Brokers on banks: Who's holding the best hand

In the high stakes game for brokers' business, MPA's sixth annual Brokers on Banks survey reveals which lender is holding the Ace

The mortgage game is getting intense.This year, brokers watched in shock as Macquarie, the former chip leader and number one bank for three years running in MPA's survey, folded its cards and walked away from the table.

Macquarie's exit, which followed closely on the heels of the very dramatic implosion of RAMS and significant withdrawal of lending by Bluestone, is symptomatic of the sub-prime virus that has infiltrated Australia and exposed industry weaknesses. And if the JPMorgan and Fujitsu Consulting report Australian Mortgage Industry - Volume 7 is accurate, brokers can expect to see even more players drop from the table in the following months.

Furthermore at the time of going to press Westpac and St.George had both taken steps to cut commissions, with CBA expected to follow suit later in the year.

But does this mean the remaining banks hold all the cards? The JPMorgan report revealed that the proportion of loans originated through brokers has dropped from 45% to 39% in the six-month period following the onset of the credit crunch. While the banks launched a significant "charm offensive" to woo customers through direct channels, the report indicates decreased reliance on brokers is more likely due to the shift in consumer favour away from non-banks and non-bank credit rationing.

As MPA's survey reveals, there's a growing sentiment among brokers that reduced competition from the non-bank sector is negatively affecting the whole mortgage industry. Brokers complained that banks have not only become less competitive (as evidenced by a "group decision" to raise rates), they've become "more arrogant" and less interested in offering new products. Brokers also complained that banks were grossly unprepared for the onslaught of mortgage customers that shifted from non-banks, and as a result loan turnaround times have decreased and communication has suffered.

But it's not all doom and gloom. Our survey reveals there are still players out there worth betting on and for the sixth annual year in a row, MPA endeavoured to find out which bank is holding the best cards.

The survey

In this year's survey, 12 banks were rated on a scale of one (very poor) to five (very good) on seven criteria: approval/loan turnaround times; BDM support; broker support; IT and electronic/technology systems; interest rates; product range and overall service to brokers.

The results were calculated and banks were ranked in each category, as well as given an overall score.

The survey only focused on approved deposit-taking institutions (ADIs). Note that HSBC was not included in this survey as it no longer deals with mortgage brokers and Macquarie bank was also excluded on the basis that it has "significantly reduced" new lending.

The majority of brokers that responded to our survey have at least two years' experience in the industry, while almost 40% have done more than six years time as a broker. A good number have played on both sides of the fence - 62% said that they have worked for a bank in the past.

Our survey also revealed that 88% of respondents put at least 50% of their loans through banks on average each month. Another 81% said their clients will initially inquire about home loans provided by banks (compared to other lenders).

Respondents were also asked to comment on: the biggest problem they've encountered with a bank's service in the last 12 months; one thing they'd like to see banks improve in the next 12 months; the best thing a bank has done for them as a broker; and the biggest change they've noticed since the emergence of the sub-prime crisis.

Lastly, MPA would like to thank all brokers who participated in this survey. We hope you find the results illuminating.

Criteria

1. Approval/loan turnaround times - speed and efficiency in processing
2 .BDM support - helpful and capable staff
3. Broker support - training, information, seminars, etc.
4. IT and electronic/technology - software, online lodgement, access to help desk, etc.
5. Interest rates - competitive pricing of product
6. Product range - comprehensive range of loans
7. Overall service to brokers

Key trends

* Approval/turn around times are number one source of broker angst
* BDMs need to step up
* Wanted: experienced bank staff

Approval/loan turnaround times

"Inefficient", "inconsistent", "incorrect" - if there's one area mortgage brokers love to comment on it's this category.

Over half of our survey respondents ranked approval/loan turnaround times as being the single most important factor to their business.

Not only did brokers identify it as important, but they also indicated it as being one of banks' worst performing areas. No single criticism popped up more than "slow approval/loan turnaround times".

