Headline of The Australian newspaper Monday June 4 2012 "Hope for mortgage 'victims'"
"Thousands of struggling homeowners could walk away from their mortgages as a series of court cases helps to expose widespread improper lending practices involving some of the nation's biggest financial institutions."
OMG!!! But property bulls were telling us that we were different to America!
"Finance industry giants are spending millions of dollars on legal fees fighting homeowners who have successfully exited their mortgages because they were stung by sub-prime-style lending practises during the last property boom."
OMG!!! Sub-prime-style lending practises? In Australia? Surely not? People successfully exiting their mortgages? In Australia? How? No, no, no! They can't, we were told repeatedly by the bulls. Part of the reason the US market collapsed couldn't happen here, they said.
"...inflating borrowers' income and ability to repay debts to secure so-called 'low-doc' loans."
No, no, no! We don't have sub-prime mortgages in Australia! It's different here! Our lovely financial institutions weren't reckless like the Americans'.
"...No docs - Client only needs to be self-employed for 1 day or more... No assets or liabilities required, no income needs to be stated!!!"
They were called NINJA loans in the US (No Income, No Job, no Assets). Here the financial institutions advised clients to register an ABN, then get one day of work, one single day, before they are eligible for a mortgage! You couldn't get a NINJA loan here. Presumably you needed to work for 8 hours. But why would our banks be so reckless?
"In the race to provide credit - and earn commissions..."
Oh, right! Think greed is pretty much universal, I guess.
"The Australian has also discovered cases of mortgage brokers, loan originators and others inflating borrowers' stated incomes on loan application forms without their knowledge."
Keep saying it: Australia is different, Australia is different, Australia is different...
""Lenders have been throwing everything they have at these cases because they know there are thousands, probably tens of thousands, of people who have been affected," say Geoff Robertson of Champion Legal..."
But Australians love housing more than Americans do, or some other property bull argument (I forget what it was)!
The fact is that the same dodgy lending practises that caused the property bubble to crash in America (and Spain and Ireland and Greece etc) also existed in Australia. The question of how great the problem was will only become clear in the months and years ahead of legal action.
Hopefully anyone struggling to pay their mortgage, or facing foreclosure from the bank, should immediately contact the bank to get a copy of all the documents. Any discrepancies in any facts should be challenged in court. This could drag on for years, folks.
So the banks are going to take big losses, through mortgage reductions or write-offs, on this debacle. And do you think banks want to become landlords, holding thousands of properties in a falling market? No chance. They'll dump them on an already over-saturated market, pushing prices down further. Try competing to sell your home with a bank foreclosure selling cheaper next door!
The other interesting part of the article is about Residential Mortgage-Backed Securities (RMBS). After the GFC, the investment market for them collapsed. In order to protect small lenders against the big banks, in Oct 2008 Wayne Swan announced the government would invest $4Bn to "shore up the RMBS market".
Think they were good investments? Securities paying a good rate of interest, backed up by residential mortgages in Australia? Well apparently investors don't (maybe they're aware of our little "Low-Doc" problem). Investors would rather buy US Treasuries paying around 1% (less than inflation), than invest in Aussie mortgages.
So in April last year Swannie had increase the obligation to $20Bbn. $14Bn of that has already been invested in RMBS. The govt claims it is invested in "...superior-quality loans with relatively low default rates...". Really? Why didn't private investors want them then?
It is obvious that the govt is now creating our own version of Fannie Mae and Freddie Mac, bankrupt taxpayer-funded organisations to invest in crap RMBS that no-one else wants. And remember, we didn't have the money to pay for it. We borrowed the money off China, amongst other places, to buy Aussie mortgages. Its part of the reason the Gillard govt has to raise our debt ceiling. It was $70Bn, then they raised it to $200Bn, then $250Bn, now who knows how high it will go? Part of the money is being used to continue to prop up the unsustainable Aussie property bubble. When the govt can no longer borrow money to keep our bubble afloat, look out below.
