NAB’s unbelievable “liar loan” scammers

Via the ABC:

The National Australia Bank has been criticised by the banking royal commission for not disclosing fraudulent behaviour by its bankers and third parties to the corporate regulator within the legal deadline.

NAB executive Anthony Waldron was grilled today by senior counsel assisting the commission, Rowena Orr, QC, about the bank’s Introducer Program, which saw professionals, including solicitors, accountants and financial planners, refer customers to the bank for loans in exchange for commissions.

In November 2015, the bank fired five bank staff in the Greater Western Sydney area, including two branch managers, for dishonesty, fraud and conflict of interest involving the Introducer Program.

The contract of two introducers was also terminated.

But NAB did not report the significant breach to the Australian Securities and Investment Commission (ASIC) within the 10-day deadline under the Corporations Act.

Instead, NAB reported the behaviour to ASIC in February 2016.

Commissioner Kenneth Hayne was scathing about the delay when questioning Mr Waldron.

“NAB knew enough to sack five employees for dishonesty and for conflict of interest,” she said.

“It knew enough by November to sack people for those reasons. [Are] you telling me it didn’t know enough to tell ASIC there was a problem?”

Mr Waldron said he could not offer a reason for the delay.

The misconduct involving the Introducer Program included faked customer signatures on loan applications and the use of fake documents, including payslips, as well as unsuitable loans provided to customers.

One of the sacked branch managers was accused of being dishonest about their relationship with an introducer, with the introducer’s address the same as the branch manager’s immediate family address.

The same branch manager was accused by a whistle-blower of misconduct in an April 2015 internal NAB email.

Another sacked employee was accused by a whistle-blower of taking a bribe which she later returned.

NAB internal documents tendered during the commission showed NAB introducers had a target of $2 million a year in loan referrals and $10 million for commercial lending.

Introducers got commissions of about 0.4 per cent of the value of a loan, and between 2013 to 2016, when fraudulent behaviour was identified, NAB had 8,000 introducers.

Nearly 46,000 home loans worth more than $24 billion were referred to NAB by introducers over those three years.

Commissioner Hayne estimated that NAB would have paid out about $100 million in commissions during that time.

Mr Waldron even admitted that some introducers were gym owners who referred loan customers to NAB in breach of the program rules.

“We weren’t as strict as ensuring they came from industries we were comfortable with,” Mr Waldron told Ms Orr in response to a question.

The bank sacked 20 staff in New South Wales and Victoria last year, and disciplined more than 30 others over the Introducer Program.

In a letter to customers released just before the hearing began today, NAB boss Andrew Thorburn said the bank acknowledged it had not done the right thing by customers in the past and that conduct was regrettable and unacceptable.

“It is important to note that since the issue was identified in 2015 via NAB’s whistle-blower program, we have made extensive changes to our Introducer Program, worked closely with ASIC, fully reviewed the cause of the issue including engaging KPMG to carry out an investigation, and commenced a remediation program for customers,” Mr Thorburn said.

The commission heard sensational evidence from an NAB internal email from October 2015, which outlined whistle-blower allegations of a bribery ring at five bank branches in greater western Sydney involving 11 bank staff, including six branch managers.

They were accused of fraud, including making fake payslips and fake identification, including Medicare cards.

“They charge $2,800 bribery for each customer for home loans mainly, but also personal loans,” Ms Orr told the hearing.

Ms Orr read from the October 2015 internal bank email: “The whistle-blower said the money exchanges hands in cash in envelopes, white envelopes, usually over the counter. Money is deposited at CBA so NAB can’t detect the deposits.

“[It’s] happening on a daily or weekly basis and has been happening for a number of years.”

Wow. The next time somebody tells you about Australia’s sound lending standards, send them this. How on earth could Wayne Byers say he knew of no such problems the other day in the senate:

UBS did the best hatchet job of all:

The most significant findings of the survey were (1) Only 72% of respondents stated their application was “completely factual and accurate”. 21% stated they were “mostly factual and accurate”, 5% stated they were “partially factual and accurate” while 2% “would rather not say”; (2) 32% of respondents who secured a mortgage via a broker stated they misrepresented some element of their application, compared to 22% who secured a mortgage via bank distribution; (3) More concerning, 41% of respondents who used a broker in 2016 and misrepresented elements of their application stated they did so based on their broker’s suggestion (vs 13% for bank channel equivalent)…

ScreenHunter_15321 Oct. 07 08.28

Of the 344 respondents who stated they misrepresented parts of their application: 14% over-represented household income (18% of those who used brokers and 5% who used bank networks); 13% overstated other assets; 17% under-represented other financial liabilities; 26% under-represented living costs; 11% “other”; 31% “would rather not say”. 12% stated they misrepresented multiple factors.

