The year in review

The global financial crisis delivered a body blow to the mortgage market during the first six months of the year, forcing some of the more notable second tier banks and non-bank lenders out of the broker channel.

Other lenders were forced to withdraw their no deposit home loans from the market.

By April the RBA had responded to the weakening economic conditions by lowering the official cash rate to 3 per cent – a 49 year low.

But conditions started to improve in the second half of the year, and the economy has continued to gain strength in recent months.

The federal government has reacted by winding back its stimulus packages – which industry stakeholders such as National Brokers Group MD Steve Lambert says provided the mortgage broking industry with a valuable buffer during what was a rough year.

“The various stimulus packages helped buoy the Australian mortgage industry,” says Mr Lambert. “I think we would be in more serious economic peril had it not been for the strength of our economy and the quick reaction of our federal government.”

AFG’s general manager of sales and operations Mark Hewitt agrees that the stimulus packages gave the industry much-needed support.

“The economy has been well insulated from the downturn, which has allowed us to capitalise on a lot of business opportunities and grow organically over the past year,” he says.

Mr Hewitt says he believes AFG will continue to grow thanks to the proposed new broker licensing regime.

Under the regime, brokers and / or their aggregators will be required to obtain an Australian Financial Services (AFS) licence from the corporate regulator the Australian Securities and Investments Commission (ASIC).

The original start date of the new regime was 1 November 2009 but has been pushed back to 1 April 2010, with the Senate Economics Committee saying the delay would give the credit industry more time to transition to the new regime.

Mr Hewitt is optimistic the new regime will raise the level of professionalism in the industry and improve the overall quality of brokers. But he is disappointed the start date was delayed, saying it was done to please the “lowest common denominator”.

“AFG is 100 per cent regulation ready, just as other serious brokers would be,” he says.

MILESTONES AND CHALLENGES

Peter Hayward, head of distribution and marketing at Citibank, says while the new licensing regime was one of the biggest things to happen to the broker channel this year, it was eclipsed by another event: NAB’s acquisition of Challenger.

“The NAB acquisition of Challenger’s mortgage management business was perhaps the biggest event of 2009,” he says.

On Tuesday 18 August, NAB announced an agreement to purchase Challenger for $385 million.

The move saw NAB acquire a significant stake in the third-party distribution channel, with around a third of all brokers falling under its control.

The portfolio it acquired included the PLAN, Choice Aggregation Services and FAST mortgage aggregator businesses and Challenger’s multi-brand ‘white label’ product capability.

In addition, NAB gained a select portfolio of approximately $4 billion of residential mortgages at a discount to face value for loan loss provisions.

NAB’s Matt Lawler says the purchase was a very positive move for the industry as a whole.

“A lot of people have been worried that the banks were going to take non-bank lenders out of the market, but I think we have proven once and for all that NAB has a long-term outlook and sees a future for this industry,” he says.

“Our support and backing means the plans that Challenger Mortgage Management had in place can certainly be achieved because they will now have the funding to accomplish them. They will be able to give their brokers different product options because of our support.”

According to Mr Hayward, the acquisition will also help improve the level of liquidity in the market.

“But the Challenger acquisition aside, liquidity was already starting to filter back into the market thanks to various non-bank and second tier bank lender support,” he says.

The global financial crisis effectively froze the securitisation market earlier this year, as investors perceived the market to be risky.

But last month, Bendigo and Adelaide Bank became the first regional bank to sell residential mortgage backed securities (RMBS) without government funding since the AOFM support was announced in September 2008.

FirstMac’s chief executive officer Kim Cannon believes Bendigo and Adelaide Bank will be the first of many regional banks to sell RMBS without government support.

“Investors are re-entering the market thick and fast now. However, I believe it will be another six to 12 months before we see any marked improvement in the wholesale arena,” Mr Cannon says.

Mr Cannon says the biggest challenge for second tier banks and non-bank lenders over the following year will be rebuilding consumer confidence.

“A lot of people were burned when GE Money left the market earlier this year. But we are currently trying to rebuild confidence in the non-bank sector and hopefully in time, we will rebuild the trust people once had in second tier lenders.”

IN REVIEW: KEY EVENTS

JANUARY

» Government introduces funding guarantee for major banks

» Aussie John rebrands Wizard

» Bankwest announces end to commissions guarantee for top six aggregators

FEBRUARY

» RBA cuts cash rate by 1 per cent to 3.25 per cent

» Rudd government unveils $42 billion National Building and Jobs Plan

MARCH

» RAMS pulls 100 per cent loans from broker channel

» Bankruptcies hit 20 year peak, up 261 per cent on 2008

» Mortgage Business reveals top 10 Originators in ground breaking industry ranking

APRIL

» RBA cuts cash rate 25bp to 49 year low of 3 per cent

» Bank mortgage servicing times blow out to as much as four weeks

» ING DIRECT terminates funding agreements with half of its mortgage manager partners

MAY

» Mortgage Choice appoints Michael Russell as new CEO

» NAB Broker commits to 95 per cent LVRs for 4 star brokers

JUNE

» Heritage is forced to pull some lending products from the market

» Aussie John sues Gadens Lawyers for negligent

» CBA is the first to implement minimum loan submission requirements

JULY

» Investor activity tipped to surge by RP Data

» CBA switches to 100 per cent online lodgements

» Mortgage Business ranks Australia’s top 25 brokerages

AUGUST

» NAB buys Challenger’s mortgage management business

» Smartline’s Joe Sirianni voted next MFAA president

SEPTEMBER

» Bankwest launches capped mortgage product to shake up competition in the industry

» MFAA threatens to cull 1,500 under-qualified brokers

» Macquarie rumoured to take ‘strategic investment’ in three aggregation groups

OCTOBER

» Bankwest pulls Rate Tracker loan from broker market

» AOFM injects a further $8 billion into RMBS funding

» Ray White takes full ownership of Loan Market Group

NOVEMBER

» Mortgage Choice breaks into aggregation with the acquisition of Loankit

» St George bank merges its commercial and retail intermediary businesses to expand broker offering

» RBA lifts official cash rate again, to 3.50 per cent

» Mortgage Business’ Elite Business Writers 2009 revealed

DECEMBER

» RBA ups rates for the third consecutive month taking the cash rate to 3.75 per cent for 2010