Share on Facebook Share on Twitter Share on Reddit + - ABC’s The Business does liar loans By Unconventional Economist in Australian banks, Australian Propertyat 10:45 am on March 2, 2018 | 47 comments Well worth a watch. Full article here. Video via Martin North. Share on Facebook Share on Twitter Share on Reddit + - YOU MAY ALSO BE INTERESTED INJoye: If RBA cuts, housing bust overVia Chris Joye today: If the RBA cuts interest$125k of value wiped from typical Sydney homeBy Leith van Onselen CoreLogic's CameronAre house prices bottoming?Highrise Harry is excited: The apartment marketFinal auction clearance rate dives into low-40sBy Leith van Onselen Last weekend, CoreLogic Comments LBSMEMBER March 2, 2018 at 11:03 am You cant tell me the govt didnt know all this was going on. They have turned a blind eye for a very long time on all this. How come now all of sudden its time to do inquiries and dig deep to see whats been going on with improper bank lending. Why didnt they do this when things were booming? Same BS that happened over here in the US. Funny how no one went to jail in the US for all the fraudulent bank lending that happened. The_Mainlander March 2, 2018 at 11:06 am +1 Minister for RE oops I mean Finance. 😉 DanMEMBER March 2, 2018 at 11:15 am If banks only lent to people who could afford to pay it back, the property market would crash, and no-one in their right mine would wish for that. Better off to just keep cutting rates, and extending loan terms, and looking the other way, and if they really get in trouble they can always sell at an enormous profit and everyone is happy. mikef179MEMBER March 2, 2018 at 11:34 am I would wish for it. The property market crash is going to be painful but in the long run will be beneficial. The great Australian property bubble has done enormous damage to the economy. Ultimately the market will say that enough is enough. Dan122 March 2, 2018 at 1:37 pm I don’t think anyone can comprehend what a full blown housing crash will be like here as this sh!t show has gone on far too long. Although I also think we need one, I’m worried we’ll turn in to Brazil or something and we will get cheap houses but also FA work, money etc.. with massive crime. There isn’t likely to be a good outcome at this stage. billygoatMEMBER March 2, 2018 at 3:02 pm @ Dan I wish for it even if its uglier than anyone can imagine. Maybe everyone will have a taste of how truly s$$t it is to be out of a home and struggle, literally spending every last cent to put a roof over ones head or making do with car, cardboard and tarps. Foreign students, tourists, workers and shoppers alike stepping over 40 something woman sleeping rough in the corridor of Melbourne Central as they line up to by chain store multi cultural nosh – factory sushi! Dan122 March 2, 2018 at 4:52 pm Bill, Australia has no culture or social bearings similar to the USA. I worry that I might need a gun to ward off would be carjackers or home invasions. This sh!t is already happening now at a time where many people are pretending to be rich. What happens when unemployment and rates rise? As debt responsible people it is unfair that we get dragged into sh!t just because others are irresponsible. Peter March 2, 2018 at 12:39 pm It’s called plausible deniability…a means of avoiding culpability. They are changing the narrative because they can see what is coming/arriving shortly. LBSMEMBER March 2, 2018 at 12:55 pm Very true Peter FiftiesFibroShack March 2, 2018 at 5:50 pm It’s so brazen that you’d think the banks have been given an assurance that they’ll never be held accountable. A couple of years ago the presenter of that piece, Alysse Morgan, posted a picture of her own home loan application. Her income had been changed to a higher amount. If they’re willing to do that to a reporter that works for a major broadcaster, one who reports on finance, it must be the norm. nexus789MEMBER March 2, 2018 at 6:15 pm It will only come to a head with a downturn. While they they keep the plates spinning this stuff remains hidden. The_Mainlander March 2, 2018 at 11:05 am Bam! That has been a very long time coming. Thank you for keeping up your stance team MB. You’ve collectively not wavered, changed the way I’ve thought and