Fed:Govt should have pursued broker code years ago -MFAA

AAP General News (Australia)
08-20-2007
Fed:Govt should have pursued broker code years ago -MFAA

By Colin Brinsden, Economics Correspondent

CANBERRA, Aug 20 AAP - The representative body for home loan brokers and lenders says
it asked the federal government five years ago to pursue a national code of conduct for
its members.

Treasurer Peter Costello yesterday called for the states to accelerate work on a uniform
law on the licensing conduct and disclosure of mortgage brokers.

In an open letter to the treasurer, the Mortgage & Finance Association of Australia
(MFAA) said in August 2002 it proposed that the government should enact such legislation
but were told it was not a federal issue and it should approach the state governments.

"So that is what we did," MFAA CEO Phil Naylor said in the letter.

"Along with other stakeholders such as consumer groups, we have been working with a
working party of the six state and two territory governments as well as representatives
of ASIC and the Treasury, towards a nationally consistent draft legislation and which
I understand will be released for public comment soon."

MFAA represents some 13,000 mortgage and finance brokers and non bank lenders across Australia.

"We are frustrated that it has taken so long, as we have always been of the view it
should have been taken up by the federal government as we requested five years ago."

"Regrettably, neither the federal government nor the opposition had the foresight to
understand the problems this refusal to act might precipitate."

Mr Costello said yesterday the uniform national laws should also stop mortgage providers
issuing low-documentation home loans to people who could not afford them.

Mr Naylor said he was not sure which organisations the treasurer was referring to as
"low doc" lenders as they were offered by both the banks and non-bank lenders.

A "low doc" loan is a loan where a full verification of the borrower is not required
but the ability to service the loan is tested against the income stated by the borrower.

This type of loan is designed to assist the growing proportion of self-employed people
in Australia who do not have PAYG evidence of earnings.

"This type of product is not the problem. The problem ... is the lending practices
of so-called `predatory lenders'," Mr Naylor says.

"These lenders prey on vulnerable and desperate borrowers, by lending amounts they
know the borrower cannot possibly re-pay or service - acting very quickly to repossess
the property when the borrower predictably defaults.

"They sometimes, improperly, use low doc loans and induce false declarations by the borrowers."

Mr Naylor estimates these lenders would constitute no more than 0.5 per cent of the
mortgage market, "but the damage they do to vulnerable borrowers and the reputation of
the industry is immense and unconscionable."

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KEYWORD: BROKERS MFAA

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