Mortgage brokers required by law to work in customers’ best interests: Mortgage Choice
Mortgage Choice CEO Michael Russell says licensed mortgage brokers “most certainly working in customers’ best interests” and are required by law to always act appropriately.
Russell is the most high-profile mortgage broking executive to speak out against a weekend News Limited article that suggested because brokers are paid upfront commissions by lenders, this creates a conflict of interest when recommending loans to consumers.
Russell called the article written by News Limited national economics editor Jessica Irvine “ill-informed” following on from comments from mortgage broker Darren Moffatt who said it was riddled with factual inaccuracies and omissions.
“It is important to set the record straight to reassure Australian property buyers that contrary to the misinformation that was published over the weekend, licensed mortgage brokers are most certainly working in customers’ best interests," says Russell.
“Furthermore, there is legislation in place to enforce that mortgage brokers are acting appropriately,” says Russell, who heads up the biggest mortgage broking franchise in Australia.
“Under the National Consumer Credit Protection Act, it is compulsory for all mortgage brokers to be licensed and to fully disclose to a customer any commissions paid on their housing loan.
“Consumers should most definitely do their own research before deciding on which mortgage broker to use. But when they do, they can be assured that ASIC oversees stringent national legislation that imposes strict obligations on mortgage brokers to always make lender and product recommendations that are aligned to customers’ requirements, objectives and financial circumstances,” Russell says.
Also responding to the News Limited article, Phil Naylor, CEO of industry body, the Mortgage and Finance Association of Australia (MFAA) called the assertions in the articles that mortgage brokers did not act in the best interests of borrowers are completely “without foundation”.
“Mortgage brokers are now a trusted source of home loan information and cost effective products.
“It is law that all commissions are disclosed fully in loan documents for borrowers, including upfront, trail and volume commissions. The industry has been closely involved in the federal government’s creation of rules to protect borrowers, who find mortgage brokers a very valuable resource in making what is the largest investment of their lives,” Naylor says.
“This is evidenced by the fact that about 41% of all home loans in Australia are now written by brokers, the vast majority of whom are members of the MFAA, which ensures the highest professional, training and disciplinary standards for the protection of consumers," he adds.
Naylor says “transparency is a key aspect of how mortgage brokers operate and it is unfair to assert that brokers are not providing unbiased and comprehensive information as it is published in the loan documents borrowers review and sign.
Ray White-owned mortgage broking group Loan Market Group also defended the industry yesterday.
Loan Market corporate spokesman Paul Smith said the brokerage was disappointed by weekend newspaper reports claiming brokers were merely “salesmen” conflicted because of the commissions they received from lenders.
According to Smith, the rise in popularity for mortgage brokers has occurred because mortgage brokers enable borrowers to make considerable savings.
“The success of a mortgage broker is built upon providing a unique service where they can negotiate lower interest rates and fees and guide borrowers through a range of products most people simply wouldn’t have the time to research,” he says.