learned about finance and economics for the better. Thank you. AndynycMEMBER March 3, 2018 at 8:01 am +1 JonoC March 2, 2018 at 11:11 am The new liar loans are for investors claiming that they live in home. There is no verification. The investor simply needs to state that they live in the home and they get owner occupier rates. Never mind they also “live’ in all the other premises that they have mortgages for at the same bank. mikef179MEMBER March 2, 2018 at 11:13 am Turning the Australian Property market into a giant casino was the most stupid idea ever. And instead of letting people lose, the house (government) kept bailing them out every time it looked like people were going to lose. Inevitable result, everyone wants to gamble. Aaron March 2, 2018 at 11:21 am This is all very simple. Brokers are the Agent of the Banks. The banks are responsible for verification of the application. If the numbers don’t add up its because there is a massive control fraud on foot. The books have been cooked. SoolMEMBER March 2, 2018 at 11:24 am Would ANZ really have new loans at 45% Liar Loans? That seems incredible or am I reading the table wrong? DanMEMBER March 2, 2018 at 11:50 am You’re reading it right. The way prices are in Inner West Sydney makes me wonder if there are any loans being written that aren’t liar loans, AlexD March 2, 2018 at 11:32 am Holy shit: https://youtu.be/O4tzwhuntxY?t=3m41s TailorTrashMEMBER March 2, 2018 at 12:25 pm Excellent stuff ….great to see the sewer is starting to flow over …..this is going to blow up real bad for the banks ……and look who’s circling….the old Maurice Blackburn and no doubt plenty of other law firm see some dosh here …..the punters will be signing on in droves to try to get out of the stupid loans they thought would make them rich ……..this is stupid Straya on a monumental scale …… …and ya gotta love that “ it would appear everyone in Straya is earning a ridiculous amount of money “……..of course they are …it’s what you would expect in a nation of baristas,uber drivers and dabbawalas ……….this RC is going to be fun …..if this is on the ABC news before we start it can only get better. ….and keep hammering it chaps ……you were on to it from the start kodiakMEMBER March 2, 2018 at 6:37 pm Lawyers… I’m almost sympathetic to the banks. The woman in the video is as dumb as a post, but the hairdressing c#nt’s been making my life difficult for almost a decade. What ever happened to “caveat emptor”? She should be allowed to fail without the public picking up the tab. jimbo March 2, 2018 at 12:27 pm I can’t cop this growing suggestion that borrowers are being hoodwinked in this process. They know EXACTLY what’s going on, that’s why when one or more banks knock them back on an application they head straight for a mortgage broker who will make it happen. There needs to be some personal responsibility here. Yes the banks are turds, but they’re often acting in partnership with greedy people. If you can’t afford something you shouldn’t be buying it. Simon March 2, 2018 at 12:34 pm When there’s a feeding frenzy the Sharks don’t care if the pilchards are 0.3% Mercury as long as they’re getting in on the action. Wiley Wolf March 2, 2018 at 12:45 pm Will be interesting to see how it goes there are class actions under way My call is the bank as the senior party (ie supposed to most familiar with due process etc) has a duty of care to the punter. Just how much duty of care, the learned courts will tell us, but any duty of care x the number of claimants will be HUGE. jimbo March 2, 2018 at 1:41 pm Yes WW, but every man and his dog who can no longer afford the Bali holiday, jetski, shellacked nail jobs and weekly hair styling is about to throw their hands in the air screaming duty of care. Whatever happened to NCCP? Jail those with significant breaches and call in loans if people knowingly falsified their applications. Wiley Wolf March 2, 2018 at 2:03 pm I keep a close eye on shopping centres and shops within. I was in pacific fair the other day, and all nail technician shops do well A new nail shop opened up on the first floor near myer, and I looked in at what seemed the longest line of customers being manicured since Tom Roberts showed us the stands in Shearing the Rams