The role of mortgage managers in a BID environment

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.”

 

by Kate McIntyre
Original article

MPA Leaders Live: Non-Banks Banks Panel 2019

MPA Leaders Live: Non-Banks Banks Panel 2019

The annual live-streamed MPA Non-Banks panel will be held on Wednesday 30th of October 2019 at 12:30pm AEDT

Panel features:

  • – La Trobe Financial – Cory Bannister
  • – Liberty Financial – John Monacheff
  • – Resimac – Daniel Carde
  • – Pepper – Aaron Milburn
  • – Mortgage Ezy – Joanna James
  • – Loanworks – Yotta Agamemnonos
  • – Ondeck – Michael Burke

Keeping the Australian dream alive

 

Joanna James of Mortgage Ezy discusses the company’s commitment to filling gaps in the Australian housing marketFinding home loan solutions for a diverse group of people – regardless of race, religion or style of living – is at the heart of Mortgage Ezy’s business mantra. Unwilling to pursue a cookie-cutter approach to loans, the company instead strives to embrace a variety of brokers and potential mortgagors who may not meet a bank’s preferred profile.

According to Joanna James, general manager at Mortgage Ezy, the egalitarian nature of Australian society has created a long-standing goal for most Australians to be able to buy and eventually own their own home outright.

“If we move to a situation where all borrowers are not able to access finance and it is simply provided to the elite, the Australian dream will be shattered,” says James. “This will create a class of renters for life, which I don’t think anyone wants to aspire to.”

James believes that renting up until retirement age would be a major disadvantage for the individual, as rents tend to increase year-on-year. By contrast, mortgage rates are comparatively stable and should only reflect interest rates of the day.

“The biggest gap in the market comes when borrowers whose first language isn’t English are unable to communicate their needs and wants” Joanna James, Mortgage Ezy

It’s an approach to homeownership that’s reflected in the company’s loaning philosophy, for both existing citizens and new Australians. Though there has been a broader trend of banks avoiding issuing loans to non-residents, alt-doc borrowers and self-managed super clients, Mortgage Ezy has continued lending to this class of borrowers. So much so, James notes, that those who are self-employed can also qualify for low-prime rates, putting down as little as a 20% deposit on a home loan.

“Australia’s greatness has been based on its immigrants,” says James. “Contrary to some people’s beliefs, immigrants support the general overall economy and often start up small businesses that create more job opportunities for Australians.”

James is quick to point out that non-residents frequently buy property prior to moving to Australia, or to provide their children with a home when they attend university. Others who purchase investment properties offer much-needed stock for permanent rentals.

“As the Foreign Investment Review Board prevents non-residents from buying established properties, the impact on the current housing market is minimal,” says James. “Non-residents provide valuable stimulus to the construction industry instead.”

Mortgage Ezy has also taken great strides towards providing discounted rates to all clientele regardless of their situation.

“People don’t need to request a large loan or be in the top income bracket to receive a rate cut.”

As an added bonus, borrowers are also excused from paying a monthly or annual fee on the life of their loan. Loan fees, James notes, are a major bugbear for modern borrowers. When they were first implemented just over 20 years ago, they averaged around $2/month. By contrast, today many sit at around $30/month, amounting to hundreds of dollars a year.

“The longer the loan runs, the greater the percentage of the loan cost the fees end up accounting for,” says James. “So a fee-free loan is a huge advantage for borrowers seeking security for the actual cost of finance.”

“Australia’s greatness has been based on its immigrants. Contrary to some people’s beliefs, immigrants support the general overall economy” Joanna James, Mortgage Ezy

According to James, the key to helping a diverse range of borrowers is to be understanding and open to differences that are important to them. It’s not just a diverse customer base that is at the heart of Mortgage Ezy’s operations; the company also promotes inclusion within its workforce in order to elevate its services when catering to people from different backgrounds.