But it's not all bad news. A number of brokers told MPA that one of the best things banks did for them this year was go out of the way to expedite a deal for their customers.

"[The lender] approved finance for a loan when the vendor gave two hours notice that if the loan was not approved that day the sale would fall through.  It was late on a Friday and the lender exceeded expectations by a mile," remarked one survey respondent.

Leading the pack in broker satisfaction this year was ING Direct, which took over the top spot from last year's winner Macquarie.

"ING Direct is the only lender who does things in a timely manner," wrote one broker.

ING earned a broker satisfaction score of 69% - the same number they pulled last year, indicating their consistency and strength in their area.

ANZ and CBA rounded out the top three, earning broker satisfaction scores of 65.6% and 60.6% respectively.

One broker praised ANZ for being "exceptional at responding to client needs, head and shoulders above anyone else".

CBA experienced the sharpest rise in this category, climbing six spots from 9th in 2007 to 3rd this year.

"CBA have really come to the fore with service and accessibility and this is as good for me as it is good for my customers," one broker said.

Not all lenders received stellar reviews from brokers. Westpac slid three places to 11th - its worst result in the entire survey. Brokers called the lender's service "atrocious" and claimed the lender was experiencing a "meltdown with processing new deals and settlements".

BankWest, which edged up from 11th place to 9th, also received a fair amount of flak from brokers in the survey comment section.
 
"BankWest turnaround times for simple 'top up' deals are taking up to six weeks as there doesn't seem to be any ownership of a file, broker support extremely poor with conflicting information between credit managers and support staff," said Lisa Welch, director of Accrete Financial Solutions in Balcatta, WA.

A number of brokers blamed the sub-prime crisis for slow turnaround times. A perceived flight-to-quality among customers has led them to flock from non-banks to banks, bogging down the system and stretching the limits of staff.

Not only have work loads increased, brokers claim bank staff numbers have been reduced, and credit policy tightening has forced them to spend more on due diligence with files.

"Bank staff appear unmotivated and seem to be staggering under the load - obviously they have been directed from above to scrutinize every file to the nth degree. Unfortunately this has not resulted in most of them being able to read file notes," said Judy West, principal of Judy West Finance in Benowa, Queensland.

Approval/loan turnaround times

50% of brokers said approval/loan turnaround times were most important to their business

Sharpest rise
CBA up 6 places to 3rd
Steepest slide
Westpac down 3 places to 11th

Approval/loan turnaround times

BDM support

A good start to being a quality BDM is having a genuine interest in the role, wrote one broker in survey:

"BDM stands for 'Business Development Manager' not I'm having a 'Bad Day Mate' so I can't return your call."

The perceived importance of BDM support has been dropping in our survey - from 22% in 2006, to 15% last year. In 2008, only 12% of brokers said BDM support was the most important bank element to their business.

The number of complaints, however, has not dropped correspondingly, indicating that perhaps disappointed brokers have learned to work around poor BDMs.

MPA scoured the survey for positive comments about BDMs, and a number were found in the comment section following our question: "what is the best thing a bank has done for you during your time as a broker". Unfortunately, many left their comments vague; praising "one BDM" that helped them on an occasion, but not indicating which bank the BDM worked for.

"Some BDMs have at times gone out of their way to assist, but this is usually after a stuff-up somewhere else in their system.  A better question would be 'What is the worst thing a bank has done?' - then I would have something to write about," said Derek McLeod, principal of Mortgage Choice in Upper Mount Gravatt, QLD.

On average, lenders received a lower broker satisfaction rating in this category - down from 61% in 2007 to 57.6% in 2008.

ING took top honours in this category, climbing from third in 2007 to first. The lender surpassed last year's winner (Macquarie) and AMP, which dropped four places from second to sixth.

The sharpest rise, however, came from Suncorp, which climbed from double digits to fourth. ANZ also achieved notable success, climbing from 11th to third.

