Jingle mail, Strayan syle

Via the ABC:

Westpac could be sued by its customers, funders and investors after admitting it breached responsible lending laws and a separate finding that it lacked appropriate lending controls.

The bank recently reached a $35 million settlementwith the corporate watchdog ASIC after admitting an “automated decision-making system” for home loans breached responsible lending laws, issuing more than 10,000 mortgages that should not have been approved.

“These admissions expose Westpac to civil action by individuals who were provided with too much credit — and inappropriately so — during their application for a loan,” Josh Mennen, a principal at the plaintiff law firm Maurice Blackburn, told the ABC.

“In circumstances where people find themselves in default on their mortgages they will be able to bring an action against Westpac, potentially, for breaches of responsible lending laws.

“It is early days in relation to any class action, but I don’t think anyone who has been following this could seriously rule out the possibility of a class action being brought.”

International investors in the wholesale money markets who funded Westpac mortgages or invested in residential mortgage-backed securities underpinned by its loans could also have a case to sue in the future if default rates rise.

“There is an argument that the international wholesale lending community who gave these banks a lot more money than they probably would have had they known that the banks did not have these controls in place would have grounds for legal action,” Lindsay David of LF Economics said.

Last year, in response to allegations of mortgage fraud and manipulation by major Australian banks, the Australian Prudential Regulation Authority (APRA) commissioned a series of confidential “targeted reviews” of major banks.

The reviews probed the data and systems Westpac uses to assess applicants’ ability to service housing loans.

The findings on Westpac were damning.

Eight out of 10 of its core lending controls were found to be “ineffective in their operation”. Most were also poorly designed.

The consequence was Westpac lacked effective measures to accurately assess the existing debts and expenses of home loan customers or properly assess their ability to service loans.

“There were limited controls in place to ensure that borrower declared living expenses were complete and accurate,” audit firm PWC, which conducted the review for APRA, concluded.

With interest rates at historic lows, arrears and default rates on Westpac’s mortgage book are low despite the adverse findings; Westpac maintains the loans which were the subject of its $35 million settlement with ASIC are performing well.

The question is whether this will continue when interest rates rise, and borrowers face the potential “double whammy” of rising rates and falling property values.

APRA findings ‘never meant to see the light of day’

The findings of the targeted review and the admissions of irresponsible lending expose Westpac to “very large litigation actions against them down the line should investors find themselves running at a loss or running at some sort of deficit due the fact that they invested into some sort of financial product that — let’s call it what it is — [involved] fraud,” Mr David said./

APRA kept the targeted reviews secret — the findings only became public when the documents surfaced earlier this year at the banking royal commission.

“These findings were never meant to see the light of day,” Mr David said.

The banking regulator did not provide the results of the targeted reviews to the Treasurer, the Minister for Financial Services or the Finance Minister, the prudential regulator told Mr David in response to a request for documents under Freedom of Information laws.

The ABC contacted APRA and asked why it had not formally communicated the results of the targeted reviews to relevant ministers, and why it had allegedly failed to inform the banking royal commission of the existence of the targeted reviews until after the commission was “tipped off” to their existence.

APRA, in response, did not answer the questions, but it told the ABC:

“APRA can and does instigate targeted reviews across all industries it regulates as part of the normal supervision process.

“APRA does not comment on its supervision of specific entities. However, as has been noted in public statements regarding the outcomes of the program of targeted reviews on mortgage lending, a range of issues was identified across all institutions reviewed. Institutions were required to provide APRA with rectification plans to deal with the issues identified.”

Westpac declined a request for an interview.

A spokesman said it was not able to comment because its settlement with ASIC was yet to be ratified by the Federal Court.

Comments

  1. “Institutions were required to provide APRA with rectification plans to deal with the issues identified.”

    I hereby demand the right to rectify the fact that I was found by the cops to be 5 km/h over the speed limit.

    • Yep, and all of these ‘victims’ would no doubt have promptly owned up even if the value of their houses was increasing. No shame.

