BFCSA Blog

Led by award-winning consumer advocate Denise Brailey, BFCSA (Inc) are a group of people who are concerned about the appalling growth of Loan Fraud around the world. BFCSA (Inc) is a not for profit organisation in the spirit of global community concern and justice.

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Liberals blaming everyone but themselves.  They were supposed to control these Bankers.  Banking Laws are there, but bad Government policies, self reg thought bubbles and non-enforcement of law are the reasons we have to suffer a rotten to the core banking and finance sector.    Scott Morrison, tries to blame banks, voters and himself 8 April 2017 Alan Austin https://independentaustralia.net/politics/politics-display/morrison-tries-to-deceive-the-bankers-the-voters-and-himself,10188   Australian Treasurer Scott Morrison is distorting the record to make an appalling set of outcomes look acceptable. His speech on Thursday to the AFR Banking and Wealth Summit was riddled with evasions, half-truths and even a few falsehoods. But who was he trying to convince? Job losses “In last year's Budget, I said we needed to focus on jobs and growth ... Since last year's budget, we've made good progress.” Untrue. There has been no progress this financial year. Since June 2016: People unemployed have increased by 16,200 to more than 748,000. Job participation...
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Australia: Following Canada into a Financial Black Hole By Unconventional Economist in Global Housing at 10:20 am on November 10, 2010 | 18 comments https://www.macrobusiness.com.au/2010/11/australia-following-canada-into-a-financial-black-hole/ No doubt many readers have heard that the Australian Government is looking to follow Canada’s lead and implement a Government guarantee of residential mortgage-backed securities (RMBS), in order to foster greater competition in mortgage lending and reduce the power of the big four banks. Following on from David Llewellyn-Smith’s critique of this proposal, I thought it timely to provide an examination of the Canadian Government’s guarantee of its RMBS market, and show readers why adopting a similar approach in Australia is a terrible idea. In doing so, I have borrowed heavily from Canadian financial blogger, Ben Rabidoux, as well as my previous article on the Canadian Housing Bubble. Canadian Housing Mortgage Corporation (CMHC): the Great Enabler The government-owned CMHC is Canada’s national housing agency. CMHC works...
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NAB, Westpac to add web warnings on interest-only loans Australian Financial Review Apr 7 2017 11:00 PM Geoff Winestock   Westpac and NAB say they are updating their online calculators of mortgage repayments to warn borrowers they could face a huge hike in monthly repayments after five or 10 years on an interest-only loan. At current mortgage rates for investors of about 5.5 per cent, repayments for a $700,000 loan will jump from $3209 a month to $4299 at the end of the standard five-year interest-only period, a rise of about a third. But if prevailing interest rates rise by just two percentage points to 7.5 per cent, repayments will jump to $5173 a month, a jump of about 61 per cent. The increase is far greater than for the same principle and interest loan which starts higher. Those figures come from the front page of the CBA website but ANZ,...
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Developers, non-banks behind property bubble The Australian 12:00am April 8, 2017 Alan Kohler   The regulators are cracking down on bank lending, but they may be missing the mark. A property financier — not a bank — told me this week that developers don’t argue about interest rates these days; the only negotiations are about the loan to value ratio and how quickly the money can be approved. The interest rate this guy charges is 13 per cent, take it or leave it. Others are the same. They always take it. The LVRs average 60-65 per cent, although the numerator (the value) can be a bit wobbly before the project starts, and most of the non-banks can approve the funds pretty quickly: they don’t usually have boring credit committees to worry about. There has been a bank credit squeeze for residential development for 18 months, ever since the Australian Prudential Regulation...
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If the housing bubble bursts economy will come tumbling down The Australian 12:00am April 8, 2017 Adam Creighton If Australia’s debt-fuelled housing boom proves to be a bubble and pops, it will be one of the biggest and most devastating crashes. No major country’s fortunes are so entwined with property as Australia’s. It also would be entirely self-inflicted, an inevitable reckoning from many years of perverse government regulations that induce banks to issue excessive quantities of cheap mortgages. More than a fifth of the country’s economic growth during the past four years, excluding resource exports, has been home building, spurred on by rising house prices, strong population growth and ultra-low interest rates, on which almost 600,000 jobs depend. And rising real estate prices have underpinned the confidence that has fuelled strong household consumption growth. Whether this turns out to be the economy’s Achilles heel is hotly debated — indeed, Australians’ confidence...