Lisa Welch, director of Accrete Financial Solutions in Balcatta, WA said: "ANZ has really changed their ethos. They are calling brokers to discuss deals, provide status updates and making sure the credit assessors and BDMs are contactable."

Wayne Slager, principal of Your Loan Adviser in Buderim, QLD said: "Consistently prompt, accurate and supportive service by ANZ BDM. ANZ's branch staff members have also shown our clients good service and courtesy...we and our clients greatly appreciate when a lenders' staff goes the extra mile to produce a positive outcome. Brokers should also acknowledge this."

Some brokers, such as Rob Whyte, principal of The Mortgage Gallery in Victoria Park, WA gave special recognition to their BDM.

"HomeSide Lending (HSL) are one of the only lenders that show a 100% commitment to our industry. HSL have referred multiple people to me, showing a genuine commitment to our industry. In return, I have been a big supporter and overall had a very happy eight-year relationship with the same BDM - Geoff Tomlin."

Good BDMs can not only help brokers get deals through, but they'll also support brokers when deals fail, such as with this broker:

"Westpac had completed a $345,000 loan for a customer (took 12 weeks for a 30-day settlement). His brother and parents then came to see me. I placed another loan $450,000 to Westpac for him (took eight weeks for a 30-day settlement and still did not get there). Parents wanted a $1.5m home loan that I did not get. After three months, they still did not have authorities, net banking, accounts, etc., set up properly by the local branch (after many times trying). Through shear frustration, both brothers and the parents went to the Bank of Queensland and refinanced the lot. Westpac clawed back all commissions and trails. Westpac refunded these to me after I kicked up a stink - lost business due to their slack service and processes, not mine. I lost good business and connections from Westpac stuff-ups, but at least they reimbursed me with refund of clawbacks for my time. It was the BDM who fought for me for a win."

BDM support

12% of brokers said BDM support was most important to their business. This was down from 15% in 2007

Sharpest rise
Suncorp up 9 places to 4th
Steepest slide
AMP, Adelaide Bank and Westpac all slid 4 places

BDM Support

Broker support

Like BDM support, this category has declined in importance in the eyes of brokers. Only 1% stated broker support was the most important factor to their business, down from 2% in 2007 and 6% in 2006. Brokers gave banks an average score of 2.55 out of five - the lowest in the whole survey.

While inconclusive, some of the overall decline could be attributed to how closely brokers relate BDM support to broker support. While they are interlinked to some extent, broker support essentially relates to the training, education and support services provided by banks. Banks that earned top marks in this category garnered positive comments from brokers about their comprehensive and consistent training. As one broker pointed out updates, particularly in these changing economic climes, are important.

"Whilst everyone understands the liquidity issues and tighter credit policies that are being implemented, a clearer communication of this combined with a partnership approach of the issues that the lenders face so that brokers can assist will improve processing for all. It is simply unacceptable to not update promotional material and have submissions declined after two weeks on the basis that 'things have changed,'" said Ian Jordan, director of BlackRange Financial Solutions.

ING performed the best in this category, scoring 60.2%. One example of ING's commitment in this area was presented by Alwyn Beardmore, who indicated that the lender provided training and support for his first two years of operation.

For the most part, survey results in this category concurred with Rob Egan's own impressions. The managing director of the Mortgage Bureau, Gippsland, VIC commented: "ING being ranked first overall and CBA third is no surprise".

But he was disappointed with NAB/HomeSide and ANZ.

"Neither of these lenders provide us with what I would call prompt service or efficient service. However, NAB/HomeSide have improved in recent times. My opinion would be that ANZ provide better service to the larger aggregator groups.

"We use lenders that provide us with good service on the basis that our customers will get the same service after settlement. So basically it comes down to the more business that you send to any lender the better the service standards would seem to be. However, service should also include the relationship manager's role and in this regard, I would rank CBA as number one, NAB/HomeSide as number two, and ING as third, with Suncorp next," Egan said.
 
