Forum Replies Created
Thanks Marty,
Perhaps the question of whether the ban is a good one or otherwise should be raised as a separate thread in the Opinion forum.
However the issue raised by dbomber in this thread seems to be that he thought that break costs were exit fees, which of course they are. He also inferred that he thought exit fees were banned outright as the Government claimed they were when in fact they aren't.
Although dbomber seems to have disappeared (perhaps disheartened by the earlier posts), there is a basic legal argument that he is entitled to recover some or all of his break costs from the Government to the extent he has relied on its claim that Exit Fees were banned outright. There was also an earlier promise from the Government that ASIC will go after lenders that simply seek to rebadge exit fees, but of course their own legislation would probably make this quite difficult to do.
I am already working with borrowers like dbomber, who want to break their fixed rate loans and am quite optimistic that we will get a result. Of course this also extends to discharge fees on all loans since the so called ban came into effect.
Cheers,
Michael Lee
Gidday Terry,
Sorry for your confusion. Your link goes to a third party website that is not the actual legislation. i.e.it's a repost for the universities, hence the disclaimer it carries.
Regardless, I had posted the link to the actual legislation (SLI 2011 No. 40) back in the beginning which in itself confirms that break costs are Exit Fees.
Again as per my post a moment ago, the core issue of liability is that the Governments claimed abolition of Exit Fees wasn't really an abolition, which is why this is a battle with them and not the banks.
The Exit Fees complaint link that I posted explains this in more detail including evidence and arguments if you are still grappling with the issues. I think if you give it a read, it will make things clearer for you.
All the best and thanks for checking,
Michael
Thanks luke86 and you too Tracey B,
However this isn't a battle with the banks, it's with the Federal Government. It also isn't waged on the basis of people who understood what they were getting themselves into (although I understand that people like Solomon10 think that they should have known what they are getting themselves into and should foot the bill).
It is for people like dbomber who have relied on information from the government and advice from perhaps less scrupulous operators on how a Fixed Rate actually works. Just like everybody here, he is entitled to some independent, reliable input.
I also understand that most users in this forum have a passion for answers BEFORE they take the leap, but I also understand that doesn't apply to the whole fixed rate population and I was really only responding to dbomber.
There is the sideline distraction that some are running claiming Break Costs are not Exit Fees, they clearly are. It's simply a case that the Governments abolition of Exit Fees wasn't really an abolition, which is why this is a battle with them and not the banks.
The motto I subscribe to is "Man fool you once? Shame on him. Man fool you twice? Shame on you". It is the people who got fooled once by the Governments Exit Fee ban that this fight is worth having.
Cheers,
Michael
Gidday gibbo1,
Also note my post linked to the actual current legislation SLI 2011 No. 40 rather than the resource linked by Terryw which carries an all care, no responsibility disclaimer.
You can also view the complaint to the Commonwealth Ombudsman on Exit Fees here which I encourage you to do if you would like to research the issue and respond more thoughtfully.
Thanks,
Michael
Terryw
Nothing new in your post and it pays to look at the thread where way back in the beginning I posted:
Michael.Lee wrote:Sorry Richard, you seem to be confused. What I said was:Michael.Lee wrote:Break costs on a Fixed Rate are an Exit Fee as are Discharge Fees.My reference to others who incorrectly say otherwise which creates the confusion includes you:
Qlds007 wrote:As Jamie mentioned exit fee and fixed rate break fee are two totally different things.They are not totally different things as you have stated and it is this misinformation from banks and brokers like you which fuels the confusion.
In fact SLI 2011 No. 40 which is the bill to which you are referring specifically identifies both a discharge fee and a break fee for a fixed rate loan as Exit Fees for the purposes of exempting them from the ban.
The real issue is that the Government has claimed to have abolished Exit Fees outright, when its legislation still allows certain Exit Fees, including of course, Break Costs.
This in essence makes the Government claims that is has banned Exit Fees an outright a lie and arguably in some cases makes those Exit Fees recoverable.