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Housing correction 'won't be orderly' Australian Financial ReviewApr 7 2017 9:00 PM Larry Schlesinger   Ask respected property analyst Martin North what form the coming downturn in the housing market might take and "orderly" is not the description he uses. Instead North anticipates a much more significant downturn in the investor-driven, debt-laden markets like Sydney and Melbourne. "Orderly" is how S&P Global Ratings director Sharad Jain described the likely unwinding of the overheated housing market, where annualised house price growth is running close to 20 per cent in Sydney and Melbourne. "It could unwind in an orderly manner as we are seeing in parts of Western Australia and Queensland," Mr Jain said at the Australian Financial Review Banking and Wealth Summit this week. But according to Mr North, whose says his view on the housing market has turned increasingly gloomier, Australia could be at the very early stages of where the US housing market...
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Valex is risk management system used by lender for credit enhancement for property valuations to go into the black box to be securitised....... Tough if you have a unique property and the property data is wrong....hence the warning by APRA on 23 May 2005 of the risk to individual properties not entire postcode areas....... At the exit if you go into default....you have to be 3 months behind in your payments, because on Day 91, the bank cashes in on all of its “side bets” (credit default swaps, default insurance payments, title insurance payments, etc.).    Potentially flawed data used by banks and lenders bump up house prices GRANT ROBERTSON and TARA PERKINS The Globe and Mail Published Wednesday, Oct. 10, 2012 http://www.theglobeandmail.com/report-on-business/economy/housing/potentially-flawed-data-used-by-banks-and-lenders-bump-up-house-prices/article4603237/  Flaws in a national databank that helps determine the value of houses across Canada have helped fuel inflation in home prices, putting mortgage lenders and borrowers at greater...
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WHY THE GREENS BILL WILL NOT GET TO THE TRUTH and WHY WE NEED A ROYAL COMMISSION INTO THE BANKS   Australian Bankers and regulators are keeping a dark dirty secret:  a massive SUB PRIME CATASTROPHE: 90% of Mortgage Loans have been written according to a cross-section of Sellers. Victims did not know these loans were INTEREST ONLY. That is the essence of this cleverly concealed plan by Bankers. The negative gearing factor is low as most people caught in this scam, earned less than $50,000 per annum per household and many were pensioners who owned their own home and had NO DEBT. Banks held 1000 strong seminars to tell sellers to hit the TARGET MARKET: People aged 50 - 90 who owned their own home and had no debt. Their tax was low to negligible so the neg gearing factor was never really an advantage. Even young people were on...
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Getting serious now:  Senators Warren, McCain, Cantwell, and King Introduce New Glass-Steagall Act   6 April 2017 http://wolfstreet.com/2017/04/06/senators-warren-mccain-cantwell-king-introduce-new-glass-steagall-act/   Sometimes Senators can move fast. Earlier today, I reported on a confidential meeting yesterday where White House economic advisor and ex-Goldman executive Gary Cohn had dropped a bombshell by speaking in support of reverting to a version of the Glass-Steagall Act. It had once separated banks from all other financial activities, but was repealed in 1999 – with terrible consequences that ended in the Financial Crisis. Read… Ex-Goldman Trump Advisor Drops Glass-Steagall Bombshell – Is there Hope? Now Senator Elizabeth Warren (D-Massachusetts) announced that she and three other senators – John McCain (R-Arizona), Maria Cantwell (D-Washington), and Angus King (I-Maine) – would re-introduce “the 21st Century Glass-Steagall Act.” Senator Warren said in the statement that it would protect American taxpayers, help community banks and credit unions compete, and decrease the likelihood of...
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The data explains Australia’s addiction to interest-only loans which has reached endemic proportions, both in terms of stock and flows (approvals). The two primary reasons why IO loans are attractive to investors is that 1) payment of interest but not principal means a larger loan can be secured against a given household income; and 2) interest, not principal, is tax deductible.   APRA has recently tightened ADIs’ ability to issue IO loans, as they assist with inflating residential land prices. In other words, they facilitate what amounts to Ponzi lending. On this basis, regulators ought to ensure existing IO loans be converted to P&I and ban future issuance altogether. An understanding of Hyman Minsky’s definition of an asset bubble would assist to confirm that IO loans have no place in the mortgage market.   The proportion of IO loan approvals relative to total approvals reached a stratospheric 46% in 2015, before...
