Loans fraud !

Thinking back to the great financial crash of 2008, it is clear how we managed to get into that mess.   A " housing price bubble " saw the price of homes rising on an almost daily basis.   People desperate to get their foot on the ownership ladder found willing accomplices in the finance industry who padded their loan applications with false documents to get housing loans that they could not afford.

The big banks then bundled these housing loans into securities with a high credit rating and sold them to unsuspecting hedge funds, superannuation entities and the general investment market.  It quickly became similar to a game of " Musical Chairs " -  there were no problems just so long as the music kept playing.  In 2008 - the music stopped !

The house price market crashed and many people suddenly found that they had a bigger mortgage than their house was worth - and for those with insufficient income to service their loan - repossession because of loan default.   The banks were stuck with housing property they could not move and the buyers of house loan securities faced ruin.    We are only now just climbing out of that great black hole !

Incredibly, it is all starting along the same road again.  There seems to be a new housing bubble as house prices recover and climb to dizzy heights - and now we learn that there are crooked mortgage brokers who are padding loan applications with spurious pay checks and evidence of wealth to get people house loans that they lack the ability to service.    Eight such mortgage brokers have been busted - and banned from offering their services in the past three months.

In many cases, the applicant is complicit in this scam, but these mortgage brokers are enticing legitimate borrowers by padding applications with a " nod and a wink " to ensure that the loan goes through smoothly - and they get their commission.

Providing false information on a loan application is a crime, and the Australian Securities and  Investment Commission ( ASIC ) is now reviewing applications.  Applicants for loans involving mortgage brokers would be wise to carefully check the documents - and decline to proceed if the figures they see " don't add up " !

The last thing we need is a repeat of the 08 debacle !