Mortgage Professional Australia magazine Issue 12.10 by Key Media

AMA FINALISTS THE INDUSTRY’S BEST REVEALED ICONOCLASTS NON-CONFORMING LENDERS GIVE A HELPING HAND

MPAMAGAZINE.COM.AU ISSUE 12.10

COMMERCIAL BROKERS CONSTRUCT AUSTRALIA’S FUTURE

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CONTENTS / ISSUE 12.10

Their own drummer Non-conforming lenders offer ‘light at the end of the tunnel’

Deal or no deal Brokers share their toughest loan deals

The industry’s best MPA reveals the finalists for the 11th annual Australian Mortgage Awards

WEEKLY INVESTIGATIONS NOW ONLINE: COVER STORY 26 | Top Commercial Brokers We pick the nation’s best performers

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‘Surthriving’ in tough times Banks sound off » mpamagazine.com.au

CONTENTS / ISSUE 12.10 NEWS & VIEWS

STATS

8 | Round-up The latest market intelligence from the world of property, economics and mortgages

66 | Top of the block Australia’s hottest unit markets

12 | On line The best from MPA Online and Australian Broker Online 14 | Product news A round-up of the latest rate changes and product launches

SMART BUSINESS 38 | Decisionship Picking the right path

PROFILES 36 | Daniel O’Brien on what sets his business apart

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68 | Your Mortgage Index The latest mortgage hunter trends from our sister website

LIFESTYLE 70 | A day in the life of ... Tim Brown, Vow Financial 72 | My favourite things ... Bridget Sakr, Genworth

NEWS / ROUND-UP

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CONTENTS / EDITOR’S LETTER

WHERE CREDIT’S DUE Small business is the engine room of the economy. That’s a statement we’ve all heard many times, but we sometimes fail to grasp its significance. For brokers, the significance is two-fold. Brokers, particularly those working in the commercial lending space, help small businesses secure vital funding that allows them to thrive, expand or even just make it through a rough patch. Secondly, brokers themselves are small businesspeople, helping to drive the economy. They help keep the banking system healthy, support the property sector and help consumers fulfil their financial goals. That’s why this issue of MPA is so exciting. Not only do we recognise the nation’s top commercial brokers (page 26), we’ve also announced the finalists for the Australian Mortgage Awards, the industry’s top accolade (page 56). It’s pleasing to give credit where credit’s due, and in this issue of MPA, we turn the spotlight on some of the industry’s best; brokers who are driving the economy, and helping build Australia’s future. Adam Smith, editor, MPA

COPY & FEATURES EDITOR Adam Smith CONTRIBUTORS Andrea Cornish, Cindy Tonkin PRODUCTION EDITORS Carolin Wun, Danielle Chenery

ART & PRODUCTION DESIGN MANAGER Rebecca Downing DESIGNER Ginni Leonard

SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Adam Smith tel: +61 2 8437 4792 adam.smith@keymedia.com.au Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Account Manager Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto brokernews.com.au

CONNECT

Contact the editor: adam.smith@keymedia.com.au

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Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

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NEWS / ROUND-UP

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NEWS / ROUND-UP ASSOCIATIONS

Martin Leedham

New MFAA head looks to engage REGULATOR

Following his official confirmation as head of Advantedge, Steve Kane recently stepped down as president of the MFAA. He was replaced by Martin Leedham, AFG state manager for SA. Leedham said he will look to use the role to increase member engagement. “We have to remember that this is a big organisation – we have 11,000 members – so we need to communicate with our members, and get them understanding what we do and why we do it.” Leedham also plans to ensure the MFAA’s push for increased broker education is delivered in a format desirable to members. “Some brokers want webinars and webcasts, while others want regional forums where they can interact face-to-face. We can’t neglect Facebook and LinkedIn either,” said Leedham.

ECONOMY

GFC still biting for banks

THE FEATURE “SUPER OPPORTUNITIES” IN MPA 12.7 NEGLECTED TO CLARIFY THAT NIC ELLIS IS PRINCIPAL OF SUPERSHIFT AUSTRALIA. MPA REGRETS THE ERROR.

Throughout the RBA’s latest easing cycle, banks have relied on a singular defence as they baulked at passing on cash rate cuts in their entirety: Australian banks point to increased cost of funds. The argument was echoed once again recently, when Australian Bankers’ Association chief Steve Munchenberg appeared before the Senate Economics References Committee’s Inquiry in Canberra. Munchenberg said banks were still reeling from the GFC and its impact on funding costs. He also rubbished the idea that big four dominance was a bad thing, saying the size and strength of the majors meant Australians didn’t have to bail out the banking system during the worst of the economic downturn.

ASIC STRIKES DOWN AGGREGATOR

ASIC has continued to prove it will have bite as well as bark in its role as industry watchdog. This time, the regulator took aim at a Queensland-based aggregator and broker. ASIC cancelled the credit licence of Pump Financial after it failed to obtain an EDR membership. The watchdog said Pump Financial’s EDR membership was cancelled in January 2012 and was

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never renewed. It was the second time in a month ASIC cancelled a credit licence due to EDR omissions. Sydney brokerage Dean Mooney Pty Ltd was also banned from engaging in credit activities after failing to renew its EDR membership. At the time, Greg Ashe, director of QED Risk Services, said it was surprisingly easy for companies to “forget” to renew EDR memberships – but at great cost.

NEWS / ROUND-UP ONLINE

INFOGRAPHIC

0.70%

On the up:

Quarterly rise (Q2, 2012)

4.80%

Year-on-year rise

Mortgage applications see a bump Source: Veda

CAREER

JUMPING SHIP BUILDING STEAM Four out of five finance workers in Australia want to jump ship and change industries, according to new research. Careers portal eFinancialCareers surveyed 472 finance professionals living in Australia, and found that 78% were considering leaving the industry altogether. Mining, oil and gas were the most popular alternative industries, with respondents citing better pay and job opportunities as key factors. Interestingly, the vast majority – 76% – were not considering moving from Australia. “This survey fires a large warning shot over the bows of Australia’s financial firms if they want to retain key staff. It comes at a time when Australia’s two-speed

economy is attracting finance workers out of the slow lane and onto the superhighway – the booming resources sector,” explained eFinancialCareers managing director Asia Pacific, George McFerran. “It means financial service firms need to immediately pay closer attention to the retention strategies of their key staff in order to avoid business risk and significant churn.” A separate survey by eFinancialCareers found 80% of finance professionals were unhappy in their current position, citing a lack of recognition within their company, higher pay on offer from other employers and the lack of career progression as factors influencing their dissatisfaction.

CONFIDENCE

CEOS LEAD THE WAY IN DOOM AND GLOOM A study by the Young Presidents’ Organization and World Presidents’ Organization has found confidence among Australian CEOs has been on the decline since October, 2010. Australian bosses are

nervous about a slowdown in China, and are sceptical that business conditions will improve over the next six months. Less than a third of Australian CEOs believe business conditions will

pick up over the next six months, while 22% believe they will actually get worse. Worryingly, 58% of CEOs said they would hold off hiring anyone new over the next 12 months.

UK holds future for online channel The strength of the online channel as a source of broker competition has been hotly debated. Direct web sales have yet to make a dent in broker dominance, despite many predictions to the contrary. But an Australian comparison site reckons a look at the UK will show that online mortgages are in our future. “We’re about three years behind the UK, where price comparison sites are hugely popular: most people there wouldn’t dream of applying for a loan or credit card without visiting one. We believe Australia will catch up quickly,” RateCity’s Michelle Hutchison said. Hutchison said brokers were worried online channels would eventually take away some of their business, and said the concerns were “with good reason”.

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NEWS / ROUND-UP BANKING

TRAINING

St.George software tackles turnarounds

GO EAST, YOUNG MAN Industry trainer AAMC has expanded into India with the launch of the ‘Australian Vocational Education Training’ scheme in Chennai, India, with the purpose of making local staff employable to Australian companies. AAMC’s managing director, Jeff Mazzini, says the scheme will benefit financial institutions, including the big four. “An example of this is the four major banks are at various stages of expansion, along with many large Australian retail companies that

St.George has been extremely forthright about the troubles it has run into over the past few months. A low ranking in MPA’s Brokers on Banks survey saw the bank’s general manager of mortgage broking, Clive Kirkpatrick, concede that turnaround times had blown out for the non-major. But the bank now says a new software system will halve turnaround times. New technology from NextGen.Net will allow the bank to turn loans around in four days, rather than eight, Kirkpatrick said.

“This removes all ambiguity and doubt, and streamlines the process of delivering the application to a loan assessor”

are seeking to also enter that market. We are also working with companies who have existing back office or processing centres to help them up-skill and develop their people to meet the Australian regulatory, management and leaderships skills,” Mazzini said.