NAB/HomeSide experienced the greatest leap up the leader board - climbing eight places to fourth overall. BankWest also experienced a significant rise in broker satisfaction. The bank climbed 11th place last year to sixth overall this year.

One broker commented: "BankWest is listening to brokers to streamline and improve their systems and relationships in a pro-active problem solving professional manner."

Another said: "BankWest has invested time and money in my business through a business coaching course and ongoing follow up afterwards. Also, I've received tremendous support from the BDM."

CBA, which placed third in this category, was noted for providing special attention to brokers.

One broker said: "[CBA] looked outside the square and delivered outstanding customer service by delivering documents to a settlement agent by foot to allow a settlement that was in the middle of falling over to proceed."

"CBA have really come to the fore with service and accessibility and this is good for me as it is good for my customers," commented another broker.

Suncorp climbed five places in the survey, perhaps due in part to actions such as this: "Suncorp's commercial lending manager helped me finish a calculation sheet when I was overseas and my assistant didn't know how to do it. It helped me to keep the client and get the loan approved within required period," the broker reported.

Westpac took a dive in this category falling from seventh to 10th in this category. Brokers' comments on the bank included "atrocious" and "a joke."

Broker support
1% of brokers said broker support was most important to their business. This was down from 2% in 2007

Sharpest rise
NAB/HomeSide up 8 places to 4th
Steepest slide
Westpac down 3 places to 10th

#pb#

Broker Support

IT and electronic/technology systems

Many brokers receive IT and electronic support from their aggregators making it difficult for them to really assess lenders in this capacity. Therefore, it's little surprise that less than 1% ranked it as being the most important factor to their business.

But that's not to say the systems lenders employ are unimportant to the process. CBA obviously recognizes this. The major lender recently announced a $580m overhaul of their processing systems to commence over the next four years. The IT reno will cover five of its core systems, including home loans. Chief information officer Michael Harte told media that its mission was to create efficiencies in the back office and "real-time, straight-through processing". Harte also said the bank would be looking at incorporating services such as auto-approvals on home loans.

According to Harte, all the major banks are looking at investing more into IT systems.

Pamela Podwysocki, loan writer for Flexible Lending Solutions, suggested lenders upgrade software to allow brokers to track loans on their website "so we don't have to sit on the phone waiting for someone to look up the info".

Her comments were echoed by several other brokers, who'd like the ability to track loans online, thereby streamlining the process for them and facilitating more open communication.

Overall, broker satisfaction in this category suggested lenders aren't doing too badly; brokers gave banks 2.78 out of 5.

In this category, ANZ ranked highest (for the second year in a row) with a score of 66.6%. 

The major lender was followed closely by ING and CBA, who scored 62.4% and 61.6% respectively.

Rob Egan, managing director of the Mortgage Bureau, Gippsland, VIC, said he uses ING and CBA online systems and find they work well, but has had worse luck with ANZ.

"[They] are easy to use and provide efficient assessment," he said. "The most recent ANZ online application was not successful, could not be retrieved and we ended up processing a manual application. ANZ IT section were unable to assist us in retrieving the application. This caused delays for our customer as it took five days for approval in principle from the date of manual submission. In reality, I can't comment on the ANZ system as we don't use ANZ all that often. As with any online system it comes down to what you are used to and the more that you use a system the better you understand it and the better it will work for you."

T/Technology
Less than 1% said IT/Technology was most important to their business. This was down from 3% in 2007

Sharpest rise
ING up 4 places to 2nd
Steepest slide
Westpac down 3 places to 5th

IT/Technology

Interest rates

Did any one phrase grab more headlines this year? A number of brokers told MPA that the biggest change they've seen since the emergence of the sub-prime crisis has been higher interest rates.

