$100m loan fraud explains auction losses

Hundreds of millions of dollars in suspected fraudulent home loans has just been flagged across 10 major banks — and it helps explain why some auction results have looked irrational. - 41% of borrowers in an UBS survey said their applications were not completely factually accurate - The wage price index printed at 3.2% for the year - The property angle: inflated incomes, misrepresented employment and fabricated or unverifiable business activity - Borrowers using mortgage brokers were more likely to submit inaccurate applications: 44% vs 29% Jacob also breaks down why Old Toongabbie and Yerongquinty's signals are moving in opposite directions, and what that means for buyers. Download the street-level report here: https://ripe.house/brief-liarloans Disclaimer: This video is general information only and does not take into account your personal objectives, financial situation or needs.

Hundreds of millions of dollars in home loans flagged this morning as suspected fraud across 10 major banks. The properties were mainly in Sydney and 41% of borrowers admitted their applications were not accurate. Inflated incomes, invented employment, offshore money closing the settlement. If an auction price has ever made no sense to you, this is the file. And one of our two suburbs moved the opposite way. Start with the number the regulator put on it. Hundreds of millions of dollars of suspected fraudulent loans uncovered across 10 major banks that between them cover the vast majority of Australia's mortgage market. Ostraka's chief executive called it a wake-up call for every lender. The operation is called Operation Claw and it found the same warning signs at bank after bank. Now the number that tells you this was never rare. When the investment bank UBS asked around 900 borrowers how honest their applications were, 41% said theirs were not completely factually accurate. That is not a fringe. That is two in five self-reported by the people filling in the forms. And here is the honest ceiling on all of it. The wage price index printed this morning at 3.2% for the year. Real incomes are what actually service a mortgage. When borrowing capacity is growing faster than that, something other than income is doing the work. So what did they actually find? Ostraka describes inflated incomes, misrepresented employment and fabricated or unverifiable business activity used to support loan applications. In some cases offshore or third-party money was used to finalize settlements and make the repayments. The agency was careful to say it did not find evidence of widespread money laundering. What it found was systemic weakness and properties bought in a way that does not comply with responsible lending law. The UBS survey is worth reading closely because it shows where the fiction sits. 34% underrepresented their living costs, 28% underrepresented their existing financial commitments, 22% overrepresented their income. Notice that the biggest category is not lying about what you earn. It is lying about what you spend. The channel matters too. Borrowers who went through a mortgage broker were far more likely to submit an inaccurate application, 44% against 29% for people who applied directly to a bank. That is a 15 point gap and it points at where the verification pressure needs to go. This did not come from nowhere. Last year the corporate regulator sued the Westpac-owned Rams over systemic misconduct including fake pay slips and altered expenses so borrowers would clear serviceability. In October the federal court ordered a $20 million penalty. This month the Rams home loan book was sold to Pepper Money for $15.4 billion. The ladder was already being climbed before today and against that wages 3.4% a year ago, 3.2% this morning. The honest borrowing ceiling is drifting down not up which is exactly why fabricated capacity had a market. Here is the contrarian read and I want to be clear about it. This is not a crash story, it is a clean-up story. For years the buyer who did their sums properly has been bidding against capacity that did not exist. As verification tightens that phantom bidder leaves the room. Which brings us to the first of two Sydney suburbs and the reason it is on the list tonight. Old Toon Gabby postcode 2146 in the Parramatta local government area 27 kilometers west of the Sydney CBD. Median sold price $1.54 million. Rental yield 2