Mortgage Shoppers At Risk: Report
Sydney Morning Herald
Thursday March 27, 2003
A report on the mortgage broking industry has found up to half of home loans are sourced through intermediaries, but a regulatory vacuum means consumers are falling prey to excessive fees and unscrupulous practices.
Commissioned by the Australian Securities and Investments Commission after a rise in complaints, the report identified structural problems which left consumers who used a broker at risk of increased repayments, fraudulent manipulation of applications, and in some cases, losing their home.
Urgent steps have been called for, including a ban on advertisements offering ``instant loan approval" and a cap on fees.
National regulation was ultimately needed, said the Consumer Credit Legal Centre of NSW, which compiled the report.
``Lenders increasingly rely on brokers to initiate loans, but some are denying responsibility for the actions of the brokers who market their products," the centre's co-ordinator, Karen Cox, said.
``To make the situation worse, access to cheap, effective, dispute resolution may be limited or non-existent if a broker is involved." The Mortgage Industry Association's ombudsman scheme was not adequate to deal with complaints because it could not compel brokers to belong to it.
More than 120 case studies included pensioners losing their homes after being threatened by brokers not to have solicitors check documents, people deceived into signing documents requiring fees thousands of dollars above that verbally agreed to, and a woman advised to change her name to hide a bad credit history.
Brokers also chased consumers for thousands of dollars in fees, even if they failed to deliver a service, the report found.
Legislation due to be introduced to NSW Parliament went some way to dealing with the problem, Ms Cox said. But the proposed bill failed to limit fees, and did not define the role of the broker.
Ms Cox said the biggest issue was clearing up who the mortgage broker acts for: ``Are they an agent for the lender, or acting for the client by giving independent advice?"
The Mortgage Industry Association responded to the report saying it recognised and was dealing with the issue.
© 2003 Sydney Morning Herald
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