MortgageLink boss Roger Poulter said earlier that he is worried that some banks may no longer find accepting mortgage broker-sourced loans cost effective.
But Berry doesn’t think this is because current commission levels are too high.
"Roger is correct that the current brokerage levels are under threat, but this threat comes mainly from the cost associated with the extra processing required by lenders to cover poor presentation, poor deal quality and poor persistency rates (loans which are actually drawn down)," Berry says.
"There are no excuses for poor presentation. The broker must add value to the application process, otherwise they are not providing a professional service to either the client or the lender."
Some lenders are having to devote considerable resources to process loans but are finding anywhere between 40% and 60% of broker-sourced applications don’t result in actual loans, largely because the brokers are "farming" the same loan to several different lenders.
Berry says that it is impossible to have all applications result in loans – there are many other reasons apart from farming – but that having 70% of loans applied for settle is a realistic target.
"The mortgage broking industry in New Zealand can be sustainable at current brokerage levels if, and only if, brokers lift their game so that lenders can achieve efficiencies at their end."
Berry sees the trend towards aggregation – brokers banding together in larger groups – as a key factor assisting greater efficiencies in the industry, allowing lenders to reduce administration costs. He notes that about 70% of broker-sourced loans in Australia are written through 10 main groups and estimates the New Zealand market is at least as concentrated.
"These larger organisations will, to protect their lender relationships and reputations, quickly resolve and ‘problems’ within their organisations."
Also assisting the achievement of greater efficiencies is that brokers have been around in sufficient numbers for long enough to have developed a track record.
"Rather than making assumptions about what will happen with broker deals, we’ve got actual data which indicates where improvements need to be made. We’ve got black-and-white figures you can refer to, rather than a hypothetical pricing model and we also have a record of how long loans have stayed on the books," Berry says.
