Mortgage brokers put the boot into UBS

Australia’s mortgage brokers have ripped into a UBS report which claimed a third of home loan borrowers fudged the truth on their applications, leading to the conclusion that Australian banks are holding a staggering $500 billion of ‘liar loans’ on their books.

The Finance Brokers Association of Australia called the UBS analysis “reckless” because the report’s conclusions are based on “implied presumptions". FBAA executive director Peter White called upon UBS to prove their case and demanded to see their survey questions.

"I want to see their data analysis,” he said. “We need to see the questions they asked participants and we need to know how much and under what conditions they were paid. UBS must prove there is no steering of answers or influences to produce outcomes which are not factual or fair or commercially sound."

The FBAA boss also questioned the validity of the data.

“They (UBS) are not a lender in the home loan space, so there needs to be clear transparency of their supposed results.” 

White also put the boot into UBS for not understanding how the mortgage broking industry worked.

“This is not their data and not data from a bank/lender, so the question must be asked as to the accuracy and integrity of the research, which is fundamentally divorced of market broker and lender marketplace data," he added.

White's key gripe, however, was that UBS analyst Jon Mott attributed much of the blame for ‘liar loans’ to mortgage brokers after his survey discovered a significantly higher number of lies on applications where loans were sought through broker channels.

As many as 32 per cent of respondents who secured a mortgage through a broker claimed to have falsified some part of their application compared to 22 per cent who went through their bank, according to Mott.
 

Banker vrs Broker

The Mortgage and Finance Association of Australia (MFAA) chief Mike Felton also took umbrage at Mott’s survey particularly the part that cited a higher level of lies were found in the mortgage applications via brokers.

“We particularly question UBS' comparison of misrepresentation in the ‘Banker vs Broker’ channels, given that the actual data shows us that default rates experienced on loans originated through the respective channels are quite similar, once controlled for demographic differences," he said.

“The MFAA relies on actual data collected by ASIC as the source of truth in these matters. ASIC data also reports extremely low numbers of brokers being deregistered."

Felton also noted that whilst the broker has an important role to play, final responsibility for approving or declining a loan has to lie with the lender.

“UBS has implied in its commentary that brokers are not fulfilling their obligation to act as professionals, or that they are placing consumers into high risk lending that they cannot afford. The findings simply do not match the reality of the consumer experience, nor ASIC’s actual data into mortgage outcomes," he said.

“We believe this research conducted by UBS does not fully consider the operating model of brokers, nor acknowledge the legal responsibility of consumers to provide full and honest disclosure in the application stage of the loan process, nor the responsibility of lenders to appropriately verify the client’s financial situation and ensure that the loan is affordable."

Acknowledging the potential for borrowers to imply that they did not fully disclose all the facts during the application process, Fenton said brokers are reliant on the customer’s disclosure and obliged to follow well-established processes to collect the data from consumers, including taking all reasonable steps to determine and verify the clients' financial situation before helping them get a loan. 

 

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