TAXES

CARBON TAXING CONSUMERS’ WALLETS With the controversial carbon tax coming to bear on the economy, a leading price index has found the first evidence of creeping costs from the much-maligned levy. The TD Securities Monthly Inflation Gauge recently showed a 14.9% monthly jump in household electricity

INFOGRAPHIC

Consumer survey:

costs, along with a 10.3% rise in gas and other household fuels. While Treasury’s modelling anticipated such rises, and said they would be offset by increased household payouts, the actual jump is on the higher end of initial estimates.

What factor would best help housing affordability? MUTUALS

MUTUAL BENEFIT FROM BROKER LOVE

51%

Lower interest rates

STATS

5.4%* *The

26%

A new government

16%

Construction incentives

Decrease in migration

Source: Loan Market

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proportion of Australian houses worth the same or less than their purchase price Source: RP Data

Heritage Bank recently touted its 13th consecutive year of record profits, and put the result down to its return to the broker channel. While the mutual pulled back from the third party following the GFC, chief executive John Minz said intermediary distribution was ramping back up. “It now accounts for around 50% of the mortgage loans that we approve, so is vitally important to us. We believe the future of lending through the broker network is extremely bright for Heritage,” he said.

NEWS / ROUND-UP

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NEWS / MULTIMEDIA

ON LINE The latest highlights from MPA online and Australian Broker Online

In motion The latest from Broker News TV

VALUE ADD How much is your service worth?

SAY WHAT? THE BIGGEST QUOTES FROM THE MONTH

“Pricing on risk is a win/win for both client and lender. The client is rewarded for their prudent approach to borrowing, while the improved quality of the lender’s mortgage book can mean more favourable investment terms and keep the regulators at bay” – nMB’s Kon Avramidis on ‘sticky’ loans and rewarding loyal customers

ON TREND How buyer’s agents can help your business

“It is ridiculous to make someone who is just starting out in life save for their retirement before they have even secured a home”

SURTHRIVE It’s tough being an entrepreneur at the best of times, but during economic turmoil, the going gets especially tough. Here are a few of Blue Print founder Creel Price’s tips for small business success:

SUMMIT It’s vital for small businesses to set goals. Aged 25 years, Price launched his career as an entrepreneur after climbing Mount Kilimanjaro, and set a goal for the business to turn over $1m a year in profit by the time he was 30. “Being in business is a lot like climbing a high altitude mountain. You get thrown these challenges and obstacles, but you just have to have a vision and think about where you want to get to. You can’t just be thinking in the immediate. You need a longer-term summit goal.”

UPSIDE Though small businesses may suffer during economic storms, it’s important to maintain an air of optimism. As a leader, it’s your job to be the ray of hope in the midst of the gloom. “Rather than being down about all of the gloom and making excuses like ‘business isn’t going to be as good this year as last year, start to think upside rather than downside. Have a positive attitude. If you’re that island of positiveness, your clients and employees are going to naturally flock to you.”

RESILIENCE Positive attitude or not, you’re bound to get tossed around as you navigate your business through stormy seas. What separates true leaders from the rest is the ability to get back up after you’ve been knocked down. “You will be going through some of the high seas, but would mountaineers climb Mount Everest if there were an elevator to the top?”

– 1300HomeLoans’ John Kolenda on the need for superannuation reform

DEBT DECISION What your clients need to know about fixed versus variable rates 12 | MPAMAGAZINE.COM.AU

“We’ve had to put it on the back-burner: the cons were starting to outweigh the pros” – Smartline’s Chris Acret on the company’s examination of a ‘no-go’ fee model

To find out more on all of these stories, as well as latest business strategy advice, special reports, profiles, news, views and analysis, visit mpamagazine.com.au

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NEWS / PRODUCT ROUND-UP

PRODUCT NEWS A bite-size guide to the industry’s newest products, key updates and fresh initiatives

SUNCORP

EDITOR’S CHOICE Who: Nationalcorp Home Loans What: Loyalty discounting

The spec: Nationalcorp has introduced a loyalty loan that gives customers a 0.5% pa rebate paid quarterly into their loan account for the first five years of the loan. During this time, borrowers also accrue a 0.25% pa bonus, which is paid into their loan account as a lump sum after five years. Moreover, after five years, borrowers get a 0.84% pa discount. Maintaining their previous repayment after the discount can see them shave years off their loan. What they say: “The average home loan is only 4.1 years, and when customers extend their loan term to 30 years each time, they just get further and further away from their goal of owning their home outright. Chasing cheap rates will only benefit a customer in the short term. If they keep refinancing, one day they will be faced with retirement and have 20 or more years left to run on their home loan. With the current climate of people refinancing every four years or so, I just want to reward customers for their loyalty. The benefit for the broker is that with happy customers in their loan for

the long term, the broker’s trail income is well protected.” – Barry Parker, managing director, Nationalcorp Home Loans

HOMELOANS

Rates slashed Homeloans has cut rates on its Ultra and Ultra Plus loans by 8bps to 5.89%, and has dropped rates on the MoniPower full doc loans by 4bps on the term loan (to 6.19%) and by 19bps on the Line of Credit (6.29%). “We are focused on remaining a nimble, competitive alternative to the majors, both in price, features and service.” – Greg Mitchell, general manager of retail sales, Homeloans

NEXTGEN.NET

“I just want to reward customers for their loyalty” – BARRY PARKER

WHAT WE SAY: Loyalty discounting helps borrowers pay off their mortgage and delivers stickier customers for brokers

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Three-year fixed rates cut to 5.57% “Ongoing international market volatility and the flow-on effects for consumers in Australia, combined with fluctuations in petrol prices and the cost of living, have left many craving certainty around their household budget, of which home loan repayments often make up the largest proportion.” – Tony Meredith, executive manager of personal lending, Suncorp

ApplyOnline+ While brokers may not see the direct impact of the new software, NextGen. Net’s ApplyOnline+ aims to reduce turnaround times and create more efficient processing. “As the mortgage industry enters a new stage, it is processing efficiencies that provide a truly competitive edge in the market. Applicants, brokers and lenders all benefit from a streamlined process that delivers quicker turnaround times.” – Tony Carn, sales director, NextGen.Net

NEWS ANALYSIS / BIG QUESTION

THE BIG ? QUESTION What’s the most important thing a broker can do to safeguard their business in the current environment? Industry experts tell us their business secrets

HAVE A PLAN Steve Kane, head of broker platforms, Advantedge We’re operating in a difficult market that shows no signs of immediate improvement, so brokers need to focus on the elements within their business that they can control. A detailed business plan will help a broker identify their strengths, weaknesses, opportunities and threats and provide brokers with the building blocks to develop strategies for the areas that they can influence. Maintaining a strong focus on existing and past clients and business referral sources is essential for brokers in the current environment. Identifying new referral sources is key at any time; however, when market conditions are tough and competition is fierce, knowing your true and unique value position and being able to professionally deliver this to new referrers and customers is paramount. Being able to do this requires a high level of organisation and development of detailed calling plans.

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In short “Keep your clients close to you by providing value, not just a transaction”

Phil Naylor, CEO, MFAA

“Ensure you have a strong brand presence through great service and innovative marketing. If you do not have a strong brand, join a group like Aussie which has!” John Symond, chairman, Aussie

WIDEN YOUR PRODUCT SUITE

STRATEGISE AND MAKE FRIENDS

David Holmes, CEO, Pepper In today’s currently volatile times where it is increasingly difficult for brokers to attract new clients, it is vital that they have a product suite that caters for as many clients as possible. Every client that a broker meets provides an opportunity. Those with a specialist product range that complements their prime products will inevitably be able to meet the needs of more of their clients. These clients more often than not require further or different products as their financial situation changes and they develop a long-term relationship with their broker. Having a specialist lender – such as Pepper – on a broker’s lending panel can increase business volumes by as much as 25%.

Doug Mathlin, Frontrunner Consulting To safeguard your business, do the following: • update the business plan/strategic plan • embark on a direct contact management plan • strengthen referrer relationships If you break your annual goals down to monthly targets and identify one or two specific areas in your business to work on each month, there is a better chance of achieving these goals. Get someone to hold you accountable for them if you can’t do it on your own. Getting closer to your customers improves your chances of building repeat and referring clients. Call one or two past clients each business day and ask them good questions.

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FEATURE / COMPLEX DEALS

GETTING OVER THE

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As five veteran brokers tell MPA magazine, getting difficult deals over the line takes a little patience, finesse and a dogged attitude

LINE A

ccording to baseball legend Vernon Law experience is a hard teacher because she gives the test first, the lesson afterwards. It’s a fitting observation, particularly for those brokers who routinely go to bat for their clients in difficult loan situations. Each deal presents its own unique challenges, some more so than others. And while there’s no replacement for experience, it can be enlightening to see how other brokers have gotten through difficult transactions. MPA asked several brokers to describe a complex loan situation and what they did to get the deal over the line.

