The risks of over-reliance by lenders on third parties, such as mortgage brokers, is a prominent theme of a draft prudential practice guide circulated by the Australian Prudential Regulation Authority that aims to prod authorised deposit-taking institutions into reviewing risk management practices for residential mortgage lending. The guide in many ways consolidates material previously articulated by APRA and there is no particular policy warning in the document.However, it opens with a ritual observation that "residential mortgage exposures have exhibited low default and loss rates," and reminds lenders that "lengthy periods of economic growth combined with low interest rates and a sustained period of rising house prices can create a sense of complacency among residential mortgage lenders."In that vein APRA targets practices it dislikes. For example, it states a preference for brokers to be paid mainly by way of trail commissions."Experience has shown that commissions paid upfront tend to encourage less rigorous attention to loan application quality," APRA said. APRA also insists - using the euphemism "good practice" - that banks "rather than a third party, perform income verification."The use by banks of multiple brands is also a cause for comment."Where an ADI uses different serviceability criteria for different products or across different brands, APRA expects the ADI to be able to articulate and be aware of commercial and other reasons for these differences, and any implications for the ADI's risk profile and risk appetite," the regulator said.Lenders pursuing market share growth are also reminded to take care."When an ADI is increasing its residential mortgage lending at a rate materially faster than its competitors, either across the portfolio or in particular segments or geographies, a prudent board would seek explanation as to why this is the case," APRA said. "Rapid relative growth could be due to an unintended deterioration in the ADI's loan origination practices, in which case APRA expects that an ADI's risk management framework would facilitate rapid and effective measures to mitigate any consequences."