Welcome Guest [Log In] [Register]


Reply
  • Pages:
  • 1
  • 8
Mortgage fraud systemic in Australia UBS finds; ABC news- Michael Janda
Topic Started: 12 Oct 2016, 05:18 PM (4,026 Views)
Ex BP Golly
Member Avatar


Mortgage fraud 'systemic' in Australia, UBS survey shows
BY BUSINESS REPORTER MICHAEL JANDA

Mortgage fraud is "systemic" in Australia, with more than a quarter of recent home buyers admitting they misrepresented some information on their loan application.

The disturbing results come from a survey of 1,228 people who had taken out a mortgage over the past two years, conducted by investment bank UBS.

The key finding was that 28 per cent of people surveyed said their mortgage application was not totally factually accurate.

Of those who admitted misstating information, the bulk said their application was "mostly factual and accurate".

However, one-in-20 mortgage applicants admitted that their loan application was only "partially factual and accurate", while 2 per cent "would rather not say".

Out of the people who misrepresented parts of their application, 14 per cent said they overstated household income, 13 per cent overstated asset values, 17 per cent understated their debts, more than a quarter understated living expenses, while over 40 per cent said "other" or would not say what they had lied about.

Around 12 per cent admitted to misstating information in multiple areas of their application.


"Unfortunately survey results suggest misrepresentation is systemic with findings similar across the 2015 and 2016 vintages, price to income levels, LVR [loan-to-value ratio], owner occupiers and investors," the analysts wrote.
"However, 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."

UBS added that, if anything, the survey was likely to understate the proportion of people who had fudged some part of their application.

"It is difficult to reject these findings, in our view," argued the UBS analysts.

"It is highly unlikely that the respondents would have stated they misrepresented their mortgage documentation when they were in fact truthful.
"If anything, we believe it is more likely these figures may understate the level of misrepresentation in mortgage applications as some respondents may not want to state they were less than completely accurate despite anonymity."

Mortgage misrepresentations more prevalent with brokers
While the overall proportion of people who misstated information on their loan application was high, an even greater proportion who applied through a mortgage broker misled their lenders.

Almost a third of people who got their mortgage via a broker admitted they were not "completely factual and accurate" with their details. That compared to 22 per cent who applied directly through the lender.

While only 13 per cent of loan applicants who went through a bank and had misstated their details said their banker suggested doing so, the result was vastly different for mortgage brokers.

"Of the 2016-vintage respondents who secured their mortgage via a broker and misrepresented their application, 41 per cent of them stated they had done this on the suggestion of their broker," UBS observed.
There was also evidence brokers were becoming more likely to advise clients to make misrepresentations.

"This was statistically significantly higher than the 24 per cent of respondents who had misrepresented an application on the broker's suggestion in 2015," UBS added.

Banking analyst Martin North said he was surprised to see such apparent failure in what he regards as reasonably rigorous bank checks on borrowers.

However, he also said the UBS data may explain a few trends he has noticed in his own surveys.

"I do see some worrying trends in terms of higher loan-to-income ratios than I would expect to see - in other words, people are actually getting bigger loans in terms of the income they actually tell me in my surveys they actually get," he said.

Including a tendency for looser lending standards in loans issued via mortgage brokers.

"They tend to have higher loan-to-value ratios, for example, and higher loan-to-income ratios," Mr North added.

The detailed study undertaken by UBS backs a report based on shadow shopping in western Sydney by Variant Perception's Jonathan Tepper and covered in the Financial Review earlier this year, entitled The Aussie Big Short.

UBS said this should trigger alarm bells within the banks.

"We believe banks need to tighten underwriting standards via the broker channel, even at the expense of near term market share," it warned.

Do all the little fudges matter?
UBS said it was possible that this kind of misrepresentation on mortgage applications had been going on for years with few adverse consequences.

However, the bank pointed out that housing is now more critical to Australia's banking system, household finances and economy than it has ever been before.