“As far as possible, one’s workforce should reflect cultural differences and the tolerance needed to respectfully deal with each and every Australian,” she says. “We have several programs that cater to different communities – these range from sharia loans right through to non-resident loans.”

James notes that a number of Mortgage Ezy staff can speak Mandarin, Indonesian and Vietnamese, among other languages. It’s something she sees as vital for the present and future success of the organisation.

“The biggest gap in the market comes when borrowers whose first language isn’t English are unable to communicate their needs and wants,” says James.

While Mortgage Ezy’s credentials in the Asian community have long been established among customers and brokers alike, James hopes to attract brokers who are exploring other niches that the banks do not cater to.

“We must remember especially as we move further into the age of technological innovation that we are in the business of serving people,” says James. “At Mortgage Ezy, we strive to promote a culture that embodies the very essence of this, creating diverse and inclusive solutions for all of our team and the people that we serve.”

In Focus: How the health of homes will impact the mortgage market

In this episode of In Focus, host Annie Kane is joined by Joanna James, general manager of Mortgage Ezy, to discuss how the health of homes may impact mortgage lending. 

As well as managing non-bank mortgage lender Mortgage Ezy, Joanna is also passionate about property from an architectural, building and building biology point of view. To help brokers learn more about this growing field of interest, Joanna joins In Focus to reveal how buildings may be affecting our health, the ins and outs of building biology, and why she believes mortgage brokers need to be aware of its potential impact on the mortgage market.

In this episode, tune in to find out:
  • What building biology is and why it is important
  • How Building Biology can be a unique value add for your clients.
  • How Building Biology could affect lending and investment in the future

 

And plenty more!

Mortgage Ezy appears in The Adviser’s Broker Guide to Non-Banks

Blurb: This engaging article written by Mortgage Ezy CEO, Peter James delves into the Royal Commission’s findings on broker remuneration and how Non Banks support healthy competition across the market. This article is a must read for brokers looking to diversify and look at their options in the lending space.

PIBC_Mortgage Ezy Profile_ES

 

morgage-professinal-australia

The non-banks on a new era of lending

Industry news as published in MPA Magazine – Otiena Ellwand | 05 December 2018

 

Industry news as published in MPA Magazine – Otiena Ellwand | 05 December 2018

Eight leaders discuss the royal commission, broker remuneration and the opportunities emerging from change.

Confusion and complexity have defined this year’s lending environment for both brokers and borrowers. With added compliance pressures and a contraction in credit, brokers have had to lift their game, explore new opportunities and seek solutions elsewhere. These headwinds have motivated them to begin adapting and evolving – actions that will strengthen their businesses to withstand future challenges. And maybe it was time for this awakening.

Read the full article here

 

Mezy Home Loan

Brokers need flexible commission model, says non-bank boss

TheAdviser – James Mitchell 

The CEO of an award-winning non-bank lender has revealed why the group allows its broker partners to choose how they are remunerated.

Mortgage Ezy chief executive Peter James told The Adviser that, amid ongoing speculation around remuneration reform, it is important to remember that mortgage brokers are small business operators.

“Each small business has different needs,” Mr James said. “One of the big things with remuneration is flexibility. In our program, a broker can take a higher upfront and a lower trail or a higher trail and a lower upfront. They can even take it all as trail, depending on the needs of their business.”

Mr James explained that Mortgage Ezy allows brokers to change their commission structure on a deal-by-deal basis. Brokers are also able to discount their commission for their clients.

His comments come after ASIC chairman Greg Medcraft made some startling remarks last week about the broker commission model as he understands it.

Mr Medcraft suggested that the current broker remuneration structure could be tempting brokers to place consumers in larger loans than necessary, and revealed that he would be tempted to do so if he were a broker.

In a statement reported by media and confirmed by ASIC, Mr Medcraft said: “The mortgage commission is based on [the fact that] the larger their loans, the more you get. So, logically, what would you do? It’s human behaviour. I’d do it.”

However, Mortgage Ezy’s general manager of operations, Joanna James, said that she is seeing more and more instances of brokers reducing their commissions in a highly competitive market.

