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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: APRA admits High Risk Lending in Australia's $1.3 Trillion Mortgage Market

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APRA worried about growth of high risk lending in Australia’s $1.3 trillion mortgage market


THE nation’s banking watchdog says it has witnessed “increasing evidence” of high-risk lending in the $1.3 trillion mortgage market as the scrap for market share intensifies in the face of low lending rates.

The Australian Prudential Regulatory Authority has laid down the law to banks and other lenders with a series of new draft guidelines aimed at sharpening risk management.

The Reserve Bank has maintained official interest rates at a historic low of 2.5 per cent since August last year.

That’s created a hothouse atmosphere among banks which are fiercely competing to grab as much of the mortgage market as possible.

“In this environment, APRA is seeing increasing evidence of lending with higher risk characteristics and it does not want this trend to continue,’’ APRA chairman John Laker said.

“The draft prudential practice guide reinforces the importance of maintaining prudent lending standards when competitive pressures may tempt otherwise,’’ Dr Laker said.


The residential mortgage market underpins lending in Australia but equally provides the greatest amount of credit exposure in the nation’s banking system.

The draft outlines best practice for lenders, including the need for sound criteria at the loan’s origin, appropriate security valuation practices, the management of hardship loans and a robust stress-testing framework.

The guidelines also underscore the responsibility of boards to cast a sceptical eye over lending growth.

“When (an institution) is increasing its residential mortgage lending at a rate materially faster than its competitors ... a prudent board would seek explanation as to why this is the case,” the guidelines said.

“Rapid relative growth could be due to an unintended deterioration in the (institution’s) loan origination practices.’’

In such a case APRA expects an institution’s risk management framework “would facilitate rapid and effective measures to mitigate any consequences”.

The guidelines also examine the standard market practice to pay brokers either an upfront or trailing commission.

It says “experience has shown” that commissions paid upfront tend to encourage less rigorous attention to loan application quality.

It says trailing commissions are more likely to provide incentives for brokers to retain and monitor customers.

But the guidelines say a prudent institution “would recognise the incentives and potential

risks inherent in its broker remuneration structure”.

“It would have in place appropriate monitoring and controls to guard against incentives to pursue loans with inadequate or false verification, marginal serviceability, excessive leverage or unsuitable terms for a borrower.”

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  • doyla66
    doyla66 Saturday, 07 June 2014

    Interesting that there's a lot of competition for low doc clients when the interest rates are so low. The message must be getting through to more consumers that falling for these rosy low rate deals could lead to misery later when the loan implodes because it was based on falsified figures, maladministration, insane LVRs and starvation level expense assumptions set up behind the scenes by the lending staff.
    The government message about tightening our belts is producing a predictable backlash when their changes are really only minimal at this stage.
    Then there's the awareness that what looks like a ripper loan at low rates on a cheap home could morph into a very unappealing proposition when banks want to boost their incomes and interest rates rise.
    What about when the RBA decide to change the game plan on what the Australian economy needs under influence of the IMF, Bank lobbyists and government policy. Want to reduce household debt in Australia? Up the interest rates and get people out of the market for cheap credit.
    In short, anything could happen, and if a deal looks too good to be true it's probably is, with hidden traps, exclusion clauses in massive contracts and probably should be treated like poison!
    That's why the number of members of BFCSA continues to rise and the complaints against Banks at FOS are still to pouring in. Fortunately, people are waking up and realising that they can do something about what seems to be an impossible situation up against an almighty Bank apparently hell bent on taking your money, your home and even your life in the pursuit of their business success. :(
    Banks are getting bad press and they deserve it. Anyone who has been through a FOS case with a solid BFCSA education have their eyes opened to the complex and deceptive conduct that routinely sits behind their simple loan. If you had known that the Bank (and FOS) assumed (but didn't mention it) your family would be ok with 30 years of Henderson Poverty Line existence in order to have a basic home, would you have agreed to the deal? Of course not! There is so much the broker or the Bank don't tell you about what they're doing when they sell you a mortgage.
    If Banks want a starting point to turn around their image, the first and simplest solution would be to write off every instance of illegal lending without further ado. Then they could get on with educating their staff on the right way to treat legal documents like loan application forms, telling the truth in selling, ethical business conduct and dropping the dirty legal tricks and offensive and illegal conduct - that would go a long way towards improving the image of the Australian Banks. Instead they're spending years at FOS arguing with upset borrowers and still hiding evidence and refusing to answer questions! Tarting up their image with the latest round of advertising is pretty much wasted effort when every defrauded or homeless borrower is out there telling everyone they can about the dreadful treatment they endured at the hands of yet another horrible Australian lender!
    Instead, FOS investigate to the point where the loan is laid out in its details, flaws, errors and even criminal conduct, decide whether this unfair contract is maladministration, then expect the borrower to continue to pay for a seriously faulty and illegal product. What a ridiculous proposition!
    Write the thing off, give it a decent burial, and allow borrowers and Banks to move on, hopefully having gained an education in the high risk behaviour in modern banking and lending. Instead and because FOS only do discounts as compensation, the lesson to the Banks is clearly not getting through if the Banks are back out there at the same time, offering cut throat deals with borderline affordability, with the same assumptions that no one will see the paperwork/digital records, borrowers will fall for it all over again and regulators will continue to turn a blind eye to the endemic malpractice that characterises law in Banking.
    APRA are right to be worried. It's a hot lending market in a legal and regulatory minefield where the Banks have the edge and the market is shrinking. But is this powerless regulatory lament the limit of APRAs clout in changing the lending game? It looks more like Banks are doing whatever they think they can get away with in lending. Only the law has changed slightly over time and that's not enough to curb a determined and highly motivated mortgage seller if they think they can get away with fudging figures with a tap on the wrist when caught. The punishment still doesn't fit the crime where Banks are involved when we look at the misery that borrowers go through through their lack of awareness of what they were getting into. Added to that the entire model of securitised credit (which is still called "lending") looks like embezzlement and even extortion when things go pearshaped.
    Consumers must be educated from school age on their consumer rights, the risks, how to protect themselves and where to get real help if they get into trouble. There still isn't enough easily accessible "in your face" information out there and reaching the right audiences in ways that they can understand. Telling a teenager to read the ASIC Moneysmart site is unlikely to produce enough impact. At present, nothing beats talking to someone who has actually been through a credit nightmare and knows exactly what to do. See a lawyer isn't an answer for someone in serious financial trouble who needs real, practical help. See a lawyer is a cop out from regulators and government departments whose jobs prevent them from giving legal advice, and often even help of any practical and experienced nature. It's very frustrating shopping around for a caring someone who knows what to do affordably. For many people the answer is don't take the risk on any of it at present. Consumer rights are a new but growing concept, but not adequately covered in depth or supported yet as being unquestionable. Hence all the complaints about Bank unfair practices, bastardry and bullying.
    A warning from APRA is only a tip of the iceberg on a sea of credit disasters created by Banks, lenders, laissez-faire government and lame regulators. In Australia, consumer credit is still a high risk business deal for consumers - easy in, tough to escape from and very dog eat dog legal stouches. We have a long way yet to go here before consumers can feel safe, if they ever will, with caveat emptor as the guiding principle in business conduct.
    Roll on the Age of Ethical Business - we live in hope.

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