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Storm Financial Group

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Carey or anyone else involved in this mess, is there any talk or evidence that perhaps the bank staff were getting some sort of kick back for approving these loans?

I've no idea if this is plausible but I'm just asking as this does go on in other industries and it just seems strange to me that the banks were so lax in the approval of these loans.
 
carey ramm said:
*
* loans totally $1.5m to a client who was originally assessed by the bank as a high credit risk for the intitial $100k home loan - yet the loans were still processed
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Were both loans via the same bank?

*
* inflated income levels - in one extreme case a retiree had a monthly income of $104k on her loan application
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It's not impossible for a 'retiree' to have this level of income. Whether a person is working doesn't necessarily determine their income.

In this example did the client leave the insertion of the income level to Storm?
How was the proof of income shown?
 
This business gets dirtier and dirtier. There seems little doubt that the Storm system systematically deceived people of the risks being taken with their money, deceived other financial institutions about the capacity of clients to pay and finally deceived clients who tried to exit.

One way or another I believe these people should be brought to justice. Hopefully it will be through successful legal and civil proceedings.

(But hey, since when did our financial system have a moral code worth the paper it was printed on? )

My fear is that we have yet to see the end of this type of corruption and that many more of us will lose our savings and investments in the collateral damage that will follow.
 
From a financing perspective the lenders will have looked at the deals in a couple of different ways, one will be that the investment income and growth will look after the interest accruing on the margin loan, therefore the client only needs sufficient income to service the home loan and living expenses.

Alternatively, for retirees they will have looked at it from the perspective that someone with a $2m portfolio will generate $200k income from that (10%, given the long term return from ASX is 13% Storm reckoned this was feasible, this is a documented fact) and the cost of the margin loan at 50% LVR, at say 9% was $90k. Therefore surplus income is $110k pa. This is more than sufficient to cover home loan repayments, living expenses and tax.

This is an example of a retireeing earning at least $100k pa, not saying it is right but you can pretty much make figures do what you like.

Now this requires the market to do 10% every year and as we, and presumably the Storm advisers, know that does not happen.

Also bear in mind that the a CBA home loan was more than likely approved in isolation to a CGI Margin Loan and the CGI Margin loan application asks no questions reagarding income, simply if you have enough security they will lend you the funds.

The blue sky view of the income lay somewhere between the salespeople/advisers and the lenders with the advisers getting 10% of the total commission generated and the lender's staff acheiving bonuses and/or commission based on the business being generated. Each will blame each other with the client ultimately signing a document that says they can afford the repayments.

Many of these people should not have got home loans in the first place, therefore no loan, no investment, no margin loan, no fees and finally no margin call. The home loan is the starting point, everything flows from there.

Getting the home loan set aside should be the strategy for many of these people.
 

10%.. a nice even number ? Sounds more like they used that number because you can figure it out in your head.

That aside, I take it this "strategy" means the "investors" would have had to sell down part of their holdings each year to pay the interest bill on the margin loan (and the resultant tax bill from any CG) that was above the dividends received... income received after the convoluted fee structure took it's hit i.e both directly and then indirectly via their index funds MER) ?
 
Generally they just prepaid the interest annually and capitalised it, the resultant tax refund then went into the 'buffer' account to meet living/loan expenses.
 
Smiley said:
How would one go about getting out present home loan - still classified as an investment loan, set aside Steve?
Click to expand...

First step is to obtain the copies of the loan application/s and supporting information and then assessing if they are based on fact or on 'projections' or even if they are a low doc loan.

Then, if they are not based on reality or differ from the information that the borrower provided to Storm/Bank make a formal complaint to the Bank through their formal complaint mechanisms.

The Bank/lender is obligated to respond, if they do not reply within the prescribed timeframe or you are not happy with the response you then complain to the Ombudsman.

The lenders do not like dealing with the Ombudsman as it is user pays, that is, the more complaints about a lender the more they pay. It costs them to open a file so they try to avoid this is a much as possible.

The key issue is to establish a pattern, if the Lender's Head Office or Ombudsman start to see a large level of unconscionable lending from one lender or even say one branch then action can be taken.

Not saying this is guaranteed, but it can't hurt. There has been talk that a loan has already been set aside but I must stress that it is rumour only at this point.

