OPENING STATEMENT – Senate Inquiry into Lending for Primary Production Customers.
DENISE L BRAILEY, President of the Banking and Finance Consumers Support Association (Inc)
19th July, 2017 Perth WA.
My Research into Australian Mortgage Fraud during the past 17 years has led me to conclude: the Frauds and manipulated data, found on thousands of Loan Applications forms are a key indicator of the existence of a CONTROL FRAUD, engineered by well-known Lenders.
Australia is now recorded as having the second highest HOUSEHOLD DEBT in the World. The amount of Subprime Interest Only loans being sold per annum (85% by our Major Banks) has grown to more than $139 billion per annum. The total mortgage loan books are reported as being $1.7 Trillion and rising.
The collective evidence of our members who include Farmers and “asset rich and income poor” ARIPs, are described by Banks as “The Target Market,” those who own their own home/property, are aged 50-years and over and have little or no debt. Farmers are targets due to extensive family land holdings and assets of stock vehicles and machinery.
Both groups are hooked into initial debt and then further suggestions of purchase only stand to increase the ASSETS for the lenders to CONTROL and increase debt to the customers, plus the exorbitant costs of servicing debt. Within five years, these 30-year loans will implode. They are UNAFFORDABLE, UNSUSTAINABLE AND UNVERIIED.
The Mortgage Loan Model uncovered, is in fact a well-engineered PONZI Structure. A never-ending stream of new borrowers with ASSETS, are required to prop up existing ASSET levels. ASSET-STRIPPING is where the RISKS are KNOWN to Lenders yet those RISKS of homelessness and ruin, are intentionally hidden from customers.
Customers are left in shock, but by then it’s too late. They are TRAPPED in a monstrous nightmare of debt and despair.
The second yet most lucrative purpose of Asset-Stripping is for Banks to offload the mortgage products into RMBS packs, then on-sale the securitisation of INCOME STREAMS to Commercial Investors. We know the income stream of so many customers are highly exaggerated created by the banks, hence the engineering of the compulsory and computerised serviceability calculator.
Bankers ensure the blame for the FRAUD is conveniently off-loaded to the borrowers and also the brokers (45%). Bank staff (55%) sell the same products, to the same targets and the fraud and the loss results are identical. SELLERS do not approve the loans. The loan file is then recorded on the TRACKER. Incomes are subject to further and manipulation by the computerised ROBO approvals.
The only winners of this Ponzi Financing operation are the Bankers. Everyone else connected to these activities are the losers. These crimes go way beyond mere allegations of unconscionable conduct.
Predatory Lending will continue in Australia, until we have a Royal Commission into Banks.
Key elements of the FRAUD obtained from over 2000 consumer files (all states) demonstrate the patterns which lead to the obvious conclusions: “intention to deceive” and “asset-stripping” are the key criminal activities that BFCSA Members have collectively uncovered during the past decade.
Farmers and ARIPs are being targeted for further debt by suggestions of purchasing additional assets. Suggestions are made to purchase assets as a condition of the loan facility. Those who have who have been under threat for years, or have lost their all assets are still left with residual DEBT for LIFE.
These activities must be stopped. We are placing our FOOD BOWL at risk of ending up in foreign hands. The Federal Government ought to declare an immediate moratorium on foreclosures of family farms.
SELLERS: 55% are Bank Managers and 45% are external Brokers and despite the Determinations from the EDR’s, the Brokers are in fact, the Agents of the Banks. EDR’s are not following the lead of the Courts. The EDR system is controlled and funded by the Code of Compliance Monitoring Committee Association (“CMCA”). The sixteen Members of this organisation are the Major Bankers.
As in any good Ponzi Structure, CONTROL of the complaint handling system is vital. The narrow clauses used from the CCMCA constitution, state that complaints against the bank cannot interfere with “commercial decisions in lending and securitisation.” That specific clause ensures all complaints re lending can be easily controlled and or redefined by the lenders.
The EDR system for all whose losses are less than half a million dollars, will only see average “discounts” on mortgages of between $20k and $60k. DEEDs are drawn up to hide the crimes committed, tied down with clauses of “confidentiality.”
For the benefit of the Senators and this Parliament, I will now point out:
KEY Indicators of Fraud in Mortgage Lending:
1. No Borrower is permitted to fill out the Loan Application Form (“LAF”). WHY is that happening?
2. Borrowers are asked to sign a three-page LAF, not knowing the document contains an additional eight pages. No copy is left with the Borrower. Why?
3. The Australian Government can no longer leave the door open for bankers to profit from fraud. The Government also ought not to be profiting from fraudulent mortgage lending.
4. Target Market flagged by Major Banks are ARIPs aged 50 and over, who own their own home and have no debt. Borrowers have no idea of the fraud.
5. Borrowers frequently complain they were not told their loans were INTEREST only. These products are sold as “normal mortgages.”
6. Manipulation of data, using “secret projected incomes,” generated by a compulsory Serviceability Calculator. This calculator uses hypothetical scenarios based on future assumptions, not in keeping with the borrower’s own truthful assessment of finances.
7. Documents are hidden from the borrower. Bankers obstruct and frustrate retrieval attempts. Bankers refuse to hand over vital documentation that clearly show the cleverly engineered financial details of the customer.
8. The ABN for a DAY SCAM is still operational with $300k loans being made to 18-year olds, particularly the sons of farmers. Parents should be made aware prior to approval that Parental Guarantees are likely to involves loss of home for the parents.
9. Lending Policy Guidelines demand ABN’s required to be registered for minimum two years, and have GST registration, with evidence of actual business performance and profitability.
10. Valuations are manipulated to provide higher figures that suit the banks arguments and then lower figures also when it suits.
11. We call on the Australian Government to ensure ALL documents contained in the Lender’s client file be handed over to the client immediately: all pages of the TRACKER / all pages of the LAF / Serviceability Calculator (2 pages attached to the LAF) / Valuations / Loan Mortgage Insurance Policy / COL Expense Sheets /.
12. A Key Indicator of Fraud: These are documents relied upon by the bank to make an “informed decision” in lending and yet hidden from the Customer.
13. All RMBS Packs should contain warnings to Corporate Investors of the level of SUB PRIME incomes in Tranches on offer. These warnings should not be mere stickers sourced from the banks to the ratings agencies. These issues were raised by me on 8th August 2012 in the “Banking Post GFC Inquiry.”
14. APRA is suggesting Low Docs are no longer in the system. APRA should be making a public statement as to why figures they are offering to BIS, may be out of kilter with reality. We ask the names of the November 2016 “external auditors,” be made available to the public as to the denials relating to Sub Prime lending and why the recent need for APRA to ask for a THIRD EXTERNAL AUDIT.
15. The Australian Government must explain why it has permitted loans to be marked “affordable” by Bankers when so many IO loans are being serviced by borrowers from a variety of “additional debt instruments” including TOP UPS, BUFFERS, LOCS, Refinancing, SPLIT LOANS, and $100,000 credit cards.
16. Relating to farmers and any small businesses, we mention the use of “Working Accounts” as a fund to be manipulated by the Banks when its serves their purpose.
None of the above activity is in the best interests of Consumers. When mired in debt, there are no funds left to seek legal advice.
I am happy to take Questions.