The New Zealand Mortgage Broker Sector
The mortgage broking sector in New Zealand was so far different animal then in 2010 when the government begin the process of regulating the sector. The new years preceding 2010, particularly in the latter half of the property boom that ended in 2008, the mortgage broking sector was a bit like the wild west. There was a property been going on, there were literally thousands of small time Mum and Dad investors wanting to get me a piece of the action in terms of rental properties and developments, and there was a large amount of money floating around ready to be loaned out to investors.
The mum and dad investors were in general naive and greedy, and many if not most of them we’re getting their information from property investment seminars and so called investment Gurus. These investment seminars and Gurus were fertile ground for Property Brokers with property to sell and for mortgage brokers with mortgages to lend. A lot of the amateur investors we’re getting involved in property development, and some of the banks were sensibly wary about this. Second and third tier lenders came to the party, obviously seeking higher interest rates than the banks would because the investments were riskier. There were a lot of mortgage brokers around this time who were heavily promoting these lenders and doing everything they could to persuade investors to invest. The world financial crash at the end of 2008 pretty much took care of all of that, and a lot of investors were bankrupted and worse, and a lot of mortgage brokers were left with very difficult questions to answer from the lenders that they had set up for huge financial losses.
The government regulations in 2012 pretty much put a stop to the whole process, by forcing mortgage brokers to become qualified including passing very difficult financial examinations, and forcing them to have a recognised complaints process and the organisation and to be part of a recognised dispute resolution process. The immediate effect of this was to confront or mortgage brokers with the possibility that they could be sued and worse by their clients and by their lenders if they were going to have been incompetent or corrupt in the way they carried out their business. Coupled with the difficulty of studying for and passing the new examinations, many mortgage brokers just simply decided it was too difficult and risky to stay in the business.
The end result is that in 2017 virtually all of the cowboy mortgage brokers have left the Industry, and the sector is now largely very competent and operating an unethical and customer focused manner.