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  • Writer's pictureMichael Clarke

The Importance of ‘truth’ in lending

Here’s a link to a recent ABC report on what’s referred to as ‘Liar Loans’ ....Link

"More people looking to break into the property market are lying on their loan applications — by either overstating their income or understating their expenses — in desperation to try to secure a home loan, according to new data." Sean Quagliani, the co-founder of financial technology company Fortiro, which big banks and other lenders use to help them detect fraudulent documents, says "since interest rates started rising about a year and a half ago, there has been a threefold increase in people lying on home loan applications".

Quagliani came up with a few examples of how this fraudulent information was provided:-

  • Modifying pay slips to increase stated income

  • Removing transactions from bank statements

Software programs and technology improvements have made it far easier for individuals to supply what appears to be authentic documents to support loan applications . Increased frequency of online loan applications also come with this danger as borrowers can simply upload these supporting ‘fraudulent’ documents in PDF format etc. Lenders and the prudential regulator APRA have tightened credit, particularly over the last 18 months via adjusted increases to loan assessment rates, together with increased minimum living expenses (HEM), resulting in more pressure for people to resort to ‘lying’ in order get into the property market or refinance current home loans.

Now the problem with the above, does not only rest on the shoulders of lenders, their staff, and / or brokers like myself, under ‘Responsible Lending’ guidelines held within the National Consumer Credit Protection laws. It also rests on you as the borrower. Lenders loan portfolios and indeed individual loans, are constantly audited by the Government’s regulatory bodies. If omissions and incorrect information is found in loan applications and it can be proven, then there are significant civil and criminal penalties that can apply to all parties , borrowers , brokers and lenders alike. Remember as a borrower you are making a declaration on your loan application that the information contained in it is true and correct to the best of your knowledge.

I’m raising this to your attention because when loans go ‘pear shaped’ we look to attribute blame on a particular party. When people are applying for finance they are simply looking at the ‘asset’ (home / business) in question. The lenders and their staff are looking to write business to satisfy shareholders. Tne real estate agents are looking to make a sale, and the lawyers will act within the necessary confines of the law. Who takes responsibility for the ‘truth’ in lending?


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