Mortgage Brokers – Page 15 – Digital Finance Analytics (DFA) Blog

Suncorp Announces Third Party Role Changes

Suncorp has announced the Head of its Wealth & Life Intermediaries team, Mark Vilo and the Head of its Bank Intermediaries team, Steven Degetto, will swap roles in 2017.

The announcement comes five months after Suncorp’s intermediary businesses were brought together under the leadership of Andrew Mair, to take advantage of the size and scale of the collective businesses, and to better serve intermediary partners and their customers.

Mair commented on the the role changes, saying they highlight the great bench strength in Suncorp’s intermediary team and allow it to start working with partners to build resilient and responsive businesses across the spectrum of financial services.

“The new appointments will give our intermediary partners the opportunity to benefit from the diversity offered by Suncorp’s senior leaders,” Mair said.

“Mark has more than 25 years’ of financial services experience and has been integral in the development and implementation of sales, product and marketing strategies across the independent financial advisers’ market.

“I have no doubt he will continue to build on the excellent results Steven has delivered for our banking brokers over the past three years.

“Steven has more than 20 years’ experience in the finance industry with the majority of this based in the intermediary channel.

“He has been instrumental in reshaping the business to deliver quality, sustainable growth and an exceptional proposition for broker partners and their customers, culminating in being named MFAA 2016 non-major lender [of the year].”

Mair said Mark and Steven are both passionate supporters of the value that intermediaries provide for their customers, and will bring that commitment and a fresh perspective to their new roles. “The role changes demonstrate the breadth of talent across Suncorp and the initiative underlines Suncorp’s commitment to being the partner of choice for intermediaries,” he said.

Of his new appointment, Vilo said: “I’m thrilled to be taking on the new role and looking forward to working in a dynamic market that shares similar challenges and opportunities that are being experienced in the independent financial advice market.”

“I’m very proud of the business the team we have created over the past few years. I have made a number of great friends and colleagues in this fantastic industry and I am looking forward to the opportunity to develop my expertise in a different type of intermediary business,” added Degetto.

Vilo and Degetto will start in their respective positions for a period of 12 months, effective 1 January 2017.

Broker channel sees significant rise in fraud

From Australian Broker.

The significant growth in fraud found in the broker channel is an ongoing concern, Veda’s 2016 Cybercrime and Fraud Report has revealed.

The report showed broker channel fraud makes up 15% of all credit application fraud and has risen by 25% in the last half year period (H2 FY2016).

Speaking to Australian Broker, Veda general manager, fraud and identity solutions Imelda Newton said it is in brokers’ best interest to take measures to detect fraud.

“A lot of the activity we see through that broker channel is where people falsify their personal details to be able to secure the finance so things like altering payslips, bank statements, tax assessments,” said Newton.

The research found the falsifying of personal details has risen 27% per cent year-on-year and more than a quarter (27%) of Australians have been a victim of identity theft, which has risen 80% in the 12 months to June 2016. 56.94% of all credit application fraud comes from an online channel.

“Even though they might not suffer the ultimate financial loss – the lender will – the thing for the broker is their reputation,” Newton told Australian Broker.

“Being associated with some fraud that’s happened is not a good thing for that sector and for those individuals whose reputation can be everything in terms of the credibility of their business.”

The data also found fraud occurrence has increased among bank branches, rising 13% on 2016, with branch channel fraud making up 12.78% of all credit application fraud.

“Everyone is getting better at detecting the fraud – there’s a lot more quick investigation and detection going on, so that’s how we’re finding out more about these cases that are happening in the branches.”

She said the rise in fraud in the branch channel may stem from banks and other lenders using manual methods of identity verification.

“One of the downsides to these manual processes is the subjectivity of manual identity verifications. By using electronic verification the subjectivity is removed and a common standard set of rules can be applied.”

Newton said from the latest insights, growth in fraud shows no signs of slowing down this year.

“This trend is likely to continue into the future, as individuals and businesses become more reliant on the internet for their banking, shopping and other financial interactions.”

The Interest-Only Loan Debt Trap

Today we discuss some specific and concerning research we have completed on interest-only loans. Less than half of current borrowers have complete plans as to how to repay the principle amount.

Interest-only loans may seem like a convenient way to reduce monthly repayments, (and keep the interest charges as high as possible as a tax hedge), but at some time the chickens have to come home to roost, and the capital amount will need to be repaid.

Many loans are set on an interest-only basis for a set 5 year term, at which point the lender is required to reassess the loan and to determine whether it should be rolled on the same basis. Indeed the recent APRA guidelines contained some explicit guidance:

For interest-only loans, APRA expects ADIs to assess the ability of the borrower to meet future repayments on a principal and interest basis for the specific term over which the principal and interest repayments apply, excluding the interest-only period

This is important because the number of interest-only loans is rising again. Here is APRA data showing that about one quarter of all loans on the books of the banks are interest-only, and that recently, after a fall, the number of new interest-only loans is on the rise – around 35% – from a peak of 40% in mid 2015. There is a strong correlation between interest-only and investment mortgages, so they tend to grow together. Worth reading the recent ASIC commentary on broker originated interest-only loans.

But what is happening at the coal face? To find out we included some specific questions in our household survey, and today we present the results.

We were surprised to find that around 83% of existing interest-only loan holders expect to roll their loan to another interest-only loan, and to keep doing so. More concerning, only around 44% of borrowing households had an explicit discussion with the lender (or broker) at their last loan draw down or reset about how they plan to repay the capital amount outstanding. Some of these loans are a few years old.

Around 57% said they knew the capital would have to be repaid (we assume the rest were just expecting to roll the loan again) and 26% had no firm plans as to how to repay whereas 39% had an explicit plan to repay.

Many were expecting to close the loan out from the sale of the property (thanks to capital appreciation) at some point, from the sale of another property, or from another source, including an inheritance.

Thus we conclude there is a potential trap waiting for those with interest-only loans. They need a clear plan to repay, at some point. It also highlights that the quality of the conversation between borrower and lender is not up to scratch.

We think some borrowers on an interest-only loan may get a rude shock, when next they try to roll their interest-only loan. If they do not have a clear repayment plan, they may not get a new loan. There is a debt trap laid for the unwary and the APRA guidelines have made this more likely.

Next time we will delve further into the interest only mortgage landscape, because we found the policies of the lenders varied considerably.