Churn not driven by brokers, says CEO
Mortgage Ezy has continued its pursuit of stamping out clawback of brokers’ commissions, announcing that no clawback applies to the majority of loans within its product range.
Having reviewed the factors creating churn, the non-bank lender and mortgage manager said that it was confident that broker activity was not a key driver.
As rising interest rates have spurred an increase in refinancing activity, clawback has become an area of contention for mortgage brokers, particularly as cashback offers have increased.
Mortgage Ezy CEO Peter James (pictured above) said that following the announcement that it would remove clawbacks on its Ezy Program in April, the company had decided to remove clawbacks more widely.
“The company has taken a bold step by abolishing clawbacks on the majority of its offerings, liberating brokers from the risk of working without compensation,” James said.
Brokers now have access to “28 no clawback solutions” from Mortgage Ezy, designed to meet a diverse range of client needs, he said.
“From prime loans to alt doc and lo doc, SMSF loans, expat and non-resident loans, Mortgage Ezy ensures that brokers have the flexibility and options to serve their clients effectively without the risks of getting clawed back,” James said.
Commenting on Mortgage Ezy’s decision to progress further with removing clawbacks, James said that reviews conducted by Mortgage Ezy showed that brokers were not responsible for churning business.
Rather, the primary causes of churn are banks’ cashback offers and other promotions targeting refinancers, he said.
The findings gave Mortgage Ezy confidence to proceed with removing clawbacks, which James described as a “massive penalty to brokers”.
“We then contacted our other funding partners, and we were pleased to achieve [this] for four out of our five funding lines, which followed suit to enable us to remove clawbacks from the vast majority of our loans we offer,” James said.
Brokers’ feedback on Mortgage Ezy’s stance on clawbacks has been “overwhelmingly positive”, James said. Among their comments were that it was “about time” clawbacks were removed, and that Mortgage Ezy’s early stance on clawbacks had inspired banks to follow suit. Commonwealth Bank announced it would remove its cashback offer from June 1, a decision since followed by other major banks NAB and Westpac.
Trust model proves successful
James said in April that the only condition to the no clawback rule on its Ezy Program was where brokers were found to be actively churning business and proven not to be acting in their clients’ best interests.
He told MPA that Mortgage Ezy’s approach to clawbacks had been successful.
“From our experience, 99% of brokers are extremely professional and honest and if anything, this initiative has caused the trust between us to only grow more,” James said.
Decision Engine Box (DEB) facilitates fast online approvals
Mortgage Ezy has an AI-powered Decision Engine Box (DEB) which streamlines the loan approval process, enabling brokers to deliver instant online approvals to their clients, James said.
DEB can provide instant approvals for all loans in the Ezy Program with up to 80% LVR and will be available across all Mortgage Ezy solutions by October, he said.
For other mortgage management programs, Mortgage Ezy will soon release instant conditional approvals online.
"With our groundbreaking no clawback policy, competitive rates, and the game-changing Decision Engine Box known as (DEB), Mortgage Ezy is fully devoted to empowering brokers and equipping them with the tools needed to thrive in the industry,” James said.
Non-bank lender Pepper Money removed clawbacks on commercial lending products effective February 1, and Commonwealth Bank has announced a change to clawback rules effective October 1.
What do you think of Mortgage Ezy’s stance on clawbacks and should they be abolished industry-wide? Share your thoughts in the comments section below.