Structure of the Mortgage & Finance Industry

Innovations in financial structuring and deregulation of the finance industry created a highly competitive industry - the mortgage and finance industry. This has enabled many more Australians to make their dream of owning a home a reality.

Getting a loan is now much easier than it used to be with mortgages more accessible to a larger number of Australians. Products now offer greater flexibility as well as very competitive interest rates, fees and charges.

Did you know that almost 45% of home loans are provided by mortgage intermediaries such as mortgage brokers or mortgage managers?

THE MORTGAGE INTERMEDIARIES

Mortgage Brokers

Mortgage brokers are intermediaries between borrowers and lenders who specialise in residential loans. They offer loans from the lenders they are accredited with (called a panel of lenders). Mortgage brokers manage/administer the loan process up to settlement on behalf of the borrower. The majority of brokers will offer their broking service free of charge as they are remunerated (via commission) by the lenders for introducing borrowers to them.

Finance Brokers

Like mortgage brokers, finance brokers are intermediaries between borrowers and lenders however they specalise in business finance such as equipment leasing, car leasing, chattel finance, business loans, debtor finance, commercial property finance.

Mortgage Managers

Mortgage Managers are intermediaries between lenders and borrowers. They are specialists who manage/administer the throughout its life. They often also assess the viability of the loan and will arrange the funds in the process to settlement. Loan payments are made directly to the lender.

Mortgage Managers may be paid through loan application/ establishment fees from the borrower or lender, and a management fee from the lender.

Aggregators/Franchises

Many mortgage brokers belong to an aggregator or franchise group. These groups or networks provide numerous levels of support to brokers such as administrative support, technology systems and software, education and training, as well as communications and marketing assistance.

Most borrowers are not aware of aggregator groups, however many borrowers will be aware of a franchise or franchise brand.

THE LENDERS

Traditional Lenders

Banks, building societies and credit unions are known as the 'traditional' lenders. They are authorised deposit-taking institutions (ADIs) that use their own funds to provide loans. Loans can be obtained directly through them, but the majority of lenders will also supply their loans through accredited mortgage and finance brokers. To receive a loan from a traditional lender you have to conform to their lending criteria. When they approve a loan they will manage/ administer the loan for its life.

Non-Traditional Lenders

This group is also known as wholesale or non-conforming lenders. They work in a similar way to the traditional lenders, however their funds come through investors, financiers or trusts. Some non-traditional lenders will appoint a mortgage manager to package, distribute, manage and administer the loans on their behalf. Non-traditional lender loans may also be distributed through mortgage or finance brokers.

Non-traditional lenders also have specific lending criteria, however this group is known for being a little more flexible than traditional lenders.

_{Source: MFAA}