Brokers are now the number one choice for consumers who are seeking a home loan or to refinance their existing loan. Businesses too use finance brokers to help them with their finance needs from car and equipment leasing to loans to help their businesses expand.
WHAT BROKERS DO
Brokers work with clients to determine their borrowing needs and ability, select a loan suited to their circumstances and manage the process through to settlement.
Some benefits of using a broker:
- They do all the legwork for you
- Access to a wider range of loans
- Experts in a wide range of loans
- More flexible
- Greater expertise as they focus on loans only
TYPES OF BROKING
Brokers can specialise in areas such as:
- Residential Loans/Mortgages
- Reverse Mortgages/Equity Release
- Equipment Leasing
- Chattel Finance
- Car and personal loans
- Business Loans
- Debtor Finance
- Commercial Property Finance
PANEL OF LENDERS
Brokers can only offer loans from the lenders they are accredited with. They call this their panel of lenders. Lenders will normally range from the large banks through to specialist non-bank lenders and mortgage managers. The size of a panel of lenders will vary from broker to broker. You can ask to view your broker’s panel.
HOW BROKERS ARE PAID
Residential brokers are remunerated by the lender and receive an upfront commission and a trailing commission on the loans they settle. It is not standard industry practice for a residential broker to charge a customer for their service due to this arrangement.
The normal practice for commercial, equipment and general finance brokers is that they enter into a mandate or agreement with the commercial or business borrower which provides for a fee to be paid by the borrower to the broker for sourcing their required finance.
WHY USE AN MFAA MEMBER
MFAA members must adhere to the industry Code of Practice which requires high professional standards, fair business practices, ethical behaviour and compliance with both the letter and the spirit of the relevant laws and regulations – all in the interest of you, the borrower.
MFAA sets the highest standards in the industry for its members:
- Industry experience
- Education standards
- Ongoing education to maintain accreditation
- Probity checks
- Professional indemnity insurance
- Membership of an external dispute resolution service
LEGAL REQUIREMENTS FOR BROKERS
New national regulation for the credit industry, including mortgage brokers commenced on 1 July 2010 and is known as the National Consumer Credit Protection Act (NCCP). Changes include that credit for residential property, including residential investment property, is regulated nationally by the Australian Securities and Investments Commission (ASIC). Note that some state laws and regulations continue to exist, such as maximum interest rate caps in ACT, Qld, NSW and Victoria.
Finance broking contracts (FBCs), have been mandatory in NSW and Victoria until 31st December 2010. However, from 1 January 2011, a new phase of the NCCP is in effect that requires that Credit Guides and Credit Quotes be provided to potential borrowers. These documents are designed to give borrowers pertinent information about their rights and obligations under the NCCP.
Another very important aspect of the NCCP is the concept of “responsible lending”, because it requires all persons involved in the provision of credit for ‘personal, domestic or household use or consumption’ to make sure that the borrower is able to make repayments on a loan (or lease) without substantial hardship. In other words, loan products must be ‘not unsuitable’ based on the objectives and needs expressed by a borrower.