One of the realities of having a hot housing market in some parts of the country is the inevitable increase in fraud.
Rising prices often mean buyers are desperate to get in (whether they should be in the market or not) and some mortgage brokers who are salivating at further juicy commissions are happy distort applications.
Since November 2013 ASIC has taken action against eight mortgage brokers around Australia for submitting fraudulent applications.
There are another 23 investigations currently in progress.
In many of the cases the borrowers knew for a fact that their applications were filled with fraudulent numbers.
ASIC’s Deputy Chairman, Peter Kell is now pointing the organization’s naughty stick at consumers, warning them not to be a party to any fraud.
It remains to be seen if ASIC will take action against consumers in the future.
One suspects this is only the tip of the iceberg, especially if history is any guide.
Well known tricks are inflating incomes, removing dependents and applying for an investment loan despite the purchase being a primary residence – serviceability looks better when it looks like you’re collecting rent!
Back in 2007 one mortgage broker was banned for falsifying documents that secured a $365,000 loan for a 20 year old unemployed homeless man!
With much of the housing recovery being investor driven and with the spruikers back in the game, there’s the real possibility desperate people have already gotten themselves into trouble.
Inflated valuations and high pressure sales tactics on off the plan properties are a recipe for disaster.
I’ve seen the aftermath and even without fraud some of the creative financing strategies fly very close to the sun.
That creative financing often means the deal is completely inappropriate for that investor’s circumstances and off the charts when it comes to their risk tolerance.
Strangely, it’s often investors who bemoan the riskiness of equity markets that are prone to placing one-way bets on property with 100% financing, using interest only repayments.
Again, investor is a generous title.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Looking for highly rated financial advisers in Australia to reach your goals?
