Up to a third of Australian mortgages could be "liar loans" based on factually inaccurate information, investment bank UBS has warned.
The global banking giant has followed up a survey of home loan borrowers that it first conducted last year, when it found evidence of widespread mortgage fraud.
The latest detailed survey of more than 900 people who took out a home loan in 2017 has found that only 67 per cent responded that their mortgage was "completely factual and accurate", down from 72 per cent of 2016 borrowers.
The vast majority of the mistruths appear to be white lies rather than total porkies, with a quarter of 2017 survey respondents saying their loan application was "mostly factual and accurate", while only 8 per cent admitted to their information being only "partially factual and accurate" — 1 per cent refused to say.
Given the average turnover of home loans in Australia, UBS has estimated that around $500 billion worth of outstanding home loans contain misstatements about incomes, assets, existing debts and/or expenses.
With just under $1.7 trillion of mortgage debt outstanding, that means home loans based on inaccurate or fraudulent information account for 29 per cent of the total, and 18 per cent of all private sector debt in Australia.
Given that the average scale of the misstatement across income, expenses, assets and living expenses was between 10-12 per cent, UBS has warned that it makes Australia's banks even more vulnerable to a housing downturn than most people think.
"This survey suggests many people have come to take house price inflation as a given and are prepared to be factually inaccurate on their mortgage application to ensure they get access to housing leverage," UBS warned in the report.
The investment bank has an "underweight", or sell, rating on Australian banks and has warned that loan losses may be bigger than expected given that many borrowers are in a much weaker financial position than the banks and regulators believe.
That would lead to even worse consequences for the Australian economy than policymakers expect if the housing market turns down.
UBS also warned that the banks may be vulnerable to litigation if home prices stop rising and over-indebted customers start defaulting.
It argued that more needs to be done by the banks to verify loan applications, starting with a requirement to see lodged tax returns.
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
You'd have to be a total moron to tell people you have defrauded your bank, so how many lied to the pollsters?
You are right, almost everyone exaggerates on their loan application, but it doesn't matter because every detail that matters is checked and rectified before the loan is submitted.
This story is just one more load of twaddle that is being pedaled by people who don't know anything about the lending process.
Take risks - if you win you will become wealthy, if you lose you will become wise
Rufus has excelled himself. UBS Bank knows nothing about the lending process.
Clearly the people who conducted the survey don't.
What they are saying is that in a survey one third of those who took part admitted they had exaggerated in their applications. I can tell you that everyone has a rosy idea of the value of their car, their furniture, their artwork, the value of their coin collection, their vintage car or motorbike, their caravan, their boat, their tools of trade, hell they'll even exaggerate the amount they think they have in their savings account, and they will tell you they earn a bit more than they really do.
But none of that matters a hoot.
Take risks - if you win you will become wealthy, if you lose you will become wise
Because property always goes up. So the value of the bank's asset will quickly rise enough to make sure everything is fine and dandy.
The house is the security for the loan - it is not and never will be the "banks asset". The banks asset is the loan itself, ie the future cash-flow contractually required to be paid by the borrower for the contracted period of time.
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.
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