"Given the rapid house price inflation that has been seen in parts of Australia (especially Sydney and Melbourne), the fact mortgages now represent 62 per cent of the major banks' loan books and household debt to disposable income is now at 186 per cent, we believe that mortgage risk is more elevated than it has been previously," UBS's analysts noted.

They said that banks needed to tighten their underwriting standards and checks on borrowers' applications, especially when those come via mortgage brokers which UBS sees as a "potential area of weakness".

Many mortgage brokers are ex-bank staff who know the compliance systems in place and how to get around them.

Another concern raised by UBS was that applicants who tended to fudge their loan applications also displayed risky credit card behaviours.

"We found a number of statistically significant correlations between riskier credit activities and those who misrepresented their mortgage applications," the bank noted.
In addition, they were people who were more likely to be spending all of their income, at 36 per cent versus 25 per cent of those who were truthful.

That means this group is less likely to have a savings buffer in the event of adverse life events, such as poor health or job loss.

On the positive side, the survey found the untruthful group were more likely to have had an income increase over the past year, perhaps explaining why some were willing to stretch the truth on their current circumstances.

Complacent home buyers, banks and regulators
Another reason why people may be prepared to take the financial risk of lying in their application to borrow more money than they can potentially afford is that only 4 per cent of them expect house prices to fall over the next year.

"Mortgage applicants appear very complacent with the outlook for the housing market," UBS observed.
"This is particularly evident in New South Wales, where 99 per cent of mortgage applicants expect house prices to be flat or rise over the next 12 months, and in Victoria, where 97 per cent of mortgage applicants expect house prices to be flat or rise over the next 12 months."

When it comes to which state was the least honest, it is perhaps unsurprising, but concerning, that the state with the nation's highest home prices — New South Wales — had a much higher rate of fudging loan applications than anywhere else, with Victoria second.

The UBS research should come as a wake-up call for the Reserve Bank, which cut rates in August in part because it was increasingly comfortable with conditions in Australia's housing market, with Mr North saying it has been too complacent on housing.

"Demand, in my view, is not tailing off and, interestingly, we're seeing a very strong resurgence in the investor sector as well as the owner-occupier sector," he said.
"I think the RBA has been too soft on the housing sector, they've been using the housing sector as effectively the proxy for solving the mining slowdown, but the result of that is we have households with very, very high debts."

UBS said its survey results also raise concerning financial stability questions.
"The quality of the banks' mortgage books is unlikely to be as strong as the banks believe," UBS warned.
The investment bank also warned banks that mortgage fraud could invalidate some of the lenders' mortgage insurance (LMI) policies they believe are protecting parts of their loan book.

POSTED FRI OCT 07 09:17:29 EST 2016

http://mobile.abc.net.au/news/2016-10-07/mortgage-fraud-systemic-in-australia-ubs-survey-shows/7911978

Edited by Ex BP Golly, 12 Oct 2016, 05:34 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
Profile "REPLY WITH QUOTE" Go to top
 
Rufus
Member Avatar


Haven't we done this on other threads.
Take risks - if you win you will become wealthy, if you lose you will become wise
Profile "REPLY WITH QUOTE" Go to top
 
Ex BP Golly
Member Avatar


You don't think it deserves its own thread?

Readers might have missed this important information.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
Profile "REPLY WITH QUOTE" Go to top
 
Khaderbhai
Member Avatar
Wealthy Suburbanite

Ex BP Golly
12 Oct 2016, 05:32 PM
You don't think it deserves its own thread?
Already has it's own thread... http://australianpropertyforum.com/topic/30020612/1/#post10005269

:re:
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Profile "REPLY WITH QUOTE" Go to top
 
Ex BP Golly
Member Avatar


Khaderbhai
12 Oct 2016, 06:01 PM
Can never have enough threads for something as nefarious an issue as systemic mortgage fraud/ obtain benefit by deception.

30% of borrowers accessing more money than they should is good for investors like you isn't it?

