A BFCSA comment on an article by MPA on Pg 22  Jan 2016

The words in italics are taken from the article and the link is at the end of this piece.

Are Lenders burying Low Doc Lending in the wake of the credit crisis?  

MPA conducted an investigation.  Yet MPA like so many others do not realise that most purchasers of Low Docs are not “self-employed” persons, but rather as BFCSA has discovered, are deliberately targeted ARIP’s.

In 2000, Bankers set the target market: ASSET RICH and INCOME POOR:   Pensioners who owned their own homes and were debt free.   Bankers dreamed up the crucial “ABN FOR A DAY SCAM.” They advised the regulators that their products were to be sold to “self-employed business people who could produce two-year documentation to prove income etc.  Sounded good and Regulators never checked to see of bankers were telling the truth.

Instead as planned, Bankers permitted and approved pensioner targeted applicants to be “self-employed for one day.”  The Majors collectively sent emails from BDMs to Brokers suggesting “Good News.”  We have copies.   In 2005, CEO’s asked their BDM’s to send out emails (we have copies) to all Brokers on the Broker Channel, and Bank Managers on the bank LOGO net: “Good news you can now do ABN’s for a DAY. No GST, target older persons……………”

In September 2015, John Symond declared the Death of Low Docs.  As founder of Aussie Home Loans, he should know, as he was one of the original creators to jump on board with the Major Banks around 2000.  He claims he created this product in the nineties.

The commentator said: Low Docs were built on deception and false hope. “It was as if Symond announced the destruction of a particularly insidious disease.  The evil Liar Loans.  BUT recent statistics do suggest that Low Doc loan market has suffered a rapid decline.”

The Big names: Bluestone, Virgin, Macquarie have all dropped out of the Low Doc market. Aussie dropped from 15% to 2%.  When MPA contacted Symond we were told: “Aussie never sold Low Doc”  (a technical whopper perhaps?)  BFCSA has the files……………………sold by Aussie but yes, Symond’s Aussie company NEVER APPROVED these loans.  Aussie sold Low Doc Loans and in 2011 told brokers to “shred the original LAFs.”  Why shred the evidence?   50% of these loans were sold by Brokers like Aussie and 50% sold by Bank Staff.

MPA and BFCSA Historical records:

Low Docs were first introduced in Australia in 1991 by Citibank.

“By 2003 Low Docs made up 3% of all mortgages sold.  In 2005 newspapers reported a Low Doc boom.  Predictions product would outstrip mainstream mortgage products by a multiple of four from $10 billion in 2003 to $20 .2 billion by 2009.  More houses defaulted on their mortgages.

Today more than 10% of loans are high risk Low Dc Loans. And 7.5% are in arrears 90 days or more.”

Who were they designed for?  Supposed to be according to Bank lending policy guidelines, designed for “small business enterprises” BUT…..

Brokers wrote around 50% of the application market.   Bank Managers and Officers wrote the other half.

STATS: The ABS estimated in June 2006 there were 1.64 million small business operators who generate about 30% of Australian economic activity and in turn they generate 3.6 million jobs.

Aggregators say they “ensure responsible lending practices are maintained.”  Suddenly they say Bankers are looking closely at their Low Doc applications.  Well that’s a first time in 16 years of obscene profits from these dreadful products.  Yes, indeed there were policies that permitted bad credit history and up to 130% LVR via of the use of alarmingly erroneous valuations.  All loans were UNVERIFIED and ASIC has finally admitted as much, after the damage to ordinary citizens started to surface in mainstream media.

Westpac is still suggesting “Low Docs make up a small percentage of overall lending for Major Banks.” Westpac has the greatest exposure to this sector.  Westpac suggests only 5.5% of its loan books are Low Docs.  CBA claims 4% exposure.  We would challenge that.

In the wake of the subprime crisis, Major Banks have been tweaking their own policies regarding these loans.”

CBA claim borrowers asking for more than 60% LVR cannot have a discount.  They have made the product more expensive!  They have no appetite for banning their own product and they cannot be trusted.

RAMS imploded in the credit crisis in 2007.  They were the fore-runners in 2004/5 and won Industry awards. Westpac purchased the name and took over some of the loans. Director Kinghorn then ran the RHG “run down program” for the appalling loans we were busy investigating.  The ones we saw were riddled with fraud and bad lending practices.  RHG wrote response letters to BFCSA in relation to a number of cases in 2009 onwards suggesting these loans were “standard industry practice.” This was to suggest Low Docs were “anything goes” in the way they were ticked as “approved.”  RHG admitted it never ever phoned the customer and never verified income. 

