An Australian bank has revealed the arrears of its broker-originated mortgages after the prudential regulator claimed they were riskier than bank-originated loans.
MyState general manager, sales and distribution Huw Bough said that while the lender sees a “very slight uplift” in loan arrears for broker-introduced loans when compared to loans originated through its branch network, the small increase in arrears is well within its risk appetite.
“Importantly, the level of arrears in our loans originated by brokers is below the S&P SPIN index which reflects the professionalism of the broker industry,” Mr Bough said.
In its final practice guide for ADIs on mortgage lending, released last week, APRA warned banks that their reliance on mortgage brokers can lead to additional risk and levels of exposure beyond their risk appetite.
In addition, APRA raised concerns over the risks associated with broker commissions.
The MFAA subsequently slammed APRA over its “completely incorrect” assertions.
Speaking to Mortgage Business, MFAA chief executive Siobhan Hayden expressed her disappointment to read such comments from APRA's chairman, saying that it demonstrates that [APRA chairman] Mr Byres has little or no knowledge of the third-party market.
“It was evidently clear that they don’t really understand mortgage broking,” she said, adding that APRA’s lending guidance exposes its failure to engage with the third-party channel.
“I was quite surprised when I read it.
“A lot of the assertions don’t seem to be based on much data,” she said.
“If there is data I would be happy to see it, but it just doesn’t seem to be accurate from what I see or hear from our lender partners."
MyState’s Mr Bough said the bank is getting great traction in the broker market and the brokers it deals with are extremely professional and have their clients’ best interests at heart.
“Our experience shows that brokers are overwhelmingly rigorous in their approach to identifying their clients’ needs and ensuring those needs are met,” he said.
“While we have very generous commission structures, as a customer-focused organisation we are pleased that commissions are not the primary driver in recommending our loans among the brokers we deal with.”
CBA and Suncorp were approached for comment but declined.
Steven Munchenberg, CEO of the Australian Bankers Association said mortgage brokers play an important role in assisting many customers find an appropriate mortgage.
"Banks only accept referrals from accredited mortgage brokers and apply the same rigorous credit risk procedures as they do to all mortgage customers," he said.