1. Julie

    Do you think that mortgage brokers were adequately regulated by the Central Bank in the years leading up to the crash?

    • Karl Deeter

      I queried that myseslf back in 2009 with Governor Honohan and wrote a white paper about the issues of remuneration in particular and many other things, the report was acknowledged but ignored. In terms of how they were monitored, there weren’t many post-event examples of mortgage brokers being systemically risky or having engaged in activity (facilitating lending not being one) that endangered people or the wider financial sector.

      Footnote 27 on page 21 of the Nyberg Report states that: Mortgage intermediaries began to emerge as a force in the residential mortgage market in the mid-1990’s, initially as a distribution channel for non-branch based mortgage lenders. Due in part to alliances with estate agents they exercised significant control over the “first time buyer” market in particular. This market was viewed by lenders as an attractive market segment and key for customer acquisition and exit financing for development lending.
      At the
      peak of the market in 2005 mortgage intermediaries accounted for about 45% of new residential mortgage loans.
      Against this background, intermediaries were able to leverage their relationships with lenders pushing for better mortgage terms (and sometimes larger loans). This led to a considerable reduction in bank margins (interest and commission). Many banks sought to compensate by increasing loan volumes to maintain earnings. While these changes impacted on the mortgage market, mortgage intermediaries had only a limited and indirect impact on the banking problems which are the subject of this Report because, in the final analysis, intermediaries did not make the lending decisions.

      I hope that helps.

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