SARAH EIFERMANN, SFE LOANS

Loan scenario: A new client who was referred to me was getting divorced and she needed to buy out her ex-partner. It was a $1m loan on a blue-chip property in South Melbourne, and while she earned enough money

to service the debt, property values had dropped in Melbourne at the time.

The challenge: The loan was $1,050,000 and the property had previously been valued at $1,170,000. But we needed $1,250,000 – which was really the true value of the property – because with $1,050,000 at $1,170,000 she was in a high mortgage insurance bracket – so it was about $40,000–50,000 in mortgage insurance. It was a good quality property and had been renovated with good quality furnishings, it was just that the market was starting to get a bit flat in Melbourne at the time. If I put in a valuation now it would probably be worth more. So what we ended up doing was we ordered a valuation from two different banks – AMP and Homeside. We got a valuation back from AMP that was acceptable for what we needed but they wouldn’t take her full income into account which we needed for servicing, nor did they have their own Delegated Underwriting Authority to approve the deal in-house. So we wanted to put her with Homeside, but the valuation was lower.

Getting it over the line: So we contested the Homeside valuation through their internal processes and ended up getting it adjusted. It was a hard process. Val Ex was the company that was used and they pushed back to begin with and we had to go to a review board. It took about a month with the valuation contesting.

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FEATURE / COMPLEX DEALS

It’s not the first time I’ve contested a valuation. But I haven’t done so in a couple of years, and certainly not with a difference of $70,000–80,000 in the valuations, and not on a property worth over $1m.

Lessons learned: Sometimes it is worth making sure for your client that you look at more than one option for a lender even if that means ordering more valuations – and the client was happy to pay for valuations if AMP or Homeside wanted her to pay. We weren’t abusing their systems – they were genuine enquiries. Don’t just settle on a ‘no’ answer, or a short valuation when it’s that serious. And if you’re going to fight for your client – to really get in there – it also helps having support from the relationship teams that you’ve got and having good relationships with them to get things across the line. It’s all about relationships in this industry. If you don’t have good relationships with your bank, credit managers and BDMs, you’re going to struggle to get your deals across the line.

DANIEL PYM, LOAN MARKET

Loan scenario: The loan was completed about eight years ago. It was my first major construction loan and the first major construction loan for my clients. The total loan amount was $9m. They were existing clients of mine – they invested in property and we did some duplex developments funded through mainstream banks. Anyway, the clients took an option (costing $50,000) on a backpackers’ resort in north Queensland with the view to redevelop into 20 apartments. My clients had never done any building work themselves, could only put up the $50,000 option fee and pay for the DA costs themselves, and they could not afford to put any more funds into the deal.

The challenge: This was a very tough deal to set, none of the big banks want to work with clients who have no real development experience and who cannot afford to invest the 30% deposit on the land.

Getting it over the line: We subsequently found a lender in Queensland – the now notorious lender MFS – who agreed to fund 100% of the land purchase, 100% of the construction cost and also capitalise the entire

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“None of the big banks want to work with clients who have no real development experience” – DANIEL PYM interest costs during the construction period. The clients had to work with an architect, get the plans/DA approved and then sell at least 50% of the apartments prior to construction commencing, all within the nine-month option period. This was a very stressful time for all concerned, to put in such a huge volume of work with no guarantee of the deal actually settling, and with no guarantee that the valuer would value the site for enough to make the lender happy to fund it. I spent about a year on the deal in total, and the clients ended up paying another options fee for an additional three months. In the end, the deal nearly didn’t settle because the clients took too long to sign the loan documents and

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FEATURE / COMPLEX DEALS

“Don’t just settle on a ‘no’ answer, or a short valuation when it’s that serious” – SARAH EIFERMANN

the lender didn’t have the originals in time for settlement. We finally got it over the line by constant communication with all parties concerned.

Lessons learned: Don’t do big construction deals. I now really specialise in residential with a bit of commercial. The business is a lot more constant with a high success rate.

KEITH BRIDGES, KERSLEY FINANCIAL SERVICES

Loan scenario: The borrower had been a customer of the lender for more than 20 years, with a AAA repayment record. The borrower owned and operated seven independent retail businesses – one as a sole trader, five trading under a company entity and another in partnership with two other parties. Business activities were deemed as “discretionary dollar spending” and since the GFC, turnover and profit

Commercial lender Sintex has claimed smaller brokers are “quicker off the mark” at diversifying into complex commercial deals

on all shops has reduced significantly. The borrower sought a loan of $230,000 to demolish and rebuild residential property destroyed in the Brisbane floods of 2011. While the property was insured, coverage did not include water damage from flooding.

Challenges: This transaction was challenging on many fronts: 1. A valuation of the land and proposed improvements to the dwelling was $200,000 less than the last valuation completed some two years earlier prior to the flood. 2. The equity position based on a new valuation identified a debt to equity position (LVR) with the lender of 112%. 3. Servicing numbers were “tight” based on the declining trading figures since the GFC. These issues needed to be addressed closely under “responsible lending” guidelines, and the ability to meet any new and current commitment in the future.

Getting it over the line: We applied “relationship, character and behavioural” principles to our submission and recommended to the bank that it was in both their interest as well as the borrower that this transaction be considered in a favourable light. As further collateral, we offered a “family pledge” to top up equity, using the borrower’s de facto spouse’s property. The proposal then provided an overall debt to equity of 80%. The bank initially informed us that our proposal was well outside the specification of the family pledge product profile. We were eventually able

When the going gets tough MPA readers also had their say on getting tough deals over the line, sharing their experiences on the MPA Online forums. Here’s what they had to say: “The trick is to have access to an experienced BDM who understands credit principles and who has the ability to connect with the broker or talk directly with a senior credit manager. Without this access, the task becomes increasingly difficult, time

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consuming and less likely to be achieved. In regard to remuneration, the current levels of lender upfront commissions do not provide adequate compensations for the complex loan applications unless the loan size is significant.” – David “I place a lot of high net worth, complex self-employed applications. They are clients who run many businesses, have multiple entities, have business lending and

borrow a lot of money. Bank assessors in the broker channel simply don’t have the skills. They read off policy and have – in most cases – poor understanding of the financials and the commerciality of a deal. I am toying with the prospect of walking away from the third party channels and putting resi business direct with business banking channels, as the assessors there have the skills and knowledge. The quality of assessors in third party is starkly lower than in the business banking divisions of these banks.” – Moonae

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FEATURE / COMPLEX DEALS

Vow Financial earlier this year launched a legal arm to help its brokers with complex property deals

to convince the lender that a “common sense” approach should be adopted, for the benefit of all concerned. The loan was eventually approved by the bank’s credit committee as originally submitted.

Lessons learned: In this transaction, it was very much a case of patience is a virtue. We dealt with numerous assessors and credit managers throughout a protracted approval process. Considerable time and effort was spent working through financial data and with the lender’s personnel to fully understand the current situation and potential longer-term risk implication should the proposal be declined. We never stopped believing.

OTTO DARGAN, HOME LOAN EXPERTS

Loan scenario: Two friends using separate unit trusts to buy a property together. The property was in a mining town, they wanted to borrow 95%, subdivide and then build a duplex. One of the customers was also on probation at a new job.

Challenges: The problem was the combination of many issues. If a customer just has one of these problems, then normally we can get it done. However, when there are several issues all with the one deal, then it just can’t tick the box with any lenders.

Getting it over the line: We did a lot of research and we ended up finding a lender that could help. Doing the research upfront makes a lot more sense than trying to push a deal through with an inappropriate lender.

“The larger the loan, generally the larger the headache. But the right information makes the process easier” – JEREMY FISHER 24 | MPAMAGAZINE.COM.AU

Lessons learned: Normally we would work with customers to “keep it simple” which would have made the deal much more appealing to a bank. We have learned to work with customers to change their situation to match what the banks can do.

RAEL BRICKER, HOUSE + HOME LOANS

Loan scenario: The client had scaled back her work from full-time to three days per week, and could not qualify for new borrowings. She had a few loans – some lower interest ones with a major bank and some with a second tier mortgage manager at 2% higher. She decided to sell one of her properties, which had a loan with a major.

The challenge: I realised that if she did that she would lose out on the lower interest loan.

Getting it over the line: I helped her do a partial discharge of one of the two titles at the mortgage manager. She then substituted that title for the one held at the major – thus releasing the property to be sold as “unencumbered”. She then used the proceeds to pay down the higher interest mortgage manager loans whilst maintaining the lower interest loans.

JEREMY FISHER, 1ST STREET HOME LOANS

Loan scenario: Client purchased a home for $8m in the eastern suburbs [of Sydney].

