Australia’s unprecedented housing bubble has forced a significant number of mortgage applicants to falsify loan applications, simply to get a foothold in the ever challenging market.
A recent UBS survey found mortgage fraud in Australia was rife, with 28 per cent of applicants admitting to falsifying loan documents. Many had either overstated household income, overstated asset values or understated debt or living expenses.
Borrowers barely able to break into the market were the group most likely to stretch the truth, with UBS reporting, “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.”
AMP’s 2016 Financial Wellness Report, released today, found 24 per cent of workers in Australia are now classified as “financially stressed.”
UBS indicated its survey was likely to understate the number of falsified mortgages and suggested mortgage fraud was “systemic” in Australia, and especially prevalent among brokers.
Wayne Byres, Chairman of the Australian Banking Regulator, APRA, has told the Senate Economics Legislation Committee, the watchdog has instructed Australia’s largest banks to have their external auditors conduct a review on their fraud control procedures.
Byres told the committee, “We have told the larger institutions that we’ll be asking them to have their external auditors do a review of what are essentially fraud control mechanisms to ensure that there are mechanisms in place and…are working,”
With such systemic fraud, there are fears a return to more prudent lending could send Australia’s overextended housing market into a downwards spiral.
Earlier this month, Roy Morgan Research found 311,000 mortgage holders in Australia had little or no equity in their home. A cooling of the market would plunge hundreds of thousands of mortgage holders into negative equity.
» Mortgage fraud ‘systemic’ in Australia, UBS survey shows – The ABC, 7th October 2016.