Quality control still lacking in broker loans

A panel of bankers at this week's LIXI conference in Sydney was unanimous in expressing the view that the quality of mortgage applications coming from brokers was still well below an acceptable standard, despite the quality criteria lenders had attached to the payment of commissions over the past year.

NAB Broker head of broker services, Amanda Rockliff, said 70 to 75 per cent of applications had to be re-worked, a figure she described as astronomical.

Commonwealth Bank's general manager mortgage wealth retail banking services, James Sheffield, said applications coming from brokers had an average of 2.5 errors.

Sheffield said: "There is cost in this and there is an issue of customer satisfaction."

Andrew McPherson, the head of marketing at Sandstone Technologies, a builder of online banking systems, said it cost a bank $1200 to originate a mortgage using current systems. Automated systems using straight-through processing technology would cut that cost in half.

Rockliff said: "Our goal is to have a one-touch process where we are given a package with all the supporting documentation.

"Very few applications come through like that. Often brokers appear to be unaware of the lender's requirements and we are drip-fed the documents."

St George Bank senior manager intermediary distribution platforms and systems, Gary O'Sullivan, said slow responses to queries held things up.

The bankers acknowledged that there were problems at their end. They were taken off guard by the strong demand for home loans with the big banks over the past year and had not budgeted for the amount of processing they would need to do.

Westpac senior manager consumer and business services team, Terry Neve, said: "We put on 130 extra people. That is settling down now."

All the big banks have core banking system upgrades under way and are hoping for greater efficiencies in the coming year. Commonwealth Bank introduced electronic lodgement in July, although mortgages are not yet on the new core banking system, and Westpac will have it from October.

Sheffield said: "We have to get valuations on our platforms. At the moment the valuation can change the whole deal."

Aussie Home Loans general manager finance and technology, John McDonald, said brokers accepted the need for quality and execution criteria in commission structures but the range of different requirements had made commission management difficult.

O'Sullivan said it had taken time "to get the drivers right" and that brokers would see some simplification in commission structures in future, especially once the processes went onto new banking platforms.

Sheffield said: "We all want to grow our business with brokers but our goal has moved from quantity to quality.

"In the past some lenders allowed brokers to dictate standards. Some of those lenders are not with us any more. A poor broker will damage your brand."