The year in review 2011 - NCCP, exit fees and all that

January saw the introduction of the National Consumer Credit Protection Act (NCCP) which requires brokers to do an extensive ‘fact find’ and consider the overall financial situation of clients in considering the most appropriate loan for them.

Not all were happy with the changes, of course. RE/MAX Western Australia’s managing director, Geoff Baldwin, felt the new regulations could negatively impact any borrower over the age of 35.

“These changes mean that a borrower aged, say, 55 can no longer take out a loan over 30 years,” Mr Baldwin said, “and they will be restricted to a much shorter term unless they can demonstrate that they will have superannuation or other assets they can sell to finalise the loan at retirement.

“Obviously, this would mean much higher repayments and in many cases it will disqualify people and exclude them from the market.”

After a period of sustained criticism of the NCCP provisions from brokers, Gadens Lawyers partner Jon Denovan – an expert in the area – leapt to the defence of the Act, claiming it had been misinterpreted by the industry.

“The legislation doesn’t mean...that anyone over the age of 35 can’t borrow money for a home,” Mr Denovan said.

Transforming not just the way brokers work with their clients but also how they conduct their business operations, the introduction of NCCP was the most significant development in the industry for some time, according to Mark Haron, principal of Connective.

“The biggest impact to the industry in 2011 was the launching of NCCP requirements and while the documentation process initially slowed brokers down, these guidelines have ultimately improved the broker proposition, which is great news for consumers,” he said.

But just as the lending industry was getting its head around the changes brought in by NCCP, massive floods hit Queensland and many brokers there found themselves struggling quite literally to keep their business operations afloat.

While the floods commanded a significant amount of the industry’s attention, the debate around fee for service also started to heat up.

NAB Broker’s general manager, distribution, John Flavell and the FBAA’s national president Peter White both threw their support behind brokers’ charging for advice; other industry pundits claimed a fee for service went against everything the broking industry stands for. The debate split the industry down the middle.

The federal government’s announcement of its plan to ban exit fees in a bid to boost competition also quickly got the industry fired up. Treasurer Wayne Swan was widely criticised by the industry, with many arguing the ban would do more harm than good for competition.

Despite the negative feedback, the ban was passed into law on March 23 and from 1 July 2011, new home loans would not attract exit fees.

March also saw the hosting of the first annual Australian Lending Awards. At a widely acclaimed event, ANZ was named Lender of the Year while Bankwest, Westpac, ING DIRECT, CBA and CUA also took out honours on the night.

In May, following extensive research, The Adviser completed its ranking of Australia’s five major lenders in the second annual Third Party Banking Report – Major Lenders, with the Commonwealth Bank of Australia securing the top spot.

Also around this time, Pepper significantly strengthened its position in the non-bank lending space by acquiring GE Money’s $5 billion residential portfolio through a series of warehouse financing facilities.

Meanwhile, just as one finance broker was being banned from engaging in credit activities after being convicted of fraud, another – 1st Street’s Jeremy Fisher – was busy winning the title of Broker of The Year at The Adviser’s inaugural Australian Broking Awards luncheon.

As July drew to a close, St George officially rebranded in Victoria as the Bank of Melbourne.

At the beginning of August, in a surprising development, consumer advocate CHOICE made a calculated move into mortgage broking. Four non-bank lenders materialised as the first participants in CHOICE’s One Big Switch campaign, with the lenders vowing to deliver group discounts to more than 40,000 mortgage customers.

Having announced plans to enter the real estate market back in July, Refund Home Loans was back in the news in October when the group declared it was going into voluntary administration.

And to cap off an eventful year for the lending industry, news broke in early November that lender ME Bank would enter the third party distribution space after realising what a large chunk of the market it was missing out on.

Now, as they look ahead to 2012, Mark Haron, principal of Connective, and Michael Russell, CEO of Mortgage Choice, agree that diversification will be the key to making the most of the year to come.

“The removal of bonuses, such as the First Home Owner’s Grant, that were present last year has affected the market and in turn brokers’ volumes,” said Mr Haron.

“With lending growth to remain flat in 2012, brokers must find more ways to earn money and those who focus on diversification now are bound to be a step ahead.”

Mr Russell agrees that brokers in 2012 will need to assess their business structures.

“The financial impact of the commission changes of 2008 will become clear in 2012 and brokers may need to assess what they do and, more importantly, how they do it,” Mr Russell said.

“Diversification will take on a far more important role in 2012, with late adopters no longer having the option to ignore the need to broaden their focus,” he added.

“On a positive note, I am confident the industry will continue to grow. More and more consumers are voting with their feet and choosing to use the services of a professional mortgage broker.”