Challenges: Getting head of credit to agree to acceptable LVR and also a competitive rate. Plus working through the multiple company and trust tax returns was a nightmare with over eight various entities earning income.

Getting it over the line: Multiple meetings with the head of credit to filter down to the raw income, which took many, many hours.

Lessons learned: The larger the loan, generally the larger the headache. But with the right homework carried out upfront and the correct information gathered, it makes the process much easier.

SPECIAL REPORT / TOP COMMERCIAL BROKERS

Those on the MPA Top Commercial Brokers list are providing finance for the businesses that build our economy

BUILT ITY C

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T S T S

he predictions out there for commercial finance look pretty dour. Recent figures from the Australian Bureau of Statistics showed commercial lending plunging more than 12% in a month, while a study by BIS Shrapnel forecast weak growth in commercial finance as a result of tough times faced by retailers. While some industry pundits have predicted commercial lending is due for a resurgence, the stats have yet to bear out any kind of major recovery for the sector. But no one told Australia’s commercial brokers that the sector was doomed. The entries for this year’s MPA Top Commercial Brokers’ list paint a very different picture for commercial lending and broking. Brokers have continued to see strong volumes, with many hitting record settlements over the past year. We received a variety of worthy entries for this year’s list, and have highlighted Australia’s Top Commercial Brokers. Many have appeared on the list before, but saw an incredible spike in their business over the past year. Impressively, six of the top 10 are first time entrants to the list, and two entered commercial broking only a year ago. Read on to see how MPA’s Top Commercial Brokers achieved their success, and how they intend to keep building the businesses that build Australia.

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SPECIAL REPORT / TOP COMMERCIAL BROKERS

Daryl Currie

Company: Commercial One Pty Ltd Total Value of Settlements: $17,318,846 Number of Commercial Loans Settled: 19 Years as a Commercial Broker: 4

Congratulations on being named one of MPA’s Top Commercial Brokers. What kind of changes have you made to your business over the past year, which have led to your success? What we’ve really been concentrating on is more focus on non-conforming lenders. The banks are very tight and choosy, and they cherry pick the deals they want. There’s still a need out there, so we’ve spent a fair bit more time investing in the private funding market. That made a difference to our business last year and it’s made an enormous difference this year.

What advice would you give to residential brokers looking to expand into the commercial market? If brokers put it out there that they’ll do commercial, when they come across a straightforward, small commercial deal, they won’t have much trouble handling it. The problem is when you say you do commercial funding, you’re likely to attract all sorts. You can get into some really complex areas and you need to be able to cater for it. A busy residential broker really needs to align with someone to handle more complex deals.

Scott Woodhouse Company: Woodhouse Consulting (Trading as Healthy Lending) Total Value of Settlements: $25,000,000 Number of Commercial Loans Settled: 15 Years as a Commercial Broker: 8

To what do you attribute your success? A lot of hard work and persistence. Spending a lot of time with each client and also referral sources.

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Simon Chesson Company: Austasia Finance Brokers Total Value of Settlements: $18,341,166 Number of Commercial Loans Settled: 73 Years as a Commercial Broker: 18

You’ve had a strong showing on MPA’s Top Commercial Brokers list. To what do you attribute your success? Client focus and looking after the client’s overall finance requirements.

There’s been some talk that commercial lending may be the next area of credit advice to fall under the NCCP microscope. How do you think commercial broking would be impacted if commercial lending fell under NCCP guidelines? As I am a financial planner, CPA, tax agent and finance broker for residential and commercial, we are not concerned with regulation if that is the way the industry goes. We do not see why it should be regulated, as the regulations and compliance are more designed to protect people from themselves. However, if more regulation is brought in, then we will comply, and will look at it as an opportunity to explain what we do for clients, and the benefits of using a broker rather than going direct.

What disadvantages does commercial broking have over residential broking? It’s more transactionally focused, so the deals are bigger and lumpier, but not as frequent.

What area of commercial lending do you tend to focus on, and why? I specialise in pharmacy lending, which I have been doing for the past 15 years. It’s a great segment to be involved in. I see a lot of passionate professionals who are making a difference to their local communities.

What advantages does commercial broking have over residential broking? For me, it’s a lot more rewarding as I see the business and client grow over time. I have to think a lot further outside the square to make the deals fit into the banks’ requirements.

Alex Sobolevsky

Company: Link Mortgage Services Total Value of Settlements: $27,178,000 Number of Commercial Loans Settled: 12 Years as a Commercial Broker: 1

In your first year as a commercial broker, you’ve already managed to crack the MPA Top Commercial Brokers list. What’s been the key to your success? Our success has been a result of building strong relationships with our referral partners and clients. We believe that our value proposition is to have deep understanding of the clients’ financial requirements and work collaboratively to achieve a common goal.

What prompted you to launch into commercial broking? I was a banker for 10 years, and a friend of mine kept saying, ‘You’ve got to get into this. You’d do really well.’

What advice would you give residential brokers looking to diversify into commercial finance? I strongly encourage mortgage brokers to diversify into commercial lending on the provision that they either already understand commercial lending, or obtain education to add value to the industry. Commercial lending has a lot of variables that impact the outcome.

Tom Waltham Company: Capital United Pty Ltd Total Value of Settlements: $31,025,000 Number of Commercial Loans Settled: 22 Years as a Commercial Broker: 5

What kinds of challenges has your business faced over the past year? The three main challenges have been: • Time: over the past year I have found that the time it takes from client engagement to actual settlement for certain transactions has increased significantly. • Valuations: clients’ expectations on values versus actual values can be the difference between getting an approval or not. For certain transactions, I have found it increasingly important to obtain valuations upfront. • Client expectations: prior to being engaged by a client, I often find that one of the challenges is communicating/explaining the difference between their expectations of credit appetite and the actual appetite of credit. This can take some time, but once understood it is easier to find the right solution for the client and move forward in a productive and positive manner.

Have you made any changes in your business over the past year? I have focused more on targeted messages to my referrer networks over the past year.

SPECIAL REPORT / TOP COMMERCIAL BROKERS

Daniel Zadnik

Company: Hawthorn Finance Pty Ltd Total Value of Settlements: $57,300,000 Number of Commercial Loans Settled: 36 Years as a Commercial Broker: 4

You’ve had a strong showing on MPA’s Top Commercial Brokers list. To what do you attribute your success? I think the simple thing is that we work hard on behalf of our clients to get them a commercial outcome, and that in turn leads to repeat business and ongoing word-of-mouth referrals. On the flipside, our lending partners have also been very supportive and work hard when provided the opportunity to work with us to try and achieve that outcome.

Have you made any changes in your business over the past year? I think one thing not reflected in the settlement numbers is that we’ve actually done quite a lot of consulting work over the past financial year. We work with the existing lender to get a more favourable outcome, and we’ve worked with some fairly significant companies in that regard.

Is this kind of consulting a growth area in the commercial lending industry? We have done it in the past, but it’s more a reflection of lenders working a lot harder to retain clients. There were periods like the GFC where banks didn’t work as hard to retain clients. Now we’re in a highly competitive market and banks are working a lot harder with the customer and broker for a better outcome.

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Mark Churchill Company: Churchill Financial Services Total Value of Settlements: $65,000,000 Number of Commercial Loans Settled: 33 Years as a Commercial Broker: 1

You’ve had a strong showing on MPA’s Top Commercial Brokers list. To what do you attribute your success? We focus fairly specifically on one industry, which makes it easy to work to our strengths. Both my business partner and I have very specific banking backgrounds in healthcare, and [are] even more specialised in pharmacy lending.

What advice would you give residential brokers looking to diversify into commercial finance? I think if you are looking to diversify you need to really have some strong contacts with the bank in the commercial area, understand the bank’s policy and if you don’t feel confident about the transaction, walk away.

What do you think the coming year holds for commercial finance? I know this is a growth area and, the harder the times, the more commercial brokers will be in demand. Coming straight out of the banks and knowing what demands are put on bankers for sales results and compliance, it’s getting harder for them to keep up with the demand in the market. Professional commercial brokers who can structure transactions and guide clients are going to be sorted out. The experience in the banks is dwindling. During the GFC all of the majors stopped putting on graduation students. This will have a flow on effect in the market.

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SPECIAL REPORT / TOP COMMERCIAL BROKERS

Daniel Green Company: Green Finance Group Total Value of Settlements: $70,200,284 Number of Commercial Loans Settled: 93 Years as a Commercial Broker: 2

Scott Smith

Company: Cairns Finance Total Value of Settlements: $78,756,270 Number of Commercial Loans Settled: 44 Years as a Commercial Broker: 6

You’ve hit the MPA Top Commercial Brokers list for the second year in a row. To what do you attribute your continued success? Hard work, long hours and strategic planning to ensure efficiencies in business operation are achieved as volumes increase.

