Australia’s low doc loan scandal exposed on the ABC’s 7:30 report.

The ABC has tonight featured a story on Australia’s developing low doc/sub-prime scandal on the 7:30 report. The video is avaliable on iView with the segment starting at about the 16 minute 27 seconds.

» Broker blows whistle on sub-prime scandal – The ABC, 13th August 2012.




26 Comments

  1. So here we have the smoking gun…

    How totaly predicatable!

    Capital gain as income

    Capitalised interest

    100% false loan documents

    Hoplessly indebted ordinary people victim/prey of the rapacious credit peddler finacial larconists

    ‘The bezzle’ in all its glory

    The RBA credit figures hopelessly inaccurate & fudged

    The denial staggering

    A nation dependent on AAA credit rating, trust and the kindness of strangers to rollover external debt

    Unquantifiable internal subprime debt bomb and the top 3 – 4 highest mortgage debt/gdp ratios in the world

    What a total SNAFU

  2. So how long have the banks been doing this?

    Is this the reason for the bubble?

    Is this the reason why house prices are so ridiculously high?

    Is this why I couldn’t afford to buy a house 4 years ago when I was trying to?

    And in fact I still can’t afford to. The prices are still simply too high for me and probably many others. We’re forced to forever be stuck on renting, wasting our money away.

  3. That explains how the average wage as measured by academics is so grossly out of whack with reality. It’s all because of adding equity to a workers wage.
    Annual wage. $40,000
    Annual ‘equity’. $30,000 (increase in value of family home)
    Average Income. $70,000 (wage + equity)

  4. I met Kate Thompson (Morgage Miracles) back when this was at its peak just before she got raided by the police.
    They (Morgage Miricles) were like sharks in a feeding frenzy and debt wasn’t an issue as your capital gain would easly pay the interest on the loan for eternity.
    Luckily something told me deep inside to walk away…………………………………..

  5. @Golan, it would be one reason.

    Our governments have also had a monumental role to play. We have seen negative gearing, 50% capital gains discounts, first home owners grants, boosts on top of first home owners grants, new home grants on top of boosts, on top of first home grants. Super funds can now leverage into asset bubbles, there is hardship arrangements to allow people struggling with huge mortgages to access and empty their super ready for retirement, changes to foreign investment review board legislation. The states had stamp duty relief, and I’m sure there are many other incentives that I have forgotten about, or left out.

  6. This fraud combined with Negative Gearing and First Home Vendors Boost is why you can’t afford a home.

    I’ve emailed 4corners 3 times to do a story on Negative Gearing so that Australia could officially wake up to this taxpayer rort. I’m guessing that there must be a few specufestors working at the ABC.

  7. The dishonest are now prisoners/captive to the honest

    If you are honest and are only willing to borrow and buy what you honestly know you can afford to repay then you shold wait until the dishonest are totally financially exposed.

    Do not buy NOW and bail out the dishonest and the dishonest financial institution larconists

    Wait until they are all begging you for your honestly earned & saved deposit as the asset price

    The debt will be worthless, do not ASSUME THEIR DISHONEST DEBTS

  8. The government is equally resposible (both Lab & Lib).

    They turn a blind eye to most of the rorting with regards to the Housing Bubble because they are scared that they will lose votes if Joe Speculator loses 30% on his inflated dogbox.

    Just say the words ‘Negative Gearing’ or ‘FIRB’ to a politician and watch how fast they run away.

  9. So can we assume that the reason why the banks were so predatory with loans is because of securitisation just like during the US subprime crisis?

  10. You don’t have to know these exact people. Only their kind. These are the “MEGA MORTGAGE MUGS” popularised by We_Love_Ha_Ha.

    They were NEVER bidding with their own money.

    The “investors” represented a disproporptionate risk because they were over exposed to a single asset class and were leveraged heavily with poor cash flows and reliant on NG/capital gains to keep leveraging. And yet the banks were aware of it. Reliant on it in fact.

