to be an undertone that third-party or mortgage broker-initiated loans are inherently riskier than other sources of loans,” the MFAA said.
“There is no evidence to support this view. On the contrary, the MFAA in this submission will provide evidence which shows that broker-initiated loans are of at least equal – if not superior – quality to those initiated via proprietary channels.”
Chief executive Phil Naylor said brokers were writing loans of higher quality than banks when judged on arrears, approval rates and conversion rates.
“These are stringent rules that come with heavy penalties if problems occur, providing strong protection to consumers at every step of the process,” he said.
Mr Naylor said that APRA was right to offer guidance on risk management practices for residential mortgage lending, but wrong to single out broker loans for special attention.
NAB general manager Steve Kane revealed earlier this year that third-party clients are younger, wealthier and better educated than direct-to-bank clients.
[Related: Brokers back APRA on clawbacks]