Your ranking improved by two places from last year. What factors led to the improvement? You’ve come out of the gates strongly after only two years as a commercial broker. What’s been the key to your success so far? Definitely my networks and referral sources. I have got strong contacts with accountants, agents, valuers and insurers. The majority of my business comes from referrals.

What’s your advice to residential brokers who may be looking to diversify into commercial lending? Pick a specialty. That’s the secret with anything. If you can pick a specialised area, you’re not competing with as many brokers in that space. If you understand that industry and focus on your contacts in that industry, you’ve got a better chance than a broad commercial lender.

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It’s important to work on your business plan as well as on the setting of new financial arrangements for your clients. The strategy surrounding my business plan has probably led to this improvement.

Have you made any changes in your business over the past year? In particular, I’ve changed my CRM platform and other technology-lead changes in the past six months and I believe I am benefiting from this.

What advice would you give residential brokers looking to diversify into commercial finance? Align yourself with a quality commercial broker and share the dealing. It is very easy to incorrectly structure a commercial transaction as there are less formalities and a great deal more latitude, this can be a trap for those that are inexperienced as there are fewer guidelines to direct you.

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SPECIAL REPORT / TOP COMMERCIAL BROKERS

Ranjit Thambyrajah

Company: Acuity Funding Total Value of Settlements: $289,260,000 Number of Commercial Loans Settled: 18 Years as a Commercial Broker: More than 28 years

some of the pre-sale requirements that hamper many development funding proposals. Acuity Funding specialises in sourcing funding options for clients who others have been unable to assist due to the complexities of their financing needs. Acuity has been able to organise a cocktail of funding to overcome some complex situations. Acuity Funding has also been successful in obtaining bank approvals for clients that have been placed under receivership by other banks. This has enabled businesses with a promising future to continue to trade out of temporary short term problems.

What advice would you give residential brokers looking to diversify into commercial finance?

Three factors can be cited as reasons for the increase: • The largest singular development this year was increased funding sources, which improved our ability to provide solutions for our clients. • Our increased volumes are also due to more brokers referring their commercial clients to [us]. • Relaxation of lending policies.

It is a must for residential brokers to start becoming better equipped in handling commercial inquiries. The only way for a broker to do so in the commercial arena is to partner with an experienced commercial specialist. Look for a mentor within the commercial finance sector. Seek to enter into a partnership or arrangement whereby you can learn the ropes/learn the workings of commercial finance thoroughly before going out alone. Brokers who refer work to a bank directly for a spotter’s fee are generally not delivering a good service to their clients as they are limiting the chance of success to the policy of that one lender.

Have you made any changes in your business over the past year?

What do you think the coming year holds for commercial finance?

We have moved out of the mortgage managed/home loan market and are now focusing on commercial financing. We remain licensed under the NCCP regulations and are always ready to assess home loans, however our primary focus is finding the right funding solutions for our commercial clients.

Continuing uncertainty in Europe will continue to spook governments and business worldwide. I have seen the commercial property market more than halve in value since the GFC. It is hard to determine when demand for commercial properties will start to improve as we are still experiencing record vacancies in commercial properties. That said, there are definitely opportunities out there to be had – look around your local area and see what is happening and look into any opportunities that may present themselves. Keep your eyes and ears open for opportunities and investigate any openings. Continue to network with others in the industry – it can be surprising where the next referral comes from.

Not only did you top the list, you substantially improved on your 2010/11 settlements. What factors led to the improvement?

What area of commercial lending do you tend to focus on, and why? Our current clients consist of service stations, small to large developers ranging from $1,000,000 developments to $80,000,000, commercial properties, retirement villages, balance sheet lending and pubs. In certain circumstances, Acuity has been able to assist overcome

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PROFILE / DANIEL O’BRIEN

DANIEL O’BRIEN

SUDDEN SUCCESS Daniel O’Brien already had several years experience in the finance industry prior to becoming a broker. So when he opened his business in 2006 he hit the ground running, scooping up numerous awards, and has cracked the Top 100 list the last four years in a row Q: What do you attribute your success to? A: Work ethic, honesty, communication and the support of previous employers and peers.

Q: What keeps you motivated? A: · Outdoing my previous financial year’s performance · Earning a comfortable income · Getting difficult loans over the line that others have failed to do · Helping a client who is genuinely appreciative and thankful for my help and advice · Being able to go to Las Vegas each year to support their local economy via my ‘donations’

Q: What was the biggest turning point of your career? A: Linking up with a real estate network in 2005. That enabled me to get a lot more opportunities in terms of leads and referrals early on in my broking career. Up until that point I was living off bread and water.

Q: How does your geographic location affect your business? A: Being based in Bella Vista and on the doorstep of the M7 motorway, I am virtually 30 minutes away from anywhere in metro Sydney. This is very convenient for

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both my clients and myself. It also allows me to have a broader geographic reach.

Q: Why did you become a mortgage broker? A: · I was years away from being able to advance my career any higher in my previous role at a major bank · The opportunity to earn more money · The opportunity to earn passive income (trail) · Being able to do what I loved (helping customers), minus having to put up with the internal politics and BS of my bank role

Q: In what ways has the industry changed for the better since you started broking? A: Public perception has changed for the better. I think mortgage brokers are a lot more widely accepted and known about now. I think stricter regulation has also helped, as it has driven a lot of brokers out of the industry. This in turn has left more business for the rest of us remaining to write.

Q: In what ways has it changed for the worse? A: I think regulation has been a positive change for the industry overall and for all loan parties, but I do feel that the current landscape is maybe a bit too ‘uptight’. While responsible lending has my full support, as a next step I would like to see further finetuning to make our current paperwork requirements less onerous and to avoid double- and triple-ups of the same information.

Q: What advice would you give to a new mortgage professional starting out? A: Have referral partners before you start. Focus on excelling in three areas with your clients: communication; honesty; and worth ethic. Avoid using

banks that make you look bad by taking too long to do things and providing unreliable service. Your business plan should simply state: get lots of referrals = seeing lots of clients = writing lots of loans = having a profitable business. Everything else will just fall into place. Just focus on the simplicity of this industry and look after your people, work hard, be honest and always keep clients in the loop and updated. Also participate in semi-regular consumption of alcohol (after hours).

Q: Do you feel fee-for-service is the way forwards? A: Yes, in some cases where justified. If commissions do drop further though, I think fee-for-service will be much more prevalent. I don’t think fee-for-service is a bad thing and I am not against it. In my demographic, some clients will be ok with it and understand it; others would refuse to use me.

Q: What is the most challenging issue facing the industry at the moment? A: Compliance and regulation. I think smaller operators will be hurting more than anyone currently. With today’s paperwork requirements, it’s virtually impossible to do it alone if you are doing decent volumes. These additional costs could be the tipping point for a lot of brokers, such as a PA or extra staff member, bigger or newer office space to accommodate staff, extra equipment, etc.

Q: How do you see the mortgage industry evolving in the next 10 years? A: I see brokers taking even more market share away from the banks; cross-sell opportunities/commissions becoming a lot more prevalent for things like personal insurance, savings accounts, credit cards; and fee-forservice becoming more common and accepted.

Factfile Daniel O’Brien, PFS Financial Services ++ Location: Bella Vista, NSW ++ Started: 2004 ++ Achievements: · AMA 2009 Finalist Broker of the Year – franchise · AMA 2008 Winner Australian Broker of the Year · AMA 2008 Winner – Broker of the Year – Independent · AMA 2006 Winner – Young Gun of the Year ++ Family: married with two children ++ Hobbies: poker, movies, seeing live bands, soccer and basketball

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BUSINESS STRATEGY / DECISIONSHIP

CHOOSE YOUR OWN ADVENTURE Your next big decision could make or break your business. Experts give advice on how not to blow it

rokers make thousands of business decisions on an annual basis. And while only hindsight is 20/20, there are ways to improve your decision-making that will give you clarity before you take action.

IDENTIFY THE ISSUE

Einstein once said that if he had one hour to save the world, he would spend 55 minutes on defining the problem and only five minutes on finding the solution. When confronted with a problem or issue that requires a decision, business owners need to draw a line under exactly what the issue is. Defining the issue will

sharpen your ability to make a shrewd call on the problem, rather than letting extraneous factors influence your actions.

EMPLOY DOUBLE VISION

When making a decision, business owners need to keep both their immediate and future goals in mind, says Jon Hemming, director of Unity Management, a business planning and consultancy organisation. “The rule of thumb is to take a long-range perspective as well as a short-term perspective on the decisions you’re making. I call it double vision. So you have a long-term strategic intent – that might be to grow the company 30% year-on-year and employ another five people over the next three to five years, increase market share and create a certain value for the business. And, in the backdrop of that strategic long-term intent, you create a 90-day action plan, which is a short-term vision. "This is where you actually make better decisions around the operation for the business and the activity you need to do to achieve your long term goals.”