Thanks Terry,
Yes it's an Exit Fee which if the loan was struck today, ought be illegal according to the Government advertising.
But the point to this topic is that it isn't illegal even today, even though it is clearly an Exit Fee and even though the Government claims that Exit Fees are banned on all new home loans.
If your friend got caught out this way by believing the Government (yeah, I know), then surely the Government shares at least some of the responsibility/cost, if not all.
Solomon10,
I understand your point of view and agree, but offer the following inputs to your thoughts.
Excepting solicitors, most people who read contracts don't understand them and have those bits they don't understand explained to them by people they trust i.e. their bank manager, their mortgage broker. If the banks and the brokers are wriggling around all over the place trying to convince you that a break cost is not an Exit Fee, then well, you know…
Another point is that the contract will not stipulate a fee per se, rather a clause with some type of explanation of a formula or formulaic principle. It is unlikely to be called a Break Cost or and Exit Fee. It probably should start with something like WARNING, but of course it doesn't.
And yet another point is that human nature means we tend to see only what we are looking for. Some borrowers are lead to believe that Exit Fees are banned outright and these people in believing this are more likely to not see the trap.
And so on.
The main point again remains that Break Costs are Exit Fees and the Government has declared Exit Fees abolished, when in fact they are not.
This appears to have caught out dbomber and that isn't quite fair.
Gidday Terry,
Not to get off point, you can read about me in SMH here.
No, I've never been a "refund broker" and No, I've never posted as "The Mortgage Detective" but Yes, my old username was mortgagedetective. However when I updated it to Michael.Lee my historical posts should have updated too.
Although I must admit I don't know what "coming off a fixed rate" means and while your opinion sides with certain banks and brokers who lead the way in confusing vulnerable borrowers, it is not supported by evidence.
Both ASIC and the Government define Break Costs as an Exit Fee. The deception and subsequent confusion lay around the Government's unqualified claim it had banned Exit Fees, when of course it had not.
I remain a tad surprised at how few brokers and are interested in supporting the borrower on this.
Thanks for the feedback Jamie, but there was more than one question and I think the others are more important.
dbomber wrote:Thanx James, so you agree with the bank? Isn't the brake charge an exit gfee?The answer to this question seems to be that you side with the Banks and the Government on this and that's fair enough, however I see things differently because I'm a squarely on the borrowers side.
I believe for example, that if a person is misled on entering an agreement then they ought be able to get out of that agreement on equitable terms i.e. those who did the misleading should foot the bill.
If dbomber didn't fully understand what he was getting into and he relied on information from the Government (as it appears), plus information from his bank or broker (which appears to be inadequate) then don't you think those professionals have a case to answer (the Government for sure).
As a broker who deals with this stuff day in and day out, you appear to have lost touch with how overwhelming mortgage selection is and the abundance of information that is dumped on prospective borrowers from marketing through to disclosure documents.
This leads most people to rely on basic information delivered by banks, brokers and now that it has become such a big player in all this, the Government.
The Government claims to have banned exit fees outright. Break costs are an Exit Fee. If you or anyone has any evidence that either of these things are wrong, post it. Otherwise we should be honest and stick with the facts.
If on top of those facts, dbomber entered into a fixed rate believing those facts, regardless of how naive others may think this to be, it's not right the he or anyone else finding themselves in his position should foot the bill. Those who knew better and claimed to be helping/protecting him but did not are the ones that should pay the price.
Gidday yourokcproperty,
I agree with your basic sentiment that disclosure is the issue, not the fee itself.
Nonetheless, this is why it is such an issue that the Government, Banks and certain Brokers are insisting that Exit Fees are abolished and that certain fees historically and commonly understood as Exit Fees are, since the ban, somehow no longer Exit Fees.
It obviously confuses the issue and lulls at least some borrowers into a false sense of security as the "outright ban" is not outright at all.
Sorry Keiko. I was answering your question. 85% no LMI is possible still subject to my earlier comments.
