Major banks investigating mortgages backed by dodgy foreign income

by AB10 May 2016
Two of Australia’s largest lenders have uncovered mortgages that have been backed by questionable foreign-income documentation, forcing them to stop approving such loans.

ANZ and Westpac have identified issues with some loans that rely on foreign income for approval, the two lenders said in separate e-mails.

The statement comes after the two lenders last month stopped loans to offshore customers who aren’t citizens or who don’t hold appropriate residency visas. The banks also disallowed the use of foreign income for such customers to qualify for a loan.

The changes made by the biggest banks in the country are part of a broader scrutiny of foreign buying of Australian homes, which has helped drive a 55% jump in home prices across the nation’s capital cities in the past seven years. 

Rising demand, particularly from China, has triggered community concern that locals are being priced out of the property market, prompting the government to tighten scrutiny of foreign investment.

“Our delinquency rate on foreign-income loans is lower than the portfolio average, and a large proportion of these loans are ahead on repayments,” Westpac’s Sydney-based spokesman David Lording said in an e-mail. 

“Overseas borrowers are also well secured.”

ANZ said the issue plagued only a “small number” of borrowers and the loans were performing better than average.

“All our analysis to date indicates the issue is relatively small and there is no material credit risk issue involved,” the lender’s Melbourne-based spokesman Stephen Ries said.

Bloomberg
 

COMMENTS

  • by Regional Broker 10/05/2016 9:55:30 AM

    OK I accept that some brokers may have been involved in a small number of cases, this article to me is unbalanced, are the banks investigating their own internally generated deals by their lending staff and mobile lenders if not why not?

  • by 10/05/2016 11:09:04 AM

    We'd like to think the industry is cleaned up of dodgy brokers but sadly that is not the case.
    Last month I was approached by two people who said their broker had put them down as single with no children, to increase their borrowing power! One is not struggling to make his repayments! How could these brokers sleep at night!!
    Another one who told me off for asking for his passport and his PR, because none of the other 10 brokers he had spoken to had asked for it!!

  • by A Broker 10/05/2016 2:53:47 PM

    Great news and if the banks are actually serious about this they will wipe out plenty of brokers that ''specialised'' in this fraudulent space. They should all be expelled from the industry and jailed.

    I know of a case that involved extraordinary volumes over many years ,and once caught, the broker voluntarily cancelled their accreditation with a particular bank and everyone (bank, aggregator and broker) just moved on. I believe that broker is still in the industry today.