Money Mortgage fraud: $500b of 'liar loans' in Australia, warns investment bank UBS

17:11  11 september  2017
17:11  11 september  2017 Source:   ABC News

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Mortgage fraud is systemic in Australia , with more than a quarter of recent home buyers admitting they misrepresented some information on their loan application.

Investment bank UBS says there is growing evidence Australian home prices are being fuelled by dodgy loans.© Ian Cutmore/ABC News Investment bank UBS says there is growing evidence Australian home prices are being fuelled by dodgy loans. Up to a third of Australian mortgages could be "liar loans" based on factually inaccurate information, investment bank UBS has warned.

The global banking giant has followed up a survey of home loan borrowers that it first conducted last year, when it found evidence of widespread mortgage fraud.

The latest detailed survey of more than 900 people who took out a home loan in 2017 has found that only 67 per cent responded that their mortgage was "completely factual and accurate", down from 72 per cent of 2016 borrowers.

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Liar loans are on the rise in Australia . mareciok. The amount of home loans that have been extended based on "factually inaccurate" information is estimated to have reached $ 500 billion, according to an updated study by investment bank UBS .

UBS . Warning Bells Are Ringing in Australia . The warning bells that these liar loans will have a drastic impact may be felt sooner rather than later. What the US Learned About Liar Mortgage Loans .

The vast majority of the mistruths appear to be white lies rather than total porkies, with a quarter of 2017 survey respondents saying their loan application was "mostly factual and accurate", while only 8 per cent admitted to their information being only "partially factual and accurate" — 1 per cent refused to say.

Given the average turnover of home loans in Australia, UBS has estimated that around $500 billion worth of outstanding home loans contain misstatements about incomes, assets, existing debts and/or expenses.

With just under $1.7 trillion of mortgage debt outstanding, that means home loans based on inaccurate or fraudulent information account for 29 per cent of the total, and 18 per cent of all private sector debt in Australia.

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SYDNEY (BLOOMBERG) - Here's something else for policymakers to worry about as they attempt to engineer a soft landing in Australia 's property market. The country's lenders could be sitting on A$ 500 billion (S0.15 billion) of " liar loans ", or mortgages obtained on inaccurate financial information

Given that the average scale of the misstatement across income, expenses, assets and living expenses was between 10-12 per cent, UBS has warned that it makes Australia's banks even more vulnerable to a housing downturn than most people think.

Mortgage arrears hit record levels

  Mortgage arrears hit record levels Aussie home mortgage delinquencies are hitting record levels around the country and are only set to go up, ratings agency Moody's reports.Ratings agency Moody's says the number of home loans more than 30 days in arrears hit 1.62 per cent in May - up from 1.5 per cent a year ago and the highest rate in five years.

The country's lenders could be sitting on A$ 500 billion (S9.04 billion) of " liar loans ", or mortgages obtained on inaccurate financial information, according to an estimate from UBS Group AG. Australian banking .

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"This survey suggests many people have come to take house price inflation as a given and are prepared to be factually inaccurate on their mortgage application to ensure they get access to housing leverage," UBS warned in the report.

The investment bank has an "underweight", or sell, rating on Australian banks and has warned that loan losses may be bigger than expected given that many borrowers are in a much weaker financial position than the banks and regulators believe.

That would lead to even worse consequences for the Australian economy than policymakers expect if the housing market turns down.

UBS also warned that the banks may be vulnerable to litigation if home prices stop rising and over-indebted customers start defaulting.

It argued that more needs to be done by the banks to verify loan applications, starting with a requirement to see lodged tax returns.

More to come.

Opaque home loan pricing an 'impediment' to competition: RBA .
Unadvertised mortgage discounts make it harder to know if you're getting a good deal from your bank, holding back competition, the RBA says.The RBA also backed the view of smaller banks that their higher funding costs had constrained the intensity of competition since global financial crisis, partly as a result of an "implicit guarantee" of the big four by taxpayers. This funding advantage enjoyed by the majors had diminished more recently because of measures including the major bank tax, the central bank added.

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