How appropriate that the corporate media reports of fraud committed against the banks.
Will the corporate media ever report that the banks commit fraud against their customers with every single one of their loans [ for example] with cash they do not actually have?
You can read the article from Friday the 13th of May 2016 from news.com.au of the headline:
Mortgage fraud is the dirty secret that could spark a financial meltdown, economist warns
A Westpac customer claims their income and assets were massively inflated by the bank.
MORTGAGE fraud by brokers and banks could bring on a financial meltdown, an economic researcher has warned.
As
at least three of the major banks investigate allegedly dodgy loans to
Chinese buyers, LF Economics founder Lindsay David says fraudulent
lending is rife in Australia’s property market — and that we should all
be scared.
NAB is the latest bank to launch an investigation after
receiving a tip-off about a mortgage broker involved in a new tower
development in Melbourne’s Southbank.
It comes as lenders instruct brokers to stop lending to overseas borrowers, after Westpac and ANZ
launched an investigation into suspect loans worth almost $1 billion.
But Mr David believes the practice of doctoring paperwork on home loans is much broader than the banks would have us think.
NAB
has been told a broker used Photoshop to inflate figures on pay slips
and bank statements in order to secure loans for overseas buyers.
“We
are investigating these claims and will refer them to authorities if
and when appropriate,” a spokeswoman for the bank told news.com.au.
It
is understood that Westpac has also been contacted about the mortgage
broker, but the bank declined to say whether any investigation had been
launched when contacted by news.com.au.
DODGY LOANS
While
the practice has long been portrayed as the work of a few bad apples in
the competitive mortgage broking industry, evidence is emerging that
senior banking employees themselves may be involved in mortgage fraud.
Last month, ABC business journalist Elysse Morgan revealed that her loan documents had been tampered with,
telling Four Corners that she got them back from the bank to find that her income had been “massively inflated”.
“There
was a line that says ‘your monthly income’, and for my husband it was
correct, but for me it was inflated by around 38 per cent,” Ms Morgan
said.
She said she had never found out who changed the figures on
her loan application, and declined to name the bank when contacted by
news.com.au.
It may sound extraordinary, but Ms Morgan is not
alone. Hundreds of mum-and-dad borrowers have contacted the Banking and
Finance Consumers Support Association with claims that lenders have
forged their signatures on loan documents, with details of their
personal income and assets bumped up by hundreds of thousands of
dollars.
BFCSA President Denise Brailey says she has reported hundreds of such cases to the financial services regulator, ASIC.
Borrowers
come to her for advice when they find themselves saddled with massive
debts and their homes repossessed, after being sold loans that are
beyond their ability to pay.
Are we on the verge of a meltdown in the style of
The Big Short? Picture: ParamountSource:Supplied
WHY IT MATTERS
When
Ms Morgan saw that her income had been inflated, even though she was
“on a pretty good salary”, she wondered: “What’s in the interest of the
organisation or the institution to prop that up?”
“You’ve only got to think to yourself, ‘are they taking it from a double-A to a triple-A rating?” she said.
That’s
exactly what Mr David believes is going on, and he warns of an
impending disaster on the scale of the collapse of the United States
housing bubble that sparked the global financial crisis of 2007-8.
If
the banks are massaging the numbers on people’s loans to make them look
more creditworthy, this would allow them to secure credit more cheaply
from the institutions that lend to them.
The Australian economy
relies on credit from these overseas sources to function, and the
integrity of the banking system, including loanbook serviceability, is
critical to the ongoing supply of capital that keeps the nation running.
Business journalist Elysse Morgan’s income was inflated by 38 per cent on her loan application.Source:Supplied
Mr
David believes Australia’s lending market is littered with “junk
loans”, arguing that there is no way the banks’ fast-growing loan books
could be entirely made up of serviceable debt.
“We think we’re just scratching the surface on this,” he said. “It’s the biggest problem facing the economy.”
Even a relatively small downturn, or a housing market collapse, could bring the whole system crashing down, he said.
“It’s quite easy to sell off your asset when it’s appreciating in value, even if you can’t pay the loan,” Mr David said.
“But when the reverse happens and you overbank what your house eventually becomes worth, that’s when real problems begin.”
