Mortgage Shopper

Mortgage Lenders: Small U.S. home loan lenders have reform concerns

Mortgage lenders and community bankers across the US are lobbying lawmakers over proposed new federal home loan credit rules as the end on the discussion period looms.

The new mortgage rules seek to reduce risk-taking on mortgage lending, but mortgage lenders say the guidelines could hurt small banks and would be bad for credit markets. The Securitized Lenders rules are part of the recently passed Dodd-Frank "Wall Street overhaul bill".

Mortgage Securitization and home loan lending Rules under contention

Now US finance regulators need to establish guidelines for originators of securitized loans, to prevent the problems that lead to the US financial meltdown.

One of the key aims of the legislation is to reduce risk-taking.

The legislation proposes to do that by enforcing mortgage lenders/originators to hold a 5 percent stake in any debt instrument pooled in the secondary market.

Will small banks leave mortgage lending?

Many people believe that making the lenders partly responsible, and tied to the home loan outcomes will see many banks leave mortgage lending, fearing the consequences of being saddled with "hurt money".

The fear is that many home buyers will be denied access to mortgage credit should mortgage lenders leave the housing market.

Is the 20% down & equity rule too harsh or a healthy safety lending margin?

The law gives an exemption for mortgages deemed to be safe enough and gave regulators the task to define such suitable loans.

Regulators have proposed an exemption for the so-called qualified home loans when borrowers make 20 percent or more down payments or equity in the home for refinance purposes.

Some believe that this should be reduced to 10 percent as 20% would kill home loan lending and home values would sink lower still.

 

Source: Mr Mortgage

Mega Bank profits: Are the glory days of mortgage lending profits over?

The big banks have never had it so good. Will new Government Reforms take this away from them?

Increased Mortgage Lending competition for the big four banks, and major banking reform from the Gillard Government could see the major banks profits shrink.

The problem is that every government reform aimed at the banks in Australia over the last 20 years have eventually added to the bottomline of the big mortgage lenders. Has this been more because of the banks wiles or the lack of foresight of the Government Policy? Maybe a bit of both.

Mortgage Exit Fees: The Fly in the ointment

 Before Christmas I wrote to the Prime Minister and advised her of the "fly in the ointment" of the Wayne Swan proposed solution to our mortgage woos. His solution was a simple one.

Make it a no brainer to switch lenders by removing exit fees on home loans and the rates would fall.

Mortgage Reform problem No 1

The problem was that mortgage managers, the securitised lenders that helped to reduce mortgage interest rates by 3% were the very ones that would be most hurt by the reform.

Why? Because mortgage managers charged the highest exit fees, by way of deferred establishment fees on their mortgages loans

These deferred fees had a sunset clause of about 5 years, so most people never paid these anyway. But it gave a way for lenders to pay mortgage brokers a commission to compensate them for their efforts. Any government reform must address this vital issue. Otherwise it could kill mortgage competition in Australia and set us back 20 years.

Ralph Norris cries Crocodile Tears over the Mortgage Managers plight.

The funniest thing is that the CBA who have all but destroyed the mortgage managers loan sector, with the help of Kevin Rudd's Banking Guarantee support, now says he is hurting for the small end of town. This is just a ploy, but Mr Norris does make the same point I rose last year. 

Australia's Banks. Are they too big to control?

Based on Ralph Norris's [CEO of CBA] comments and the reality of the power and control of the Big Four Banks, its time to ask the unthinkable.

1. Are the banks too powerful to control? 
2. Have they become the Mafia of Austalia, where they can do what they like and still be supported by the government? 

Sometimes the lines between the profit motive, the public good, and business ethics are blurred and this I believe is where we are in the banking debate right now.

The business Power of the banks

A case on point Norris claims that:

The moves to limit excess fees on credit cards and improve credit protections will have a similar perverse effect as far as the reaction from the major banks.

 The new national credit protection regulations means that banks simply have a higher cut off level for those to whom they are willing to provide credit.

Does this not smell of a lender who thinks he owns the lenders and credit space?

If so is he right. I say yes to both propositions!

The law of unexpected consequences

The best intentions of government regulations often create unexpected consequences.

The Government needs to focus more on the purpose of the reform and how it will affect the mortgage industry as a whole.

Any bank and mortgage reform aimed at lowering mortgage rates, and exit fees has to be balanced with the planned growth non bank lenders. That means a no bank involved sector. Not the miss-mash we now have. Allowing banks to own their competitors is a stupid idea that keeps repeating itself in the mortgage lending sector.

 Author: Rick Adlam, Mr Mortgage

Big banks to profit from market muscle in 2010

Australian home buyers and homeowners will feel the squeeze of the big banks' market muscle in 2010. 

 With the demise of sub-prime lending, the collapse of the non bank lenders and the securitised lending brands now being controlled by the banks,  and tighteneing credit rules by the Reserve Bank of Australia, the scene is set for higher lending margins by the big banks. 

And that means higher interest rates for homeowners with a mortgage, as well as mortgage shoppers.

According to recent Australian Prudential Regulation Authority data The commonwealth Bak and Westpac wrote nearly 60 percent of the home loan mortgage business between them in 2009.

When you add the ANZ and NAB figures in that 90% of all home loans written be the top four players. That is what I call market muscle on steroids.

Small fry, Bank of Queensland, Suncorp-Metway and Bendigo Bank have been left with 1.8 per cent, 2.9 per cent and 2.2 per cent of the mortgage market, respectively.

As you can see there is no space left for the rest of the players in the micro-bank, international bank, credit union, building society, and non-bank home loan sectors.

If I were buying shares in 2010, I would seriously look at the potential rise of profits that this market position offers the big four banks.

On the other hand, if I were looking for the best loan deal, now and next years, I would be looking at a non bank lender.

Rick Adlam, Mr Mortgage