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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: Warnings from Standard & Poor's re Mortgage Market Stimulation: Banks and disorderly correction in Property Market

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Beware the 'disorderly correction': Standard & Poor's warns on overheating mortgage market

Banking and Finance

Date September 5, 2014

Clancy Yeates


Standard & Poor's has cautioned against further stimulating the mortgage market, saying this would increase the risk of a housing bust and make Australia more vulnerable in a financial shock.  The global credit ratings agency also backed the big banks' opposition to "bail-in" rules for creditors, warning the major lenders could be stripped of their AA- credit ratings if Australia went down this path.  In a submission to the financial system inquiry led by former Commonwealth Bank chief David Murray, S&P argued against several policies floated by Mr Murray to help smaller lenders compete in home lending.

Regional banks have told the inquiry they face an unfair playing field under current rules that allow the big four banks and Macquarie about half as much capital for every dollar lent out, because of the larger banks' more advanced risk systems.  But in a blow to the regional banks' push, S&P said giving the smaller lenders capital breaks would create new risks in the banking system.  It would likely mean the regional banks were holding smaller capital buffers for absorbing shocks, raising the risk of rating downgrades for these banks, S&P said. Moreover, it could funnel even more credit into the booming housing market, risking a "disorderly correction".

"Greater access to housing credit may put further strong upward pressure on house prices. This would increase the risk of a disorderly correction in property prices down the track, which may hurt economic growth and risk financial instability," it said.  "We already view the household sector as highly leveraged, driven by previous run-ups in house prices. Promoting higher household leverage could therefore raise households' financial vulnerability even further."

The ratings agency also argued against government support for mortgage bonds - a key funding course for the non-bank sector.  Similar concerns about fuelling the mortgage market have also been raised by the Reserve Bank and the Australian Prudential Regulation Authority - which are likely to be influential with Mr Murray given his concern with financial stability.

Sydney dwelling prices jumped 16.2 per cent in the year to August 31 and Melbourne prices rose 11.7 per cent, RP Data said this week.  The surge is of growing concern of regulators, with RBA governor Glenn Stevens this week warning the economy could face "nasty shocks" in the future if people take too many risks while interest rates are at record lows.

Separately, S&P highlighted the risks of another proposal being considered by the inquiry: a "bail-in" of creditors. This is where senior bondholders are exposed to losses in a bank collapse, rather than taxpayers.  S&P said adopting "bail-in" rules could affect the major banks' ratings, as these were currently premised on the assumption that government support for banks in a crisis was likely.  It also warned the economy would made more be vulnerable in a financial crisis if Australia chose to "bail in" the foreign investors that banks rely on for part of their funding.

"We believe Australia could find it challenging to effect an economic recovery in circumstances whereby a key source of funding upon which the recovery would likely depend—senior unsecured creditors—had been 'bailed in' during the downturn," it said.


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