Unfortunately survey results suggest misrepresentation is systemic with findings similar across the 2015 and 2016 Vintages, price to income levels, LVR, owner occupiers and investors. However, there was a correlation between borrowers who misrepresented their application and: those whose expenditure was broadly equal to their income; stated they are under financial stress; or have missed a debt payment…

Interestingly customers who come from NSW were more likely to misrepresent their mortgage applications. Notably this continues to be the most buoyant housing market in Australia. Customers from Queensland are more likely to be factually accurate.

ScreenHunter_15322 Oct. 07 08.31

Finally, the use of mortgages for investment purposes accelerated in 2016 contrary to the banks’, RBA and APRA’s data…

ScreenHunter_15324 Oct. 07 08.35

We believe this ties in with the ‘areas of less factual accuracy’ section above. This may suggest some customers were not factually accurate when stating the purpose of the loan, especially given the higher interest rate which has now been introduced on Investment Property compared to Owner Occupied mortgages.

What does this mean?

We believe these results are disturbing given: the recent housing market reacceleration; elevated household leverage (186% debt to income); and mortgages accounting for 62% of bank loans.

ScreenHunter_15323 Oct. 07 08.34

While banks have tightened underwriting following APRA’s ‘sound lending’ guidance, it does not appear to have prevented applicants ‘stretching the truth’. While low unemployment and rising house prices may help prevent losses near term, more rigorous auditing of applications appears essential, especially via brokers…

We believe it is more important than ever that the banks tighten their mortgage underwriting standards and ensure applications are factually accurate. We continue to see the mortgage broker network as a potential area of weakness in this process.

Even more here. And don’t forget the hedgie sting in Sydney in 2016 which showed that little if anything had changed:

Underwriting standards are poor in banks. The regulators trust the big four banks’ statistics, but we’ve seen that underwriting standards are much worse than advertised.

In our due diligence, we told mortgage brokers and bank managers that we required a 95% loan-to-value mortgage at 10x our gross household income to buy our dream house, and we were consistently told it was not a problem at all. All we needed were two payslips and mortgage insurance. We asked if the bank would call our employer, and both reputable and disreputable brokers said banks rarely verified payslips. Also, “most of the people checking documents are in Indian call centres.” Furthermore, we were told that as long as the payslips had the right Australian Business Number (ABN) and the business checked out, that was enough.

This is not how it has to be. In the UK, for instance, after the credit crunch, banks are far more thorough when verifying income. The bank cross-checks payslips with one’s bank account to see the net amount received corresponds to the gross amount paid. A lengthy affordability questionnaire must be filled out to make sure that pay is sufficient to cover mortgage payments, that are also stress-tested for higher rates. Bonuses, once nonchalantly taken as regular income, are much more strictly dealt with. No-deposit and minimal-deposit loans are much rarer and harder to obtain. Similarly, the US has tightened lending standards since the financial crisis.

But in Australia, more alarmingly, we were informed from various sources that disreputable brokers had software to make authentic looking tax returns for clients who needed mortgages. We were encouraged to lie about our incomes by multiple brokers in order to get dodgy loans past bank loan officers.

It should come as no surprise that lending standards have fallen as third-party origination of mortgages has risen. This was typical of standards in the US in 2005-07. Today, almost half of new housing loans are originated by third parties.

But our biggest surprise came when we visited a building society (a thrift). The bank manager told us her lending standards were conservative compared to the big banks. She would check our income more thoroughly. She then encouraged us to take a 95% loan to value ratio at 10x our gross income because, “It isn’t worth saving another 5% when house prices will rise more than 5%. By the time you save the 5%, prices will rise exponentially.” Those were her words, not ours.

Needless to say, John Hempton of Bronte Capital and your dumbfounded analyst from Variant Perception wandered around Sydney in shock and amusement after every meeting.

When the Dumb Bubble implodes it will be epochal stuff.