One broker commented: "Noticing for the first time in 18 years that banks are invoking the right to raise their own interest rates (above RBA rate rises) as the cost of funds have increased. But I believe that there is far too much of the herd mentality adopted by the banks to raise and lower rates. This should be policed by the government as it provides institutions the ability to still maintain high profits at the borrowers' expense. The lack of insight by these institutions to foresee illiquidity in the wholesale funds market shows irresponsible lending practices, as these critical issues should have been factored in their pricing models. As a result, banks are receiving negative consumer sentiment as they appear to only be looking at their bottom line and maintaining huge profits."

Yet despite concern over soaring rates, only 10% of brokers rated this category as being most important to their business. This indicates that price alone is not dictating the industry, and brokers are looking at the overall service proposition.

Still it comes as no surprise that ING, a market leader in price, topped the charts, scoring 74.8% in broker satisfaction - the highest rating in any category by any of the banks in our survey.

BankWest edged out last year's leader in this category, CBA, and AMP took a fast train to fourth overall, indicating that brokers and borrowers are attracted to its competitive products.

But some brokers are looking for banks to come up with innovative ways of softening the burden of higher rates for borrowers.

"Love them to look at their consumers and look for ways they can help with the ever increasing interest rates, whether they drop ongoing fees for a period of time, allow a free swap to interest only for a period of time or other initiatives," Andrea Kerr, principal of Go Niche in Forest Lake, QLD said.

Interest Rates
10% of brokers said interest rates were most important to their business. This was down from 13% in 2007

Sharpest rise
AMP up 10 places to 4th
Steepest slide
CBA down 2 places to 3rd

Product range

For the second year in a row, only 3% of brokers rated product range as the most important factor to their business. While product range may not outweigh approval/turnaround times in brokers' minds, it nonetheless plays an important role, especially for brokers dealing with niche market segments.

Unfortunately for brokers specializing in the low-doc space, the credit crunch has resulted in a tightening in credit policy and many brokers have found lenders less willing to take on high-LVR loans. Of course, the collapse of RAMS (now regrouped under Westpac), and the substantial reduction in lending by Macquarie and Bluestone, has also limited product offerings.

Robert Krol, director of Eagle Finance, gave banks an average score on product range.

"Apart from BankWest's rate tracker loan, there is nothing really outstanding in the conforming market place, and the current credit crunch/crisis has stifled the 'variety and flair' of the non-conforming market."

Rob Whyte, principal of The Mortgage Gallery, Victoria Park, WA, said many lenders are a little too quick to throw the baby out with the bathwater.

 "Many lenders are scrambling for policy changes to close the doors to the very products they poured millions of dollars into, namely the low/no-doc market. It is a sign of the times globally; however some are reacting with more haste than possibly needed."

While brokers complained there's an increasing dearth of products to choose, they still gave banks an overall rating of 3.30, on par with last year.

Overall, there wasn't huge movement in this category when comparing this year's results to 2007. CBA traded places with ANZ for first and St. George took third for the third year in a row, while the others stayed more or less in the same range. Regional banks rounded out the bottom of the category in terms of broker satisfaction.

Some brokers complained that lenders, such as CBA, actually have too many products, which bog down brokers and customers. Others commented that lenders often advertise new products or special offers, but are "unprepared for the increase in work loads and have not provided staffing resources to compensate. This results in three to four day turnarounds turning into 15-plus days."

Jennifer Reedy, owner of Loan Solution Services, in Narre Warren South, VIC, said banks are offering specials without providing the staff to cope with the extra business.

"It is only common sense that if you have a special you are going to increase business and therefore need the staff to cope with this. I will not use a bank when it has specials as all it does is cause delays, frustration and cost a great deal of time to get the deal through on time."

Product range
3% of brokers said product range was most important to their business. This is the same as 2007

Sharpest rise
NAB/HomeSide up 3 places to 8th
Steepest slide
Westpac down 2 places to 6th

Overall performance

Sometimes it's the little things that really stand out for brokers. Chocolates, gift certificates, sports tickets are nice, but brokers in our survey said even verbal acknowledgement from banks that they are a vital part of the mortgage industry would suffice.

