A furor has erupted over mortgage broker ‘clawback’ fees.

A consumer advocate report lists growing dissatisfaction with the practice; citing them as being perceived as de-facto early exit fees.

Clawback fees are attempts to recover commissions when a loan has been refinanced.

The outrage at clawback fees hit the headlines today after Matthew and Stephanie Lee decided to fight a fee imposed by their former broker Home Loan Experts. The couple allege they sought a construction loan from St George last year. However, they were advised by Home Loan Experts to take out a regular home loan for $940,000 and to refinance later.

St George informed the couple that they wouldn’t be able to provide the extra money for the construction loan. In turn the couple decided to refinance their $940,000 home loan with ANZ.

Home Loan Experts would have been paid a fee by St George over the life of the loan. However, with the refinancing that commission evaporated. Home Loan Experts sent the couple a $3,378 clawback fee for the amount they would have earned had the loan remained with St George.

Matthew and Stephanie Lee believe this is unfair. The government, they say, has gone to great lengths to remove early exit fees. This has been done to encourage greater competition among lenders. A clawback fee simply acts as an early exit fee and reduces competition.

Home Loan Experts’ operation manager, Andrea Morgan, said the contract “clearly stipulated the fee and the circumstances under which it was payable.

“While we don’t agree with the customer’s behavior and decision to publicize this matter, it won’t change our company’s position. This customer is going to extreme lengths just to get out of having to pay a fee.”

Phil Naylor. Photo: www.news.com.au

Phil Naylor. Photo: www.news.com.au

It’s a difficult problem. As Phil Naylor, chief executive of the Mortgage and Finance Association of Australia, said: “Taking it from the brokers’ point of view, they’re being punished for something that is no fault of theirs. They’ve negotiated a loan for their customers in good faith and then the borrower refinances within a short period of time. Brokers would prefer not to have to clawback, but if the loan wasn’t refinanced, the lender wouldn’t clawback from the broker, and the broker wouldn’t clawback from the customer. It’s a circular argument I know, but that’s how it works.”

In the end it seems the existence of clawback fees is yet another reason not to use mortgage brokers. As Gerard Brody told new.com.au, “If you get your home loan directly with the bank they can’t charge you these fees.”

About The Author

Someone you can depend on to respect you and care for your dog. Let me help you give your dog the life it deserves.

Leave a Reply

Your email address will not be published.