“I actually see brokers discounting their commission to set the loan for the client and do the right thing. At least once a week I will see those conversations happening,” she said.

“We understand that some brokers are playing in very competitive markets. If they are competing with an online discounter, for example, they have the power to dial down their commission with us and still set the deal.”

One of the biggest bugbears for brokers is getting paid on time. It is not uncommon for brokers to wait up to three months to be remunerated. The Mortgage Ezy chief said that the non-bank pays all of its broker partners on the day of settlement.

“Most of these guys are small business owners with wages to pay, so we make sure that they are paid on the day of settlement,” Mr James said.

Mortgage Ezy was ranked the top Mortgage Manager in Australia in the 2017 Momentum Intelligence Third-Party Lending Report – Non-Bank Lenders, partnered by The Adviser.

 

 

Mortgage rate hikes pressure income

Mortgage rate hikes pressure income

14/06/2017 Michael Roddan – The Australian 

 

 

 

 

Constant interest rate increases made by the banks to shift borrowers from interest-only loans to principal-and-Interest mortgages are squeezing incomes at a time of record-low wage growth and exploding household debt.

Since mid-2015, Australian lenders have pushed through seven rounds of interest rate rises independently of Reserve Bank moves.

While owner-occupiers have suffered rate increases in the order of 40-basis-points over that period, borrowers with interest-only loans have borne the brunt of higher rates.

Interest-only loans are now on average about 70-basis-points higher for owner-occupiers and 100- basis-points higher for investors than if the rate had tracked the cash rate. The increases are set to continue, as banks encourage borrowers to switch to principal-and-interest loans as a response to the prudential regulator’s derisking of the overheating east coast property market.

A requirement by the Australian Prudential’s Regulator’s Authority to cut back interest-only loans and reduce lending to investors has caused the rate rises as banks seek to reduce demand for riskier loan products.

Although ANZ passed on a five-basis-point rate cut to owner-occupiers paying principal-and-interest on Friday to offset a 30-basis-point rise on interest-only loans, the changes are the equivalent of an eight-basis-point rise across the whole mortgage book.

Macquarie analyst Victor German said the push to encourage borrowers to switch to principal-and-interest loans was “another hit to household disposable income.” A borrower making the switch would see their monthly repayments increase by about 40 per cent, which German said “will ultimately lead to further reductions in disposable incomes and put even greater pressure on highly indebted households.’

For the most indebted 10 per cent of households in the country, many of which are on interest-only loans, the switch to higher repayments would reduce disposable incomes by up to 6 per cent, Mr German said. Westpac is currently defending allegations it failed to properly assess borrower’s ability to repay loans at the end of the five-year interest-only period.

Interest-only loans, where the principal is not paid down for about five years, is currently account for about 40 per cent of all loans written. APRA is trying to reduce that to below 30 per cent. With the restrictions placed on all banks, Mr German said other lenders would be forced to follow ANZ’s rate rise to prevent customers from simply jumping ship.

Over the past two months, rates for investor and interest-only borrowers at most banks have risen by as much as 56-basis-points, according to new research from Rate City.

It comes in a period of stagnant wage growth and exploding household debt, mainly driven by surging house prices. Australians are also eating further into their savings, which is an unsustainable driver of economic activity.

Shaw and Partners analyst Martin Crabb said the level of savings was “plummeting” as household mortgage repayments rose above the long-term average. “We were saving an annual $107 billion back in 2012; today it is $57bn.” Mr Crabb said.

The average level of interest payments as a share of household income over the past four decades was 7.7 per cent. “Today is it 8.5 per cent”. Mr Crabb said.

The latest monthly survey by Digital Finance Analytics found 24.8 per cent of households were suffering mortgage stress in May, an increase from 23.4 per cent in April. Households are “stressed” when income does not cover ongoing costs.

According the CLSA analysis, every 10-basis-point increase in variable mortgage rates takes about $1.4bn of discretionary spending out of the economy.

