Mortgage Express severs ties with several Chinese brokers, calls in FMA

Property

Big reduction in Chinese speaking brokers at Mortgage Express as the Financial Markets Authority called in over conduct and compliance concerns

11th Apr 17, 1:21pm by Greg Ninness

By Greg Ninness

Mortgage Express has severed ties with many of its local Chinese mortgage brokers and called in the Financial Markets Authority (FMA) over concerns about their conduct and compliance issues.

Mortgage Express is the mortgage broking arm of Harcourts, the country's largest real estate agency. Late last year Mortgage Express became concerned about compliance issues surrounding mortgage applications made through several of its brokers associated with a company called Brilliant Finance Ltd.

Brilliant Finance was formed in July 2015 and operated as a mortgage brokerage on Auckland's North Shore, catering to the Chinese community.

Industry sources say the company has been extremely successful and was likely to have arranged hundreds of millions of dollars of mortgages for its clients last year.

Brilliant Finance was so successful that ANZ named it the bank's Mortgage Adviser Emerging Business of the Year for 2016, and Brilliant Finance signed up to join the Mortgage Express network, with its brokers operating under the Mortgage Express banner.

However the relationship did not last long.

Just before Christmas Mortgage Express chief executive Sarah Johnstone called in the FMA over concerns around compliance issues with some mortgage applications submitted by some of Brilliant Finance's brokers.

Both the FMA and Mortgage Express are giving away very little detail of what was involved.

"Brilliant Finance was brought to our attention by Mortgage Express at the end of December 2016," an FMA spokesman said in a statement when contacted by interest.co.nz.

"Mortgage Express raised concerns about potential conduct issues with Brilliant Finance and we have been engaging with Mortgage Express about compliance matters arising from this," the FMA spokesman added.

"The matter is now in the hands of the FMA," Mortgage Express said when it was contacted for comment.

ANZ was also reluctant to comment when asked about the company it lauded as the "Mortgage Adviser Emerging Business of the Year for 2016," saying, "We don't comment on our arrangements with contractors," when asked about it's relationship with Brilliant Finance.

However industry sources have suggested one of the likely areas of concern for Mortgage Express and the FMA could be around the standard of documentation provided by mortgage applicants that were reliant on overseas income to meet their mortgage commitments.

This became a major problem for many property buyers last year, especially those from China, after Australian regulators clamped down on mortgage lending where the borrower's main income was from overseas. There was also a clamp down by authorities in China on the amount of money people could take out of that country.

That led to the big four Australian-owned banks operating in this country - ANZ, ASB, BNZ and Westpac - severely restricting mortgage lending to borrowers that were heavily reliant on overseas income, something that has been a significant contributor to the relatively low number of residential property sales that occurred in the Auckland market this summer.

Since the FMA became involved there has been a dramatic reduction in the number of Chinese speaking mortgage advisers at Mortgage Express.

A month ago the company's website said it had 23 Chinese speaking mortgage advisers but that has since been reduced to 11 and Mortgage Express has expunged all references to Brilliant Finance from its website.

Brilliant Finance did not return calls.

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50 Comments

by CJ099 | 11th Apr 17, 1:36pm 1491874619

Yeah I wonder how may other money laundering organizations are out there servicing NZ Real Estate Agents?

by two otherguys | 11th Apr 17, 2:02pm 1491876122

Wonder away - you'll never know - it's being buried and covered over right now

by 2 Tooth Bora | 11th Apr 17, 4:18pm 1491884333

THE FACT IS MANY and increasing daily going by the number of Asian owned Auckland rentals rented back to Kiwis. This Government needs a good kick up the A***!

by donbond | 11th Apr 17, 6:42pm 1491892975

Housing ponzi to support money laundering.

Is the government not aware?

by dictator | 11th Apr 17, 6:53pm 1491893632

As we're slowing discovering they are completely aware that this is the case. National and their coalition members don't want to stop the flow of dirty money because they know it will cost them votes. They are supporting organised crime to get reelected.

by NorthernLights | 13th Apr 17, 2:14am 1492006442

Not only that but if you like Maurice Williamson will take care of your NZ property after helping you obtain residency status How neighbourly is National !

by Delboy1953 | 12th Apr 17, 10:27am 1491949654

The Government must have (or at least should have) been aware of money laundering via NZ housing for some time. How else can someone in China buy a NZ$4M house when the Chinese authorities only permit him to take out of China US$50k a year? It is mathematically impossible without the money being sent here through unauthorised channels. Every sale to a foreign buyer (and I don't mean just those non-resident for tax purposes) should require clearance from the NZ IRD.

by user123 | 11th Apr 17, 1:40pm 1491874851

23 Chinese speaking brokers at just one NZ company! But according to our all knowing government foreign buyers were not a significant force in the market.

