A brokerage director has expressed his regret for the widening gap between the funding that would likely be acquired by the borrowers through a direct application from the bank and those who go through a broker.
Loan Saver’s Adviser, founder, and director, Mr. Colin Kidd, has stated that he had observed an evident risk concerning the brokers. He mentioned that brokers are not completing detailed expenditure analysis, and there is a difference between the way expenses are obtained by brokers and lenders.
Mr. Kidd has said that brokers are able to match the expenditure requirements of the lender but that the risks involved with the analysis will stay with the broker, he continued.
The Loan Saver Director added that in order to reduce the compliance risk, the brokers need to obtain valuable information about expenditure by the use of bank statements than any other requirements if they will directly apply in the bank. He then added that a signed budget is not acceptable as an expenditure analysis.
Upon considering the recent dealings with lenders,
the Loan Saver Director said that there are cases where he had included a significant singular expense in the required analysis. He had explained in the notes that it is a singular expense linked to a new business to be launch. However, the lender has indicated that the new small-business owner’s expenditure was too big to pass its serviceability assessment. This happened despite a clean credit record of the customer.
Lenders now need to follow the indicated expenditure noted in the statement of position. Thus, notwithstanding the singular expense, they will use the full amount. Now, if clients will go directly to their lender, they don’t need to go through with the expenditure analysis, but rather, the lender will accept the client’s statement of position, and the loan will be processed.
MR. Kidd had noticed that some borrowers have been able to acquire a loan directly from the bank which they could not do through a broker. Having a higher chance of obtaining a loan directly from the bank than through a broker will affect their means of deciding where to apply for finance.
One of the main reason why clients go directly is because of the long waiting period that if they go directly through a bank, they won’t wait for too long as they will be getting an approval. Therefore, bank managers write loans that were declined by the brokers. This is why there is an existing widening gap between what can be funded through a lender and what can be funded through a broker.
Moreover, the AFCA (Australian Financial Complaints Authority) has been assessing historical cases based on the current credit policy requirements around expenditure. They have been applying retroactively the current assessment criteria to loans written before the Global financial crisis, and this is a cause for alarm, especially for the brokers who write large amounts as they will probably face litigation.
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