A second look showed a mirror at the far end. Girls spend a fortune at those shops, even in rundown Southport mall the nail shops do well. https://www.ngv.vic.gov.au/essay/tom-robertss-shearing-the-rams-the-hidden-tradition/ SoMPLSBoyMEMBER March 2, 2018 at 3:49 pm Banks are quite happy to NOT be required to provide a ‘duty of care’ but enjoy the misperception that they do. http://www.corrs.com.au/publications/tgif/supreme-court-finds-that-a-bank-does-not-owe-a-duty-of-care-to-investigate-the-financial-circumstances-of-its-debtor/ Wiley Wolf March 2, 2018 at 5:29 pm SO, well holy mackerel, there it is. Supreme friggin Court?? that accounts for the aloof attitude of the banks. that is also the written termination notice for very many punters Thanks. DanMEMBER March 2, 2018 at 12:49 pm All borrowers are being hoodwinked – not just the ones who lie. Its an arms race of deceit as prices rise people who are compelled to lie to compete with others who are lying. Everyone ends up paying more on the price of their house due to inflated loan sizes. Likewise those who write mortgages are compelled to accept dodgy applications, or lose the business to those who will. Aaron March 2, 2018 at 1:19 pm That’s elegantly succinct. [email protected] March 2, 2018 at 1:26 pm +++ [email protected] March 2, 2018 at 1:24 pm Correct, Jimbo, but sleazy lawyers are always there to advise them how to get out of their rsponsibilities when the shite hits the propeller blades. The charge is responsible lending NOT borrowing or always accuse the party with the deepest pockets or there’s no point sueing, ah? Sam Kutesa March 2, 2018 at 1:59 pm My 7 year old LOVES cars, wants a Tesla or a Mustang – so I sent him down to get his license – Vic Roads said he was too young to drive. So he went to a Vic Roads Authorized Broker and they said no worries here’s a license from Vic Roads. The Banks have the duty of care to advise customers HOW MUCH they can borrow – that’s their job. I wouldn’t have a clue… If the banks out-source that to a broker – it is STILL the banks responsibility – I see where you are coming from about personal responsibility – but its the banks clear stated, absolutely mandated, legislated, regulated JOB to provide loans that are reflective of peoples ability to pay them back – no question about this at all. . DaveMEMBER March 2, 2018 at 3:40 pm True, but that’s what regulation is for – in this case, to stop banks from making too many risky loans and thereby creating a systemic risk. If it were the case that the mortgage market would find a natural stable equilibrium through the rational and sensible behaviour of individual borrowers, then we wouldn’t need any regulation. (which is why economics as a discipline is partly nonsense, because it relies on an assumption that is proven to be always wrong when it matters most). So the dodgy behavour of the banks actually deserves its comeuppance in the form of lawsuits, you could say this is the market performing as it should (if you also accept that banks shouldn’t have to worry about whether borrowers can pay or not). Its just the flip side of foreclosures. tonyddMEMBER March 2, 2018 at 7:17 pm Mostly true but that is what the legal system will decide. Getting this into courts is the only way to get justice, which includes letting many borrowers burn. [email protected] March 2, 2018 at 1:01 pm In another scene from the THE BIG SHORT, a banker says; “the american housing market is rock solid”. Sounds familiar, folks? GavinMEMBER March 2, 2018 at 1:43 pm I smell fear, fear is beautiful. jimbo March 2, 2018 at 1:50 pm I’m still only smelling the chops and snags at the BBQs. That’s the litmus test – once the property fear overpowers that it’ll be on like donkey kong. Ino March 2, 2018 at 11:46 pm “It’s as if a billion sphincters kazooed the Imperial march all at once, … and then silence” . . . “I fear something terrible happened here…” Hugh PavletichMEMBER March 2, 2018 at 3:25 pm LEARNING FROM THE IRISH 2007 HOUSING CRASH … THE SEVERE COSTS OF MULTIPLE STRETCH … It’s high multiple lending that ‘does in’ the Banks and their customers … as they learned with the Irish housing bubble collapse in 2007. When the housing bubble burst there … putting all its Banks