Maybe it's just lucky timing, but the tap of foreign (Chinese) funds gets turned off late last year and almost instantly the Auckland property market starts to cool.

by gingerninja | 11th Apr 17, 2:50pm 1491879019

My thoughts exactly user123

by RickStrauss | 11th Apr 17, 3:47pm 1491882477

Let every young Kiwi who's displaced from the Auckland market look and see how they've been lied to.

by Delboy1953 | 12th Apr 17, 10:20am 1491949258

Only 23? I thought it would be more. I live and work on the North Shore. When I walk around Takapuna it no longer feels like I am in New Zealand. National simply don't care. The inconvenient truth is they see the housing disaster in Auckland as a win for them. They know the wealthy people who prop them up are loving having the world's most expensive housing.

by NorthernLights | 13th Apr 17, 2:18am 1492006684

Yes Chinese buyers were so much a force in the Auckland market I hired the top Chinese speaking agent myself ! Why would a kiwi boy do that if Chinese were not the prominent buyers ? Maybe I was learning Mandarin perhaps at the time ?

by Independent_Observer | 13th Apr 17, 8:55am 1492030531

I had to go into a Ray White office on the North Shore back in 2015 to sign a rental agreement. It was on the second floor so you couldn't get a sense of what was happening in there until inside.

When I got inside, I was blown away. There were about 15 Chinese agents on the phone back to China, with real estate listings all made up in Chinese plastered all over the walls. I said to the lady who was dealing with the rental agreemnt (NZ European) what it was all about and she said: 'Don't worry about it'.

This was about the same point National were denying there was a foreign buyer issue - and I thought, jeez our leaders in Wellington are full of it. As a younger kiwi, seeing how we were having our houses sold from out under our feet, being forced into rental accommodation - I was a little angered to say the least.

by Penguin | 11th Apr 17, 1:51pm 1491875493

About time these murky practices were closed. I personally would like to see some mortgagee sales as a result of the investigation.

by dictator | 11th Apr 17, 2:05pm 1491876341

It's only taken a few months for fraud issues to start emerging. I'm not surprised and this will just be the tip of the iceberg.

by Conrad | 11th Apr 17, 2:07pm 1491876450

Doesn't the rampant fraud usually emerge after the bubble pops? How many borrowers juiced up their income to qualify for a loan in the past few years do you reckon?

by dictator | 11th Apr 17, 2:19pm 1491877197

Once a bubble pops there's no way to conceal the cash flow problems. I'm surprised something like this has turned up so quickly.

Given the polite language used in expressing the issues it's easy to read between the lines that it's something very serious. Not just a bending of the income rules (which happens but it's usually not enough to file a regulatory complaint about as the application will still be compliant). Maybe fraudulent documents or other suspicious activities. There's a big leap in effort between, internal discussions, booting out a company from a network, and filing a complaint.

An investigation and the potential cascade effect could provide us with some interesting news.

by NorthernLights | 13th Apr 17, 2:25am 1492007116

Dictator so true about the use of polite language by media in NZ to describe foreigners washing dirty cash through NZ property purchases
Maybe Mr Key didnt want to be left accountable for allowing this all to continue for years under his watch ?
Then again no politician in NZ is held to account! Remember Cave Creek ?

by J.C. | 11th Apr 17, 3:12pm 1491880379

Doesn't the rampant fraud usually emerge after the bubble pops?

"Exposure" of rampant fraud usually occurs after the bursting of bubbles. From the largesse of Japanese banks to Bernie Madoff, these things usually don't surface until the euphoria ends. Most people don't compare about fraud when they feel they're on the winning side.

by Yoda | 11th Apr 17, 3:06pm 1491879980

A bold person may say something stinks. But a wise person may say nothing, lest a rich person with business interests engage an outrageously expensive lawyer.

by PocketAces | 11th Apr 17, 4:20pm 1491884433

Bold and broke go well together in that circumstance

by mvgsmf | 11th Apr 17, 2:07pm 1491876450

Wow , no , really...gee.

All good "Rockstars" have a dealer on call..........

by workingman | 11th Apr 17, 2:55pm 1491879335

Maybe the real estate agents, mortgage brokers and the bankers should reflect on Clause 11 of NZ's Comprehensive Strategic Partnership with China:

'The two sides also acknowledge the positive development of practical and effective cooperation on crime and legal matters. This includes formal cooperation under the Treaty between New Zealand and the People's Republic of China on Mutual Legal Assistance in Criminal Matters and highly effective Police to Police cooperation (including under the framework of the Memorandum of Arrangement on Crime Cooperation ... and other informal channels of cooperation). The two sides will continue to work constructively on these issues, including with respect to joint efforts to combat cross-border crime, and to facilitate the recovery of the proceeds of crime within our respective legal frameworks.'