    • Indeed – eventually you slowed down and actually stopped your car. The fine should be waived completely.

    • worse….shows Wayne Byres committed perjury during the senate hearings when he said APRA were not aware of or investigating any fraudulent behaviour by the banks…… Off to prison for you Wayne!

      • White collar crime isn’t crime because the collar is white. The defense rests its case your honour and thank you in advance for finding in my favour.

      • You’re the soul of compassion. I hope you don’t eventually get compassion fatigue as I feel you will need to be compassionate on a grand scale and for a long time.
        Perhaps.
        In 18 months, maybe?

  2. I would hate to see the mug punters put in houses for free because of dumb banking decisions. Then again the prudent and clever continue to be punished by actually doing their own sums… *sigh*

      • Jumping jack flash

        Yes, this.
        Nobody gets free money. The system would implode. Someone has to pay. I doubt it will be the banks.

    • reusachtigeMEMBER

      This propaganda piece posted by serial permaneg propagandist @rj2k000 says that there’s a precedent for people to be given the house if they can prove fraud by the lender –

      https://news.goldcore.com/ie/gold-blog/australias-banking-system-may-be-the-bloody-big-butterfly-which-triggers-next-financial-storm/

      And secondly, only in Australia has the court system established a precedent where, if you can prove your mortgage broker or banker manipulated your loan application, you can keep your home and cancel your mortgage. It’s a free house for the victim of the fraud, and a whopping loss for the bank.

      Can anyone confirm this to be true or not?

    • @Gavin – True, otherwise the stupid will be rewarded.
      I had a benevolent thought that the mortgages should be reset to reality and repayments should be based on the average of equivalent property rents for in that area. The bank gets punished, the mortgagee is still stuck with a house in a lousy area and it seems a reasonable response.

      Then I thought of all the smug b*stards I’ve suffered through dinner parties with for the last ten years, talking about how clever they were with their investments and I thought “Nah, this needs to be a lesson for the ages. They need a heavy spanking, one their grandkids will remember”

      • We are on the same page, however I think Reusa’s relations parties also have lots of spankings, but probably all consensual so not deemed as punishment. 🙂

      • “The bank gets punished”

        Except they don’t. Not really. At worst, shareholders get smashed, but the scumbags/criminals who orchestrated it all, and who profited the most walk away with their million dollar plus bonuses.

  3. Philly SlimMEMBER

    It isn’t just those 10,000 folks who were subject to the glitch, it is everyone else that was forced to pay too much because the banks gave EVERYONE too much cash and this bid up house prices. The whole of Australia has a class action against Apra and all the banks.

  4. A mear drop in the ocean considering the profit it made as a result. Fluffing around the rim and nothing more !! That’s what the entire Royal Commission is, fluff around the bum hole. Not one bank will actually feel a finger slip in.
    How can they when they basically print the money and artificially lift asset prices ? win win for banks no matter what !!!!!

  5. Jumping jack flash

    If you can swing a free house then good on you, and I’m not an expert at contract law by any stretch of the imagination, but a mortgage is a contract. You’d have to prove that the mortgagees told the bank the utter truth about their incomes and expenditure and the bank still gave them as much as they asked for.
    And does that mean the banks can counter-sue for customers’ submission of misleading information? Pretty sure nobody wants to open that can of worms

    but, I also didn’t think they’d go through with an RC lest the house bubble implode and Australia become Argentina… and look what’s happened/ing.

    As for the banks’ banks suing the banks, well, surely they would simply put up their interest rates to reflect the new risk instead of killing them off via litigation? Seriously.

    Seems like a bit of false hope for free money is going on…
    Free money can’t exist in this system.

  6. Can the government remove the guarantee of the banks based on their illegal activities? The banks have been leaving open cans of petrol everywhere while smoking crack and tossing matches over their shoulders. When it goes up in flames the insurers will have to declare the contract void.