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Lack of clarity on loan requirements against the backdrop of increased lender and regulatory scrutiny is “eating into the profitability of a deal”, an award-winning mentor has observed.
Speaking to The Adviser, Nancy Youssef, founder of Classic Finance Group and Classic Mentoring & Coaching, agreed that there has been a noticeable difference in the way home loans are assessed and, subsequently, in turnaround times over the last couple of years.
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She attributed the slower turnaround times on mortgage applications to the increased amount of customer information brokers are required to provide – especially information relating to living and discretionary expenses – but also lack of communication or miscommunication about loan requirements.
“What I noticed is that policies can change, and that doesn’t always get communicated to the broker. Also, different assessors will look at things differently, as do different banks,” Ms Youssef said.
“With the increased regulatory [oversight] and everything that’s been happening from an industry perspective, it certainly has blown out assessments.”
She noted that while serviceability assessment rates have decreased in response to the Australian Prudential Regulation Authority’s (APRA) revised home lending guidance, it doesn’t necessarily help the overall credit proposal.
“I think a lot of brokers are a bit confused about their responsibilities. How much paperwork do we have to collect? How much of that paperwork do we need to really scrutinise?” Ms Youssef said.
She noted that this is “eating into the profitability of a deal” given the time and effort it takes to prepare an application has increased – a sentiment many brokers have shared.
“Especially with smaller operations where they’re strapped for staff, or they’re limited by how many people that can put on, they’re looking at it and going: ‘It’s not even profitable by the time I’ve met the client and put [the application] together and got it approved’,” Ms Youssef added.
According to the award-winning mentor, brokers should not hesitate to ask BDMs for clarity.
“Brokers can shoot themselves in the foot by not putting up their hand and saying: ‘I really need you to come in and talk to my team about what you are looking for?’” she said.
“We don’t hesitate sometimes to bring a credit officer in to talk to our team or our mentees to [share] what exactly they need us to do to make loan applications go through a lot faster.”
Ms Youssef, who recently released her new book Fear Money Purpose, said that in the face of uncertainty, brokers first need to decide whether they want to stay in the industry and adapt to change.
“It’s a question I’ve even had to ask myself and ask my team. As a business owner, it’s not something that we can just gloss over and think, ‘It’s going to go away.’ It’s not,” she said.
“If you’re passionate enough that you want to stay, then you need to make changes.”
A good starting point for brokers who are exasperated is to undertake a review of their processes and marketing strategy and identify opportunities in their current databases to capitalise on.
“Ramp up your marketing; don’t cut it back. And stay in touch with your clients because that’s where you’re going to find most of the gold,” Ms Youssef said, adding that brokers should invest in professional development.
A number of brokers have come forth claiming that they’ve noticed a stark difference in the way broker-originated loans are assessed, compared to loans that go directly through a lender’s proprietary channel.
For example, founder and director of Loan Saver Colin Kidd recently said brokers need to obtain substantial detail about expenditure using bank statements than what customers would be required to provide if they approached the banks directly.
“A signed budget is in no way acceptable for an expenditure analysis,” he said.
“If the clients go directly to the lender, they don’t need to do the expenditure analysis [using] bank statements. They’ll accept the client’s statement of position and the loan will go through.”
[Related: Credit scrutiny tougher on broker-originated loans]
