Hope for mortgage "victims" - Australian subprime starts to implode

[boomtown]

Article in the Australian says that there has been widespread fraud by mortgage brokers misstating income of borrowers. When those borrowers then default, judges are extinguishing the mortgages leaving the borrowers with the house.

"Lenders have been throwing everything they have at these cases because they know there are thousands, probably tens of thousands, of people who have been affected," said Geoff Roberson of Champion Legal, who has run the cases against First Mac. "The problem for many borrowers is they don't know they have been wronged and simply roll over when the banks come knocking."

"Every time the borrowers receive the forms they are blown away," Ms Brailey said. "Incomes have been grossly exaggerated, false employment job descriptions have been entered or they have been stated as being employed when they're not. In one case, a lowly-paid deckhand was described as a ship's captain and described as earning $150,000 a year."

One email from a Macquarie Bank business development manager to brokers says: "Why not try Macquarie for the below reasons . . . No docs - Client only needs to be self-employed for 1 day or more . . . No assets and liabilities required, no income needs to be stated!!!"

This has serious implications for the stability of the Australian RMBS market.

According to Fitch Ratings, low-doc loans comprise about 8-10 per cent of every mortgage in the Australian securitised mortgage market. Fitch analyst James Zanesi said that proportion of low-doc loans was similar in the wider, $1.2 trillion Australian mortgage market.

According to Fitch, low-doc loans were more than four times as likely to be in default than standard loans, with 5.5 per cent of all "prime" low-doc loans in default compared with 1.26 per cent of all standard loans.

5.5 percent of Australian mortgages in default? Hang onto your hats looks like this could be an interesting ride.

 

[Sunfish]

A friend of Mrs Fish, caught up in the Storm Financial debacle, had her mortgage extinguished by Comm Bank. Obviously a dodgy deal done they wanted to keep under the carpet.

 

[geoffw]

5.5 percent of Australian mortgages in default?

No. 5.5% of lo docs in default. And lo docs are 8-10% of all mortgages. So that's .55% of all mortgages. Plus full docs- 1.26% default, 90% of all mortgages. 1.134%. Total 1.6834% of all mortgages together. That's hardly imploding.

Don't forget to attribute something when you quote it please. Although I can only read a part of the article because it's behind a paywall.

 

[pennyk]

Great response Geoff.

Dont mortgage applications have to be signed, including the estimate of income/ expenses?!?

This article makes it sound like people had no idea that the brokers and banks were using higher income estimates. In most cases, I can imagine that it would have been the borrower who gave these higher estimates. If not, they would've at least signed the document, so they could have corrected any mistakes.

This seems to be another example of people blaming others for their misfortune.

 

[boomtown]

Geoff

Absolutely right on the percentages. I wrote the post at 6am and clearly was not thinking straight.

Apologies.

 

[wylie]

Great response Geoff.

Dont mortgage applications have to be signed, including the estimate of income/ expenses?!?

This article makes it sound like people had no idea that the brokers and banks were using higher income estimates. In most cases, I can imagine that it would have been the borrower who gave these higher estimates. If not, they would've at least signed the document, so they could have corrected any mistakes.

This seems to be another example of people blaming others for their misfortune.

This was my comment to hubby this morning. It's like trying to say that the accountant is responsible for submitting wrong tax figures. The buck stops with the person who signs the application.

 

[Sunfish]

This was my comment to hubby this morning. It's like trying to say that the accountant is responsible for submitting wrong tax figures. The buck stops with the person who signs the application.

I would think that if mortgages are being extinguished, then it would NOT have been a simple case of fraud by the borrower. The wording indicated to me that an intermediary or bank official deliberately did the fraud.

If someone desperately needs a loan and the loan arranger gives a wink and a nod and says "it will be all right, I'll arrange it" the financially naive will say thanks and shake his hand. During the Storm Fin affair, all sorts of dodgy applications were accepted [some not even signed, we are told]. I know of one case where a couple lost their house which was in joint names, but the wife had no idea what was happening. Says she didn't sign anything.

Even professionals will drop their standards in the euphoria of the times.