Many brokers said banks should recognize them as partners in the mortgage industry, rather than competition.

ING has made its appreciation for the broker channel public. In December, Brett Morgan, ING's executive director of intermediary mortgages, told MPA: "Brokers remain our primary touch point for home loan customers and we'll be stepping up our focus and support of this channel in 2008."

Perhaps ING's lack of channel conflict is one reason why brokers ranked the lender first overall this year. The bank moves up one spot, taking over first place from last year's Macquarie who has since reduced its lending and all but withdrawn from the market.

While both ANZ and AMP earned respectable scores, AMP's result is slightly more impressive - the lender climbed six spots in one year! AMP's scores in loan approval/turn around times and interest rates helped it catapult up the rankings. Considering the relative importance brokers place on turnaround times, it's perhaps not surprising the bank floated to the top so easily.

Citibank placed fourth, right behind AMP. Perhaps both Citibank's and AMP's attention to the third party channel is bolstering their scores.

While overall, regional banks slightly underperformed compared to the others, special mention should be made of Suncorp. The bank made significant ground this year, coming from dead last in 2007 to eighth overall. The bank performed exceptionally well in BDM support, an area of distinct concern for brokers. One broker commented: "[Suncorp] listens and seeks your feedback."

Westpac's results were particularly disappointing. The lender fell from fourth overall in 2007 right to the bottom, placing 11th overall. It's difficult to measure, however, if negative broker response to the Westpac's decision to cut commissions played any part in its sudden drop in favour. Had the survey been released prior to Westpac's announcement or at a later date (perhaps after other lenders announce a similar cut), the results may have been different. But without substantial evidence, MPA can only conclude from brokers' comments that the biggest reason for its plunge in broker satisfaction has more to do with poor loan approval/turnaround times. A number of brokers commented that bank seemed unprepared to deal with the sudden perceived flight to quality of customers from non-bank lenders.

The results were somewhat anti-climatic for some survey respondents.

 "In general, all lenders' service standards have dropped dramatically to a level that could be described as woeful, overall. ING coming first does not surprise me; however any of the major banks ranking in the top five surprises me," said Robert Krol, director of Eagle Finance.

Overall performance
Sharpest rise AMP up 6 places to 3rd
Steepest Slide
Westpac down 7 places to 11th

Overall standings
And the winner is...
1 - ING Direct
1st in approval/turnaround time, BDM support, broker support, interest rates and overall service to brokers
2 - ANZ
1st in IT and electronic/technology systems, 2nd in approval/loan turnaround time, broker support, product range and overall service to brokers
3 - CBA
1st in product range, 3rd in approval/loan turn around time, broker support, IT and electronic/technology systems and interest rates

Feedback

The comment section of the survey was quite edifying. MPA asked brokers to share positive experiences they've had with banks over the last 12 months. A number of brokers shared specific examples of banks that highlighted lenders' ability to be flexible, expedite service when necessity called for it and use commonsense.

Brokers were particularly pleased when banks referred clients back, acknowledged the quality of their submissions and worked through borderline deals.

But with the sweet, we've got to have the sour - and there were plenty of grapes to go around.

Table talk

What we have here is a failure to communicate. Sure, slow loan approvals and a lack of BDM support came up frequently on the complaints board, but the underlying issue for brokers is undoubtedly communication, or rather the lack thereof.

Nothing puts brokers on tilt more than being forced to chase down loans, only to be given the run-around at the other end. Apparently, brokers hate "having to continually phone the bank to keep the application going from step to step" and find "departments are to big, not personal and no one seems to take ownership of a file." 

One broker said: "You won't believe the number of applications I've had where incorrect fees have been charged to clients and then have had to spend time to get back/amended. But to try to find someone to deal with these issues has been a nightmare."

