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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: Home loan scheme could increase negative equity risk, economists say

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Home loan scheme could increase negative equity risk, economists say

Sydney Morning Herald May 13, 2019 12.00am

Clancy Yeates


Both major parties' pledges to guarantee thousands of mortgages with deposits of only 5 per cent could result in more people ending up with a loan that is bigger than their house is worth, if the house price slump continues, economists say.

After Prime Minister Scott Morrison on Sunday announced the scheme to lift housing affordability, market economists said the idea brought with it the risk of borrowers finding themselves in negative equity, where the outstanding balance on a mortgage is greater than the house's value.

After banks cut back on low-deposit home loans in recent years, Mr Morrison on Sunday unveiled a new scheme that he pledged would allow buyers to overcome the difficulties of saving for a 20 per cent deposit, which is what is generally required by banks to avoid the cost of mortgage insurance.

The scheme would be subject to limits on borrowers' income, the cost of the house being bought, and it would only be open to 10,000 borrowers a year, about a tenth of the recent number of first home buyers.

The idea, matched by Labor, is touted as helping buyers bring forward their purchases, but there are concerns it could exacerbate the high level of housing debt in Australia, at a time when house prices are falling.

"It's in effect encouraging people to take out 95 per cent loan-to-valuation ratio (LVR) loans," said Saul Eslake,  a former ANZ Bank chief economist, who is now a vice-chancellor research fellow at the University of Tasmania.

"In a market where prices appear to be falling, there's a risk that someone who enters this scheme may find themselves in a negative equity position."

Mr Eslake has previously criticised first home buyer grants for putting upward pressure on house prices, but he said this objection did not apply to the latest proposal, at a time when prices were falling.

Independent economist Stephen Koukoulas said it was "not the best nor the worst" policy he had seen on housing affordability, but it did appear to encourage people to take out loans with small deposits, which brings extra risks to the buyers in a falling market.

"This one seems to be encouraging a very high LVR at a time when we do know prices have been under severe pressure, and they are still falling," said Mr Koukoulas, who is managing director of Market Economics, and was an adviser to Julia Gillard as prime minister.

AMP chief economist Shane Oliver said some form of government move to prop up the housing market was "justified and warranted," and this normally came in the form of support for first home buyers.

"It does raise the prospect that property prices will end up bottoming earlier and at a higher level than might have been the case," Dr Oliver said.

Even so, he also said the policy could further raise household indebtedness, including to the risk of increases in negative equity if the market continued to fall. Negative equity has been rising, albeit from a low base, as prices have fallen over the last year.

The Property Council of Australia said the idea was a "smart proposal," while the Australian Bankers' Association said it would look forward to further details of the policy.



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