Organising private mortgage finance in Australia is unregulated. You are not required to have an Australian Financial Services License, or Australian Credit License, or be a member of the Australian Financial Complaints Authority (AFCA) or to jump through any other regulatory hoops or hurdles.

However there are certain rules which need to be adhered to ensure that these regulatory frameworks do not become applicable.

To avoid triggering the Corporations Act when arranging a syndicated mortgage (and therefore requiring an AFSL) there are three crucial requirements.

  1. The broker must not exercise discretion over which loans money is invested in. Each lending decision must be the investor’s. You cannot be given a sum of money by the investor and be told to go an invest it on their behalf wisely, that would make you a fund manager;

  2. There must be a syndication deed that effectively provides for the management of the loan by the syndicate members (not you);

  3. All commercial decision concerning the management of the loan must be made by the investors and not by you. You can make recommendations but the decision must be taken by the investors.

To avoid the National Credit Code, (which requires the lender to hold an Australian Credit License) you cannot write mortgages governed by the National Credit Code. Most brokers reading this will have an Australian Credit License, or at least be a credit representative of an aggregator. However, that still does not allow regulated loans to be written because private investors do not have a credit license.

Regulation of Private Mortgage Brokers