The incomes were exaggerated by over $100,000 after we found the use of the RHG service calculator.  All banks were using the same computerised program income estimations.  No borrower was permitted to fill out their own forms and only ever sighted and signed three pages of an 11 page hidden document.  No copies were permitted of the LAF or the attached service calculator.  RHG was right when it said all these questionable practices were standard industry practice.  All loans we investigated (around 2000 for Major Banks and RAMs) had been approved with Mortgages around 90% -130% LVR.

The “demand” for these loans is not accurate as most borrowers we have spoken to were “spruiked” and offered a way to become a retiree rather than stay a pensioner with a skilfully penned but hopelessly flawed financially strategy.  The Industry suggests only “self-employed” persons were targeted and this is false.  Pensioners and Low Income persons were targeted as Macquarie boasted of a 2005 ARIP market meaning $50 billion estimated from the ARIP market: Asset Rich and INCOME POOR.  The assets were simply the elderly people’s home and banks knew they had no debt.   BFCSA has been the forerunner in calling for a Royal Commission into this widely abused market by the Banker Engineers of Faulty Products.

For 15 years Low Docs were a great product for Bankers on commission, producing massive profits for the Major Banks (85% reported share)?  Brilliant for business?  Where are all these financial engineers now?  The Bankers have been jumping ship between 2014 and 2015.  Low Doc products were a giant PONZI. 

This evil product, the worst ever sent to market and sold to vulnerable people, made bankers very wealthy whilst regulators played tiddly winks at their desks.

Now the loans are collapsing, the elderly victims are losing their homes.  The banking and finance industry will take a decade or more to recover from the public exposure of their nefarious activities.

RAMs is now using Pro Pack Loans as the “new name.”  Same rubbish in our view and guaranteed to implode within 4 years.  Its Buyer Beware all over again.  RAMs dubiously claimed it protects its customers.  Viewing the correspondence flooding in my email inbox the past 12 years that is simply not true.  All loans we have seen were imprudent and in fact the Lending Policy Guidelines were breached at every turn.  The Codes of Conduct were tossed aside by those who signed to uphold the idealism. 

The deceit lay in the approval processing, and not the fault of the Brokers.  Sellers were simply writing up forms with no idea of the fraud by Bankers after the loan apps were sent to the banks for processing.  The bank copy was altered inside and different to details written up by the broker.  As in the UK “the banks had used gallons of white out.”    

A Royal Commission is now essential for the economy.  The Federal Government suggests it is moving to tighten up lending practices.  Why do that if all was clean and above board?  The Bankers admit there are $197 billion of these loans sloshing around in the system.  Over 600,000 families are thought to be affected.

NAB admits it sees Low Docs as a policy rather than a product!  Oh please………what nonsense…… so for NAB its business as usual.  We have seen large numbers of imprudent Low Docs from NAB with ASIC ignoring the pleas from distressed elderly people about to become homeless.  Had this been any other manufactured product its dangers would have been circulated by regulators and the product RECALLED and WITHDRAWN from sale.  Instead the victims received silence and uzz off letters.

For the past four years the Major Banks made more money from dastardly “refinancing” to bury the evidence for another lucrative period.  Our banking industry DARK SECRETneeds to be exposed and we urgently need the perpetrators who belonged to the Cartel to be brought to Court and allow pensioners and low income victims to experience Justice.  The cover-up continues and now the main offenders have jumped ship, the cover up by regulators continues.  John Flavell should be thoroughly investigated due to his comments in this article.  The final LMI mention is a tell-tale giveaway as to why insurers have stepped back.  Their contract states: “if fraud is found on the LAF…….etc.”   Australia needs to wake up.

The first witnesses to be called to the stand before the Royal Commission should be the recent speedily departed CEO’s of the Major Banks.  They were the Manufacturers, Engineers and Leaders of the Australian Banking Cartel, producing one of the greatest banking heists this nation has ever seen.

Brokers are now distressed and coming to BFCSA, worried about what has actually happened to their existing customers and including their own families. 

Low Docs are indeed a TOXIC PRODUCT.  Borrowers and Brokers need to stay away from untrustworthy Bankers for at least a decade.  The Low Doc Mortgage is indeed in its death throw as the truth emerges.

It’s a crime scene of unprecedented proportions as many of these loans were “asset loans” as a collective bank driven quest for asset stripping took place.  The article warns of severe penalties for the uninformed sellers.  What action will the Government take against the Engineers?

Asset Lending is a criminal offence, as is Cartel activity.  A Royal Commission must take place if we are ever to place trust and confidence in the banking sector once more.  Consumer Protection was non-existent and predatory policies had led consumers back to buyer beware and at the mercy of evil Bankers.  Consumer Protection means de-regulation of banks must end immediately.