by NorthernLights | 13th Apr 17, 2:28am 1492007335

Free trade agreement with China explained;
CHINA 1st
NZ 2nd
Even the Chinese understand this in any language

by russellj | 11th Apr 17, 3:07pm 1491880060

Not to mention the cash turning up in suitcases, the tour parties members each bringing in cash (as long as declared if over 10k per person the Govt doesn't give a toss) which is then aggregated,and the money laundering (REs and lawyers being outside of rules til next year earliest).

by NorthernLights | 13th Apr 17, 3:22am 1492010523

Russell absolutely ! My neighbours property auction had an entire white hiace van load arrive all with "tour guide" each member had earpieces for translation of events by their RE tour guide !
Never witnessed this before at a NZ property auction
If a van load of Chinese who cannot speak English and require a translator turn up for a auction in suburban North Shore I'd say they might be having an impact on the price the property is sold for ?

by Gordon Gecko | 11th Apr 17, 3:10pm 1491880213

Phase 2 of the AML/CFT legislation implementation will capture Real Estate agents et al. The Justice Dept website suggests this will be passed by Govt in mid 2017. It is anticipated businesses will have 18mths to comply. Likely to be a massive shock to the system for some agents/firms.
While this is a positive move it does however rely heavily on the full co-operation of the agents in lodging suspicious transaction reports and having robust risk programs in place to identify and prevent money laundering etc.

by CJ099 | 11th Apr 17, 3:11pm 1491880285

And of course National have turned a blind eye to all of this open money laundering. They must know is going on with the RE's. Remember it's the RE's that have been the most resistant to the AML measures trying to delay the process for as long as they can get away with it, to all of our cost!

by dictator | 11th Apr 17, 4:17pm 1491884243

Once the extent of the money laundering becomes obvious I wonder if National have considered the backlash of citizens not being able to buy houses to enable organised crime. At least on the upside there's no point saving for retirement if you're going to work until you die.
http://www.sbs.com.au/comedy/article/2017/04/11/millennials-encouraged-…

by Brock Landers | 11th Apr 17, 7:57pm 1491897436

In Australia they are still joking about this. In New Zealand KiwiSaver was plundered by National and the real estate industry long ago.

by two otherguys | 11th Apr 17, 4:13pm 1491884027

Genii (2 genius's) at work

Genius 1
You have to take your hat off to our genius lawmakers who can make laws then leave a loophole and spend the next 20 years thinking about closing the loophole as genius spivs exploit it till the cows come home

FMA does not regulate Mortgage Brokers - they are specifically excluded
Who is not a 'broker'?
Certain financial service providers are not brokers under the FA Act, including:
•Insurance and mortgage brokers. Because the property or client money they hold is not a financial product.
https://fma.govt.nz/compliance/role/brokers-and-custodians/who-needs-to…

And identified in May 2011 by Amanda Morrall of Interest.co.nz
New regulation puts investment advisers under the microscope; lets mortgage brokers, insurance brokers and syndicated property dealers off the hook.
http://www.interest.co.nz/kiwisaver/53296/new-regulation-puts-investmen…

Genius 2
You have to take your hat off and admire the genius of imported spivs who can come here and identify a niche they can exploit while driving buses through at speed without need for care while at the same time cocking a snook at the local spivs waving at them as they speed by

by dictator | 11th Apr 17, 4:23pm 1491884596

I thought the old trick was to fly a helicopter over a development and not land. ;) I guess a bus is far more efficient.

by Cowpat | 11th Apr 17, 5:14pm 1491887646

And how many of those local Chinese mortgage brokers have arrived within the recent surge of immigrants due to a stated occupation shortage.

by Zak | 11th Apr 17, 5:26pm 1491888403

Interesting the brokers have been found out ,but one bank is interviewing for a whole lot more Asian speaking brokers. Anti money legislation will see a reduction in the number of Asian speaking Agents as well. This will effect the big Agencies as there is a huge number that deal with Asian speaking buyers. Again its so obvious looking at the top team agents in the large agencies as too who is buying the properties. I wont mention their names for fear of this comment being deleted.

by KH | 11th Apr 17, 7:44pm 1491896689

From the mouth of ANZ about Brilliant Finance
2016 - ANZ lauded the "Mortgage Adviser Emerging Business of the Year for 2016,"
2017 - ANZ is saying, "We don't comment on our arrangements with contractors," .
Mmmmmh. That seems to be having it both ways. We would expect nothing less from a big corporate.

by abnz1 | 11th Apr 17, 8:07pm 1491898025

New Exposure every day convinces vote for change.

Luckily election not far away.

by CJ099 | 11th Apr 17, 9:03pm 1491901416

Does anyone know whether Ray White Real Estate Agents are still operating in China to sell NZ property or has that all been shut down now?

