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Mortgage Fraud: $500b of 'Liar Loans' in Australia, Warns Investment Bank UBS

Posted by Michael Janda | September 12, 2017

House roofs in suburban Australia, aerial view
Photo: Investment bank UBS says Australian home prices have been boosted by dodgy loan approvals. (ABC News: Nic MacBean)

Up to a third of Australian mortgages could be "liar loans" based on factually inaccurate information, investment bank UBS has warned.

Key points:

  • Only 67pc of mortgage applications "completely factual and accurate"

  • Almost 40pc of loan applications through a mortgage broker had at least one misrepresentation

  • NSW residents most likely to lie on their loan application

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.

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." Only 8 per cent admitted to their information being only "partially factual and accurate," and 1 per cent refused to say.

If anything, UBS believes its survey would understate the prevalence of mortgage misrepresentations as some people would be nervous about admitting it, even anonymously.

"It is highly unlikely respondents would have stated that they misrepresented their mortgage application when in fact they were truthful," the bank noted in the report.

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.

Dodgy loans leave banks more exposed to housing downturn

The most common lie was understating living costs (30 per cent), while understating other debts or overstating income or assets each accounted for around 15 per cent of misrepresentations.

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.

 

 

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"CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea–it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 832-932-3952 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online)".

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