Australia’s unprecedented housing bubble has forced a significant number of mortgage applicants to falsify loan applications, simply to get a foothold in the ever challenging market.
A recent UBS survey found mortgage fraud in Australia was rife, with 28 per cent of applicants admitting to falsifying loan documents. Many had either overstated household income, overstated asset values or understated debt or living expenses.
Borrowers barely able to break into the market were the group most likely to stretch the truth, with UBS reporting, “there was a correlation between borrowers who misrepresented their application and: those whose expenditure was broadly equal to their income; stated they are under financial stress; or have missed a debt payment.”
AMP’s 2016 Financial Wellness Report, released today, found 24 per cent of workers in Australia are now classified as “financially stressed.”
UBS indicated its survey was likely to understate the number of falsified mortgages and suggested mortgage fraud was “systemic” in Australia, and especially prevalent among brokers.
Wayne Byres, Chairman of the Australian Banking Regulator, APRA, has told the Senate Economics Legislation Committee, the watchdog has instructed Australia’s largest banks to have their external auditors conduct a review on their fraud control procedures.
Byres told the committee, “We have told the larger institutions that we’ll be asking them to have their external auditors do a review of what are essentially fraud control mechanisms to ensure that there are mechanisms in place and…are working,”
With such systemic fraud, there are fears a return to more prudent lending could send Australia’s overextended housing market into a downwards spiral.
Earlier this month, Roy Morgan Research found 311,000 mortgage holders in Australia had little or no equity in their home. A cooling of the market would plunge hundreds of thousands of mortgage holders into negative equity.
» Mortgage fraud ‘systemic’ in Australia, UBS survey shows – The ABC, 7th October 2016.
The only way mortgage fraud is possible is the lenders are enabling it.
It is easy to tell if someone can afford the loan, check tax assessment notice, current expenditure and recent savings rates. I do it with my kids all the time.
Yes, things can change and often do. Life is not always kind.
But it is hard to claim your income/spending etc is personal/private if you want to borrow $8ook.
Sounds a bit like sub-prime to me, pass the popcorn/peanuts
Ninja (No income, no job, assets) loans have always been encouraged by the banks who try to distance themselves from the fraud by using brokers. They give them the required figures and the loan applications are altered accordingly.
The banks have nothing to lose as the debt created is only a computer entry and all interest payments are real money earned from work. Even if the muppets (customers) default they seize their real asset for zero outlay. They prefer them to go under in the first 5 years when most of the payments are interest.
Even mafia loan sharks can learn a lot from the system.
old News. this has been reported on since 2009 or even further back. The only question is when will the whole housing Ponzi scheme implode? 2015 was the beginning, when mainstream media began reporting that propery was not such an iron clad investment as had been the case in the previous decade. Slowly the negative sentiment builds. Consumer and business confidence erodes, until….WHAM!
It’s not just household debt. I have zero debt. My accountant comments that he has clients where they have multiple debts that are linked such that if one thing goes the whole lot will go. Would hate to live my life in that way. As Mark says above bring on the popcorn.
@Mark. Well said I was going to say the same thing. I think with crash hits they are going to find all kinds of dodgy stuff like they did in the US.
My wife just joined the gym and paid for the year.
When asked how she wanted to pay she said “out of the savings account” to which the reply was “Wow! We never get that anymore”
We are in Perth and it is getting more dire by the day, the media will not report on it though or if so it’s sparingly.
RBA Table d01 shows that there has not been one single month this year of positive (+) personal credit growth. The last month was December 2015, which was no surprise because it was Xmas.
To anyone else that believe personal credit is the driving force of the economy, its easy to see what this means. People cannot afford to borrow any more, even at these ridiculously low rates because their wages will not allow it, which brings me to the next point, by the time this has happened, the most recent loans are probably junk loans that should never have been given out-hence the defaults that are occurring.
This was coming in 2011 , the RBA ‘saved the day’ by lowering rates. All that’s happened in this country that’s ‘different’ and ‘not like the rest’is that we’ve postponed the 2009 GFC by borrowing like idiots for 7 years, bringing us to a worse position.
This is why Malclom Turncoat was selected to be our next PM.
The banking cartel knew that they would soon need a bailout (or bailin)and they needed someone who would do the dirty work on the Aussie Taxpayer. Unfortunatly for MT things dindn’t work out according to plan in the last election, and he might be left holding the bag himself. Ironic really.
Whats the bet this will involve stimulus such as grants etc.. that will only serve to blow house prices up even further like it has in the past.
http://www.news.com.au/finance/real-estate/buying/scott-morrison-declares-housing-a-priority-but-can-he-actually-deliver/news-story/3153a9e4e1712b00696098b636f9a968
Rather than increasing the number of first home buyers entering the market (which will just cause more upward pressure on prices due to extra demand) They need to either reduce prices (not going happen on their watch) or reduce the number of investors (also not going to happen)
What are the “bail in” or “bail out” laws in Australia?
If they end up using taxpayer money to prop up the banks I will be seriously pissed off.
To clarify previous comment…
Bank shareholders should be first in the firing line, as opposed to deposit holders.
(Actually bank executives should really be first in the firing line. They all should be lined up against a wall and shot. But they wont suffer at all. They simply take all the upside in the form of annual bonuses when times are good, and setting for base salary when times are bad).
But seriously, wouldn’t it be a tragedy if the poor sensible deposit holders (ie: those who actually worked and saved their money) had to bail out those who recklessly mortgaged themselves to the max ?
As for government taxpayer “bail outs”, I say no way. If something is going to fail then let it fail.
Yes, the bailing out/in of corporations by Government has nothing to do with capitalism or free market outcomes, justice or any ethical notion of what approximates the right action.
They have their own ethic: To save themselves…that’s all!
Still…if all this is upon us then why is the financial sector, on the ASX, not already in a clear bear market?
To my mind, it should be forward looking and be the first to decline, free market or no.
When i got my first mortgage in ’05, the Wizard home loans guy tried, unsuccessfully, for an hour to get me to borrow almost three times the 170K that I asked for and knew I could service easily, even at the 7-8% interest rate level I was paying. I said, ‘But I’m only earning 50k a year,’ and he was like, ‘Nope, I can get you past that. Don’t worry.’
I fell short of calling him an idiot but he tried.
Look at the trend of new loan approvals for those outside the serviceability criteria;
Source:APRA
Mar 2010 934
Jun 2010 1,103
Sep 2010 1,163
Dec 2010 1,218
Mar 2011 1,116
Jun 2011 1,360
Sep 2011 1,484
Dec 2011 1,366
Mar 2012 1,309
Jun 2012 2,053
Sep 2012 1,997
Dec 2012 2,299
Mar 2013 1,973
Jun 2013 2,480
Sep 2013 2,150
Dec 2013 2,443
Mar 2014 2,224
Jun 2014 2,877
Sep 2014 2,695
Dec 2014 3,211
Mar 2015 2,875
Jun 2015 4,510
Sep 2015 4,068
Dec 2015 4,233
Mar 2016 3,599
Jun 2016 3,484
June 2015 , the Cash Rate went to 2% and Banks got greedy, no wonder APRA are sounding alarms.