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Beware of the Shadow Ledgers   Look at this timeline and note the similarity...S Shadow Inventory Timeline September 2011 - "Home Sales 7% Higher Than Last Year." Banks started working through the foreclosure pipeline, boosting home sales but lowering prices. July 2011 - "One Million Foreclosures Pushed Out to 2012." Foreclosures continue to back up, thanks to delays in bank processing. It took 318 days for banks to foreclose in the second quarter, 41 days longer than a year ago. May 2011 - "Home Prices Keep Falling." Sixteen million homeowners (28%) were upside-down in their mortgages, adding to the shadow inventory and causing home prices to fall 1% a month. December 2010 - "Foreclosure Probe Adding to Shadow Inventory." The foreclosure rate was down 24% from the prior year. That should have been great news, but wasn't. It was because banks were slowing down their foreclosure process in response to a...
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EX-RBA boss rubbishes company tax cuts By Unconventional Economist in Australian budget at 12:12 am on April 7, 2017 | 1 comment By Leith van Onselen   https://www.macrobusiness.com.au/2017/04/ex-rba-boss-rubishes-company-tax-cuts/   Do-Nothing Malcolm gave a keynote address last night at The Sydney Institute’s 2017 Anniversary Dinner, whereby he pushed the case for further company tax cuts, claiming that the benefits will flow to workers [my emphasis]: Most of the burden of high company taxes is borne by workers because high taxes discourage firms from expanding, from hiring and from paying better wages… Company tax, as I have noted is ultimately a tax on workers, a tax on jobs, a tax on wages. Reducing company tax means businesses can invest more, employ more staff, and pay them more. An uncompetitive business environment can be the difference between firms investing in Australia or choosing to invest elsewhere. If we don’t act now we will be...
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Read the comments....... Ex-Goldman Trump Advisor Drops Glass-Steagall Bombshell 6 April 2017 http://wolfstreet.com/2017/04/06/chances-of-new-glass-steagall-act/ Is there hope? According to “people with direct knowledge of the matter,” cited by Bloomberg, White House economic adviser and one of the ex-Goldman Sachs executives in the Administration, Gary Cohn, dropped a bombshell at a meeting on Capitol Hill yesterday. The meeting was arranged by Senate Banking Committee Chairman Mike Crapo of Idaho. Lawmakers and their staffs from both parties participated in the discussion that ranged from tax reform to financial regulation. Cohn said he generally is in favor of splitting commercial banks from everything else, in a return of sorts to the days of the Glass-Steagall Act. Bloomberg: Cohn’s remarks were prompted by a question from Senator Elizabeth Warren, one of the finance industry’s most relentless critics, said the people who asked not to be named because Cohn’s meeting with Senate Banking Committee members was private....
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What about all those gold rolex watches and planes bought by property developers? Bob Day, Rod Culleton could be forced to repay their Senate salaries, allowances Adam Gartrell 7 April 2017 http://www.watoday.com.au/federal-politics/political-news/bob-day-rod-culleton-could-be-forced-to-repay-their-senate-salaries-allowances-20170406-gveykg.html The Turnbull government is considering pursuing dumped senators Bob Day and Rod Culleton to repay hundreds of thousands of dollars to taxpayers. Senior government figures are discussing whether to go after the pair for up to $250,000 paid to them in parliamentary salaries and expenses last year. The High Court has ruled Bob Day's election invalid so who will replace him? The High Court has now ruled both men were invalidly elected - Mr Culleton because he was bankrupt and Mr Day because he had a constitutionally prohibited financial interest in the Commonwealth because of a complex office leasing arrangement. Mr Culleton was paid more than $100,000 in salary and superannuation between the July 2 election and the court's...
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Negative gearing is only part of the problem...INTEREST ONLY LOW DOCS are the sub prime generator of selling homes to people who cannot afford to buy. Steve Keen stated property was 40% overvalued when the GFC hit and it was for those who had low doc loans approved and had to sell.. APRA’s guide was banks only had to insure 40% of their loan portfolios. It’s just going to mean more recycling of properties which is exactly how a PONZI works!   7.30 Report does the investor bubble By Unconventional Economist in Australian Property at 12:27 pm on April 6, 2017 | 52 comments   By Leith van Onselen https://www.macrobusiness.com.au/2017/04/7-30-report-investor-bubble/   ABC’s 7.30 Report last night ran a segment on how first home buyers (FHBs) are becoming casualties of Australia’s specufestor bubble. The segment features a property developer, Pat Singh, basically telling FHBs to  do whatever they can to enter the...