    • Who said “prevalent? Nothing is prevalent. It was a few rogue guys. They’ve been found and fired. Nothing to see here. Move along.

      • Just like Diesel Gate, those rogue employees and engineers doing naughty things! Good thing the CEO’s would never condone such things!

      • Correct. This is the genuinely held view of everyone inside and outside of the banks with any amount of influence. The RC will uncover cases of misconduct but the system will be absolved.

    • Correct: NAB told us just yesterday that “business conditions are the best for 20 years”??
      That is surely politically inspired to hold the puntertariat from panicking.
      Now the other story about, of the escape plan all have for those living in sydney??
      Well they are going to have to move fast cos by my calculations many of those planning to escape now have negative equity in RE and no future employment prospects, and especially no future prospect of obtaining a loan for RE. it will be The Great Escape into Poverty . Applies to Hellbourne as well.

      • @WW , What if a China man has a million dollars debt(fromAusbank) on a house. SHTF and he wants to bail to China and I offer him $250K in cash.
        Does the bank hold the deeds or lawyers? Is it possible for this to happen?

      • the bank as the owner holds the title
        Course its possible, probably an everyday event shortly.
        on the Jewell for example, the chineee debtor transferred ownership to his strayan nationality son.
        but the commo bank of china still holds the title, and the responsibility, btw
        Dont be attracted by any seeming good deals, this will collapse in a heap, even then it may be tricky to pick the bargains.
        Keep your hands in your pockets (Sid Kidman)

  1. I’m just amazed that this is all such a shock & surprise. For years I’ve been dealing with clients who have been able to borrow & borrow & borrow & consume & consume & consume & yet every time I have said “you can’t afford to borrow & consume anymore” & they just laugh & say you’re so funny, but I can’t hear anyone laughing around here? (sound like a line from a song?). then they say you’re just a boring accountant I’ll talk to the money man…..! Boom! & then the tax can’t be paid but still they borrow for the European sexy car & the can gets kicked down the road & borrow for that extra really necessary property until, wammo, the money man can’t get any more & wammo the taxman commeth & wammo WTF it wasn’t my fault someone should have told me……! “WTF do you think I was saying all these years?” The bank RC is just scratching an itch on the surface. The whole Money system & lots else is just plain vanilla corruption. Nothing else, just total corruption. But it is still dressed as real productive jobs.

    • But as Pascoe and Reusa would say: Yeah, nah; no one cares.

      However, waiting for the fan of faeces to blow all over their faces is taking forever.

      • You’re a whingy waiter and a negative norton.

        While you’re waiting for some fan to do something, Reusa has been blowing it all over peoples faces all the time.

        You’re clearly not going to the right parties.

      • Just like the property game, haroldus, you only see “spurt over” effect if you pull out. Never happens.

    • When I told my friends I was going to be a comedian they all started laughing at me. They are not laughing now.

    • Borrow and consume is nothing new, they’re probably just doing what their parents did and are telling them to do. Extending the mortgage was always the easiest and cheapest way to afford that new car, renovate the kitchen or even pay for an overseas holiday.

      However that strategy only works in an era of higher inflation and wage growth magically shrinking the mortgage. We’re now in a period where low interest rates have tempted Australians to borrow up to their eyeballs and many households are watching their purchasing power actually go backwards – but the debt remains.

  2. In the immortal words of the great George kastanza …… Remember Jerry. It’s not a lie if you believe it.

  3. The Traveling Wilbur

    This is truly shocking. 0.4 commission? That’s only 48K if meeting target/s. How is any honest bank employee supposed to support the maintenance costs of a yacht every year with that?

    What were NAB thinking? Pay peanuts for commissions, get monkey business.

    • It’s the tip of the iceberg. Some ‘referrers’ on the lower north shore have been earning up to a million dollars by introducing our new overseas friends to a friendly and flexible mortgage broker.

  4. Who could possible know what is going through the mind of Wayne Beyers or APRA?

    Economic secret business is the basis of how independent regulators like APRA protect the interests of financial sector insiders.

    The Bank Apologists love “independent” regulators like RBA and APRA as it only means independent of democratic control.

    Not independent of the interests of those that really matter……the FIRE industry.

