Breaking Interest Rates News

An MFAA accredited mortgage consultant and his company have been expelled for misconduct.

According to a statement by the MFAA, Mr Anh-Tuan Pham and his company Freedom Finance & Property Group engaged in dishonest conduct by manufacturing and submitting income supporting documentation from his company for two individuals not employed by the business.

As such, The MFAA Disciplinary Tribunal decided this morning to expel the broker and his company from the industry body network.

“This conduct was contrary to clause 42 of the MFAA Code of Practice which states, ‘A Member must not engage in any acts or omissions of a misleading, dishonest, deceptive or fraudulent nature’”, a statement by the Disciplinary Tribunal read.

MFAA chief executive Phil Naylor said the company had a well defined Code of Practice which demands high standards of behaviour, ethics, expertise and experience.

“As the MFAA represents the majority of Australia’s mortgage brokers with over 12,000 members, we take this responsibility to members and to borrowers seriously. We have strongly lobbied for the past four years for consistent, nation-wide regulation of mortgage brokers and welcome the passing of the National Consumer Credit Protection Act but will continue our strong approach to disciplinary matters as we believe it is in the best interest of consumers and our members,” Mr Naylor said.

Despite the Reserve Bank raising the official cash rate last week, Liberty Financial has announced it will absorb the increase and keep rates unchanged for new customers wanting a commercial mortgage.

This step follows the recent announcement of Liberty’s enhancements to its commercial lending products, which includes an increased maximum LVR for prime full doc business to 80 per cent.

Liberty Financial’s commercial group sales manager Bob Turnbull said the company’s decision to absorb the latest interest rate hike was a further indication of the lender’s ongoing commitment to the third party channel.

“By keeping rates on hold, we are inviting the industry to try Liberty as a viable commercial alternative to the banks,” Mr Turnbull said.

Liberty has seen an increase of over 25 per cent in commercial loan applications since its most recent announcement, signalling that its momentum in the market continues to build.

A former mortgage broker, who is currently being investigated for fraud, has fled the country, forcing officials to raise an airport alert.

WA-based former Mortgage Miracles broker Kate Thompson has been under investigation for the last 14 months for altering loan application forms and falsely inflating the incomes of borrowers in order to originate bigger loans.

In late 2008, Ms Thompson's offices were raided by police after a string of her clients, predominantly retirees and lower-income earners, claimed their incomes had been falsely inflated on loan application forms, according to a report in The Australian.

They said the loans they were given – which allegedly were for the purpose of investing in other properties, many of them allegedly overpriced – were far too high for them to be able to meet loan repayments.

Separately, Ms Thompson allegedly raised about $5m from her clients, many of whom were Mormans, for a retirement-village style development called "Mormonville".

Ms Thompson has previously said she had "not misappropriated any funds" and had "never acted in the capacity of a real estate agent”.

Mortgage Miracles was liquidated in November 2008.

Yesterday, WA major fraud squad detective Ken Forster told The Australian that Ms Thompson left the country for Hong Kong.

Detective Forster said airports and ports had been placed on alert to contact WA police if she returned to Australia.

Part time brokers worried about the introduction of licensing and ongoing lender volume hurdles can rest easy.

I-Financial Group will soon allow selected brokers to be authorised representatives under its Australian Credit Licence.

Part time brokers who have struggled with lender volume hurdles, commercial office requirements and other ‘filtering mechanisms’, can maintain full accreditation to write loans from I-Financial Groups I-Loan suite as well as any other lenders where the broker chooses to meet that lender’s requirements.

“Through an embedded referral process with our employed brokers the authorised representative will still be able to offer more than 25 lenders to their clients and receive a referral fee for doing so – while maintaining the all important client relationship,” I-Financial Groups managing director Craig Morgan said.

According to Mr Morgan, it is becoming increasingly difficult for part-time operators in any financial services discipline to maintain the technical skills and product knowledge necessary to individually deliver a credible service offering.

“Even where the product knowledge of the individual is maintained at levels as high as, or higher than, their full-time counterparts – lender volume requirements and the time and money required to be spent on Continuing Professional Development, compliance and systems – may make it impractical for the vast majority to justify obtaining a license,” he said.

Under the new group, a broker will have the opportunity to earn referral income for insurance, financial planning, property, commercial finance, leasing, SMSF loans, and plant and equipment finance.

“In short, most of these brokers will have a far broader financial services offering than they do now.  And they will have dramatically increased their revenue streams,” Mr Morgan said.

The I-Financial Group is currently calling for expressions of interest with a view to identifying potential authorised representatives in the pre-July registration period.

More than 40 per cent of first home buyers are experiencing some sort of mortgage stress, a new report has revealed.

According to the latest Fujitsu Mortgage Stress-O-Meter monthly update, almost 50 per cent of the 255,000 first time buyers who entered the market during the last 18 months are expected to experience some degree of mortgage stress if interest rates continue to head back towards their historical averages.

Fujitsu Australia and New Zealand executive director Martin North said the drivers of stress continue to rotate compared with the bottom of the stress cycle in March 2009.

“Stress caused by interest rate rises have lifted by over 11 per cent, and costs of living by over 3.4 per cent, whereas fear of unemployment fell 6 per cent and redundancy fell 1 per cent,” Mr North said.

During February, the number of households experiencing some degree of mortgage stress rose by 0.7 per cent to 581,000 – significantly less than the peak of 900,000 recorded in August 2008.