Morgan Stanley analyst Richard Wiles said home loan repricing was likely to continue. He forecast that the banks would push through two rounds of rate rises to offset the cost of the banks levy and APRA’s new rules for larger capital reserves, which are expected to be announced in the next two months.

 

Mortgage Ezy steps in for foreign buyers

Mortgage Ezy is the latest to lend to foreign buyers, with a $500 million offer

1490318975778

Australian Financial Review

Australian independent non-bank lender Mortgage Ezy is the latest to join the growing list of alternative financiers providing funding to foreign property buyers.

The group has a $500 million commitment from a warehouse facility of an international bank to provide loans using a securitised model.

“It will be the first of its kind in that the whole pool will be only for non-resident borrowers and there is strong evidence to suggest that a bond such as this will have strong investor interest and will be able to be securitised,” Mortgage Ezy founder Peter James said.

“However, even if the bond is not taken to market when we reach that limit, we will have up to an additional $3 billion to lend out before we reach ultimate capacity and have to securitise.”

About $100 million in loans have already been approved since February, representing only the “tip of the foreign buyer lending iceberg”, Mr James said. He estimated the size of the foreign lending market in Australia to be about $1.5 billion a month, especially after the big-four banks departed from foreign lending.

Mr James said $500 million would be exhausted in the next three months given present appetite of the market.

Mortgage Ezy has strict lending criteria – borrowers must not have purchased more than 10 per cent of a building, have enough funds in the bank locally or overseas and the right visa class.

Loans are capped at a loan to value ratio of 75 per cent, at interest rates of 4.79 to 7.95 per cent, depending on each application. The higher the LVR the higher the interest rate but a 75 per cent LVR is maximum.

Only properties in metro capital city areas would qualify.

Ensuring the sales entered into by foreign buyers are settled is paramount to ensuring the market does not “slump”, Mr James says.

The Chinese capital restriction was the only thing stopping them from settling their acquisitions, he said.

“If foreign buyers left, they may cause a slump in property prices and confidence in the market overall. In addition our reputation in Asia will be severely damaged,” Mr James said.

“Chinese buyers are generally very wealthy individuals but most of them are self employed … and even if they can’t get money out of China, their family and network of friends will rally to bring the money together. You will need a catastrophe like values to halve for them to walk out of a sale.”

WRITTEN BY

by Su-Lin Tan

Australian Financial Review

Number 1 Mortgage Manager 2017

2017_SEAL_Mortgage Managers-01

 

Mortgage Ezy is off to another flying start to the year after taking out Best Non-Bank Lender in the Australian Lending Awards for a second year in a row to now being ranked number 1 Mortgage Manager 2017 as voted by the huge representation of Broker  from around the country in TheAdviser Third Party Lending Report.  Like always Mortgage Ezy was up against some stiff competition with the likes of Australian First Mortgage, Better Mortgage Management, Better Choice Home Loans, Future Financial and Loan Avenue but came out the clear winner.

TheAdvisers Third Party Lending Report is the industry leading report into broker’s perceptions and opinions of the non-bank lending sector and individual lenders within that sector. The Third Party Lending Report selected 8 of the highest ranking factors to shape the research survey. In addition to this brokers were asked a standard NPS question including:

  • Product pricing and policy
  • Product range
  • Turnaround times
  • Overall quality of BDMs (access to BDMs, BDM proactivity and effectiveness in solving any problems).
  • Credit assessment staff – access to and ease in dealing/communicating with credit assessment staff.
  • Client support – effectiveness in servicing your clients post-settlement.
  • Training and education – provision of training, whether product-specific, compliance or other.
  • Commission remuneration and structure – simplicity of structure to qualify for the maximum available remuneration and overall amount of commission paid.

“We would like to thank all the brokers who participated in the national survey and look forward to continuing to build stronger partnerships with all of our brokers with the determination to offer the very best products and service unmatched in the market place”. – CEO Peter James