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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: Good, Bad and Ugly of the RMBS Resurgence - Alan Kohler

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http://www.abc.net.au/news/2014-04-17/kohler-the-good-bad-and-ugly-of-rmbs-resurgence/5396428

The good, bad and ugly of RMBS resurgence

The Drum

By ABC's Alan Kohler

Updated 17 Apr 2014

The mortgage-backed securities market is booming and bodes well for bank competition. But it's driving house prices higher and making it even harder for first homebuyers, writes Alan Kohler.

After five years of near death, the residential mortgage-backed securities (RMBS) market in Australia is roaring back to life, which is both good and scary.  Good because the banks might finally get some competition from non-bank lenders again; scary because the resurgent supply of prime and subprime mortgage money from yield-hungry investors is not being matched by the supply of new land to lend against, so it's just driving house prices higher.................We are seeing two quite different markets being mixed together: one for credit that is active and plentiful (call this one nitro) and one for land that is short (call it glycerin).

A large and growing proportion of the securities are backed by non-conforming, or sub-prime loans, paying higher yields. These are about half "low doc" (not much detail on the borrower) and half to borrowers with bad credit ratings.  According to one issuer I spoke to this week, the buyers are apparently church funds, health insurance companies and state treasuries that prefer the risk/return equation of sub-prime mortgages.  But most of the RMBS being issued are AAA securities and, surprisingly, a lot of them are being bought by banks, which are, in effect, funding their competitors.

They are doing it because the furious competition, and therefore high interest rates, for retail deposits has filled their coffers and there isn't enough demand for credit to soak it up. Buying AAA-rated mortgage securities is an easy way to make a return, even if you don't know the end customer and can't sell them insurance or super.  Money has been pouring into bank deposits for a few years, and now, once again, it's pouring into the arms of "shadow banks" at lower interest rates, reminiscent of the non-bank lending boom from 2003-2007.....................

The only problem with this idyllic scene is that all the money and lending competition is only pushing up real estate prices.  There simply isn't enough land being released in Australia to match either the demand for housing or the supply of credit.  Bob Day, the Family First Senator-elect and one of Australia's biggest home builders, calls it the "Baptist/bootlegger" problem.

The Baptists and the bootlegger were both in favour of prohibition for different reasons: one for misguided morality, the other to make money. He says that about 15 years ago a similar (non-collusive) coalition of environmentalists and developers formed in Australia to restrict land release.  The result, says Day, is that while the cost of building a house has come down, getting land to put it on is hard and expensive. He says that 20-30 years ago the price of a block of land was about 40 per cent of the cost of a house; now the land cost is 2-3 times the cost of a house...............

Will the Coalition Government regulate the supply of credit or restrict negative gearing? Unlikely.  So it looks like your super will have to go towards buying the kids a house: they'll never be able to afford one.

read more http://www.abc.net.au/news/2014-04-17/kohler-the-good-bad-and-ugly-of-rmbs-resurgence/5396428

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  • setup
    setup Sunday, 17 August 2014

    The property prices have gone through the roof and are unrealistic. This generation have to work for the rest of their lives to pay of their home. We have become a nation of slaves to the banks.

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