While mainstream lending policy is often black and white, there are always shades of grey – which is why non-bank lenders and mortgage managers are vital in the current environment. For general manager of Mortgage Ezy Joanna James (pictured), mortgage managers are crucial for the health of the industry and have an important role to play once best interests duty is implemented in January next year. She spoke with MPA about the challenge of deciding what is in the customer’s best interests and how mortgage managers could be a valuable source of information when deals don’t fit neatly into the mainstream lending box.
Understanding the role of mortgage managers
If you ask the majority of consumers what a mortgage manager is, chances are they won’t have an answer. Historically speaking, however, mortgage managers have been around for decades – and they are responsible for many of the added features we see in loan products today.
James said that during the 80s and 90s mortgage management was the brainchild for groups such as Aussie Home Loans; bringing about the birth of securitisation and greater competition against the banks.
“It’s been credited with reducing home loan rates considerably,” she said.
It also led to the introduction of the offset facility, as well as variations to policy and product features that shape the current offering in the market today.
“It’s been a very vital part of the Australian lending landscape, but typically because it is in a wholesale space it’s not necessarily a space that consumers understand well,” she explained. “It’s time that people really understood - we’ve been around this evolution since the 1980s.
“We are independent businesses that create that colour and that tapestry that is needed in the lending environment.”
This is particularly relevant in the COVID-19 environment, she said, in which mainstream lenders have tightened their policies to service predominantly vanilla deals. She offered the example of SMSF lending.
“We play very much in the niche business of SMSF lending,” she said. “We’ve been onboarding brokers at a rate of knots and having larger writers from aggregation groups come to us because they know they can’t actually access these products through the mainstream.”
The impact of best interests duty
This relevance is only set to increase this year following the implementation of best interests duty, she added; mortgage managers playing a significant role in offering a suite of different solutions.
Mortgage managers operate in a variety of ways, but in a nutshell, they act on behalf of a lender or lenders. They may have several agreements with wholesale funders, smaller banks or international banks and typically design and distribute products on behalf of these lenders. Many mortgage managers, such as Mortgage Ezy, also look after credit processing for the funders they represent, and even provide aftercare for their customers.
One of the reasons mortgage managers will see increased relevance following BID is because they represent multiple lenders and typically operate in the non-conforming space. If a broker puts through an application with them for one of the lenders they represent and it turns out something in the policy doesn’t quite fit, a mortgage manager may have another solution through one of the other lenders they act on behalf of. This is essential for the health and diversity of the lending environment as countless Australians recover from the recession and COVID-induced uncertainty.
“It’s really important that people understand there is this dynamic, interesting, powerful, potent, professional group of people within the lending landscape that are continuing to advocate, promote and encourage diversity for the best interests of the entire lending community - not just what the majors deem is acceptable lending,” said James.
Getting priorities right
One of the biggest challenges brokers face now that BID has come into play is knowing what to prioritise as the best interests of the customer. Is price more important, or does policy play a bigger role in determining the best fit for their goals and objectives?
“We want to be able to support brokers as they go through this transition in January because otherwise there’s going to be a lot of people that may be confused about what’s the best thing to do, which is the opposite of what this legislation was brought in to achieve,” she said.
“Lending is black and white but there’s always grey - there’s always a client that doesn’t fit or a property that’s got something quirky about it or a particular situation that needs to be looked at, and that’s what managers do really well because we work with so many different lenders.
“We can’t necessarily recommend products but what we can do is, if a broker was to ring and say, ‘this is the current situation that I have and there is something unique about the situation for this borrower’, most managers would very quickly be able to say, well look, ‘it would fit this lending platform’ or ‘it would fit this lending platform’.
“Where it would fit this lending platform, here is the pricing and here is our current service proposition on those offerings.
“The broker would then still need to look at that and make their own assessment around, relative to other products on the panel, whether that’s appropriate or not.”
James said mortgage managers are very passionate about supporting both brokers and their clients in getting the best loan for their circumstances and looking after their best interests.
“We’re used to hearing from the larger players and the bigger groups - but the smaller groups, they are the counterpoint, and you have to have a counterpoint if you want to have diversity in the industry,” she said. “We are quite proud of what we do - it’s very complex and looking after the client’s best interests is something this channel has been doing for a long time.”