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read the comments...... David Murray warns of 1890s housing crash depression By Houses and Holes in Australian Economy, Australian Property, MB fund at 4:51 am on April 5, 2017 | 167 comments https://www.macrobusiness.com.au/2017/04/david-murray-warns-of-1890s-housing-crash-depression/ God bless David Murray. Somehow this goes virtually unreported today: The chairman of the government’s Financial System Inquiry, former Future Fund chairman David Murray, yesterday sounded a further alarm on the housing boom, saying a crisis on the scale of the 1890s great property collapse could not be ruled out. “What people should do is look at the 1890s, which was caused by a housing land boom,” he told The Australian. “To say it won’t happen and simply ignore it is wrong.” Half of the nation’s banks closed their doors following the 1890s crash. “Many people say a crisis has a low probability of ­occurrence, but the problem with that view is that whatever the probability, the severity...
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About 10 per cent of the loans in a standard prime RMBS mortgage pool are low-doc loans. the average life of an RMBS is substantially shorter than its final legal maturity, which is usually set to occur after the longest dated loan in the underlying portfolio is due to be repaid in full, and is typically around 30 years. The expected life at issue of most RMBS is typically two to five years. The most common form of enhancement comes from splitting the asset- by the loan originator or another bank.   Asset Securitisation in Australia   http://www.rba.gov.au/publications/fsr/2004/sep/pdf/0904-1.pdf   Page 7 The loans can be financed initially on or off the originator’s balance sheet. Banks and other deposit-taking institutions generally opt for the former and periodically sell a pool of loans to an SPV to be securitised. Mortgage originators tend to do the latter, finding interim funding for the loans from...
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Malcolm Turnbull backs RBA warning as household debt hits new record Australian Financial Review Apr 5 2017 11:00 PM Jacob Greber   Household debt is rocketing towards 190 per cent of disposable incomes, ramping up pressure on the Reserve Bank of Australia and regulators to take action that avoids a US-style debt crisis. Prime Minister Malcolm Turnbull endorsed Reserve Bank governor Philip Lowe's warning that household debt is rising too fast and linked the high burden of servicing loans to the need for the Commonwealth to manage its debt. A key reason for maintaining the government's AAA credit rating is that credit agencies assume Canberra will bail out any banks that are blind-sided by a housing crisis. "All of the warnings that the Reserve Bank and APRA have made about rising levels of debt are well made," Mr Turnbull said in Sydney on Wednesday. "That's their job, the system is working....
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APRA plays Santa Claus for bank CEOs Sydney Morning Herald April 5 2017 - 5:19pm Michael Pascoe   Hats off to Westpac CEO Brian Hartzer for the use of understatement by declaring Australian Prudential Regulation Authority's (APRA) alleged crackdown on real estate investors wouldn't have "any particular profitability impact". Boosting profits by a few billion tends not to hurt. And higher profits tend to lead to higher bonuses. APRA is playing Santa Claus for bank CEOs. No toasting of any gullible media though, who swallowed the line that investor fervour would be noticeably cooled by reducing the proportion of new interest-only loans from 40 per cent to 30 per cent. Good for banks that will charge higher rates to encourage a proportion of investor customers to switch to principal-and-interest loans, negligible impact on the size of the investor book that can continue to grow by up to 10 per cent a...
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Fortune favours the strong: Behind APRA's move on mortgages Australian Financial Review Apr 5 2017 5:40 PM Wayne Byres This is an edited transcript of the speech given by APRA chairman Wayne Byres at the AFR Banking and Wealth Summit in Sydney on Wednesday April 5, 2017.   Thank you for the opportunity to be part of the third AFR Banking & Wealth Summit. I've titled my remarks today with the Latin phrase, fortis fortuna adiuvat. Over the years, this has been interpreted in a number of ways – often as fortune favours the brave or fortune favours the bold. However, as a prudential regulator, I am attracted to an earlier interpretation: fortune favours the strong. As a proverb from Roman times, it remains highly relevant today. In the past few days, there has been a great deal of attention given to our recent announcement on additional measures to strengthen one...
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