The hot topic in the mortgage industry at the moment is the very high level of loans which are approved but not drawn down.
Rob Tucker, immediate past chairman of the Mortgage Brokers Association, says the number of approved loans not being settled is running at between 40% and 60%.
It isn’t only mortgage brokers who are responsible for all this unnecessary work, but in some cases brokers are submitting the same loan to two or more lenders, a practice known as "farming."
As Tucker sees it, the solution is in training brokers so that a higher proportion of deals actually stick. "As brokers become more skilled, it’s happening less and less," Tucker says.
One lender says some brokers regard it as part of their service to customers to give them a choice of several different lenders, but it creates unnecessary work at a cost to both the broker’s and the lender’s business.
In National Bank’s view, some of the problem results from the current buoyant conditions in the housing market. A number of people with pre-approved loans are finding it difficult to find the right house, says bank spokeswoman Cynthia Brophy. "There really is a shortage of stock in the market, particularly in Auckland.
David Hamilton, head of mortgages at ANZ Bank, says lenders have a responsibility to let brokers know what is happening to draw down rates and to provide incentives to improve the rates, but they haven’t done this in the past.
"You can’t improve what you don’t measure," he says. It is in both brokers and lenders interests to improve the situation," Hamilton says.
"The issue for the brokers is to ensure they can meet their customers’ needs. They need approval and relatively speedily." Where the broker is unsure of getting a speedy approval, they might try more than one lender as a form of insurance. In that case, it’s up to lenders to assure brokers they can meet their needs, he says.
"If the lenders want a better conversion rate, they should do something about it."
David Cunningham, head of priority marketing at WestpacTrust, doesn’t see it as such a big problem. "Certainly, WestpacTrust’s got fairly streamlined processes to deal with broker applications. It’s not the same overhead as if we had to sit down with a customer," he says.
"There are efficiencies in the WestpacTrust back office which means it’s not necessarily as onerous as it might seem." Cunningham claims his bank’s draw down rate is running at about 80% of approvals, but says some people might define what constitutes an approval differently.