    All at sea on an ocean of paper promises.

  11. I’m a bit sick of watching all the Aussie banks spend Billions on advertising when the same Billions should be in the Loss Reserve.

    What a joke

  12. I also am on the abolish negative gearing bandwagon, house prices are unsustainably high and now is a bad time take a 600k mortgage to be enslaved to debt but the problem is if you can’t beat ’em you gotta join ’em to stay ahead in these times.

    I somewhat reluctantly purchased (with a family member) 3 homes off the plan in a non-urban NSW location and all have been on-sold prior to completion with tidy returns for shuffling some paper.

    It would take me 2 years to save the same amount of profit and I save 60% of my wage each week. I understand there is risk involved but it seems there will always be somebody on the other end of the ponzi scheme willing to buy a share.

  13. @ Unsure, try that strategy in Japan, USA, UK, Ireland, Greece, Spain, or even China.

    It is the belief that ‘somebody’ will always be there that causes this entire mess. When ‘some’body turns to ‘no’body your strategy fails spectacularly, wiping out massive “equity”.

    Tulip, mississipi, dot com, property, it doesn’t matter the commodity:- All bubbles fail from the same source. Human emotion.

  14. So, with CommBank announcing a $7 billion + “profit” that will be nicely privatised, anyone on here willing to bet on the length of time until they are on the lookout for a “small bailout” at the Taxpayer’s expense??

    “The dollar is at an all time high plateau and will stay there for a considerable time”

    “The Stock Market is at an all time high plateau and this is to be regarded as “The New Normal” for the foreseeable future”

    – and – “We are different here, ALL our Banks are responsible lenders, and follow “Best in Class” lending practices”

    Remember the first two comments hark back to the 1920’s and were the rage just before the Great Depression.

    “What goes around comes around” – and “History has a habit of repeating itself”.

    Rent and wait NOW, buy at pennies to the dollar LATER.

  15. The power source for the ATM is failing… credit growth.

    I anticipate a 50%+ decline over 5 – 7 years

    It will be 40% in cheap 50% for medium and 60% for high end

    Occupancy density will rise to 3+ therefore rental will stagnate or decline

    Banks Govt owned

    15% unemployment

  16. @ P & TS,
    If you call the federal government stepping up to buy $16billion of RMBS, then our banks have already had quite a considerable bail out. CBA still chucked out a nice dividend to it’s shareholders 🙂

  17. I have given up trying to work out what is really going on with this country, everything is so screwed, RBA came out and said yesterday that the predicted housing price collapse won’t happen. To further muddy the waters of reality the share-market has been going up’n’up….. why? I read the news in Europe…. the real news, things are really bad, GDPs continuing to fall, Greece & Spain hanging on by shoe strings….. even high suicide rates of their people due to the desperation they now face.

    Hell, even here jobs keep vanishing….. almost every week. I noticed that listed companies are claiming decent profit increases….how? Vic government now faces a potential combined billion dollar lawsuit from Tatts & Tabcorp, so how the hell can things be doing so well that markets keep going up, that, according to the banks people have started borrowing more, that housing is ok….. how?

    If this were a video game it would be no big deal, but its reality… isn’t it?

  18. @ P & TS Matty Unsure

    A net 1489 mortgages were extinguished in the state of Victoria past 12 months i.e. negative mortgage growth

    In an ordinary affordable market (not a land price bubble) you would expect 15 – 20,000+ net increase in mortgages

    All those relying on selling to a greater fool, the pool of greater fools is rapidly contracting and the competition to find them is about to become a crush at the exit door

  19. @PETER_W, Unemployment would be between 10-15% now. Most likely more toward the 15% mark. I’d say it would have been 10% around the 2008/2009 period. Joblosses are more prevalent now as the media is making mention of them, and there are more of them too. There were joblosses occurring to from that period too (2008/2009).

