Mortgage fraud game on? ASIC loses HEM case

Via the ABC:

The Federal Court has dismissed ASIC’s responsible lending case against Westpac and ordered the regulator to pay the bank’s costs.

ASIC had alleged that Westpac breached responsible lending laws on up to 262,000 home loan approvals made using an automated process that relied on the Household Expenditure Measure benchmark, rather than using each applicant’s individually assessed living costs.

In September last year, Westpac agreed to pay a $35 million settlement to ASIC and admit that it breached responsible lending laws.

However, in November Justice Nye Perram sensationally rejected the settlement, finding that it was ambiguous and that the parties did not actually agree on what the responsible lending laws required and, therefore, how many loans were in breach and what the penalty should be.

Yet they did agree that there had been a breach or why settle?

Hopefully ASIC will renew the case via some other route but, if not, this will be a signal to the banks to get back to mortgage fraud as soon as possible. There are still private class actions underway.

My hope is that the HEM changes we have seen to date are structural but this will not help.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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