Banks move to protect borrowers
Sunday 14 March 2004
Mortgage brokers are under scrutiny to ensure they don't abuse their positions by unethically ramping up their income as the housing market boom eases.
By The LandlordThe Mortgage Brokers Association (MBA) has asked banks to use their backroom systems to identify brokers "churning" - moving clients between banks to ramp up commissions.
The association is also seeking legal clarification on whether mortgage brokers sourcing loans for borrowers from a variety of lenders can properly be described as "free".
Already the association has backed away from using the word "independent" because brokers receive commissions from lenders for securing them business, and now uses words such as "unbiased" or "impartial".
MBA chairman Brian Berry said: "We are also a business that does not charge clients, and that makes the service `free' in one sense."
But paying broker commissions was a cost to lenders, and ultimately passed on to consumers.
How mortgage brokers are paid also lies behind fears that as the housing market slows, they may resort to churning to maintain the healthy levels of commission-based income they have become used to in boom times.
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