Mortgage Brokers Under The Limelight For Liar Loans, But Who Really Is To Blame?
Australian housing prices are on the decline, but why? It is possible that the decline is a result of the regulators (APRA & ASIC) tightening lending standards which is putting pressure on overseas purchasers and investment loans.
The tightening is perhaps sparked by the unveiling of the problems associated with “liar loans” as seen in the 2007-2008 global financial crisis and an animated Steve Carell calling “the Big Short”.
Over the past few months we’ve seen many brokers being called in for questioning in relation to “liar loans”. Who really knows what has sparked regulators to investigate, all we know is that it is happening and may be having an effect on the property market.
Mortgage Brokers who have been writing loans for decades are being called in for questioning: Why are there discrepancies on the pay slip? How come I can’t call the employer? Is it because they don’t exist? Do you have the originals of a document that looks like a fraudulent bank statement?
The answers to these questions often leave Banks, Aggregators, MFAA and ASIC to start asking some questions:
1. Are you a fit and proper person?
2. Do you have good fame and character?
3. Is it in the public interest to allow you to continue maintaining a credit license?
These questions have been trialled time upon time in tribunals and courts across Australia and around the world and is generally the requirements to get you over the line (so far as character is concerned) to qualify as a lawyer, accountant, financial planner or mortgage broker. And, so they should. The integrity of members of professional groups needs to be upheld, too often we hear phrases such as “dodgy accountant” or “dodgy broker”.
But what defines fit and proper? Edward Richard George was permanently banned as a mortgage broker on 31 July 2013 in relation to findings that he had falsified loan applications for himself and four clients.
One of the questions for the tribunal when he appealed the decision in early 2014 was whether or not he was now a fit and proper person to provide financial services and engage in credit activities.
Mr. George admitted to his wrong-doing, but not without reason. He persuaded the ADT that the offences were out of character and has since then re-applied himself in a manner acceptable to meet the standards required, resulting in the permanent ban reducing down to a three (3) year ban.
No doubt the ADT understood that humans can often make mistakes too.
My only reservation is, who are the real crooks here?
Decades ago the only place you could get a loan was through a Bank, now, you can sit with an independent mortgage broker who would have a variety of products from different banks available to you. The mortgage brokers are driven by up front commissions and on-going trail.
If mortgage brokers are found to not pass the requirements to qualify as a member of the elite group of credit providers it could very well mean that their on-going trail is taken off them and given back to the credible and honest aggregator and bank. Aggregators and banks who for years turned a blind eye to documents which are easily detected as fraudulent.
Maybe in years to come we will be investigating aggregators and banks for their involvement in the decline of the property market.
But for now it would seem that turning a blind eye sometimes isn’t such a bad thing. Just depends on which side of the fence you sit on.