ASIC flags crackdown on investor mortgage lending

By Leith van Onselen

The noose is tightening further around property investors, with the Australian Securities and Investments Commission (ASIC) flagging that it will tighten lending standards on investor mortgage lenders. From The Australian:

ASIC chairman Greg Medcraft… [said a] probe into the underwriting standards of a sample of 11 financial institutions had uncovered unacceptable practices.

“What we are seeing in some areas is that clearly the interest rate that some are using is too low in terms of the level,” he said, suggesting 7 per cent would be a reasonable rate.

“That’s where you should be thinking about if you are looking at your ability to repay the loan,” he said.

ASIC intends to publish next month the full results of the study…

ASIC’s pending crackdown falls under its “responsible lending” purview.

In concert with the recent macro-prudential lending restrictions implemented by APRA, Australia’s major banks, and some second tier lenders, it should assist in taking some heat out of the investor market.

In other related news, more than 86 property spruikers have been caught is an ASIC sting to stop promoters selling dodgy rent-to-buy schemes and “free” investment seminars. From The Australian:

At least 10 property groups around the country face legal ­action for making unsubstantiated and misleading claims about their property investment schemes.

Among these groups are Easyhomes WA in Perth, Rick Otton and We Buy Houses in NSW, and Victorian companies Creative Property Australia, Benny Bull and operator Benjamin David Chislett.

Other traders, including [Dymphna “the Dynamo”] Boholt, have been ­issued with ­legally enforceable undertakings, and have been made to promise they would modify their behaviour, including changing their ­advertising and to stop making misrepresentations.

Lawyers and property executive argue that the number of ­unscrupulous operators is growing…

History doesn’t repeat, but it sure does rhyme. It is looking a lot like 2003/04 – the peak of the last bubble – when spruiker Henry Kaye was subject to similar action.

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Leith van Onselen
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  1. The amount of loan should not be more than 4 times of the household income. The proof of the income should be always from ATO rather than a pay slip which could be fake one. A lot of people just give the bank fake pay slip to borrow. I know a lot of irresponsible financial planner or mortgage brokers just give their clients wrong hints that if they want to borrow a million their pay slip has to top up to 150k a year… it is very popular in the property investment lending…household receiving warfare from centre link can even borrow more than 1 million from the bank…60% of the people I know borrow from the bank to invest in property for the past 2 years are using fake documents…

  2. MMh, wondering if I should hold off on that home auction this weekend and keep a renting.

  3. Cpt_RussiaMEMBER

    I have come upon a youtube clip explaining how the “economic machine works” from Ray Dalio’s perspective he runs “Bridge Water Associates”

    It describes credit debt and deleveraging with relation to inflation and deflation (general economic cycle)

    but the explanation is done really well

    I found this video has a close relationship of what is happening in individual countries and is similar to MB consensus on Austraila

    What do you guys think of Ray Dalio?

    • Hedge funds, a publicity-shy sector of the financial industry where the super wealthy invest their money in the hope of making above-average profits, were just handed an opportunity to make even more money under a new law signed by President Barack Obama. Consumer advocates say that unsophisticated investors may be at risk as a result.

      Most U.S. investment funds are regulated under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 which restrict how much the fund managers are paid and what they do in order to protect naïve investors. Many hedge funds are designed to get around these restrictions by raising money from a select few sophisticated investors.

      Under the Jumpstart Our Business Startups (JOBS) Act, signed into law by Obama on April 5, 2012, the threshold for publishing annual reports has been raised to 2,000. It also allows hedge funds to conduct “general advertising” although specifics will have to be spelt out by the Securities and Exchange Commission (SEC) within 90 days.

      For example, big hedge funds seek “qualified purchasers” – who have at least $5 million in money – who are exempt from these restrictions under section 3(c)(7) of the 1940 Securities Exchange Act. Smaller hedge funds seek as many as 100 “accredited investors” – those with a net worth of over $1 million (not including their houses) or a minimum annual income of $200,000 (or $300,000 for married couples) – under the 3(c)(1) of the Investment Company Act of 1940.

  4. Hi X,

    How has your life improved from increased population over the last 10 years or so?
    How has your life not improved?
    I would suggest that for the existing population, rampant immigration is reducing their standard of living. If by saying that statement, I’m racist, then string me up.
    If the standard of living has declined, when was the last time the existing population were asked whether or not they were happy with our population? And whether or not the numbers here are playing a part in declining living standards?
    I wonder when something, or someone, will have enough balls and clout to truthfully represent the mood of existing Aussies views on our population. I think I will be holding my breath until my last,
    They better ask soon while there are still some of us that were born here left. Maybe that’s the reason they are not asking that question right now, since they know damn well that most if not all of us born residents here think it is lunacy and suicidal to not address overpopulation.
    I’d suggest what is happening is happening without widespread approval by people born here. But then again, their views don’t count for much any more do they? It appears that pollies just want us to die off so the replacement immigrants, can just accept whatever our pollies dish out, since whatever they dish out here, is better than what they had in their place of origin.

    It doesn’t help the rest of us.

    Then again, I’m full of it right?

    Population is an issue no one sees as important. We can just keep growing and our existing infrastructure will happily cater for infinite numbers without any increased economic cost required.
    I must be living in a different country since all I see, is less blue sky, clouded out by increased cement, and a growing debt.

    Take care X

    • good posting steernorth

      we need a wealthy no-pollie like dick smith to bring these issues to attention..

      our major banks etc tell the govt to jump, and the govt say how high on the issue

  5. I’ve been unemployed all year. I got a mortgage pretty much based on my capacity to earn based on previous years. Didn’t use a broker, just dealt directly with the bank.

    That said, I probably should be getting a job soon.