Victims reveal ‘rogue’ swoops

A NSW couple talked into a wealth-creation scheme say the income they supplied a mortgage broker in 2005 for the loan application was increased six times on bank documents without their knowledge.

The wealth-creation scheme included buying a three-bedroom Kawana Island apartment.

The couple say it was only when they were finally able to secure a copy of their Loan Application Form earlier this year that they discovered their incomes had been listed at $150,000 each rather than the actual $25,000 each in 2005.

They have also discovered that in other applications for investment property purchases in the Northern Territory and North Queensland, their individual incomes had been listed as $130,000 each and $70,000 each.

On no occasion was the couple contacted by any of the lenders to check incomes and whether they were financially fit to take on the loans.

They were in trouble from the outset. Rental income failed to cover loan costs and the gap, which kept widening, was too much for real incomes they earned to cover.

Advocate Denise Brailey, of the Banking and Finance Consumers Support Association, says the couple's situation is similar to that of thousands of Australians.

Ms Brailey, who has saved 200 homes from repossession in the past decade, says nothing short of a royal commission into the banking sector can address what is essentially a rogue system.

She argues that Australia is not immune to the sub-prime mortgage crisis that hit the United States nearly five years ago, estimating that up to 10% of Australia's $1.3 trillion in full documentation loans are toxic.

That represents a $124 billion vulnerability in the banking sector and adds to an estimated $100 billion in risky low-document loans.

A Senate Economics References Committee "Post-GFC Banking Sector Report" tabled last year has recommended that "an independent and well-resourced root and branch inquiry into the Australian financial system be established".

Ms Brailey said action needed to go further than that. The Australia Voice Party, made up of consumer support association members, will stand senate candidates in every state in September with the aim to force a royal commission into the banking system.

Courts are now finding lenders liable and ordering the tearing up of mortgages where it can be proved that incomes have been altered from the amounts submitted by borrowers without their consent.

Ms Brailey said an examination of 1100 loan application forms found not one "clean loan" with the correct income.

"People are being misled by a bank-engineered scam,'' she said. "The problem goes right to the top.''

Her target is the service calculator used by 30 banks and accessed by anywhere up to 20,000 brokers.

Its calculations are printed off and attached to loan application forms without the borrower's consent.

"Of the resulting 11-page document, the client only sees three,'' Ms Brailey said.

She said the calculator factored in futuristic income and in one case, concerning pensioners on $24,000 a year, calculated a tax advantage as income when they did not pay any.

Ms Brailey alleges banks deliberately do not do income checks with the consequence that people are having the equity sucked out of their assets.

When the NSW couple who bought the Regatta apartment at Kawana walked into an Investment Club seminar in 2005, they had been attracted by the prospect of increasing their retirement wealth.

They were 58 and financially strong with $300,000 in savings and a business account carrying $200,000.

They owned a workshop valued at $450,000, the business and its equipment valued at $250,000, business and personal vehicles valued at $90,000 and held only a $250,000 mortgage on their $650,000 home of 35 years on which they had just spent $200,000 for earthworks.

That position had been earned through a lifetime of hard work.

They attended the investment seminar with an eye to getting out of the business and retiring at 60.

"The Investors Club had all the resources regarding property,'' the woman said.

"At their meetings, they would have a representative from one of the following (brokers): bank agents, researchers, support members, accountants, solicitors all inside the club - everyone you needed to buy properties. Sometimes a guy from RP Data.

"They say you need to invest so you don't depend on the pension.

"In hindsight, we were naive and trusted these people. Now we know they target older people for their asset wealth.''

The couple's situation is now dire. They have exhausted hardship relief from the

banks, have had to close their business and are now living like paupers with no way of serving $130,000 in annual repayments on loans, and line-of-credit loans totalling more than $2 million.

"We were relying on experts. These were blue-chip properties and would double in seven years, so we kept paying until we could pay no more", she said.

"This is a transferral of our wealth to the banks."

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