Or do you think it places your investments at risk?
Edited by Ex BP Golly, 12 Oct 2016, 08:11 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
Profile "REPLY WITH QUOTE" Go to top
 
Khaderbhai
Member Avatar
Wealthy Suburbanite

Ex BP Golly
12 Oct 2016, 07:50 PM
30% of borrowers accessing more money than they should
Considering mortgage default rates are a fraction of a percent, I don't think 30% of borrowers are accessing more money than they should.

Even if a borrower makes a mistake on their application, the bank will verify these details against tax and employment records, so there's nothing to worry about.
Edited by Khaderbhai, 12 Oct 2016, 08:08 PM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Profile "REPLY WITH QUOTE" Go to top
 
Ex BP Golly
Member Avatar


Khaderbhai
12 Oct 2016, 08:07 PM
Considering mortgage default rates are a fraction of a percent, I don't think 30% of borrowers are accessing more money than they should.

Even if a borrower makes a mistake on their application, the bank will verify these details against tax and employment records, so there's nothing to worry about.
Who to believe, an internet random who proclaims himself a rich suburbanite, or UBS.

So difficult :wak:
Edited by Ex BP Golly, 12 Oct 2016, 08:22 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
Profile "REPLY WITH QUOTE" Go to top
 
Khaderbhai
Member Avatar
Wealthy Suburbanite

Ex BP Golly
12 Oct 2016, 08:21 PM
Who to believe, an internet random who proclaims himself a rich suburbanite, or UBS.

So difficult :wak:
If you don't believe lenders check details, then just apply for a loan and enter some false income data that doesn't match your payslips and tax statement.

You'll soon find out.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Profile "REPLY WITH QUOTE" Go to top
 
Ex BP Golly
Member Avatar


Khaderbhai
12 Oct 2016, 08:31 PM
If you don't believe lenders check details, then just apply for a loan and enter some false income data that doesn't match your payslips and tax statement.

You'll soon find out.
It must be so nice to be you....except, you are a confessed mortgage fraudster yourself aren't you Shadow :lol

"....Mortgage Settlements Australia’s national compliance and risk management director Paul Agnew says there are “numerous reasons” for the proliferation of mortgage fraud, including desperation and lower moral standards.

According to Mr Agnew, a “large number of people [now] believe that falsifying applications is part of the norm and not a crime”.

New technologies have also helped borrowers feel comfortable dabbling in mortgage fraud.

“Criminals now have easier access to the information and technologies needed to commit mortgage fraud,” he says.

Of course, while borrowers form a majority of those responsible for mortgage fraud in Australia – law firm Gadens believes at least 80 per cent of all successful mortgage fraud can be attributed to the borrower – they are not the only ones massaging the truth for their own gain.

The mortgage market’s fraudsters also include brokers, originators, valuers, accountants, legal advisers and lenders.

In its most pernicious form, fraud can involve a syndicate of market participants colluding to obtain loans or property by a variety of unlawful means, including providing false information.

And according to Veda’s general manager of fraud and identity solutions, Imelda Newton, mortgage fraud ‘rings’ are more common than one might think.

“Of the recorded 6,500 mortgage fraud incidents in Australia in 2011, there was a real mix as to the culprits,” Ms Newton says.

“Individual fraudsters did not dominate the incident numbers and nor did fraud ‘rings’ – both really played an equal part.”.....

http://www.theadviser.com.au/features/analysis/8401-to-catch-a-fraudst-er
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
Profile "REPLY WITH QUOTE" Go to top
 
Khaderbhai
Member Avatar
Wealthy Suburbanite

Ex BP Golly
12 Oct 2016, 10:56 PM
you are a confessed mortgage fraudster
Nope. I'm very honest.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
ZetaBoards - Free Forum Hosting
ZetaBoards gives you all the tools to create a successful discussion community.
Learn More · Register for Free
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply
  • Pages:
  • 1
  • 8



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy