It’s a common problem for mortgage brokers and their clients – waiting for lenders to discharge loans.
In the 2020 Home Loan Price Inquiry report, the ACCC recommended a time limit of 10 business days should be imposed on lenders to complete the discharge authority.
Mortgage broker Tara Gibbs (pictured), of NSW South Coast brokerage On Point Home Loans, said nine times out of 10 this timeframe wasn’t met and her business expected banks would take an average of 20 days to discharge a loan.
Gibbs said she and her team spent a lot of time coordinating discharge paperwork from banks on behalf of her clients.
“This is a huge time waster within our office,” Gibbs said. “Our settlement/admin officer is constantly liaising with both incoming and outgoing banks and sometimes their respective solicitors. It is not uncommon for her to spend half her working day on the phone or emailing banks confirming the settlement is on track between all parties when a discharge is involved.”
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Gibbs said it was imperative for the brokerage to stick to a standard 20-day discharge time frame.
“Some banks are faster and some can be slower. However, as a business we anticipate an average of 20 days for a bank to process a discharge,” she said. “We ensure that as soon as we get a conditional approval with a lender, we lodge that discharge to save us days from full approval to settlement. We find by us following up every few days this speeds the process. “
Gibbs said the issue of discharge delays was a sad reality and a real cost to her business.
“All of these wasted hours coordinating the incoming lender and the outgoing lender is so time consuming,” she said. “We even confirm all parties are on the same PEXA ID (you would be surprised how often they are not). As brokers, it is unfortunate that we cannot trust the system and believe everyone is working towards the same outcome.”
Gibbs said banks have now moved to insisting their clients call them directly to initiate a loan discharge, which could be a burden on the client due to lengthy phone hold times.
“We really try to keep the clients out of the transaction after they sign the discharge form and absorb any stress associated with stubborn banks not committing to a settlement date,” she said. “We will only get the client involved as an absolute last resort.”
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Gibbs said without naming names, some were worse than others when it came to banks delaying discharge settlements.
“By knowing who those are means we 100% record what we have been told, by who and by which bank, so when we can call back three days later and advise who we spoke to and what they said, we are in a stronger position to move a file,” she said.
“One of our biggest challenges we face is when banks advise the broker that they are ready to take the booking, however, will not accept the booking until 24 hours before settlement is due. This becomes very problematic when a purchase and refinance occurs on the same transaction and causes all parties unnecessary stress.”
Gibbs’ advice to brokers facing this issue was to implement strict in-house processes.
“It is important to ensure your client nominates you as their broker to authorise you on the discharge form,” she noted.
“Constantly following up with all parties is also very important. Ensure access to all solicitors’ portals is granted, so as brokers we can constantly monitor where the file is at. Until we get that glorious ‘settlement is booked’ confirmation, we do not rest.”