  5. What I don’t understand is why hasn’t the cost of borrowing gone up for the banks, I would’ve thought overseas lenders would start to worry by now. I’ve actually heard the opposite is happening and the big banks cost of funding in the wholesale market has gone down. It makes no sense!

    • Haha. You fooled yourself again with “rational” analysis of this beast.

      Rational responses will only resume AFTER the accident that detonated the bubble, not before. You can not count on rational actions to BE the accident; the pin that pops it. Can not.

      Because if you could, there would be no bubble in the first place.

      • The Traveling Wilbur

        And the inaugural Joe Hockey award for Seperating the Wood from the Trees (given unironically to the ‘sounds like something Joe would say, but it’s actually clever’ statement of the year) goes to… Peachy!

        Someone had extra Zen with their wheaties this morning?


      • (Wiping discretely a manly tear)

        They grow so quick! One day they’re young with stars and sunshine in their eyes, the next they’re cynical, with dark shadows and glinting of cold steel in their gaze…

        MB has taught you well, young Peachy apprentice!

    • The drivers of those capital inflows are exchange rate manipulation.

      Plus what risk are you talking about.

      Everything is guaranteed by you and I

    • “Can you explain that to me? How’s
      the value of an insurance contract in no way affected by the demise of the thing it insures?”
      The Big Short
      (In other words – banksters)

    • Bauer, if one is to understand the great mystery, one must study all its aspects, not just the dogmatic narrow view of the bears. If you wish to become a complete and wise leader, you must embrace…a larger view of the Force. Be careful of the bears, Bauer. Only through me can you achieve a power greater than any bears! Learn to know the Moron side of the Force, and you will be able to save your portfolio from certain death…..

  6. This will precipitate the real tightening…and it will be massive. For years we’ve watched and thought how can these people afford it….truth is they couldn’t but they got the money anyway…and now they can’t. Related point my wife was talking to a business banker and apparently very busy with lots of ‘finance / mortgage broking’ businesses up for sale right now…

    • Stephen,

      Dont hold your breath that the revelations of crooked and corrupt banking sector behaviour will result in less credit for property market speculators and gamblers.

      Keeping out of control amounts of bank credit flowing into the residential property market is absolutely critical to the political interests of Scott Morrison and Malcolm Turnbull.

      They will do absolutely ANYTHING to ensure that there is enough credit flowing to avoid any significant correction…e.g. More than 10-20%.

      And you will NOT know it has happening because APRA operates in secrecy and ASIC and other regulators will simply say ongoing investigations to avoid releasing any specific information.

      That Beyers did not know what was going on….assuming he is not silly enough to lie to the senate…..simply means that information is not given to him so he can plausible deny.

      Independent banking system regulators are only independent of the interests of the public.

      • Banks are a reflection of deeper sociological drivers oo7….

        Neoliberalism’s advent precludes bank malfeasance and is inclusive of vast swaths of industries and public institutions.

        Disheveled… but then when you have people that think reality can be viewed by two intersecting plots…. wellie…

      • “Keeping out of control amounts of bank credit flowing into the residential property market is absolutely critical to the political interests of Scott Morrison and Malcolm Turnbull.

        They will do absolutely ANYTHING to ensure that there is enough credit flowing to avoid any significant correction…e.g. More than 10-20%.”


      • Maybe but lower level arse covering will at least subdue it a bit…and we are already seeing that play out in the housing market imho

      • Unfortunately “….deeper sociological drivers….” are not in the terms of reference.

        Best keep that for your university of the third age classes. They gobble up all that sociological stuff and Margaret Mead.

      • Stephen,

        There certainly will be some change in behaviour but the macro level matters to Scott and Mal.

        There is an alternative to local credit creation to support prices and that is direct foreign capital from offshore buyers armed with cash or offshore credit.

        So even if they do slow immigration the FIRB will be waving through every application they can.

      • I’m with you Peachy but honestly, if some overseas ‘investor’ thinks a 2 bedder in Newtown is a buy at $2m plus maybe we should bus them in?

      • @Stephen, bussing then in is exactly what we’ve been doing.

        Only buses were not big enough, so we quickly needed to get the 747s and the A380s.

      • If housing or other crashes could be kicked down the road forever, they wouldn’t have happened in many other countries and many other parts of Australia already. Look at parts of SA, North QLD The Gold Coast, NT, WA, mining towns. Rational punters will not bet on house prices ad nauseum if they see the prices going south and lenders start soiling their underwear.