Cheers,
Michael
Sorry Richard, you seem to be confused. What I said was:
Michael.Lee wrote:Break costs on a Fixed Rate are an Exit Fee as are Discharge Fees.My reference to others who incorrectly say otherwise which creates the confusion includes you:
Qlds007 wrote:As Jamie mentioned exit fee and fixed rate break fee are two totally different things.They are not totally different things as you have stated and it is this misinformation from banks and brokers like you which fuels the confusion.
In fact SLI 2011 No. 40 which is the bill to which you are referring specifically identifies both a discharge fee and a break fee for a fixed rate loan as Exit Fees for the purposes of exempting them from the ban.
The real issue is that the Government has claimed to have abolished Exit Fees outright, when its legislation still allows certain Exit Fees, including of course, Break Costs.
This in essence makes the Government claims that is has banned Exit Fees an outright a lie and arguably in some cases makes those Exit Fees recoverable.
Your decision and others like you who have jumped on the bandwagon to support a Government lie further fuels that confusion. If anything, I would have thought an person truly acting in the interests of the borrower would be going up against the Government on this one instead of trying to re-write common language to cover up a lie at the borrowers expense.
Michael
Hi Dave,
You have every right to be confused. Besides you, Luke001 is the closest to the complete truth – i.e. that borrowers get caught out by the contradiction and misunderstanding.
The broker responses here demonstrate why this is such a problem. Although many now claim Break Costs on Fixed Rate loans are not Exit Fees, it is widely acknowledged that they are. Banks and brokers trot out a different line to keep themselves out of trouble when people like you start asking for a refund.
Break costs on a Fixed Rate are an Exit Fee as are Discharge Fees.
The issue here is that you and many other borrowers have been left in the dark – although it was promised that Exit Fees were banned outright, only one particular type has been. Everything else is smoke and mirrors.
I am aware of borrowers that have had their break fees on Fixed Rates waived or reduced., and if you have been duped, I think you should go after yours as well.
<moderator: delete language> Others trying to make a fool of you can only succeed if you let them.
Cheers,
Michael
Gidday Keiko,
Yes, however it will come down to the strength of your application which includes both the unchangeable material facts, which lenders are approached for the deal, your buying power and how your story is pitched.
I just posted a moment ago about truly independent mortgage brokers. It's worth kicking some tyres there and asking them what they think your chances are.
Kindest regards,
Michael
House Call,
Great you have found a solution.
If you ever need SMSF funding, one of the leaders that I've turned to for my articles (and most of the media has as well) is i-financial. Ugly website, but a good knowledge source at http://www.ifinancialgroup.com.au.
All the best,
Michael
Sorry Terry and Greg, I seem to have confused you.
A pro-consumer mortgage broker takes their fee from commissions and cashbacks 100% of the remainder. They are different to a Borrowers Agent.
A Borrowers Agent doesn't have arrangements and is able to look at more than just shopping a deal. However when they do, they look at lenders directly as well as what comes out of mortgage brokers offering cashback deals. i.e. the Borrowers Agent doesn't pay the commission, the cashback broker would.
You can learn more about the difference at http://www.proconsumer.com.au, or you can get the complete guide for consumers by buying my book, Mortgage Free Debt Free from my website, Big W, Dymocks etc. If you buy it from my site, send me an email and I will intercept it from warehouse and dedicate it for you.
Greg – we've spoken before as I approached you last year or the year before after your original post to see whether you were stepping away from commission based work. At the time you said no, however Victoria is still crying out for a local Borrowers Agent as per my shout out on ABC Melbourne. From memory, Vanilla have been operating their model for about two years.
Richard – Yes, I will answer your question, it's a great one and I fully understand your concern/curiosity over how you would set your model given your past of relying on lenders to set your revenue model for you. Don't worry, that's a common concern for those switching from pro-commission to pro-consumer. I'll get back to you once I have finished modelling some ideas for you.
Cheers all,
Michael
Gidday Gents,
Firstly, there is a real difference between a shovel and a spade, one is for digging, the other is for shovelling.
Similarly there is a real difference between a mortgage broker and a borrowers agent.
