Australia, White added, appears to have the harshest clawback-related penalties in the world, a particularly difficult reality for brokers considering the fact that early termination of a loan, while rare, remains a possibility.
“A loan [can move] early. Either somebody set the deal up wrong, which can be a problem in those first four months, or alternatively somebody just won the lotto, they’ve had a death in the family, got an inheritance, they decided to pack up and move overseas,” he said. “They can move around and change jobs. We have a lot of people move up and down that Eastern Seaboard.”
How do clawback rules differ elsewhere?
In Ireland, meanwhile, brokers generally receive 1% commission across the board, according to Rachel McGovern (pictured, top left), director of financial services at Brokers Ireland, with the severity of clawbacks depending on the year of the loan termination – usually amounting to 100% in the first year, 50% in the second, and 25% in the third.
While commissions in Canada vary depending on the terms, clawbacks there are comparatively rare, according to Sadiq Boodoo (pictured, top center), president of the Canadian Mortgage Brokers Association – Ontario (CMBA-ON).
“For the most part, none of [the lenders] have a clawback,” he said. “Some lenders have specific products [for which], if you break it within the first year – some of them are six months – they’ll claw back, but nothing after that.