    @Romsey, I know the RBA claimed that a housing price collapse is not on the cards. Makes you think doesn’t it? I mean I know the RBA’s decisions can (and does) effect the economy, but I also think, what would they know about property really? And why would they come out and say such a thing in the first place? Sounds like a “…calm down everybody, we know what’s going on…”, then exit stage left, or say, “…we didn’t think that would happen…”.

    Talk about irrationality happening all round. With less actual wealth (or money) around, really high debt/credit issuance and consumption, small business, and bigger ones too (not big ones) going to the wall, price of everything going up, salaries on the decrease,… we have a stock market and the dollar on the way up, as well as property prices still way too much.

    I speak off the top of my (empty slightly irratic) head, but don’t stock markets always shoot for the highest stars then everyone wakes up the one morning, and there are brokers jumping out skyscraper windows?

  20. Romsey, I hear you.
    Bad = Good.
    Down = Up.
    Get in or be priced out forever.
    It’s all emotion. Sure, anything can happen, but what’s the likelyhood of it?
    Aliens? Sure. Really? No, not.
    Nothing is fixed in Europe.
    China is hot air (& after a 3 week tour) built on shitty foundations (buildings/infrastructure).
    Keep your money in your pocket. Try & keep your Job.
    We’re all adults. We are responsible for our actions.
    Don’t argue now, they won’t hear. Just don’t let them say nobody knew/ever told me.

  21. If you want to know how its all going to end when the mining boom is over…….look to Ireland. Wanker Bankers, property developers and small time investor wannabees leveraged up to their neck are to blame. Not to mention financial regulator assholes a-hole pollies. Check this out……ya gotta laugh

    http://www.youtube.com/watch?v=IPNyU0a2ko8

  22. The delusion and denial is staggering. Read Brailey’s submissions carefully. These people (100 – 250,000) have signed up to a ticking debt time bomb ($50 – 120 billion), they will all default eventually because they have insufficient income to service the debt. The debt compounds and the loans roll over and are refinanced rinse & repeat until LVR = 100%. Check the Victorian DSE statistics 104,000 housing sales p.a. 190,000 mortgages lodged p.a. Check AFG lending data 17.3% FHB loans + 10.6% 2nd 3rd 4th upgrade loans = ONLY 27.9% of ALL loans made are to actually live in the dwelling. 350,000 NG’s loose $10,000 p.a. on incomes of < $35,000 p.a.

  23. To further fuel the fires of hell, a quote that made me take note was made by the Daily Reckoning,

    “Australia’s financial sector is now larger than all of the Eurozone’s by market cap. That’s despite our GDP being about a twelfth the size. When something is this far out of whack, it tends to revert. And that means a plunge in ASX financial shares.”

    So our banks collectively for a nation of about 21 million are worth more than all the banks in the entire Eurozone and its population of many hundreds of millions. I need a whiskey.

    Having just watched the ABC report on the sub-prime of Oz I didn’t realize that the fed government was actually involved in approx $57 billion dollars worth of fraud, nice.

    I also like the bit where the banks are actually continuously refinancing people to avoid them defaulting for more than 4 years despite not making a single payment, of course it just serves to make the overall debt bigger.

    Now I need scotch.

  24. Low doc, no doc, full doc, whatever, to suggest that people are starting to stop payments on their mortgages to gain access to their super funds is beyond a joke. They ought to outlaw access to super before preservation age regardless of circumstance. Super was always the last frontier for the property industry, perhaps this is they way they can access it. It’s only a matter of time before the spruikers start publically advising people to do it and we know the Government won’t care.

    http://theage.domain.com.au/real-estate-news/home-owners-raid-super-to-pay-mortgage-20120818-24fda.html

  25. This week we took a call from our family in Oz…. we live in the UK. They called and said “isnt it great to see the UK economy is doing better, hopefully you’ll be back on track now.”

    We were perplexed.

    Just recently the news has been saturated with stats about our ever deepening double dip recession, our rising unemployment, still falling property prices.

    Yet somehow, our Australian relatives had been fed the line that all is ok in the world of finance!

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