Broker
blows whistle on sub-prime scandal
A
WA mortgage broker who got rich by "fudging figures" has
blown the whistle on the banks that conspired in Australia's own
sub-prime mortgage scandal.
ABC,
14
August, 2012
n
2007 Kate Thompson was WA mortgage broker of the year. Now she is
facing fraud charges.
It
is alleged Mortgage Miracles, in Canning Vale in Western Australia,
obtained investment loans for customers by using falsely inflated
earnings and assets.
Ms
Thompson admits that is exactly what she did.
"I
would get upfront commission, I would get a trailing commission. I
was probably earning about $5 million a year. It was great. It was
wonderful. But it was all a lie," she said.
But
she was not alone.
"Hook
me up to a lie detector test and hook them up. I'll lay my evidence
on the table. They will fail a lie detector test miserably. They are
corrupt. They are protecting each other," Ms Thompson said.
Along
with similar claims before a parliamentary inquiry in Canberra last
week, her evidence has the potential to rock the finance industry.
"Through
a series of emails from banks to brokers how to get their deals
across the line, make the deal fit. They targeted older people,
people on carers allowance, age pensions," Denise Brailey, from
the Banking and Finance Consumers Support Association, told the
inquiry.
The
evidence suggests that banks and other lenders tacitly encouraged
mortgage brokers en masse to make up fictitious stories about
customers so they could get loans and to falsify their income.
"I
do not think there was a bank or non-bank lender that wasn't doing
it. From my files alone, I am certain I could evidence every single
bank," Ms Thomson said.
The
allegations centre on low-doc loans.
They
were initially designed for the self-employed and small business
people - recognising that they can lack documents such as pay slips,
group certificates and the certainty of income banks demand for
conventional lending.
But
low docs became a free-for-all.
"They
were very tight to begin with but eventually they were absolutely
shocking, no rules at all, tell us what we want to hear, tell us
anything," Ms Thompson said.
As
banks competed aggressively to sell their loans, the pitch to the
brokers was persuasive.
"I
received 4,000 emails, and in those emails from the banks to the
brokers you'd see clearly bank officers instructing the brokers how
to have no-loan mortgage insurance, no income necessary, no assets
and liability, virtually just get a signature on a document, send it
in and we'll give this person, no matter what their income or
affordability criteria is, give them a $500,000 loan," Ms
Brailey said.
Ms
Brailey says it is a "roll call" of all the major banks.
"We've
got Macquarie in there, we've got Westpac, NAB, ANZ, Commonwealth,"
she said.
Ms
Brailey has dedicated herself to exposing the scandal.
She
says people could have an ABN number for one day and get low-doc
loans which were meant for business people.
"That
is the whole point of why we are saying it was so fraudulent; low
docs were supposed to be for two years, self-employed and here they
are saying ignore that, even if they are a pensioner, by going online
and getting them an ABN number and putting that number on the form,"
she said.
"They
can get these low-doc loans supposedly for business people... Yes,
the bank would automatically approve it."
Ms
Thomson says in her eight years of finance broking, she only ever met
one person who was genuinely self-employed for one day.
"In
reality they were nothing of the sort," she said.
"They
were just old people who didn't do much more in their day than cook
their dinner and do a bit of gardening, and yet I had to present them
as a professional something, anything."
'Hopeless
situation'
On
the Pacific Highway just south of Newcastle in New South Wales is the
home of Michelle Matheson, a single mother of three.
A
few years ago, juggling bills, she contacted a local business that
said it could help people manage their money. The adviser who saw her
was in fact a mortgage broker.
"He
took me down the path of purchasing a home I guess, unfortunately,
the journey along the way has been quite abhorrent," Ms Matheson
said.
She
says she was told to buy a home, despite at the time being a single
parent, working part-time, and earning around $24,000 a year.
The
loan application, which she only received recently, said Ms Matheson
was a self-employed professional and grossly overstated her income.
"My
income has been stated, not obviously by myself, but either by the
broker or somebody at the bank, has been stated to be $75,000 per
year," she said.
Ms
Matheson named her house Hope, but she admits her situation was
hopeless.
"I've
taken on two to three jobs at a time, I work up to 90-hour weeks.
I've sold everything to make mortgage payments," she said.
"I've
got credit card debt of close to $30,000 because I've had to put
mortgage repayments on that."
Ms
Matheson's mother took out a second mortgage on her home to help
Michelle get the loan. She has had to sell and now lives in a
demountable in a caravan park.
The
stories of other people caught up in the low-doc loan scandal all
have similar themes.
"If
you can't trust your bank manager, then who can you trust?"
Barbara Flowers of Brisbane said.
"Exactly
the same thing's happened to all of us.
"Somebody
in the head office said, 'Mrs Flowers, I've no idea how you got into
this mess, you have $750,000 worth or shares and you have got $13,000
worth of income from rental properties you have rented out'.
"And
I said, 'well if you can find it, I'll give you half of it because it
doesn't exist'."
Royal
commission
Ms
Brailey says there needs to be a royal commission into the banking
sector.
She
says she has received about 500 loan application forms from people in
trouble with low-doc loans and not one is clean.
"The
figures fudged, the details forged, by brokers or bank officers
themselves," she said.
Ms
Thompson recalls the tricks banks taught brokers to get loans across
the line, such as calling rising house prices "income".
"So
when we were putting down a customers income we are - we were -
allowed to use capital growth. It's projected income, it's not
disposable income but we were allowed to use it," she said.
She
says banks were targeting pensioners, people who were asset rich, but
income poor.
"Six
or seven of those bank officers actually used to come into my office
and write up the applications themselves," Ms Thompson said.
"Fudged
figures... they make it fit, and that's what they were telling us to
do and they were prepared to it themselves, they were doing it
themselves, they knew the game.
"These
people are losing their homes. There is nothing I can do now except
tell it like it is."
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