A traditional broker works for commission and has no agency/loyalty contract with anyone. Traditional brokers are a significantly more expensive option for the consumer.
The perception that mortgage brokers are professional salespeople is accurately driven by the basis of remuneration i.e. commission. That commission is paid by the lender and variances lender to lender, product to product, feature to feature is vast (i.e. $24,000+ even before you start talking about interest only, fixed rates, loan amounts etc).
This income pressure does not apply to a broker operating under a pro-consumer agreement as any commission surplus to their costs is passed back 100% the consumer. As their fees are unlikely to exceed even a few thousand dollars, the cashback to the consumer is very significant and there is no "in panel", anti consumer pressure. However these folks, for the most part, still only make money if they sell a loan.
A Borrowers Agent has an implicit agency agreement with the Borrower. Unlike a broker they do not have a commission paying panel and look not just across lenders, but broker offerings, including cashback deals as well. There is no conflict of interest at all whether you are talking about structuring, lender selection or any aspect of borrowing.
You should appreciate that the word Agent has significant legal implications and, once 160B is implemented, so are words such as impartial, unbiased and independent.
The key thing for borrowers to understand is that this legislation (160B) removes the commission driven mortgage brokers ability to lawfully use these terms and the wriggle room still used by many.
Despite changes in the law, Borrowers Agents will still be able to use the words impartial, unbiased and independent. Pro-consumer mortgage brokers will, perhaps with some limitation, be able to use these terms as well.
In addition to the pro-consumer, anti-commission ethic built into their revenue model, both of these options usually deliver mortgages from the the vast majority of popular lenders for significantly less than the lenders themselves as well as commission based mortgage brokers.
Unbiased, impartial and independent help with your mortgage for less.
Cheers,
Gidday Terry & Richard,
Yes.. there has been a username change to avoid confusion with the active mortgage broker called Mortgage Detective and simplify things. Nothing else of course has changed.
Thanks for raising the example of a doctor Terry, but you are probably better off looking at the real estate industry for a distinction.
A real estate agent works for the seller and operates on commission. This is most similar to how a mortgage broker operates, although fair to say, there is no agency agreement as a broker, its an introducer agreement which, in a legal sense, makes the broker neither an agent for the lender, nor an agent for the borrower. Simply a commission based sales professional.
A buyers agent is a real estate agent who has done their time as a real estate agent and swapped sides to work for the buyer. Same too for a Borrowers Agent. They work strictly fee for service and do not take commissions. If lenders offer a commission or similar, this money is paid back to the borrower.
I hope that helps you both and if you ever feel like working for the borrower instead of commission, you can have a poke around http://www.borrowersagent.com.au to find out more. Heavens knows we need more of them.
Cheers,
Michael
Good point Luke,
Tax advice, estate planning and asset protection are all critical considerations in any investment decision.
It's great to bandy about ideas however when the rubber hits the road, get individual advice and make sure that this advice is independent and from a suitably qualified professional offering a written opinion.
Mortgage brokers arrange loans and when it comes to actual loan/lender selection, it still pays to remember the serious anti-borrower bias that can weigh into the advice of traditional brokers.
Borrowers agents don't suffer this problem at all and pro-consumer mortgage brokers don't suffer bias within their lending panel. Both are licensed professionals for the purpose sorting out your mortgage.
All the best,
Michael
Gidday Phrix,
Sorry for joining this party late, however I was on deadline for an article.
St George are an interesting lender and I use one of their mortgage broker training flyers on my facebook page – the course is called "Customers will do as they are sold".
Although it's currently legal for any mortgage broker to claim independence there is legislation due through next year that will outlaw most from making that claim due to commission bias because commissions vary between around $1960 and $26,000 just among the big 4 banks.
If you really want to save some dollars the only way to side step clever selling is to continue to grow your knowledge and get advice from either a borrowers agent or a pro-consumer mortgage broker rather than old fashioned commission driven brokers.
You should also make sure your lender/broker/agent gives you quotes on your options for your Total Individual Cost, not Comparison Rate etc.
Take care,
Michael
