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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: Paddy Manning on Australian Sub Prime Crisis ticking time bomb loans

Posted by on in ROYAL COMMISSION URGENT
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http://www.crikey.com.au/2014/08/01/the-next-subprime-mortgage-crisis-in-the-making/

The next subprime mortgage crisis in the making

|Aug 01, 2014

 

We’re not as immune from the mortgage lending laws that triggered the Global Financial Crisis as we might think!  It is a bit of myth that Australia dodged the global financial crisis because we had tougher lending standards than the United States, where ticking-bomb subprime mortgages were packaged up into toxic derivatives like collateralised debt obligations, slapped up with dodgy AAA credit ratings and on-sold to financial institutions investors all over the world...............

 

Swept under the carpet in Australia during the GFC was the prevalence of loan application fraud, a form of predatory lending that consumer advocate Denise Brailey has been campaigning to expose for years. 

The transfer of responsibility for consumer credit laws was transferred to the Commonwealth under the National Credit Act 2010, with the Australian Securities and Investments Commission taking over regulatory responsibilty. ASIC’s view was that there was no systemic predatory lending problem in the banking system. One of the odder moments during the recent Senate inquiry into the performance of ASIC — which was rightly preoccupied with financial planning scandals in the Commonwealth Bank — came when Brailey appeared on the afternoon of February 20. ASIC chairman Greg Medcraft had appeared earlier that morning, in the main event. The committee members either had half an eye on the clock or were simply unconvinced by Brailey’s argument that there was still a systemic problem with predatory lending, particularly for investment.............

Brailey runs the Banking and Finance Consumers Association, and her warnings cannot be dismissed. She has first-hand experience dealing with hundreds of victims of dodgy lenders and is right to sound the alarm. Continued low interest rates, upward-spiralling residential property prices propped up by self-managed super funds, and deteriorating lending standards are all adding fuel — and with that comes the risk of fire.

In May CHOICE warned against risky lending practices, with banks extending 40-year loans worth a terrifying 120% of the value of the property — so the borrower starts off with negative equity. Yes, it is tough for young borrowers to get into our inflated property market, but this sort of lending cannot end well. Better to fix the underlying problems in the housing market — like negative gearing, which undermines government revenue, entrenches advantage and pushes up prices artificially — than shovel young borrowers into a lifetime debt trap.

Yet we learned in this must-read piece a fortnight ago that the big banks are resisting the Australian Prudential Regulation Authority’s move to toughen up lending standards through its draft prudential practice guide for residential mortgages, which includes a bunch of good advice on how a borrower’s income is verified (especially when self-employed), proper use of interest rate buffers, how living expenses are estimated for the purpose of loan serviceability requirements, limitations on the use of lending policy overrides, and oversight of applications from third-party loan originators like mortgage brokers. For example: “a sound oversight process … would include ensuring that all material facts are contained within the application and that the borrower is not asked to sign incomplete application forms for later completion by the third party”. You don’t say!.........

The Australian Bankers’ Association say APRA is being too prescriptive. They are wrong. We will have missed the lesson of the GFC if we just pat ourselves on the back. Loan standards must not be a casualty of a welcome renewal of competition. Already glowing from their wind-back of the previous government’s Future of Financial Advice reforms, the big banks chasing growth at all costs must be saved from themselves.

 

 

 

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