BFCSA Blog

  http://www.macrobusiness.com.au/2012/08/q2-rmbs-arrears-mixed/ Posted by Houses and Holes in Banks on August 31, 2012 | 3 comments -  "Where does this sit with Denise Braileys work, and 100000 people affected by dodgy low doc loan practises? Are banks hiding defaults?"  EDITOR:   Yes they certainly are and a point I raised in transcript.......APRA reacted next day and asked banks for updates!!!  More lies!  Government needs urgent AUDIT into FULL DOCS, LO DOCS AND NO DOCS......     From Moodys:   Sydney, August 31, 2012 — The prime 30-plus arrears rate remained steady in the second quarter at 1.66% in June, and unchanged from March. In addition, the rate has not moved much from the same period last year when it was at 1.67%. While the overall index is at 1.66%, considerable variation exists within the market. Historically, major bank deals have performed better than those of non-major bank ADIs (i.e. other ADIs), which have, in turn, outperformed non-ADIs....

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...