Yes Home Loans’ CEO Lee Boueri is not a happy camper. He says the Federal Government’s $8 billion residential mortgage backed securities (RMBS) scheme, which is being implemented by the Australian Office of Financial Management (AOFM), is not targeting the correct group.

“It should be addressing the real basis of the suffering, which is distributors such as us,” Boueri exclaims maintaining that judging from what has been set in place the government didn’t understand the securitisation model properly.

“The industry is hard to explain and I think a lot of government departments walked away from it thinking it would be a nightmare to get their heads around,” he says.

His concern is that the government’s target for its injection of funds is the securitisation market not the non-bank lending sector and that therefore mortgage managers (the non-bank sector’s retail arm) will not receive the appropriate flow-on.

The Federal Government’s hope is that its investment in RMBS will boost the non-bank lending sector, which is shrinking fast due to the credit crunch and the drying up of funds on the international wholesale market, and boost competition in the mortgage market.

The scheme is well under way. FirstMac and Members Equity were the first lenders to be given a tick by the AOFM followed by Challenger and RESIMAC.

But Boueri says that while he applauds the government’s desire to tackle the issue of liquidity in the mortgage market he would like to see funding being channelled directly through the retailers and bypassing the intermediary of funding vehicles.

He remarks that the government’s stated agenda, to return competition to the mortgage industry, will only be achievable if the benefits filter through to consumers via retailers.

“The depth of the crisis is more than the lack of liquidity in the market. There’s a lot of play going on in the background where a lot of big interests are at stake,” claims Boueri.

(Yes Home Loans is currently embroiled in a legal battle with GE Money, one of the biggest funders of non-bank housing loans.)

Boueri argues that non-banks are suffering because of a serious lack of transparency in the sector.  Stating that this causes confusion for both government legislators and consumers he urges the industry to deal with the issue “for its own protection”.

“The core of the problem is that there is so much depth to our industry it’s not simple for people to understand. So everyone tends to get lumped together and non-bank lenders, mortgage managers and brokers all end up in the same bucket.

“As an industry we’re at fault because we’ve blurred the lines over the last 10 years as the market got hot,” he says.

Boueri says one of the main difficulties for the non-bank sector is that it is minus a voice.

Critical of the MFAA he says the industry body has a strong bank support base in terms of sponsorship, which he believes makes it biased towards banks.

“Brokers and banks represent 95% of the MFAA and only 5% is represented by non-bank lenders but ironically non-bank lenders started the MFAA.

“You’ve got a whole lot of merging interests in the MFAA that are not necessarily non-bank,” says Boueri adding “from an industry outsider’s perspective the MFAA looks like a communication medium between banks and their brokers”.

Boueri told Lending Central he believes that the non-bank sector is in real danger. He maintains that he receives dozens of supportive phone calls from other mortgage managers who are unwilling to take on the big guns the way he has done.

A strong advocate of national regulation Boueri says “before laws are made there is a certain presumption that most people will adhere to a code of ethics.

“That’s the foundation on which laws are posted.”

He admits his concern is that within the mortgage industry there is a flaunting of the basic moral fibre on which decent businesses have been built and that this has the potential to undermine the whole non-bank sector.