If you have been following Denise Brailey, a consumer advocate and president of the Banking & Finance Consumers Support Association (BFCSA) or investigative journalist at The Australia, Anthony Klan you will know there is a potential Subprime crisis brewing in Australia.
Over the past few months we have heard numerous stories of home loans being extinguished by the Supreme Court on the basis they were fraudulently provided to people who couldn’t afford them. In some cases, lenders provided loans to individuals that had been unemployed for some time, and almost always overstated the borrower’s income. Despite reassurances our banking system was best practice, hundreds of emails from lenders and brokers has surfaced demonstrating predatory lending practices.
In June, one of these Subprime lenders appealed two Supreme Court rulings in the High Court in hope of reversing what could be a nasty precedent for their industry. They lost and the floodgates started to open.
Today, Denise Brailey has been briefing a Senate inquiry in Canberra. She told the inquiry in the past six weeks she has seen 400 low-doc or no-doc loans and each one had been tampered with. “Not one of them is a clean document,” she said.
According to Mrs Brailey, Fitch ratings estimate 8 to 10 percent of residential mortgage-backed securities (RMBS) comprise of low-doc loans. Fraudulent loans could top $2 billion.
In a bid to kickstart a frozen securitisation market after the GFC, the Australian government had purchased over $15 billion RMBSs and is potentially holding many of these fraudulent loans.
» Banks cheated on home loans, inquiry told – The Herald Sun, 8th August 2012.
» Subprime borrowers ‘let down by system’ – The Australian, 5th June 2012.
» The mortgage sting – The Australian, 5th June 2012.
» Courts rule against lenders as boom-time low-doc loan frenzy unravels – The Australian, 13th June 2012.
» Emails detail banks’ love for low-doc loans pre-GFC – BusinessSpectator, 13th June 2012.
» High Court rules against financier of low-doc loans – The Australian, 23rd June 2012.