BUSINESS STRATEGY / DECISIONSHIP

“Use your intuition, which is super powerful, but then go and do some market research to substantiate that gut feeling” – JON HEMMING According to Hemming, without double vision it’s virtually impossible to end up with a business you want. “If you just look short-term and around the money you’re spending it can [create] very knee-jerk reactions to things that are happening. "You lose sight of the big picture as to why you’re in business and then you continually make bad decisions based on reacting to what’s happening around you instead of strategically thinking about where you want the business to be.”

COST/BENEFIT ANALYSIS

Another tool business owners might find useful when faced with a difficult decision is cost/ benefit analysis. This is a methodical way to determine whether a possible course of action will yield positive or negative results. “Business owners have a real challenge separating the true benefit of the dollar spend that they make. And in these times where cash flow is a premium, it’s really important to understand what result you’re going to get from every dollar spent,” Hemming says. The advantage of doing a simple cost/benefit analysis is that it allows a business owner to separate out the intrinsic benefits of every dollar spent. "So you can prioritise your spend against getting the right outcomes for your business,” he adds.

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But Hemming also advises business owners consider the benefit and costs of an action that isn’t taken. For instance, if a broker spends $1,000 on office equipment, they are effectively not spending $1,000 on marketing. An analysis needs to determine how this affects your business in the long run.

AVOID INDECISION

One of the biggest mistakes business owners make is failing to take any course of action. According to Theodore Roosevelt, in any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing is nothing. Hemming suggests that the window of opportunity closes when you take too long to make a decision. “If business owners continually procrastinate, the options available to them are often reduced. I’m not saying make a decision for the hell of it, but move forward. Businesses that just sit passively and don’t make decisions often [find] their choices disappear.”

GUT INSTINCT

Richard Branson is the poster boy for following your gut instincts. According to the rebel entrepreneur, “A business should be involving, it should be interesting, and it should exercise your gut instincts.” That niggly feeling, your spidey senses, that tingle in your mind – gut instinct is that hard to place sense that something is right or wrong. But where does “gut instinct” come from? According to psychologists, gut instinct comes from experience. When faced with a situation, your brain takes a series of mental shortcuts by rapidly searching through your mental files to find an analogy that best matches the current situation. For instance, an employee tells you they’re doing fine, but you know they’re not. It could have been a fleeting look on their face or something about their voice that matches with a previous experience in your memory bank that had a similar pattern. Whether you’re aware of it or not, you draw on that experience to make a conclusion about the situation in front of you.

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BUSINESS STRATEGY / DECISIONSHIP

Worst business decisions in history 1858: Edwin Drake builds first oil drill, but fails to patent design 1876: Western Union rejects telephone patent 1908-1925: Ford refuses to improve Model T 1962: Decca Records turns down The Beatles 1979: Ross Perot underbids for Bill Gates’ Microsoft company 1981: M&Ms rejects Stephen Spielberg’s request to use product in E.T. 1984: ABC-TV turns down The Cosby Show 1985: New Coke 1999: Excite passes up opportunity to buy Google for $750,000

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FEATURE / CONSOLIDATION

RESEARCH

While Hemming acknowledges that gut feeling is critical, he also advises business owners to back it up with research. “You have to have a good gut feel. But, more importantly, you’ve got to support it with the facts. At the end of the day, you can make a better decision by having the right information on board. If you can’t measure it, you can’t manage it,” he says. “Use your intuition, which is super powerful, but then go and do some market research to substantiate that gut feeling. And when you’ve done your research, go out and nail your market.”

EXPERT ADVICE

When you’re stuck, why not use a lifeline? Getting advice from a friend, mentor, or professional consultant is a great way to crack a problem you can’t work out on your own. “It’s one of the most important things business owners can do. Having someone objective that’s outside the business is absolutely vital,” Hemming says.

CHECK THE SOLUTION

You won’t always make the right business decision. In 1962, Decca Records rejected The Beatles, saying “guitar groups are on the way out” and “The Beatles have no future in show business”, which just goes to show that even big businesses get it wrong sometimes. “A lot of SMEs are often dealing with missing and incomplete information. They don’t always have the systems and support and information, the quantitative information, like some of the bigger companies do,” Hemming says. “So the name of the game is to make the best informed decision you can, but then have the ability to review it and check in that it is the right decision.” Decca Records may have lost out on The Beatles, but soon after realised their mistake and signed The Rolling Stones. “If you’re continually not making the right decision, you either need some more information or you need different people around you, supporting you in the decision making process or looking at it in a different way,” Hemming says.

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BUSINESS STRATEGY / DOCUMENTATION

GOOD REASONS

TO DOCUMENT YOUR WORK It’s easy to get caught up in the daily grind and forget about efficiency, but Cindy Tonkin shares how documenting your tasks can help you work smarter

ou know that you could do some things better, but it’s often hard to know where to start, and to work out what will give you the best bang for your buck. Documenting will help to answer both those questions and more. Here are seven reasons why you should document what you do.

YOU DO MORE THAN YOU THINK

Alex regularly got to the end of the day feeling like he’d achieved nothing. It seemed he lurched from one urgent important task to the next. He wrote down everything he did for just one day. He felt better when

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he saw that he had actually achieved something. That was before he even changed anything. List your tasks and feel better too.

DUMP IT

Alex showed his list to Kym at reception. She showed him her handwritten list of client contacts, which duplicated the spreadsheet he kept. And that triplicated the main client database which Kym also maintained. They dumped both extra tasks and each saved 20 minutes a day. List what you do, and work out what you can dump.

DELEGATE IT

After documenting for two weeks, Alex realised that almost half of his time was spent doing things an administrator could do for him. He delegated some of it to the receptionist, and out-tasked some more. When you have two weeks worth of data, you can begin to see the patterns of what you can delegate.

drinks, it became a teambuilding activity and a training exercise. Afterwards, people said they wished they’d taped it in order to show new staff. Everyone had buy-in to the new lead generation process because now it wasn’t just Alex’s anymore. You could document a process with your team, and teach them how they can help you (or replace you!).

IMPROVE IT

Now he had time to focus. It became clear to Alex that what mattered was lead generating and client follow-up. First he chose to delegate parts of his client follow-up. He sat down with post-it notes and documented the client follow-up process with Kym. Between them, they not only documented what Alex did, but they also added some steps designed to wow their clients. When you take the time to document a process, you can see more clearly where it can improve.

TEACH IT

Alex then mapped his lead generating process with the whole team. He did it live, with post-it notes and coloured markers onto a large piece of cardboard. He not only told them what he did, step by step, but he also explained why he did it like that. The team added their own ideas. With chips and some soft

RELEASE IT

Alex let the team do things the way they had documented for a week or so. He says it was a little like when he taught his daughter to ride a bike: he needed to take his hands off and risk her falling. This part of the process was tough on him but it had an excellent payoff. He began to take days off here and there for conferences and events. Even a long weekend here and there. When you document and delegate, you can begin to release yourself from the responsibility of some things.

TAKE A HOLIDAY

When he knew that the team could look after his clients whenever he needed them to, Alex took a nice relaxing holiday for four weeks in a row. He received no calls or emails from the office during that time. Alex chose to take his holiday in Thailand. Where will you go?

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FEATURE / NON-CONFORMING

THE DOC IS IN For banged up borrowers who need time to heal, non-conforming lenders may be just what the doctor ordered

he GFC left a lot of borrowers in bad shape. Retrenchment meant that many who could easily service their debts before now found themselves facing mounting arrears. Struggling small business owners had to fight to keep their heads above water. And worst, many borrowers who desperately needed a lifeline found credit markets closing their doors. But non-conforming loans may offer some of these hard-luck borrowers a light at the end of the tunnel. Iden director Barrie Gaubert describes non-conforming products as first aid for banged up borrowers. “You can think of non-conforming as being in the hospital for one to two years for recovery. The borrower has had some problems and they need help over the short term to get back on the straight and narrow,” he says.

