Aggregators: Mortgage Wisdom CEO David Smith talks compromise
By Jill Fraser for Lending central
Continuing our series on aggregators Lending Central spoke to Mortgage Wisdom CEO David Smith who maintains that as long as brokers and lenders continue to see issues as black and white the stalemate will persist.
LC: Are your brokers angry about the current situation with the big four banks?
DS: Yes, but I’d say they are equally frustrated. They’re actually extremely frustrated at present.
They’re trying to do everything that’s asked of them but the rules are constantly changing and they’re getting very concerned about where it’s all heading.
LC: What do you do in response to the frustration? Where do you go with it?
DS: Our brokers try to solve their issues by conventional means and when all else fails they call on Head Office for assistance. Head Office then escalates the issue accordingly.
Where the broker might be speaking with the BDM Head Office would be speaking with the National Manager, Lending Manager or even the General Manager.
LC: What sort of response do you get from lenders?
DS: The responses are becoming more and more disappointing. We don’t seem to get the audience we used to. The argument back to us is that more education is required or that lending policy has tightened.
Lenders are still empathetic but we don’t get anywhere near as many wins as we used to.
LC: Do you think that’s because they’ve got more muscle due to the diminishing competition?
DS: I think it’s a bi-product of that. There is no doubt the industry needs better competition. I believe the major’s can now pick and choose who they want to lend to more freely than in previous markets. I also understand that because of the GFC more cautious lending practises are required. I believe a number of factors have all come together to create this issue, not just diminished competition.
LC: As the middle man what’s it like to be in your shoes?
DS: We get as frustrated as the broker. We see the inconsistencies across the whole service proposition. The skill set in some lenders’ back office is low at present and it seems from time to time the lending process has become more important than service to the customer.
LC: Do they acknowledge that?
DS: There might be an occasional apology but centres consistently focus on the problems we cause, not the problems they cause.
LC: When you speak of inconsistencies are you referring to processing times?
DS: Definitely. Many consumers have strict contractual timetables that seem to be forgotten at present.
LC: What do you think the solution is?
DS: More consultation. We’re now having more conversations with decision makers and we believe that this will solve the problem. If the issue is the education of our brokers then allow the aggregator to play a more active role by buying them in from the outset.
LC: Do you believe that the accreditation schemes are fair?
DS: Lenders are saying why would we hold open three thousand spots for people who don’t give us a loan in 12 months and when they do ring they take up 16 hours of our time? How is that fair on those who have to wait while we try to get those transactions through?
We’re not convinced that accreditation should be linked purely to volume and are more supportive of quality measurements. We’re also concerned about the effect these new rules have on the broker’s impartiality.
There is some logic in the way they’re changing the business rules and therefore the distribution side of the operation must be aware of the problems. But this new position has happened so quickly and with limited consultation. We have asked the lenders to review their new policy.
LC: Have you been successful?
DS: Definitely. It boils down to negotiation. It’s a case of being more open in the communication process - the lenders must realise that their collective requirements are almost impossible for a small to medium broker to deliver.
We must always remember that the consumer must be the one to choose. Some of the lenders appear to now be listening. On the other hand brokers are starting to realise the damage that can be caused by poor quality submissions.
LC: Do you think brokers need another representative body? A lot of brokers feel that they’re being treated like second-class citizens.
DS: The ground rules have changed and the brokers need increasing support but I wouldn’t go that far.
Most of our brokers are ex-bankers and have been in the business for 10 years and built solid relationships. So there’s most probably an extra step when it comes to communication, commitment and respect.
LC: Between whom?
DS: Between the broker and the BDM or lender. Also between the aggregator and the lender.
We’ve been doing this for 10-plus years and while the whole process needs a review I wouldn’t say that we’re treated like second-class citizens.
With the many changes in the industry brokers are requiring increased support and it is up to the current industry body and the broker’s aggregator to better represent their interests.
LC: Some brokers believe that banks are trying to get rid of the broker market.
DS: That’s been the underlying feeling ever since the broker channel was created. There’ll always be retail banks somewhere wanting to change the distribution population. They’d rather have control of the customer through the front door than Third Party.
There is also a belief at present that lenders offer better service through their branch network than the broker channel and the brokers are feeling threatened.
However certain lenders are discussing the concept of linking our brokers with their local branches to improve the service to the consumer. They have indicated that they now realise the broker channel has more success in introducing new lending customers to the branch than the branch does.
Channel conflict has also been a concern since the industry commenced and this initiative if managed correctly will go a long way in increasing the broker’s value.
LC: What are your thoughts on the accreditation schemes?
DS: There are people who have been adversely affected by recent changes and aren’t happy with the new rules especially where there will be costs associated with maintaining their accreditation. Accreditation is not just about volume, but the professionalism and quality of the broker as well. Aggregators can assist in managing how the broker enters the lending process but only a few lenders seem to want to know how.
LC: Are you saying that all sides should be listening more to each other?
DS: Without a doubt and it’s starting. Industry think tanks are happening and more groups are coming together. The only way to get the improvements as required is for all stakeholders to come together and stop the domination that current exists.
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Greg July 6, 2009
A good question for David Smith would have been “What do you consider your role to be as an Aggregator”?
Look up the dictionary David, it is to aggregate the business of all of your brokers for the best possible commission split and continuity of arrangement. Having said that is follows that you aggregate the business in suitable form that the lender can accept, so, your role is to negotiate on our behalf and to take responsibility for the quality of applications submitted by we brokers.
When the lenders start changing the rules, you need to stand up and do the educating and training. Since you have not, this may be why the lenders have taken up that role.
A lot of what you said though is music to my ears. Make it work and I’ll come on over……..