Lenders may be caught out by a technicality in the freshly drafted disclosure regime, requiring them to publish mortgage manager rates.
Analysis conducted by Gadens Lawyers of disclosure regulations released yesterday identified that the regulations will require lenders who fund mortgage managers to show on the lender's website the maximum rate at which a mortgage manager can lend.
Gadens Lawyers senior partner Jon Denovan said lenders who lend both direct to consumers as well as through mortgage managers could be impacted.
"I understand the reason for the requirement is to prevent unscrupulous mortgage managers from increasing the interest rate above a market rate, thereby disadvantaging borrowers and benefitting the manager. Some sections of our community are particularly vulnerable to such tactics," Denovan said.
However, Denovan said that funders may not want to show these rates on their website for many reasons, including not wishing to identify their managers and not wishing to confuse consumers by publishing two sets of rates.
"Arguably, the regulatory intent can be satisfied by the rate being displayed on the manager's web site,and the MFAA has asked for this change. It's anybody's guess whether the request will be agreed to," Denovan said.
The regulations will also require that a lender of record for mortgage management programs must include in their credit guide an explanation of the relationship between the lender and the mortgage manager. "This means that credit providers who run a mortgage management program will need two credit guides - one for direct business and one for mortgage management business," Denovan said.