"Thousands of struggling homeowners could walk away from their mortgages as a series of court cases helps to expose widespread improper lending practices involving some of the nation's biggest financial institutions."
OMG!!! But property bulls were telling us that we were different to America!
"Finance industry giants are spending millions of dollars on legal fees fighting homeowners who have successfully exited their mortgages because they were stung by sub-prime-style lending practises during the last property boom."
OMG!!! Sub-prime-style lending practises? In Australia? Surely not? People successfully exiting their mortgages? In Australia? How? No, no, no! They can't, we were told repeatedly by the bulls. Part of the reason the US market collapsed couldn't happen here, they said.
"...inflating borrowers' income and ability to repay debts to secure so-called 'low-doc' loans."
No, no, no! We don't have sub-prime mortgages in Australia! It's different here! Our lovely financial institutions weren't reckless like the Americans'.
"...No docs - Client only needs to be self-employed for 1 day or more... No assets or liabilities required, no income needs to be stated!!!"
They were called NINJA loans in the US (No Income, No Job, no Assets). Here the financial institutions advised clients to register an ABN, then get one day of work, one single day, before they are eligible for a mortgage! You couldn't get a NINJA loan here. Presumably you needed to work for 8 hours. But why would our banks be so reckless?
"In the race to provide credit - and earn commissions..."
Oh, right! Think greed is pretty much universal, I guess.
"The Australian has also discovered cases of mortgage brokers, loan originators and others inflating borrowers' stated incomes on loan application forms without their knowledge."
Keep saying it: Australia is different, Australia is different, Australia is different...
""Lenders have been throwing everything they have at these cases because they know there are thousands, probably tens of thousands, of people who have been affected," say Geoff Robertson of Champion Legal..."
But Australians love housing more than Americans do, or some other property bull argument (I forget what it was)!
The fact is that the same dodgy lending practises that caused the property bubble to crash in America (and Spain and Ireland and Greece etc) also existed in Australia. The question of how great the problem was will only become clear in the months and years ahead of legal action.
Hopefully anyone struggling to pay their mortgage, or facing foreclosure from the bank, should immediately contact the bank to get a copy of all the documents. Any discrepancies in any facts should be challenged in court. This could drag on for years, folks.
So the banks are going to take big losses, through mortgage reductions or write-offs, on this debacle. And do you think banks want to become landlords, holding thousands of properties in a falling market? No chance. They'll dump them on an already over-saturated market, pushing prices down further. Try competing to sell your home with a bank foreclosure selling cheaper next door!
The other interesting part of the article is about Residential Mortgage-Backed Securities (RMBS). After the GFC, the investment market for them collapsed. In order to protect small lenders against the big banks, in Oct 2008 Wayne Swan announced the government would invest $4Bn to "shore up the RMBS market".
Think they were good investments? Securities paying a good rate of interest, backed up by residential mortgages in Australia? Well apparently investors don't (maybe they're aware of our little "Low-Doc" problem). Investors would rather buy US Treasuries paying around 1% (less than inflation), than invest in Aussie mortgages.
So in April last year Swannie had increase the obligation to $20Bbn. $14Bn of that has already been invested in RMBS. The govt claims it is invested in "...superior-quality loans with relatively low default rates...". Really? Why didn't private investors want them then?
It is obvious that the govt is now creating our own version of Fannie Mae and Freddie Mac, bankrupt taxpayer-funded organisations to invest in crap RMBS that no-one else wants. And remember, we didn't have the money to pay for it. We borrowed the money off China, amongst other places, to buy Aussie mortgages. Its part of the reason the Gillard govt has to raise our debt ceiling. It was $70Bn, then they raised it to $200Bn, then $250Bn, now who knows how high it will go? Part of the money is being used to continue to prop up the unsustainable Aussie property bubble. When the govt can no longer borrow money to keep our bubble afloat, look out below.