Severely stressed households (those facing a potential sale or foreclosure, or forced refinance) rose by a further 2 per cent driven by interest rate rises, flat income levels and cost of living increases.

That said, mild stress fell slightly thanks to continued improved investment performance in recent weeks supported by more favourable employment prospects.

Property prices are expected to climb 10 per cent this year, according to McGrath Real Estate.

In his latest market review, the real estate’s chief executive John McGrath has said property prices should continue to rise on the back of limited supply.

Moreover, Mr McGrath said investors and upgraders would also be responsible for an uptick in property prices.

“The first two quarters of 2010 will be the launch pad for a long period of sustained growth in Sydney property prices,” he said.

“I predict gains of 8 - 10 per cent in most areas this year. We saw a sneak preview in the last quarter of 2009 when properties between $250,000 and $1.5M all seemed to be enjoying a price surge due to increased buyer activity, notably at the lower end before the First Home Owners Boost disappeared. In 2010, there will be further upwards pressure on prices across the board due to low supply and high demand, particularly from upgraders and investors.”

Mr McGrath said he was encouraging investors to buy in areas they know.

Dishing out his top 10 picks for investors in 2010, Mr McGrath said Cammeray in NSW would be the best performing suburb this year in terms of house prices.

“I think Cammeray will be closely followed by North Wollongong, Queenscliff, Dee Why and Coogee,” he said.

Rounding off his top 10 investor suburb picks, are Lane Cove, North Parramatta, Erskineville, Surry Hills and Ryde.

Bendigo and Adelaide Bank’s BBB+ credit rating from Fitch Ratings has been upgraded from stable to positive, suggesting the bank may soon be upgraded to A-.

If the second tier lender was upgraded to A- it would be able to access wholesale money at cheaper rates and close its competitive disadvantage against the major banks.

Fitch said the bank had managed to withstand the pressures of the global financial crisis well, with profitability recovering in the first half of the 2010 financial year.

“Around 98 per cent of the lenders portfolio is secured,” Fitch said.

“Furthermore, its exposure to higher risk commercial lending is low relative to larger Australian banks, and is reflected in asset quality ratios.”

With fear mounting that some of the majors could follow Westpac’s lead and reduce their maximum loan-to-value ratios (LVR), non-banks are using the opportunity to reinforce their position as an alternative to the big four.

National Mortgage Company yesterday announced it would continue to provide 90 per cent investment loans with capped mortgage insurance where required.

The non-bank’s head of credit and risk operations Jeff Chapman told The Adviser that the company would not be tightening its lending criteria in the foreseeable future.

“We continue to be backed by strong balance sheet wholesale funding lines and as such, we see a big opportunity for not only ourselves but also other non-bank lenders that have strong funding lines,” Mr Chapman said.

“We have been a market leader in construction loans for some time and have built specialised platforms to assist our introducers and builders. We also spend time with our introducers and build unique products that meet the needs of their respective platforms.”

Mr Chapman said the company was currently developing some new products that will be rolled out to its broker channel later in the year.

“There will be some exciting additions to our product stable in the next few months. We are planning to roll out a self managed super fund loan. With continued support around LVR levels and fast approvals, loan introducers will always find a solution for their clients via our funding platform,” he said.

Harcourts Financial Services has voiced its support for the industry’s impending move to regulation.

The company’s chief executive officer Andy Graham said the introduction of legislation was a positive move for the industry as it would improve broker positioning and credibility in the market place.

“I see this new regulation as a real positive for our business and will assist in building the professionalism of our industry by weeding out the cowboys and under-achievers from the dedicated industry participants,” Mr Graham said.

Harcourts Financial Services is currently looking to expand the business through both organic growth and diversification.

“We have a base of 45 outstanding mortgage consultants right around the country, with the aim to continue to build our team to 70 high-quality, industry-compliant people over the next 12 months,” Mr Graham said.

Already, the company has seen a marked upswing in its monthly written applications, which increased by 149 per cent in the last two months.

“We look forward to our next financial year, assisting our clients, developing a one stop scenario for all Harcourts clients, and continuing to diversify our business via other avenues such general and risk insurance sales, and asset finance opportunities.”

The Reserve Bank of Australia has put out the call for greater construction activity, warning that a housing bubble could result if nothing is done.

RBA assistant governor Phillip Lowe said if the nation's population growth remained strong, more of the economy would need to be devoted towards housing, presenting challenges both to labour markets and governments.

"If this does not happen, further adjustment in housing prices and rents is likely to occur to balance supply and demand," Mr Lowe said.

Australian home prices surged 13.6 per cent last year, as a strong economy and robust population growth spurred buyers to push prices higher on limited availability. At the same time bottlenecks in the new home construction have curtailed supply, adding to price pressures.

Delays on planning approvals and a shortage of skilled tradesmen - a problem likely to worsen as the mining boom looks set to return – have also been contributing to rising costs in the sector.

Recent statistics from RP Data found that Australia’s most expensive homes are likely to rise in price by 10 to 15 per cent this year.

Earlier this week, a 1950s beachhouse, described as ‘liveable’, was sold to a local buyer for $7.35 million.

RP Data found NSW and WA luxury sales were the strongest in the last quarter of last year in comparison to the corresponding period in 2008.

In NSW, 45 homes sold for more than $5 million each, compared with 40 the year before.

Similarly, in WA, 13 properties were sold for more than $5 million, compared with one in 2008.