 

[Bigtone]

No. 5.5% of lo docs in default. And lo docs are 8-10% of all mortgages. So that's .55% of all mortgages. Plus full docs- 1.26% default, 90% of all mortgages. 1.134%. Total 1.6834% of all mortgages together. That's hardly imploding.

Don't forget to attribute something when you quote it please. Although I can only read a part of the article because it's behind a paywall.

thankfully someone can read

 

[Crabnet]

Don't forget to attribute something when you quote it please. Although I can only read a part of the article because it's behind a paywall.

A lot of the time Google is able to penetrate the pay wall for some reason.
http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&sqi=2&ved=0CG0QFjAA&url=http%3A%2F%2Fwww.theaustralian.com.au%2Fnews%2Finvestigations%2Fhope-for-mortgage-victims-as-homeowners-winning-battle-against-banks%2Fstory-fn6tcs23-1226382076020&ei=HwrMT4LHHLCQiQfvvejLBg&usg=AFQjCNFD7vPTGJcjNt7ka9LbP1tAgjIR2w

 

[Aaron_C]

Yes lots of lo-doc fraud occurs due to false declarations etc. Let's face it - if you really wanted to defraud a bank or your broker there are plenty of ways to do so. Which normally isn't a big problem for a bank because they only lend 80% of your security so they are covered even if you do default. However, the stupid credit laws etc make it hard for lenders when it is clearly a borrower defrauding them yet claiming otherwise to get out of a deal they signed. Very annoying.

 

[Token Funder]

Not surprisingly, the vast majority of borrowers making the "lies were told but not by me" argument are property investors of one sort or another.

One of life's little ironies is that it is the cohort most dogmatic about property as a low risk, perpetual money making machine and most vociferous in their complaints about the inability of banks to understand just how fabulous a borrower they are, that are the least likely to want wear the consequences of their decision.

 

[Aaron_C]

I concur TF. People can't have their cake and eat it too.

 

[Bigtone]

Not surprisingly, the vast majority of borrowers making the "lies were told but not by me" argument are property investors of one sort or another.

One of life's little ironies is that it is the cohort most dogmatic about property as a low risk, perpetual money making machine and most vociferous in their complaints about the inability of banks to understand just how fabulous a borrower they are, that are the least likely to want wear the consequences of their decision.

everyone who buys a property is in effect a property investor.

 

[Marty McDonald]

I concur TF. People can't have their cake and eat it too.

Stupid lending policies and stupid borrowers don't mix.

 

[marg4000]

I read the article in The Australian, and it would appear from the report (and we all know newspapers tell the whole truth and nothing but the truth, don't we!!) that there are reports of applications being "doctored" after signature and before being presented to the bank. Yes, by the big bad mortgage brokers according to the report, who were only interested in whopping commissions.

Seems to be a case of "he said, she said etc.".

High Court challenges to come.
Marg

 

[Terry_w]

Here is an article from Today's papers

Bankwest ignored all safeguards, says court
June 4, 2012 - 3:36PM
Read later
The Victorian Supreme Court has sharply criticised the conduct of Bankwest in allowing the wife of a businessman to sign multiple documents in support of $18 million of loans when she had next-to-no business knowledge and no advice or warnings about what she was signing.

In a decision that was intended to answer procedural questions in a case brought by Bankwest against Naseem Abdul and his wife, Theresa, the court said it would be unconscionable for the bank to pursue a claim against Mrs Abdul.

Read more: http://www.smh.com.au/business/bank...-says-court-20120604-1zrl1.html#ixzz1wnvfpfwW

 

[Token Funder]

everyone who buys a property is in effect a property investor.

Couldn't disagree more

 

[devo76]

I think bigtone is correct. PeoPle are not spending heaps of $$$$$$ on chocolate bars here. It's a purchase you commit to, look after and You hope/expect to preserve the cash you put in and build on that over the years.

For many it may not be a good investment.but an investment it is.

 

[Aaron_C]

Investment or home-owner it makes no difference under the NCCP as long as it is a natural person buying it and it is residential property.

 

[matto_]

Did I read peoples mortgages are being canceled. Not bad if you can get it.....