Mortgage fraud rampant among broker clients

by Miklos Bolza10 Oct 2016
A UBS survey of more than 1,200 mortgage holders who have taken a loan out in the past two years has found that 28% said their applications were not factually accurate.
 
More shockingly, 41% of those who secured a mortgage through a broker said their broker encouraged them to misstate information in the application.
 
This was a large proportion compared to those who secured their mortgage through the banks. Of this group, only 13% said their banker suggested they misrepresent their details.
 
The following table looks at the percentage of incorrect claims made to both brokers and banks by those who claimed to have given false information.
 
Misrepresentation Brokers Banks
Over-represented household income 18% 5%
Over-declared other assets 14% 11%
Under-represented other financial commitments
(e.g. mortgages, personal loans, credit cards)
18% 12%
Under-represented living costs 26% 25%
 
A systemic problem?
 
Looking at the types of mortgage holders prone to providing false information, the report found they were more likely to be credit card revolvers, spend a larger proportion of their income, or face an unresolved financial challenge.
 
UBS analysts found that there were similar levels of misrepresentation from 2015 to 2016. This was also true when comparing whether the buyer was an owner occupier or an investor or the different ratios of house prices versus disposable income.
 
This “suggests to us that misrepresentation of mortgage applications is not contained to a particular part of the Australian housing market, and may be systemic,” they wrote.
 
Understated
 
“It is difficult to reject these findings, in our view,” the analysts said. “It is highly unlikely that the respondents would have stated they misrepresented their mortgage documentation when they were in fact truthful.
 
“If anything, we believe it is more likely these figures may understate the level of misrepresentation in mortgage applications as some respondents may not want to state they were less than completely accurate despite anonymity.”
 
Brokers are winning
 
One positive trend from the report was that brokers were more successful in lead conversion than the banks. While 60% of customers secured their mortgages via a broker, only 40% did so through the banks. This was despite 80% of customers discussing home loans with the banks.
 
This highlighted the difficulty banks generally have converting discussions into sales, the study analysts wrote.

COMMENTS

  • by Steve Morrison 10/10/2016 9:49:53 AM

    I really get quite frustrated by reports like these...Did UBS commission this on their own or were they commissioned by someone? What is their motivation for this report?...Be nice if they specified what type of client was been interviewed because I don't know how you can misrepresent income when we as brokers (good ones) are compelled to verify income via payslips and PAYG Summaries or tax returns...now if they are fraudulently created then that is another matter and deserves to be dealt by the law. Then the topic of liabilities ie personal loans, credit cards...as a broker we request statements for all liabilities...should the client not fully state their position they will eventually be found out as banks carry out credit checks so any undeclared liabilities will certainly come to light and require an explanation. There are checks and balances in place. I know some brokers even carry out their own credit checks with the clients permission of course to make sure that there are no little hidden surprises that could affect the success of an application.
    Finally it would be nice if when reports like this are published that they clearly state their motivations and give a balanced view, not one that supports a particular view point

  • by Cubeman 10/10/2016 10:14:38 AM

    It's a common misconception IMO that we as brokers can increase income - even if we can / could / do, the credit team will pick it up by annual using income by YTD and for us, we have to have 3 months bank statements which cross reference to the clients pay for our ACL.
    So, yes, the client may have said that their home was worth more or included an increased income figure - but it still has to go through us as the broker and then the relevant credit team for approval so I think it would be fair to add that these anomolies had little or no impact on the overall credit acceptance of the application

  • by Vested Interest Broker 10/10/2016 12:05:47 PM

    A new study published by a company with a vested interest in funds management which probably means a dislike for the property/mortgage industry. Any professional survey writer can ask questions that will give responses favoring their agenda. Please post articles that don't waste my time. With our industry under review, why are you throwing dirt on brokers with this sort of wishy washy nonsense? I'm happy to receive your email every second day if there's no real news today.