to the wall and requiring bailouts exceeding 70 billion euro or about $NZ 109 billion (note interview with Prof Bill Black and others link below). Irish housing across its metros on average went from 4.7 times annual household income in 2007 to 2.8 a few years later … refer the schedule of Demographia Surveys at http://www.PerformanceUrbanPlanning.org . Australia is currently 5.9 times … New Zealand 5.8. What was the capital base of the Irish Banks in 2006 and 2007 ? If a 4.7 unweighted median multiple across its metros blew the Irish banks out of the water, how come the Australian and New Zealand ones are supposed to survive 5.9 and 5.8 respectively ? Following the bust, the Central Bank of Ireland found in subsequent research, it was high income multiple lending (more so than high loan to value lending) that did the most damage to the Irish Banks … and it imposed a general lending cap of 3.5 times gross annual household incomes. A year earlier the Bank of England had capped at 4.5 times. In normal housing markets house prices should not exceed 3.0 times annual household income, requiring sensible mortgage loads of about 2.5 times (Demographia Survey http://www.demographia.com ). Prof Bill Black & others discussing the Irish financial system performance may be of interest … Youtube https://www.youtube.com/watch?v=t7zd5dRILBw Hugh PavletichMEMBER March 2, 2018 at 4:02 pm COVER STORY Family home in cities soaring further out of reach … Newsweekly Australia http://newsweekly.com.au/issue.php?id=494 by Chris McCormack News Weekly, March 10, 2018 Australia has no affordable housing markets, according to the Demographia International Housing Affordability Survey: 2018. The 14th annual Demographia survey measured 293 international housing markets’ affordability in the third quarter of 2017 (the 2017 survey measured 406 markets at the end of the third quarter of 2016) and ranked them according to a median multiple (MM): that is, the median house price divided by median household income – with a score of 3.0 or below being affordable and 5.1 and over being severely unaffordable. The number represents how many years of pre-tax income would need to be earned to pay for a house. … read more via hyperlink above … Hugh PavletichMEMBER March 2, 2018 at 4:36 pm US mortgage rates up for 8th week; 30-year at 4.43 percent – NZ Herald http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12004777 WASHINGTON (AP) — Long-term U.S. mortgage rates crept higher this week, marking the eighth straight week that it cost more to borrow to buy a home. … read more via hyperlink above … GOOGLE NEWS SEARCH ‘US MORTGAGE RATES’ … https://news.google.com/news/story/dCdUwmXj10LuRgMd2piiCdy3LTupM?hl=en&ned=us&gl=US Mediocritas March 2, 2018 at 4:14 pm Bears mentioning that, like in the USA, a lot of this comes down to the moral hazard created when the initiator of a loan is not responsible for funding the loan. It’s pretty easy to write a terrible loan if you’re not the one who wears it on a default. Banks, in many cases, are just middle men, not much different to brokers. They hit the money markets and effectively connect a foreign lender to a local borrower, collecting commission and ongoing servicer fees. The local borrower thinks they took a loan from Bank X, but really they’re borrowing from a Norwegian pension fund. Depending on how the deal is structured, the intermediary can create a firewall that shields it from a default. Systemic fraud follows as surely as night following day. Ajaydee73MEMBER March 2, 2018 at 6:40 pm The solution to sloppy lending is even sloppier lending. Then these irresponsible borrowers who can’t pay their loans can sell to even less responsible borrowers. This will cause property prices to go up, which will increase equity of current property owners, who can use the equity to lever into their 2nd, 3rd, 8th, 10th property. [email protected] March 2, 2018 at 6:47 pm I’m ashamed I haven’t though of it that way, buddy…..of course… I think the term is PERPETUAL MOTION MACHINE. TimMEMBER March 3, 2018 at 12:09 am That was awesome! I don’t know where this is going, but it can’t be good. Lemme C March 3, 2018 at 6:56 pm Australian housing is the real Ponzi scheme, not cryptocurrencies.