      • My bet is there will be a paltry monetary fine for the banks, a drop in the bucket for them. The Government will announce strengthened lending laws…….just a rehashed version of NCCP and all will be forgiven. They now want to come off this thing looking strong.

        On a positive note Ross Greenwood was hammering it on his show last night, playing clips of the QC hammering the NAB exec. With any luck it might blow up. Surprising for a banking apologist.

      • oo7….

        Mead – ???? – she had nothing to do with Rand and corporate posse.

        If you don’t like academia made all the market forces described in ‘Science Mart’ might unpack that a bit for you or the only other alternative is some religious musings – but then you said your working on the side of angels…

  7. It does seem a bit disconcerting that this M.O. spread like a virus globally, in just a few decades, one would think some sort of transmission vehicle would be responsible. I mean Bush Jr was advised by the FBI about mortgage fraud, then some boffins reminded him they had a war on and a recession was bad juju for team spirit.

    I mean Obama [rabid lefty] nominated Penny Pritzker to USSoC, so bipartisanship was never an issue.

    Then one has to consider Xi looking like he’s going FDR Pecora Commission ready.

    Too top it all off El’ Trumpo is miffed at the SEC for not deregulating fast enough and rumors of Kudlow as NEC director.

    disheveled… its like watching Boggie Nights without the happy ending…. stuck in the fall from grace and trying to scam a way back to better times… oh and the parking lot thingy….

    • HadronCollision

      You’re right it is very much looking like Boggie nights – very muddy – not the slick Boogie Nights where it’s party time

  8. How about that figure 23, Zip back up and have a look at it,Very long term mortgages as a percentage of GDP. What is not shown there is the assumption that GDP can continue to hold up to allow the repayment of those mortgages, especially as the FIRE sector of the economy now is included in the GDP figure.
    We now have a cyclone off the coast up here. What mostly sustains a cyclone is its wind, evaporates the moisture and keeps the cycle going, when the moisture runs out the cyclone runs out of puff and dies, very quickly.
    As this inquiry is showing us, the fire sector is all smoke and mirrors manipulated by dishonest people. When the fire sector collapses, the gdp will collapse, and thus the ability to repay those long term debts stalls. Just like a cyclone.

      • TD has called for the death penalty for drug dealers, and I support that.
        These finance types, will through their actions, cause people to end their life or the lives of others.
        Manslaughter would be a realistic crime for the actions of such people.
        there is going to be some very interesting legal cases to come from all this.
        I was wondering why the price of Slater & Gordon is on the rise?

  9. I still remember posting this one weekend a couple of years back when someone inside NAB told me about. Some clown said I was taking BS, no way it would have happened.


    All NAB’s Waldron could muster was a timid “yes, ma’am” in complete deference to the illumination of fact which revealed extensive fraud. So much for the “we plan to defend our position with vigour” that is the usual prelude.
    Abject terror at what lies ahead.

    • Terror at what? Being “forced” to resign and being punished by walking away with a bigger payout than if he’d won Lotto?

  11. “But the inquiry heard the introducers involved in the cases of misconduct fell outside those industries, including people who ran gyms.”

    Want help with those squats ? How about a home loan ?

    Seriously WTF ?

    • Gyms are full of people trying to keep up with The Jones. Social groups of gym goers egging each other on. A perfect place to steer people into residential loans.

    • Perhaps reusa will say fake news but it is good to wait for his comments.

      Anyways, the Moron side of the Force is a pathway to many abilities some consider to be unnatural.

  12. What is extraordinary is the punters desire to secure a loan – whatever it takes!

    The breaches thus far are pretty small cheese and appear to have been appropriately dealt with by the bank. The Introducers concept not a good one, too close to a spotters fee in another market…

    • Lets get some of those bank operatives up on manslaughter charges, the full criminal conviction.
      then see what the outcome is.

      • Hey Wiley, are you ever going to stop freeloading? You obviously spend a lot of time here, so why not do the right thing and become a member?

      • Hay Craig… when you have a membership to Tattersalls I might over look your bitching, I mean free loaders like you should know your place.

  13. Ross Gittins speaking at 6pm tonight. Newcastle Institute forum. Souths Leagues Club Merewether. Topics: Rent-seeking, the ‘game of mates’, and the stuff-ups of economic reform