Having too many hands on the file is like having too many cooks in the kitchen - it slows things down. And speaking of slowing things down - is "pedantic" the new buzzword this year? MPA has never seen the phrase repeated so often in one survey. Brokers claim credit tightening policies have led to an unnecessary level of scrutiny. The result is a bottleneck in processing. Several brokers also tied the slow turnaround times to inexperienced and overworked bank staff.

And if bad bank service leads to customers taking their business elsewhere, brokers take a hit. Almost 68% of brokers in our survey have had a loan clawbacked by a bank in the last 12 months, although the reasons for such actions are numerous. Some brokers, however, feel that "customers, not the broker, should be penalised for closing a loan early". 

Brokers are good
An overwhelming number of brokers also told MPA that banks are not doing enough to promote the use brokers to the public.

Many brokers felt that banks could improve relations with brokers by viewing them as partners in the mortgage industry, not as competition.

"They view brokers as a threat, instead of promoting our business overall," one broker said.

Many felt that banks verbally "broker bash."

"[Banks should] let the public know that they utilise brokers and [we] are not scary money-hungry criminals," one broker said.

Rob Whyte, principal of The Mortgage Gallery Victoria Park in WA, would like to see banks improve their commitment to the third party channel.

"A noticeable decline in support is becoming more and more evident with many lenders. As an introducer, it's disappointing to see the worm turn when the industry starts to enter a different phase such as we are now. My perception is based really on only three or four of the major players, not all," he said.

Perhaps lender love is being diminished by decreasing reliance on the broker channel.

According to research by JPMorgan and Fujitsu "we are beginning to see a stagnation in the level of outstanding loans initially written through a broker". The report found that in the six-month period following the onset of the global credit crunch in July 2007 new loans through the broker channel declined from 45% to 39%.

On a brighter note, the report did find that customers seeking to refinance were more likely to use brokers.

Commissions

Last year, MPA asked brokers what would be the worst thing banks could do in the next 12 months... 40% of 2007 survey respondents said "cut commissions". Well, here we are one year later and the issue has reared its ugly head. At the time of writing, Westpac had announced it would slash trailing and upfront commissions with St.George implementing pay for value commissions system across the board - other majors indicated they would also be reviewing their payment structures.

Brokers should have seen the writing on the wall when JPMorgan and Fujitsu Consulting reported in March that "thus far brokers have retained a disproportionate share of the 'mortgage profitability pie'".  The Australian Mortgage Industry - Volume 7 report suggests that while banks have to deal with higher costs of funding, the absolute dollar profit paid to brokers remains unchanged. In effect, brokers receive 100% of the economic value of a mortgage. The report warned "clearly, the banks will not allow this situation to continue in perpetuity".

The report indicated a number of banks and non-banks are already looking to implement some changes to commissions. Non-banks are looking at extending clawbacks as far out as 24 months. NAB has introduced a tiered trail structure (the level of trail increases with loan duration). CBA differentiates commission paid to brokers on basis of 'quality' parameters and bonuses. Non-banks are experimenting with "broker self-select" models that allow brokers to provide discount at the cost of their commissions. And a number of lenders are using different mixes of upfront, trail and clawback structures.

The report also indicated that 51% of brokers said that they would recommend different lenders based on the commission offered.

Areas brokers were most let down by in the last 12 months

* Approval/turnaround times
* Lack of communication
* Inexperienced staff
* Poor BDM support
* Errors
* Channel conflict

The best things banks have done for brokers in last 12 months

* Acknowledged brokers as partners
* Flexible policies
* Assisted with urgent deals
* Good service to customers
* Listening, responding to needs, acknowledging mistakes

Top 5 areas of improvement

(1.) Approval/turnaround times
(2.) Communication
(3.) Efficiency
(4.) Loyalty
(5.) Broker service

Effects of sub-prime crisis

MPA asked brokers to describe the changes they've noticed in their dealings with banks since the emergence of the sub-prime crisis.
* Credit policy tightening
* Higher interest rates
* Less product choice
* Increase in arrogance
* Slower service