BFCSA Blog

Received this response from Treasury related to the truth behind securitisation and it's potential impact on the investment the AOFM has made. 

Hi All, I thought I'd put these important definitions up for all members because, after reading a lot of older posts, I notice that there is a range of knowledge levels amongst our group and I feel that it's important to help all members to come to understand what has happened in their particular situation. To do this, certain concepts need to be understood. The following links include a definition of the term, an explanation of the term and, in some instances, a video to further explain the term. It's definitely a good starting point for anyone who needs to improve their knowledge on this complex topic. If this post gets a good response, I'll continue to add to it over time. Apologies to any members that already know this stuff. Maybe you can chime in with some further useful terms and definitions? Contract: http://en.wikipedia.org/wiki/Contract Debt: http://en.wikipedia.org/wiki/Debt Equity: http://www.investopedia.com/terms/e/equity.asp Equity Stripping:...

  A really excellent video on the topic explaining what happens with your loan and mortgage after it is signed and registered... http://www.investopedia.com/video/play/credit-default-swaps/#axzz2ATETiAKM  ...

New document explaining more about Securitisation http://www.nber.org/chapters/c9619.pdf By:  Gary B. Gorton and Nicholas S. Souleles     12.1 Introduction This paper analyzes securitization and, more generally, “special purpose vehicles” (SPVs), which are now pervasive in corporate finance.1 What is the source of value to organizing corporate activity using SPVs? We argue that SPVs exist in large part to reduce bankruptcy costs, and we find evi- dence consistent with this view, using unique data on credit card securitiza- tions. The way in which the reduction in costs is accomplished sheds some light on how bank risk should be assessed. By financing the firm in pieces, some on–balance sheet and some off– balance sheet, control rights to business decisions are separated from fi- nancing decisions. The SPV-sponsoring firm maintains control over busi- ness decisions, whereas the financing is done in SPVs, which are passive; they cannot make business decisions. Furthermore, the SPVs are...

07 May 2012 Issuers of over-the-counter derivatives relating to the wholesale price of electricity could have easier financial requirements if the proposals in ASIC's new Consultation Paper 177 Electricity derivative market participants: Financial requirements are adopted. This new consultation paper, which is part of ASIC's revisiting of financial requirements for the financial services industry generally, proposes to simplify financial requirements of AFS licensees by moving to a test of net tangible asset measure of 10% of revenue. On the other hand, ASIC is proposing longer cash flow projections for electricity derivative market participants – these would be rolling 12-month cash flow projections prepared quarterly. But the proposal only applies to AFS licensees who only trade electricity derivatives. If you trade gas, weather or oil derivatives as well as electricity, then the standard derivatives financial obligations will still apply. As a result, this change would be of benefit really only to traders...

Thanks for the info on Securitisation and RMBS at the link in RMBS's Explained, above. It is amazing how this has be allowed to grow since way back in 1988 with the RBA.  Also loved the definitions :-)  ...

For years Gadens have had the lion's share of the action in the Australian Mortgage Fraud. It is a matter of public record that they have defended the perpetrators of Fraud, orchestrated the bullying and repeated efforts to intimidate blameless and innocent home owners and witnesses to the Court hearings all in the name of "Justice" - and been allowed to get away with it by some of the "bank blinded" Australian judiciary! If you'd like a few samples of Gadens' handiwork on behalf of NAB, Bank West, Ing and others use the BFCSA blog search engine or see austlii.edu.au Gadens aren't the only lawyers willing to do this type of work.  After all this BANK SCAM has been going on for years under the watchful eye of both major Australian Political Parties. All borrowers and BFCSA members should check their documentation and report in with a list of all legal...

David Collyer was right. Denise's evidence and assertions are based in many years' research. There is no room for speculation in the black and white of her evidence. It's FRAUD. What is more it is intentional, premeditated and well organised systemic fraud. How can the regulators and the politicians deny the facts and keep their credibility? They can't. Further evidence has been revealed since the initial hearing at the Senate Inquiry. It underlines the even greater need for a Royal Commission. The Australian public want the truth. Investors want the truth. Borrowers want the truth. Our international reputation is also under scrutiny. Surely it is part of the job description of any chief regulator or parliamentary representative to supply informed, well-researched answers not off the cuff comments based on assumptions and their own opinion in order to protect their jobs! They are paid handsomely to supervise and ensure the stability our...

