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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.


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BFCSA: ABC News: Concern about decline in Lending Standards: ie Sub Prime Lending Australian Style

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Concern growing about decline in bank lending standards

Updated Fri 7 Feb 2014, 2:05pm AEDT          Pat McGrath

There is growing concern about the risks of loosening lending standards among Australian banks. A survey by the Swiss investment bank UBS has found increased competition is forcing local lenders to take on riskier loans. The trend is being seen as not only a threat to the stability of Australia's property market, but to the broader economy as well.

PETER LLOYD: There is growing concern about the risk of loosening lending standards among Australian banks.

A survey by the Swiss investment bank UBS has found increased competition is forcing local lenders to take on riskier loans.

The trend is being seen as not only a threat to the stability of Australia's property market, but to the broader economy as well.

Here's business reporter Pat McGrath.

PAT MCGRATH: UBS has asked the chief financial officers at Australia's major banks and regional lenders about the performance of their loan portfolios.

The survey found that concerns about the future of the housing market and competition in the sector had led banks to ease their residential and commercial lending standards in the second half of last year.

Rodney Maddock was previously head of strategy at the Commonwealth Bank.

He believes banks are being forced to compete for shrinking pool of credit demand.

RODNEY MADDOCK: When banks revenue line is really driven very much by the growth of credit, we've actually had historically very low credit growth for the last few years, I just think that's the biggest problem.

PAT MCGRATH: Extremely loose lending standards in the United States, in which banks were offering loans to people who had no chance of covering the repayments, are generally seen as the underlying cause of the global financial crisis (GFC).

Rodney Maddock says Australian banks also took on risky loans in the years before the crisis.

RODNEY MADDOCK: The immediate aftermath of the crisis, the lending standards were tightened quite considerably and you can actually see in some of the data that the spread between what was being charged to good and bad credit actually opened very considerably.

It would be natural I think that as the people become more confident about the economy, people who might have been seen as quite risky during a crisis become bigger risks.

PAT MCGRATH: After years of astronomical growth, US house prices plunged in the years after the GFC.

Australian house price grew by around 10 per cent last year, and are tipped to post similar gains this year.

Property analyst Louis Christopher says loosening credit standards could pose a risk to those prices increases, but he cautioning against reading too much into one report.

LOUIS CHRISTOPHER: Yes I agree that a loosening of credit standards particularly at the middle end or the top end of a cycle can cause problems on the other side of that cycle. There's no doubt about it.

PAT MCGRATH: But I guess it also demonstrates that there is strong demand, people still want to buy houses whether they are investors or first home buyers.

LOUIS CHRISTOPHER: At this point in time I got to say the buyer demand in this country is very, very strong. It does depend on which capital city we're talking about but overall its probably some of the strongest buying conditions I've actually seen since really about 2009.

PAT MCGRATH: Economist Steve Keen has been predicting for years that unsustainable credit growth in Australia is leading to a property bubble that will have to burst eventually.

He's not surprised that banks are reporting a loosening of lending standards.

STEVE KEEN: If I was I'd be surprised when the sun comes up. The capacity for financial sector to forget the mistake that led to the previous disaster is legendary throughout human history and we're just repeating it now with of course the assistance in Australia of the Government providing all sorts of additional reasons to overheat the market.

PAT MCGRATH: Those reasons, Steve Keen says, include allowing self-manage super funds to invest in property, as well as fuelling investor demand for housing by allowing negative gearing.

STEVE KEEN: You can't all get rich selling second hand houses to each other. You've got to sell them to somebody and normally that somebody else has been first home buyers. Well, because price has been driven so far out of reach of incomes, the first home buyers are simply dropping out of the market like flies and we now have the lowest level of first home buyers I think in the history of Australian housing market.

So that would make it unsustainable were it not for the fact that we've opened up the superannuation system as well and of course we also have non-resident buying of Australian new properties.

PAT MCGRATH: He's now tipping Australia's apparently property bubble could burst within the next two to five years

STEVE KEEN: We're all still focusing on the mistakes the Americans made in the housing market but their level of debt, mortgage that is down to about 60 per cent of GDP, we're 85 per cent and heading north so we are incredibly fragile and to believe this is a successful way to manage an economy I think is nonsense.

PETER LLOYD: That's economist Steve Keen ending that report from our business reporter, Pat McGrath.

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