About
Private Mortgage Investment
Investors and Borrowers have used private mortgages as an investment and for funding in Western Australia for over 100 years. A private mortgage is a contract between a Borrower and a Lender (Investor) for a real estate secured loan of money for a fixed term and fixed interest rate, with interest only payments.
The key feature of a traditional private mortgage is the Investor’s name being registered on the Certificate of Title as the Mortgagee (Lender). In order to match the amount of money the Borrower wishes to borrow with that available from Investors, Australian Financial Services Licence holders puts together Investors in a contributory private mortgage.
The Investors hold their respective shares, as registered Mortgagees, in proportion to their monetary contributions to the Mortgage. The Australian Financial Services Licence holder who arranged the advance also manages the contributory private mortgage, for a fee.
Private mortgages are used by Investors as a form of fixed interest product to achieve a higher interest rate return, albeit with a higher risk of interest and principal repayment. Private mortgages are not a bank deposit and therefore are not afforded any of the protection to Investors available for bank depositors.
Borrowers use the private mortgage market to access funds for business working capital, property purchase or refinance needs.
With the standardisation of credit approval processes by institutional lenders, even creditworthy Borrowers can have difficulty obtaining finance as they are unable to meet exactly the stringent criteria, especially in relation to small business financing.
All Borrower applications for a private mortgage are assessed locally on an individual basis by PMFM.
Business of Private Mortgage Funding & Management
Private Mortgage Funding and Management was established in 1995 by the Directors who have been involved in the private mortgage market since 1992. The Directors believe it is the only Australian Financial Services Licence holder based in Western Australia that specialises solely in the arranging and managing of contributory private mortgages.
Private Mortgage Funding and Management Limited (ACN 072 121 352) is the Responsible Entity and Manager of Private Mortgage Investment Scheme (ARSN 090 993 552). Funds under management exceed $60 million for a range of investor clients under the Managed Investments legislation.
Investors range from private individuals and corporate lenders to self-managed superannuation funds and retirees. PMFM has developed over time the experience, systems, procedures and skilled staff to manage Mortgages for the Private Mortgage Investment Scheme.
Licensing
Private Mortgage Funding and Management Limited (ACN 072 121 352) is the Responsible Entity for the Private Mortgage Investment Scheme (Australian Registered Scheme Number 090 993 552). and holds an Australian Financial Services Licence (# 237861)
In order to as act the Responsible Entity of a Managed Investment Scheme and to issue a Product Disclosure Statement the Manager must hold an Australian Financial Services Licence issued under and meeting the criteria of Managed Investments Legislation.
The Private Mortgage Investment Scheme has been designed to comply with the Managed Investment Legislation (as amended) contained in the Corporations Act 2001 whilst retaining the important key feature: Mortgages will be registered and held in the name of the investors (Members).
As part of an internal auditor rotation policy, and following receipt of ASIC’s consent, Ms Lucy Gardner has resigned as Auditor of the Compliance Plan for the scheme and was replaced by Mr Robert Hall, in June 2023.
Investors (Members) Applications may only be made on the Application Form attached to the Part 2 Product Disclosure Statement. The Application Form and the Part 2 Product Disclosure Statement must be read in conjunction with the current Part 1 Product Disclosure Statement.
The Australian Securities and Investments Commission takes no responsibility as to the contents of the Product Disclosure Statement.
Neither the Manager, nor their associates or directors guarantee the regular payment of interest, the repayment of capital or any particular rate of return or the performance of the investment generally.
The Manager recommends Members seek appropriate independent financial or legal advice from their accountant, financial adviser or solicitor.
Regulation
The private mortgage industry is primarily regulated under the Managed Investments provisions of the Corporations Act 2001.
On 1 July 1998 amendments to the Corporations Law were proclaimed by way of the Managed Investments Legislation. The Financial Services Reform Act 2001 further amended the Corporations Law, now known as the Corporations Act 2001, and was effective from 11 March 2002.
The Corporations Act 2001 is supervised and enforced by the Australian Securities and Investments Commission (ASIC).
Lending for personal purposes or investment property purchase or refinance is also regulated under the National Credit Code.
On 1 July 2010 new Legislation known as the National Consumer Credit Protection Act 2009/ National Credit Code became Law. The principal areas are the regulation of owner occupied lending, residential investment property finance, broker licensing and Responsible Lending practices.
Breaches of the lending requirements may result in the Courts potentially re-opening and examining the terms of the Mortgage advance. It is within the Courts power to vary the terms of the advance if it finds a breach and these remedies can include loss of interest and Principal.
Federal Government Legislation Anti-Money Laundering and Counter-Terrorism Financing Act 2006 is aimed at preventing and detecting money laundering and terrorism financing in line with international standards.
This Legislation imposes a number of obligations on Reporting Entities in the provision designated services such as funds management/ Managed Investment Scheme. These obligations include, among others customer identification & verification of identity (by way of a “100 point” type check using original documents such as current Passports and Drivers Licences) and ongoing customer due diligence and reporting suspicious matters:
Landgate Western Australia has introduced Verification of Identity requirements prior to the registration of certain instruments; predominately Transfers of Land and Mortgages.
All parties signing a Mortgage or other instrument are required to be identified and verified using original documents such as current Passports and Drivers Licences.
Australian Financial Services Licence holders are also required to be members (in addition to their Internal Dispute Resolution procedures) of an External Dispute Resolution Service such as the Financial Ombudsman Service.
The Manager recommends Investors seek appropriate independent financial or legal advice from their accountant, financial adviser or solicitor.
Capabilities
Many Borrowers have substantial real estate but unable to meet exactly the banking industries stringent criteria, especially in relation to small business financing. Institutional lending interest rates for business purposes are comparable to those of private mortgages.
With the standarisation of the credit approval process by institutional lenders, even creditworthy Borrowers have difficulty obtaining finance unless they are able to exactly meet the credit criteria.
All Borrower applications for a private mortgage are assessed locally on an individual basis by PMFM. Individual customised funding solutions are offered and no Mortgage Insurance is required.
Approved transaction are rapidly funded, documented and settled.
Complete the Online Enquiry Form for further details of how PMFM can Offer A Solution for your funding requirements.
Links
Regulator www.asic.gov.au
ASIC Money Smart fido.asic.gov.au
Industry body Mortgage & Finance Association of Australasia www.mfaa.com.au
Ombudsman Credit & Investments Ombudsman www.cio.org.au