The long awaited LF Economics Report is one of the most explosive documents to be presented to the Senate in recent times. The 147 page comprehensive and powerful submission has been accepted and published on the Senate website.
Senators had decided enough was enough and formed the vital senate inquiry into White Collar Crime, responded to by over 200 submissions from BFCSA Members and by expert economists, Lindsay David and Philip Soos.
The warnings regarding the obvious property housing bubble, the aggressive Ponzi Financing of sub-prime mortgages by the major Banks and the identification of a Control Fraud at play in the banking sector should be placing all levels of Government on notice and their agencies on notice.
One could be forgiven for wondering what effort a small consumer group had to put into attract the attention of a highly respected firm of economists who could assist in cracking open the biggest bank scandal in Australia's history
BFCSA identified LAF Fraud in 2001 and later in 2005, the collective bank practice of lending to "asset rich income poor" investors: a disturbing sign of a property bubble in Australian housing market.
The record ratio of house prices to incomes and banks targeting "asset rich and income poor" investors are two signs the Australian housing market is poised for a fall, housing economics group LF Economics says.
LF Economics' co-founders Lindsay David and Philip Soos join others warning of a Big Short housing bubble in Australia.
Banks have consistently lent to borrowers who would never be able to repay "unless they flip their house for a profit", Mr David said.
Using loan application forms collected by financial services consumer activist, Denise Brailey, Mr David said these investors - "asset-rich and income-poor" (ARIP) investors - with income as low as $23,000 have managed to obtain $400,000 loans to finance their property purchases, often negatively geared.
Many of these loans were obtained with basic bank applications forms which were altered to make borrowers look more creditworthy then they actually were, Mr David explained.
The group has also made a submission to the the penalties for white collar crime senate inquiry which is due to report in July.
LF Economics Submission is now published on the Senate website: (#63)
Ms Brailey and BFCSA have also made a submission to the inquiry. (#23)
Reviewing collected application forms Brailey has been pouring over these documents for 15 years. Ms Brailey has often said lenders have been "systematically targeting "ARIP" older investors" who owned their own home and had no debt.
"They were not told these "mortgages" were interest-only loans. They were not informed the loans would implode within five years and they would become homeless," she said.
Subprime Loans also known as "low doc" or "no doc" loans have escalated since the global financial crisis. APRA is still in denial.
Low interest rates just announced by the RBA, would not stop house prices from crashing, Mr David said.
"You don't need interest rates to move higher to see house prices fall," he said.
"As very long-term housing price indexes have shown in Australia and elsewhere, prices move in cyclical patterns regardless of what interest rates are doing."
"Lower interest rates since the peak in 1990 have merely encouraged Australian households to maximise leverage to speculate on residential property. Otherwise, speculators don't take into account what the prevailing interest rates are, they only care about potential capital gains."
"We now know that when banks walk away from lending to a particular housing market, house prices crash."