STILL KICKING Non-conforming lending tends to be lumped in with low-docs. But Pepper COO David Holmes says there is a distinction. While low-docs may fit within the non-conforming basket, not all non-conforming loans are, by definition, low-docs. “In its broadest definition, non-conforming lending includes any loan that does not meet the requirements for lenders mortgage insurance (LMI). Loans do not qualify for LMI for many reasons such as credit history, employment history and credit scoring and these loans can be either full-documentation loans or alternative income loans. It is not the method of evidencing income that defines a loan as non-conforming; it is the fact that one or more of these characteristics makes it ineligible for LMI,” Holmes says. And while many non-conforming lenders exited the market following the GFC, Allstate’s general manager Tony Shield says that those who remain have strong sources of funding and are eager for business. “The funders have got a clearer vision of the risks and

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FEATURE / NON-CONFORMING

benefits of non-conforming lending and have a better understanding of the whole cycle. While the funding levels we saw pre-GFC may not return, the market has a more mature view of what it will and won’t fund. Funding will always be available for good nonconforming lenders with clear policies and procedures.” Resimac and Pepper, the two main lenders in the non-conforming market, provide funding to a variety of mortgage managers. The two weathered the GFC, and both emerged as strong sources of funding. Both have undertaken RMBS transactions, with excellent uptake from investors. Resimac COO Allan Savins says, although funds have become more expensive, wellpositioned, non-conforming lenders have still managed to remain competitive. “One of the challenges facing all lenders in the current climate is the increased cost of funding. There has been significant volatility in funding costs which we as a wholesale lender have had to manage, and have

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done so successfully due to our solid relationship with investors and warehouse providers,” he says. Holmes agrees, and argues that the non-conforming market is still healthy. With many lenders exiting the scene, and traditional banks tightening their credit policies, Holmes says the remaining non-conforming lenders have moved in to fill strong borrower demand. “Credit guidelines within the banks are certainly not loosening which provides a large potential pool of high quality borrowers for the specialist lenders such as Pepper,” Holmes says. “With the likes of Bankwest and ING no longer offering alternative income loans, it confirms the point that it is specialist lenders that have the experience and knowledge to service these borrowers. “These loans are not the commoditised loans that banks usually desire; rather, they are specialised labour-intensive loans that only specialist lenders can accommodate,” he says.

BROKER BEWARE While funding may still be flowing and lenders may be active, many brokers have been spooked by the NCCP. By nature, non-conforming loans are a riskier venture. They cater to borrowers without squeaky-clean credit, and the spectre of unsuitability can tend to hang over brokers in such situations. Glen Gillespie of Better Mortgage Management concedes that brokers may be nervous about dealing with non-conforming clients. Some, he says, also found themselves and their customers burnt by some of the “excessive” exit fees charged by specialist lenders prior to the government’s ban. But Gillespie says brokers are working through the “hangover” caused by the onset of NCCP, and many are losing their fear of the nonconforming market.

“If a broker is just a rate seller, they’re going to be hesitant to sell the products, because they’re not the sharpest rates” – BARRIE GAUBERT, IDEN

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FEATURE / NON-CONFORMING

This is just as well, Savins claims, because responsible brokers have nothing to fear from non-conforming deals. “As long as brokers take the time to make reasonable enquiries as to the borrowers’ needs and financial position and acts with honesty and integrity, then there is no reason for brokers to be concerned about offering specialist loans,” he says. And as brokers come to terms with NCCP, Shield says it is important to realise that nothing in the regulations precludes non-conforming products. In fact, he says they may be the most appropriate course of action for many borrowers. “At the end of the day, NCCP is about ensuring that the loan is not unsuitable. It doesn’t legislate or prescribe interest rates or the types of borrowers that can access non-conforming loans. In light of that, borrowers’ circumstances might require a nonconforming product. As long as it meets their needs and is not unsuitable, NCCP should have no further implications,” Shield says. The ability to meet client need is the crux of these products, Gaubert contends. Many borrowers who fall into the non-conforming profile need to secure finance in order to begin alleviating their fiscal woes, and non-conforming products may indeed be the only option in their particular situation. “If a broker is just a rate seller, they’re going to be

hesitant to sell the products, because they’re not the sharpest rates. But it’s about giving the customer a solution rather than letting them wither on the vine. The broker becomes a doctor and finds a solution,” Gaubert argues.

EXTRA ATTENTION But brokers who do venture into non-conforming deals must be certain to do their own due diligence. Gillespie says it’s all about asking the right questions. “With non-conforming borrowers, you have to ask a lot more questions. A lot more of the onus is on brokers with this type of lending to make sure they tick all the boxes,” he says. National Finance Club national BDM for SMSF and custom lending Phil Foweraker says he tries to apply an approach which identifies how a borrower ended up in a non-conforming situation, and whether a non-conforming loan will help them out of the situation. “I like to give this the NFC approach,” Foweraker says. “ ‘N’ is ‘now’ [as in] where are the clients now? ‘F’ is ‘from’ [as in] where are the clients coming from? What happened in the past? ‘C’ is ‘commercial or common sense’ [as in] does this deal make common and commercial sense, and will it give a benefit to the client?” he says.

Non-con do’s and don’ts DO:

DON’T: ” Look really closely at bank statements and income documents, and just keep asking questions. Attention to detail is everything” – Tony Shield, Allstate Home Loans

”Make sure the loan is of benefit and is a solution for the customer” – Barrie Gaubert, Iden

” Get the full story behind why the borrower is currently in a nonconforming situation” – Glen Gillespie, Better Mortgage Management

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”Don’t submit the deal if you are unsure” – Phil Foweraker, Club Financial

”Don’t assume all borrowers are the same” – Allan Savins, Resimac

” Never compromise credit for new business volumes. Strong, sensible credit guidelines must be paramount and should not be broken down in a race for volume” – David Holmes, Pepper

“These loans are not the commoditised loans that banks usually desire” – DAVID HOLMES, PEPPER Benefit to the client is, after all, the end goal. Understanding where a client has come from and how they ended up in their current situation can help brokers determine if a non-conforming product can deliver this benefit.

BACK ON TRACK The ultimate test of whether a non-conforming product can deliver borrower benefit is whether it can help a client get themselves out of nonconforming territory. Shield says it is important for brokers to remember that, although non-conforming loans carry a higher price to reflect their higher risk, they eventually help

borrowers qualify for traditional finance. “It’s important to remember that while non-conforming loans are written over 30 years, they don’t run over 30 years,” he says. And it’s the trek out of non-conforming territory that the broker is helping the borrower with. Foweraker says leading borrowers through this rocky period can help brokers forge lifetime relationships with their clients. “The best thing about brokers using non-conforming lenders is that they will have a client for life. How? If a client with an adverse credit background comes to a broker and the broker was able to assist to a nonconforming lender, the broker can keep in touch with the client, and once the background is clear, the broker will be able to place and refinance the client back into the mainstream.” Gaubert agrees, and says non-conforming products are meant to be a short-term solution. As long as they provide a “light at the end of the tunnel”, he says these loans are delivering a valuable service to borrowers. “During the GFC, plenty of people had lifechanging events, particularly small businesses. They’re the engine room of the economy, and they’re the ones who are going to need non-conforming loans to get them going again so they can get on with business.”

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FEATURE / NON-CONFORMING

PRODUCT RESIMAC (Hemisphere) Phone: 1300 764 447 Web: resimac.com.au COMPANY

PRODUCT INITIAL NAME RATE

MAX STARTUP LVR FEE *

MAX LOAN AMOUNT

LOAN FEATURES

REQUIREMENTS

Hemisphere Financial Solutions

Full Doc

From 7.81%

90% $949

$1,500,000

• Unlimited cash out to 80% LVR • Rate step down •R efinance and debt consolidation • Offset, debit card, BPAY

• Full documentation • Clear and credit impaired • Any worthwhile purpose including business use

Hemisphere Financial Solutions

Alt Doc Plus

From 8.49%

90% $949

• Unlimited cash out to 80% LVR • Rate step down $1,500,000 •R efinance and debt consolidation • Offset, debit card, BPAY

• Clear and credit impaired • Self-employed, 6 months ABN • 3 months business bank statements • Accountant letter or 6 months BAS • Any worthwhile purpose including business use

Hemisphere Financial Solutions

Alt Doc Premium

From 7.89%

85% $949

• Unlimited cash out to 80% LVR $1,350,000 • R efinance and debt consolidation • Offset, debit card, BPAY

• Self-employed, 12 mths ABN • Clear credit • Accountant letter or 6 months BAS • Any worthwhile purpose including business use

Pepper Home Loans Phone: 1800 737 737 Email: enquiries@pepper.com.au Web: pepperonline.com.au PRODUCT NAME

INITIAL RATE

MAX LVR

NEW Pepper Flexi Advantage PLUS

From 8.54%

80%

STARTUP FEE

$995 (includes 1 standard valuation)

MAX LOAN AMOUNT

LOAN FEATURES

INCOME DOCUMENTATION

$1,000,000 (up to 70% LVR)”

• No LMI required • Unlimited debt consolidation • Unlimited number of defaults, judgements or writs registered >12 months prior to application accepted (paid or unpaid) • Up to 2 defaults registered <12 months prior to application accepted (paid or unpaid) • 2 months current mortgage arrears accepted

PAYG - last 2 payslips plus a letter of employment or latest group certificate Self-employed - last 2 years tax returns and last two years tax assessment notices

$1,000,000 (up to 70% LVR)