He
argued that Australia’s spiralling household debt — now worth more than
$2 trillion, in an economy that has a GDP of just $1.6 trillion — posed
a danger to the economic system, which may only be acknowledged once
“the bubble bursts and causes havoc”.
And with much of Australia’s economy linked to the property market, he said, the results could be catastrophic.
“There are just too many loans out there that are simply never going to be able to be repaid,” Mr David said.
“During
a real estate boom, everyone is too busy speculating and making paper
profits to care about what is happening ... Only voices from the fringe
see through the deception and raise concern, while the government,
regulators, economics profession and the public are seemingly oblivious
to the clear and present dangers.”
AN INSTANT PAY RISE
Among
the documents in Ms Brailey’s files is a Westpac loan with a gross
annual income allegedly inflated by a whopping $288,000.
The document forms part of LF Economics’ submission to
the Parliamentary Inquiry into Penalties for White-Collar Crime, released earlier this month.
On
it, the self-employed borrower, whose name is marked out for privacy
reasons, has listed the alleged discrepancies: “motor vehicle —
overinflated by $10,000; personal effects — overinflated by $100,000;
monthly income — exaggerated by $14,500; rental income — exaggerated by
$3456.
Westpac customers say their loan application forms were forged.Source:Supplied
Westpac customers say their loan application forms were forged.Source:Supplied
The
Westpac customer also claims that the loan was written down as being
for investment purposes when in fact it was their home; that its
valuation was inflated by $25,000; that their listed occupation as an
investment manager was incorrect, and that they owned an $85,000 share
portfolio, when in fact they owned no shares at all.
Ms Brailey says she has thousands of documents on file showing similar cases.
Buyer’s agent and property commentator Catherine Cashmore also believes the problem is widespread.
“I’ve
got clients it’s happened to, changes happen without them seeing,” Ms
Cashmore said, disputing the banks’ line that they subject all loans to
“rigorous checks”.
TIME FOR CHANGE?
With voters growing frustrated by repeated scandals in the banking sector,
Prime Minister Malcolm Turnbull last month warned the institutions to lift their game.
Opposition Leader Bill Shorten
has
promised a Royal Commission into the sector if Labor wins the coming
Federal Election, but has been light on detail about what it would
cover.
ASIC, which Mr Lindsay accuses of “turning a blind eye” to mortgage fraud by bank,
will soon get an extra $120 million over four years to crack down on the banking and finance sector.
Last month’s funding announcement was widely read as a move aimed at blunting Labor’s calls for a Royal Commission, which
Treasurer Scott Morrison has said would “put at risk confidence in the banking system”.
None
of the big four banks would provide detail of how they ensure loan
application forms are accurate when contacted by news.com.au.
Westpac
spokeswoman Lucy Wilson said the bank had “no tolerance for fraud”,
with “systems in place to identify and thoroughly investigate any
potential dishonest behaviour”.
“If fraudulent activity is
discovered, we take action against those involved ... liaising with the
appropriate regulator and the police as required,” she said.
An
ASIC spokesman said in a statement: “If someone suspects their loan
application or any similar document had been altered without their
knowledge or approval, that may well involve a serious misrepresentation
and a complaint should be made as soon as possible.”
In its
supplementary response to the parliamentary inquiry, the regulator said
dishonest or fraudulent conduct was “more commonly found in relation to
mortgage and finance brokers rather than lenders”.
Since taking
over regulation of consumer credit in 2010, ASIC has investigated more
than 50 mortgage brokers over alleged fraud relating to home loans and
personal loans, with 13 criminal charges resulting in 11 convictions,
including four guilty pleas. There have been at least 38 administrative
actions, which usually means bannings.
The Finance Brokers
Association of Australia, for its part, claims that mortgage fraud is
“limited to a small section of the industry and is definitely not
systemic and entrenched”.
FBAA chief executive Peter White conceded that loan tampering was a problem, but argued the practice was “not widespread”.
“Ninety
nine per cent of brokers are doing the right thing but unfortunately,
like in any industry, there is a tiny element who cross the line,
particularly when it comes to the repayment of loans that rely on
foreign income from certain countries,” Mr White said.
