The Adviser


Brokers not to blame in subprime scandal

Evidence suggests brokers are not to blame despite ASIC's jump to roast brokers in the Senate inquiry into the subprime low-doc ‘scandal’.

In their submission to the inquiry by the Senate, ASIC has backed lenders while hanging brokers out to dry.

“It appears that dishonest or fraudulent conduct has been more commonly found in relation to mortgage and finance brokers, rather than lenders,” the submission read.

However, Banking and Finance Consumers Support Association (BFCSA) head Denise Brailey spoke to The Adviser about her personal fight against ASIC's involvement in the scandal, and claimed despite the regulator's claims, brokers were not to blame.

“Our association represents around 1,200 people who have been involved in these unaffordable toxic loans,” she said.

According to research from BFCSA, brokers weren’t involved with a third of the subprime loans in question.

“Thirty-four per cent of the loans our members reported were written by loan officers at banks and had nothing to do with mortgage brokers. This high percentage is obviously at odds with what ASIC has said," BFCSA said.

“We have consistently found errors and lies in ASIC's claims. In the past, ASIC said that 99 per cent of subprime loans were low-doc loans. However, our figures suggest otherwise.”

According to the data from BFCSA, of the total ‘toxic’ loans reporter, 18 per cent were both written by employees of the banks and were ‘high doc’ loans.

“We were staggered by these results,” Ms Brailey said.

On her blog, Ms Brailey published a meeting she had with one of the commissioners of ASIC, where the commissioner allegedly said he agreed with the findings from BFCSA.

“He said only three per cent of brokers are rogue, which is one of the few figures we agree on, but it wasn’t the brokers and the BDMs who developed the loan serviceability calculators that were clearly misleading, it came from the executives because it was a way for people to sign up and put their homes on the line for loans they couldn’t afford.

“When I said that, he agreed the lenders were definitely the engineers of the subprime scandal,” the blog read.

However, ASIC's submission to the Senate refutes the claims by BFCSA, claiming that most of the subprime loans written by brokers happened prior to National Consumer Credit Protection (NCCP) legislation in 2010.

“Almost all of the loans that BFCSA members have raised concerns about were entered into before the [NCCP] act commenced, with most of the loans issued between 2004 and 2008,” ASIC stated.



+3 #6 James 2013-10-29 11:11
I remember clearly both Bdm's and loan assessors walking me through how deals should be structured. Just about every low doc or no doc loan i did was bounced off someone at a bank first. The most important question to the clients always being, 'are you comfortable with the repayments?'.
Once again the facts are ignored and history is rewritten.
+17 #5 Barney 2013-10-28 12:22
Customers ask to borrow the money. They sign the loan application forms requesting it. They sign the mortgage docs. They get legal advice. They know the interest rate and their commitments.
Then when it goes bad it's "someone else's fault" or "predatory lending". Whilst there may be a few examples of this, there are many clients who knew what they were doing and were greedy and not are simply looking for a cheap way out...
+4 #4 AaronG 2013-10-28 11:56
I actually miss the old subprime and lodoc market. Does that make me bad? There might have been a few people who shouldn't have done it, but a heck of a lot of people got houses and are still happily in those houses who couldn't have done it any other way. Should we say to them,'Hey, you never should have gotten your house and lived the Australian dream because a few other people got THEMSELVES in over their heads?" That is what we are moving towards now. No one would ever get kille don the roads if we all drove 1 kilometer per hour. Should we then say to people they should be able to drive 100 kms? The fact is that we did have a few mortgagee possessions after the GFC but nothing worth overhauling the best banking system in the world over. I miss the 1 day ABN!! Heresy!!! Quick, burn me on the NCCP Stake!
+8 #3 Larz 2013-10-28 11:51
BFCSA are a group of deperate borrowers led by a crazy woman and still people take notice of them. It takes about 10 mins to read their web site to realise these are desperate people who in most cases make bad business decisions and now are looking to blame anyone they can to to try to get some money back. They see Denise Braily as their last hope. In Aust we had some poor lending practices but these were isolated and could never be described as a "sub prime scandal"
+6 #2 Peter Benson 2013-10-28 10:26
A great opportunity for the MFAA to add their findings.
Also, we can scarcely hold 'pollies' to account if they are being fed BS and non-factual info. Next we will have some more draconian legislation based on the ASIC submission.
+32 #1 Overtheborderbroker 2013-10-28 10:11
Am I the only one who remembers BDM's proudly standing in front of assembled broker groups and coaching us on just how easy it was to apply for lo doc's and no doc's - starting with the fabulous one day ABN policy. Who remembers the PAYG lo doc at 60% LVR? It wasn't a broker invention but a "big four" bank hmmmmm. Maybe it was all a dream. So ASIC how about looking at the lenders who created the products and policies in the first place. It's easy to shoot the troops, it's a bit more difficult to go after the hierarchy but hey, what's new? As usual never let the facts get in the way of a good story.

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