This is different to the Ombudsman complaint system about Storm, this is a complaint against the Bank.
 
Julia

1. the loans were undertaken by the same bank - interesting file note from the bank saying valued client storm referral.
2.this lady had been unemployed for 9 years and then retired - actual income was $30k per annum not $104k per month after tax!!! (thats $2m pa pre tax)
 

This is getting bizarre, I wonder who actually filled in the sections stating the income & when & by whom were the documents signed.
 

I did not look at that avenue. I am in process of getting a home loan for my mums house as she has mortgage she cannot pay. The original loan was taken out by Dad as he was working full time and could pay interest. Mum was not working (pension age). Dad died 7mths after 2nd mortgage obtained and CBA was notified. Mortgage name was not changed out of dad's name. Would this have been because she would have not passed the credit checks as she has no capacity to pay??? The loan was in Estate of "Dad" CO Mum. confused
 
The Storm website is a joke. The same old questions stay on there day after day, with only the odd new one being added.

Someone asked him if he thought the Storm model would have been appropriate in the 87 market crash.
He didn't even attempt to answer the question, saying instead 'We stand by our previous comments that this crisis is unprecedented'.

This person - I won't call him a man - is a coward.
 
Solly said:
This is getting bizarre, I wonder who actually filled in the sections stating the income & when & by whom were the documents signed.
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Yes, this would seem to be a pretty fundamental point.
Carey, do you have this information? Surely the client to whom you refer in your last post would not have inserted this fictitious information?
 
cassimatis.com.au

Talk to Us

Click here to talk directly to Emmanuel and Julie.

Recent Questions

Is it possible that you could have geared your clients any higher? - Lachlan

"Given its taken the largest event since the Great Depression in the 20’s to place Storm’s model in danger, this question seems to answer itself. We don’t believe our strategies were risky in normal circumstances and more than 15 years of success bears testimony to that fact." - Emmanuel and Julie

They dont answer the question, except to imply that- yes, we pretty much "maxed out" our clients debt.

They also keep referring to the "Great Depression" but conveniently ignore the "1987 stock market crash" which was only roughly seven years before the start of their "15 years of success" - and then failure.
 


What this answer means to me is that "Storm's model" didn't cater for all probable market conditions and corrections ; it appears that it works well in unprecidented rising markets but the model didn't handle the events of downward corrections the recently happened.

I would be interested to know what modeling was done?
Who did the modeling? What scrutiny was this model placed under and who reviewed the results of the modeling?
What was the role of Ignite Financial Systems and Research?

There appears to me to be a possible fundamental flaw in the methodology that was used. I have to defer to those qualified in these areas to provide answers and opinion.
 

Steve, would that also apply to Macquarie Margin Lending - they have the shares as security and are not interested in assets, liabilities & salary etc.
No matter how I try, I can only get the simplest paper work, just basic name, address, financial advisor information?
 

Solly

That's the understatement of the year! There was a fundamental flaw all right, and just about every other kind of flaw imaginable too!
It doesn't take any particular qualifications to work that one out!

The two most obvious flaws are....
1. The model relied on the continuation of the bull market - a completely unrealistic expectation since bull markets are the exception rather than the norm.
2. There was no effective contingency plan in place to manage risk if the bull market ran out of steam.

He keeps harping about how this crash was an unprecedented event. When reminded that a worse precedent was established by the far more brutal 1987 crash, he pig-headedly sticks to his claim that the current crash was unprecedented.
The simple fact is that this man has proven himself incompetent to manage his clients investments. Now he's showing that he lacks the courage and character to admit it.
 

Pindibog

This one is a little different in that when the loan/s were approved the borrower presumably had the capacity to repay. The Bank had a couple of options available after your Father passed away, leave as is (sometimes it is better not to know) or refinance into your Mother's name. The latter it would seem would not have been possible and therefore it was left as is.

It may be worth investigating if any new monies were advanced subsequent to his death or if any material variations were made to the loan/s (extension of interest only terms or like).

Seek some advice though before you make the final decision about refinancing as there may be alternatives, especially if fixed rates are involved.
 

Can we post in any colour on this thread?

Perhaps blue for Storm Victims, red for the many Italian-Australians yet to have their day with Manny, black for the deceased and white for those who have decided to move on.

gg
 
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