Brokers not to blame in subprime scandal

Brokers not to blame in subprime scandal

Steven Cross Comments 6
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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.


Brokers not to blame in subprime scandal
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