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Board drops brokers’ bond

MORTGAGE originators have had their compulsory bond reduced by 90 per cent to just $5,000 by the Finance Brokers Supervisory Board.

To qualify for the bond, mortgage originators will be required to take out professional indemnity insurance to a minimum value of $1 million.

The board chose to reduce the bond for mortgage originators because their area of operation fell between the regulations of the Finance Brokers Control Act of 1975.

Under the Act, mortgage originators were forced to lodge a $50,000 bond with the WA Government and undergo training.

That Act was designed to control finance brokers who raised private money to fund mortgage investments, and financial institutions such as banks and building societies that loaned money to the public.

Mortgage originators act as brokers for many different financial institutions, often on a commission basis.

A Department of Consumer and Employment Protection officer said the board had decided to reduce the bond because mortgage originators did not handle any monies.

Finance brokers and financial institutions will still be required to lodge the $50,000 bond and meet the training requirements. This will give them an unrestricted business certificate.

Mortgage originators opting for the $5,000 bond option will be given a restricted business certificate.

This will only allow them to offer products from lenders recognised by the credit code, such as banks and building societies.

The change in bond does not require a change to the Act. It only says there has to be a bond set by the Finance Brokers Supervisory Board.

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