From: http://www.macrobusiness.com.au/2012/06/debelle-says-no-risk-of-housing-bust/ This report from Macro Business (26/6/2012) is short but the comments below it are well worth reading. They include references to the June 2012 articles by Anthony Klan and the court decisions against the Banks, plus opinion from brokers and others. The updated link to the Podcast of the MFAA Adelaide conference contains a recording of the Panel discussion and a transcript in slides.  Remarks by Guy Debelle, assistant governor of the RBA, were also reported in Property Observer: http://www.propertyobserver.com.au/news/housing-market-worries-not-keeping-me-up-at-night-rba-assistant-governor-guy-debelle/2012062655277 As jimbo (MB) commented:  "Why would the bubble keep him awake at night, with his recession proof job, $300K gig and borrowings at well below market rates (if he has any)?"    ...

  This is an interesting historical article on perceptions about Australian RMBS. It certainly pays to be informed about risk in the marketplace.   by Hardeep Dhillon     In terms of collateral, the Australian residential mortgage-backed securities market has performed better than its peers for several years, thanks mainly to its blemishless default history. After a post-crisis slump, a revival of domestic issuance is under way; but it could take much longer for cross-border transactions to follow.   The peak came in February 2007 with the A$7 billion ($5.5 billion at time of issue) multi-currency transaction by Commonwealth Bank of Australia, via its Medallion programme. As well as being the largest RMBS by an Aussie borrower, the deal set a new pricing benchmark, with the most senior US dollar-denominated notes offering a pick-up of just 4 basis points over Libor. Around that time, spreads on deals from the three other banks...

Dissecting RMBS Fraud in Action This information is courtesy of Thomas Anderson of www.theclassifiedfiles.com. This notice from WESTPAC Australia might seem innocent enough. It’s just a public notice...right?  Let’s dissect the fraud that is happening right in front of your eyes. [Color variations and bolding are the author's to show several named companies.]  ~~~~~~~ PUBLIC NOTICE WESTPAC MORTGAGE SECURITISATION DISCLOSURE In the interest of public awareness and to ensure that Mortgage Holders with Westpac are given full disclosure of the details of their loans, please be advised of the following announcement: Westpac Banking Corporation in association with JP Morgan (Australia) Limited, Perpetual Trustees, Waratah Receivables Corporation and Westpac Securitisation Management Pty Limited have been involved with a number of Residential Mortgage Securitisation programs including: Series 2002-1 G WST Trust Series 2007 - 1G WST Trust Progress 2010-1 Trust (AMP Bank) REDS Trust Series 2010-1 (Bank of Queensland) Torrens Series 2010-1 (Bendigo and...

The other day, as a matter of my own interest, I began to list incentives for Predatory Lending that are built into the Securitisation process.  I finished it today, then decided to post it for anyone interested.   I've made little change to my notes, so hope it makes sense.  If anyone knows any other incentives, let's add them to the list.

 We know that the banks wanted more securitisation profits. To achieve that they wanted more loans secured with mortgages.   This lead to the 'Originate to Distribute' model.   Enter Lo Doc and No Doc loans. 

Incentives 

The banks preferred to securitise at risk loans secured by mortgages, so created incentives for brokers to promote Lo Doc loans over traditional loans by making the Lo Doc loans more profitable for brokers. The original mortgagee was NOT at risk if there was a failure to pay so didn't care how risky the...

How can ONE mortgage be backing MULTIPLE securities derived from it? It can't.  Typically, multiple securities are derived from the one mortgage.  I've spoken to a person, with excellent credentials, in the USA, who told me that the worst case he personally investigated was where 30 securities were made from one mortgage - each claiming to be backed by that one mortgage.  I understand that even more have been created at times. That's why, as another expert has told me, the securities are NOT backed by the mortgages.  They are back by the INSURANCE that is taken out on the securities.  It protects the Trust.  The Borrowers lose.  The End Investors lose. So, the term 'Residential MORTGAGE backed Securities' is misleading. They should be called 'Residential INSURANCE backed Securities'....

How can ONE mortgage be backing MULTIPLE securities derived from it? It can't.  Typically, multiple securities are derived from the one mortgage.  I've spoken to a person, with excellent credentials, in the USA, who told me that the worst case he personally investigated was where 30 securities were made from one mortgage - each claiming to be backed by that one mortgage.  I understand that even more have been created at times. That's why, as another expert has told me, the securities are NOT backed by the mortgages.  They are back by the INSURANCE that is taken out on the securities.  It protects the Trust.  The Borrowers lose.  The End Investors lose. So, the term 'Residential MORTGAGE backed Securities' is misleading. They should be called 'Residential INSURANCE backed Securities'....