Not saying that they were setting up a business vehicle for money laundering but then again, now that I come to think of it.....
I remember there was a big fuss over it last year: Ray White links up with China to sell more properties
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…

From article: Lianjia, which has more than 6000 branches in more than 25 cities in China, will co-list Ray White's New Zealand and Australian and properties in Mandarin on its websites, the report said.

by Zak | 11th Apr 17, 9:19pm 1491902352

Barfoots and Bayleys have been doing that before Ray White . Typical media only picked up Ray White because they advertised it. The others didn't advertise that they did it.... Of course all the very happy sellers wouldn't be complaining .

by CJ099 | 11th Apr 17, 9:39pm 1491903581

Yes I'm sure you're right Zak. I just wish we had someone as strong as Marc Cohodes to voice more publicly what's been going on in regards to money laundering and bloating global property markets. He has spoken out for Vancouver but I guess that we're so far away at the arse end of the world we get easily exploited and forgotten about.

And you know that Vancouver has been taken advantage of by money launderers then so has NZ.

On The Money CBC article: https://twitter.com/OnTheMoneyCBC/status/842543716891992064

by Joe Public | 11th Apr 17, 9:37pm 1491903467

Vote labour and put an end to this madness

". Under our policy only citizens and permanent residents will be able to buy existing homes. Removing this speculative demand from the market will help stabilise prices and give Kiwi families a fair shot at buying a place of their own."

Email Phil and tell him you support this policy and he should be more vocal about it:

Philip.Twyford@parliament.govt.nz

by Joe Public | 11th Apr 17, 9:46pm 1491904000

National completely ignored Demand even to the point where they try and prevent the actual demand from being reported with Delay tactics etc... LINZ have had over 2 years, 24 months, over 700 days to sort out their survey and get the data to the people....

Labour are the only party looking to reduce DEMAND.....

by make my day | 11th Apr 17, 9:55pm 1491904533

We have imported thousands of immigrants from some of the most corrupt countries in the world, it is without doubt that some of these people will carry on with the corrupt practices that are normal in their homeland; NZ's reputation will be damaged as a result, if found out they should be on the first plane with a one way ticket from whence they came.

by sharetrader | 11th Apr 17, 10:33pm 1491906814

So in short these clients would not be able to service the mortgage on income from NZ whether that be wages and or rents, How many were roll over mortgages for properties brought on the premise of CG.
It was explained to me ages ago the price paid did not matter as long as you got in first as there are waves of Chinese buyers and money to come, when I brought up that all markets change and cycle I was told I did not understand Chinese and this from Chinese people,
Well the market is now changing and could even change more in September, interesting times ahead

by JetLiner | 12th Apr 17, 9:14am 1491945279

I've observed that it's quite common for Chinese, and even some non-Chinese, to say "you don't understand China/Chinese" when:

a) they don't understand what you're saying

b) they disagree but can't think of a suitable reply or counterargument

c) they understand on some level that you're correct but don't want to change their views or admit to changing them.

Once you see through that, you understand that it's just a defensive formula used to shut down a discussion.

Having said that, it's really surprising the number of people out there who think that real estate is not subject to market cycles, because it's a 'special' asset class!

by Roy1 | 12th Apr 17, 5:43am 1491932601

Like minded. Corrouption invited corruprion.

No one was blind but was and is need of the government - their very survival depends on it.

Need money supply to support housing ponzi irrespective of the reputation as long it helps government vested interest.

NZ is not what it use to be. It is prosperity by national but is it really a type of prosperity that we wanted.

Think and Vote

by Averageman | 12th Apr 17, 7:33am 1491939224

Still amazed that National continues to think this is a non issue. Its almost like the banks (the only winners) are pulling their strings.

That said pretty sure Labour prior to its first term campaigned that they would sort out the tax fiddle on specuvestment many moons ago. And they did nothing. Turned out many MPs had look thru operating as well.

One notes their housing policy commits to nothing but a navel gazing session on this issue.

by mrp | 12th Apr 17, 10:07am 1491948479

i know some broker is making 400k+ a year there...

by Henry_Tull | 12th Apr 17, 10:35am 1491950140

See how people think. See the bank johnnie is telling you how it really is.....

ANZ was also reluctant to comment when asked about the company it lauded as the "Mortgage Adviser Emerging Business of the Year for 2016," saying, "We don't comment on our arrangements with contractors," when asked about it's relationship with Brilliant Finance.

When is an independent agent fighting for the best client outcome not. When one is the bank's contractor.....

by Keep It Kiwi | 12th Apr 17, 3:17pm 1491967040

Is this really surprising!?

by Boatman | 21st Apr 17, 9:42am 1492724530

Housing will be National's nemesis