• No LMI required • Simplified paperwork. No BAS statements required • Unlimited number of defaults, judgments or writs registered >24 months prior to application accepted (paid or unpaid) • Up to 2 defaults registered >12 months prior to application accepted (paid or unpaid) • 2 months current mortgage arrears accepted

ABN registered for 12 months GST registered for 6 months Declaration of financial position Minimum of 6 months business bank statements

$1,000,000 (up to 80% LVR)

• No LMI required • Unlimited defaults, judgments or writs when registered >36 months prior to application (paid or unpaid) • Defaults under $500 ignored •Unlimited cash out for acceptable purposes including business use and payout of ATO debts

ABN registered for 24 months GST registered for 12 months Declaration of financial position Minimum of 6 months business bank statements Last quarter’s BAS statement

NEW Pepper SelfEmployed Advantage PLUS

NEW Pepper Easy

From 8.79%

From 7.99%

75%

80%

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$995 (includes 1 standard valuation)

SHOWCASE Club Financial Services Phone: 1300 557 600 Web: clubfs.com.au PRODUCT NAME

INITIAL RATE

MAX LVR

STARTUP FEE

MAX LOAN AMOUNT

Full Doc

from 8.21%

90%

POA

Alt Doc

from 8.29%

85%

POA

LOAN FEATURES

REQUIREMENTS

1.5m

• Redraw • Offset • Split Loan • Salary credits

• All defaults and judgments under $1,000 are disregarded • All defaults and judgments paid more than 12 months or “unpaid” if listed more than 2 years ago at time of application are disregarded

1.5m

• Redraw • Offset • Split loan • Salary credits

• Stat Dec and Accountants letter, ABN to be registered for a min of 6 months • All defaults and judgments under $1,000 are disregarded • All defaults and judgments paid more than 12 months or “unpaid” if listed more than 2 years ago at time of application are disregarded

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Allstate Home Loans Phone: 1800 101 368 Web: allstatehomeloans.com.au PRODUCT NAME

INITIAL RATE

MAX LVR

STARTUP FEE

MAX LOAN CREDIT IMPAIRED AMT

Full Doc Specialist

8.22%

90%

$949

LoDoc Specialist

8.30%

85%

$949

LoDoc PLUS Specialist

8.90%

90%

$949

Full Doc Clear

7.99%

95%

0.50%

Express Lite Doc

8.95%

80%

Express Commercial

9.40%

70%

LOAN FEATURES

REQUIREMENTS

$1,500,000 Redraw; offset; split loan facility; inward direct debits/credits; $1,350,000 internal portion transfer; inward deposit book payments; BPAY; $1,500,000 outward third party direct debit

PAYG or S/E

$1,500,000 Unlimited cash out

PAYG or S/E

1.25%

$1,500,000 Unlimited cash out

One year ABN + accountant’s letter only

1.25%

$1,500,000 Unlimited cash out

LoDoc construction (no presales) up to 6 units – Cat A locations

Two-year ABN + accountant’s letter 6 mth ABN + accountant’s letter + 3mth statements

Victoria Mortgage Group Phone: 03 8600 7900 Email: info@vicgroup.com.au Web: vicgroup.com.au PRODUCT NAME

INITIAL RATE

MAX LVR

STARTUP FEES

MAX LOAN AMOUNT

LOAN FEATURES

SMSF REQUIREMENTS

Five Star Flexi

6.40%

80%

$750 plus legals and valuation

$2m

A specialist refinance product

Arrears and minor defaults are acceptable

Better Mortgage Management Phone: 1300 662 661 Web: bettermm.com.au PRODUCT NAME

INITIAL RATE

MAX LVR

Lo Doc Premium Specialist

From 7.91%

85%

$1,574 (additional risk fee applies depending on LVR)

Premium Specialist Access

From 8.22%

90%

$1,574 (additional risk fee applies depending on LVR)

Flexi Access Lo Doc

From 8.29%

Flexi Access

From 8.29%

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STARTUP FEE

MAX LOAN AMOUNT

LOAN FEATURES

REQUIREMENTS

$1.25M

Unlimited cash out, 12 month ABN OK, payout ATO debt OK, funds for business purpose OK, 100% offset available, defaults up to $1000 ignored

Accountant verification of income

$1.25M

All defaults/judgments <$1000 ignored, all defaults judgment either paid more than 12 Last 2 payslips and months ago or listed more than 2 years ago group certificate ignored, 100% offset account

85%

$1,424 (additional risk applies depending on LVR)

$2.5M

Unlimited cash out, 12 month ABN OK, payout ATO debt OK, funds for business purpose OK, defaults up to $500 ignored,defaults listed >12 months ignored

Last 6 months trading statements for business to verify income

90%

$1,424 (additional risk applies depending on LVR)

$2.5M

Defaults up to $500 ignored, defaults >12 months ignored, up to 2 months mortgage arrears

Last 2 payslips and group certificate

Iden Group Phone: 1300 334 336 Web: iden.com.au PRODUCT NAME

Iden Assist

Iden Business Assist (low doc only)

RESIDENTIAL/ COMMERCIAL

Residential

INITIAL RATE

from 8.09%

8.09%

TERM

10–40 years

VARIABLE/ MAX FIXED LVR

Variable

MAX LOAN STARTUP FEE AMOUNT

90% (full doc) 85% (lo doc)

$1,490 (application fee) $295 Valuation fee $440 Legal fees $400 title insurance Risk fee of up to 2% of loan amount applies

up to 80%

$1,490 (application fee) $295 Valuation fee $440 Legal fees $400 title insurance Risk fee of up to 2% of loan amount applies

LOAN FEATURES

REQUIREMENTS

$2,500,000

• Adverse credit (paid or unpaid) can be considered • Unlimited debt consolidation • Available for refinance, including non-conforming, private and solicitor loans • 2 months’ current mortgage arrears can be considered • Available for the purchase or refinance of residential property • Working capital for business purposes, ATO debt and debt consolidation • Unlimited cash out

• Full-doc (PAYG) last 2 payslips plus either a letter of employment or latest payment summary (Self-employed) Last 2 years tax returns with Tax Assessment notices • Low-doc - ABN registered for 12 months, GST registered for 6 months, declaration of financial position, Minimum 6 months business bank statements

$1,000,000

• Unlimited debt consolidation • Available for refinance, including, non-conforming, private and solicitor loans • 2 months’ current mortgage arrears can be considered • Available for the purchase or refinance of residential property • Working capital for business purposes, ATO debt and debt consolidation • Unlimited cash out

Low-doc - ABN registered for 24 months, GST registered for 12 months, declaration of financial position, Minimum 6 months business bank statements

Finalists n 5 October this year, Sydney’s Town Hall gathers the industry’s finest for the most recognised accolade for mortgage and finance professionals in Australia. The 11th annual Australian Mortgage Awards have seen record nominations as brokers, lenders and aggregators have hurried to recognise their best and brightest for the industry’s night of nights, a gala function hosted by Australian television icon Ian ‘Dicko’ Dickson. As the awards draw closer, MPA is delighted

to reveal this year’s list of finalists. Each category represents businesses and individuals at the top of their game, recognised by their peers for their outstanding achievements over the past year. MPA and its publisher, Key Media, would like to extend our thanks to our sponsors, as well as to all those who took the time to vote. We congratulate our finalists, and look forward to seeing you all at Sydney’s Town Hall on 5 October.

AUSTRALIAN MORTGAGE AWARDS 2012 / FINALISTS Official event partner

A WORD FROM OUR PARTNERS Westpac is both delighted and proud to be returning as the official event partner of the 2012 Australian Mortgage Awards. This is an exciting major event that recognises and celebrates the outstanding achievements of individuals and businesses in the Australian mortgage industry each year. In a competitive and challenging environment, we all need to drive a customer-focused agenda that raises the bar on the value we deliver to our customers; the successes we will celebrate at the AMAs demonstrate this approach – continued strength, innovation, professionalism, passion and courage within the mortgage industry. The year 2017 will mark both Westpac’s 200th anniversary and entry into our ‘Third Century’ as the first Australian bank and the first Australian company to reach this milestone. Like many of you, we understand what it takes to be a leader in the industry and we are uniquely positioned to help customers achieve their financial goals through good times and bad. Over the past 12 months, it has been particularly important for us to build greater business partnerships locally with our aggregator partners and professional brokers, to ensure we continue to offer quality services and provide a great experience for customers. At Westpac, we recognise that business sustainability is about doing what’s right, and it’s the reason why we’re committed to supporting those that take responsibility for the future of their business right now. Together with our key partners and broker advocates, the focus is firmly on the future and delighting the customers we put at the centre of everything we do. On behalf of the Westpac team, I congratulate all the award finalists nominated in the 2012 Australian Mortgage Awards. Tony MacRae, General Manager, Westpac Mortgage Broker Distribution