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The Australian Finance Group share price has now doubled since the Royal Commission

The mortgage broking industry was widely touted as one of the biggest losers from the findings of Kenneth Hayne who led the Royal Commission into the financial services industry.

In fact a lot of the headlines over the commissioner’s findings were on recommendations that trailing and even upfront commissions paid to mortgage brokers be banned as a conflict of interest.

Hayne recommended the ban to avoid conflicts and the possibility that borrowers could be pushed into worse deals by brokers more concerned about their own commissions than the interests of a borrower.

Hayne even went as far as to suggest mortgage fees ultimately should be paid by borrowers, not by the banks as the lenders. 

As a result shares in leading mortgage brokers such as Australian Finance Group Ltd (ASX: AFG) and Mortgage Choice Limited (ASX: MOC) plunged last February, but have since gone onto rebound 63% and 105% since the post-commission lows.

The reason for the rebound is because the federal government, under pressure from the mortgage broking industry, has abandoned plans to legislate Hayne’s recommendations as it feels the mortgage broking industry could suffer or make less profit due to the recommendations. 

In other good news for these mortgage players the Liberal party scored a shock federal election win last May to put changes to negative gearing off the table and the RBA has moved to support property investing via two rate cuts since the Royal Commission. 

It’s always darkest before dawn for AFG and Mortgage Choice management then.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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