The MFAA has hit back at APRA over its “completely incorrect” assertions about mortgage broker commissions in its residential mortgage lending guidance.
“APRA’s APG 223 Residential Mortgage Lending attempts to provide ADIs with sound business practices related to mortgage lending,” an MFAA spokesperson said.
“It’s assertion however that ‘commissions paid upfront (to brokers) tend to encourage less rigorous attention to loan application quality’ is completely incorrect.
“I am disappointed to read such comments from APRA's chairman and it demonstrates that Mr Byres has little or no knowledge of the third party market,” the spokesperson added.
The MFAA’s retort comes after Mortgage Business yesterday reported that the prudential regulator had warned banks that their reliance on mortgage brokers can lead to additional risk.
Since the introduction of the National Consumer Credit Protection Act (2009) the rigour applied to mortgage lending by mortgage brokers normally exceeds what is currently delivered directly by ADIs, the MFAA said.
“The ‘prudent’ and ‘reasonable’ suggestions offered to ADIs in APG 223 are most often ‘required’ and ‘fundamental’ within a mortgage broker's business,” it said.
“Confidence of the third-party channel by ADIs is demonstrated by the fact that 50 per cent of new loans to lenders are now attributable to mortgage brokers.”