An ABC Four Corners report on Monday night (21 August) exposed an alleged Westpac internal performance expectation document requiring bank lenders to complete six to nine home loan requests each week, with performance bonuses of more than $6,000 each quarter in exchange for exceeding the target.
According to the ABC, staff that don’t meet the target are “performance managed” out of the major bank. Further, similar policies exist at all big banks, sources confidential to the ABC claimed.
Brokers did not escape scrutiny. The program highlighted the case of Carlene Stafford, a property investor who claimed to have been encouraged by a developer to borrow $445,000 to invest in a Queensland property. ANZ granted the loan; however, Ms Stafford’s broker had allegedly filled in the application form in lieu of Ms Stafford herself and neglected to highlight that Ms Stafford was due to retire soon.
Further, Ms Stafford was unaware that the bank’s estimates of her financial situation left her with a sum of $9.17 at the end of each month.
Defending the serviceability calculations, ANZ CEO Shayne Elliott said: “The reality is that when customers come to us, we do a thorough due diligence on their ability to repay their loan and that they understand the risks that they are taking and . . . that's totally in our interest.”
After Mr Elliott met with Ms Stafford, ANZ released a statement to the ABC claiming: “Ms Stafford acknowledged that she was responsible for declaring her estimated expenses and advising ANZ her financial position was not likely to change in the near future.
“For ANZ’s part, Mr Elliott recognised she has not missed an interest payment and had been targeted by aggressive sales tactics by both the developer and broker.”
According to the ABC, ANZ and Ms Stafford have reached a confidential revised settlement.
Philip Dempsey, a former mortgage broker with Aussie Home Loans, also indicted the industry, saying that there are some “serious issues for brokers”. He said that brokers who don’t meet targets are “transitioned out of the industry”.
“There'll be targets around providing [an] arbitrary number, $2.5 million, $3 million worth of lending a month, which you probably need to write as a commission-only broker in order to survive financially, put food on your table.
“But when that pressures on every month, and then there are cross promotions and cross sale requirements for insurances and the like, that also come into play.”
Mr Dempsey added that there have “definitely” been instances of brokers encouraging clients to apply for more money than they could comfortably repay.
According to the former broker, there are a “variety of reasons” why that would occur. He said, however: “One of the bottom lines is that's how they pay, so the more dollars they lend, the more they get paid. There's that immediate need to fill your own financial requirements, and it's very difficult sometimes. The lines can become blurred as to what's right, right for the client or right for me.”
He added that a client asking to borrow a loan valued at 7.5 to eight times their income would be “encouraging” to a broker as it would mean a greater commission.
Mark Bouris of Yellow Brick Road acknowledged that there are “rogue” brokers in the industry. However, he emphasised: “There hasn’t been a preponderance of fraud, but there has been an increase, I would say, of cowboy-type mentality, [a mentality of], ‘Look, I can get into this industry and I can make a big quick buck and get out of here.’”
Mr Bouris said that the only issue was if a broker fraudulently or negligently filled in the forms, but added that the banks are "pretty tough now".
"They just don’t accept everything just because you put it there in writing," he said.
“At the end of the day, the banks are the ones that do the approval. The brokers don’t.”