Mortgage Broker top performer now faces jail over massive home loan fraud

A few short months ago a New Zealand mortgage broker was hailed as her company's top performer in a low mortgage location, now the 43 year old mother faces 10 years behind bars after being convicted of fraud. 
The mortgage broker pleaded guilty in a Wellington District Court to using scissors and a photocopying machine to create false documents to write more than NZ$15 million in phoney mortgages.
Some unsuspecting clients have lost their homes and others are struggling to continue to make their mortgage payments.
The woman's branch office starred as the best performing in the company, supported by the fake mortgages, between September 2006 and July 2008 - and it was this that lead to her undoing.
Never meet your heroes
The parent company began an audit into her loan applications because her branch's outstanding performance was at odds with its geographical location.
Most of the loans obtained through the woman's actions are being repaid.
She has been remanded on bail until 27 January for sentencing.

Beating credit card bankruptcy in Australia

Increasing numbers of people are finding it difficult to manage their finances, including their credit card debt.
Part 9 of Bankruptcy Act introduced in 1997 aimed at keeping people out of bankruptcy.
Debtors arrange to partly repay creditors over time debt agreements are one stop short of declaring total bankruptcy for the increasing number of people who can't pay their credit card debts, personal loans and bills.
A debt agreement under Part 9 of the Bankruptcy Act, allows debtors to strike a deal with their creditors to repay less than the full amount at an agreed weekly rate over a period of time – without any additional interest. It is an option for people with unsecured debts of less than $77,021 and after-tax income below $57,765.
Now big creditors seem to be getting tough and, according to debt agreement administrators, some are insisting on unrealistic returns from insolvent people.
Part 9 agreements were introduced in 1997 following widespread public concern about young people in particular having to file for bankruptcy over consumer debts such as small credit card debts or even mobile phone bills.
Since then an industry of debt agreement administrators has grown up, often relying on heavy marketing and with trading names such as Debt Assist, Debt Relief and Debt Busters.
They specialise in organising agreements and approaching creditors who vote on each proposal. Fox Symes is a market leader in the industry, filing about 300 agreements a month.
"Some of the big lenders have totally unrealistic expectations," says Deborah Southon, director of Fox Symes.
"People are coming through now with up to $78,000 in consumer debts," Ms Southon says. "You can't pay that back in less than five years and probably not at much more than 40¢-50¢ in the dollar."
Recent amendments to the Bankruptcy Act enshrine the principle that an insolvent person's debt agreement proposal must be affordable and therefore sustainable.
Debt agreement administrators say Westpac and St George Bank are among big lenders voting down debt agreements based on the debtor's ability to repay.
The administrators report a noticeably harsher approach from Westpac and St George compared with a generally supportive approach of the Commonwealth Bank and National Australia Bank in particular.
Some say that St George is telling them no less than 65¢ is acceptable, while Westpac is said to be voting down agreements that return less than 70¢ in the dollar, regardless of the circumstances of the debtor.
Penny Doube, a debt agreement administrator based at Tarragindi in Brisbane, says that on average her agreements involve an insolvent debtor repaying about 50¢ in the dollar over three years.
Ms Doube says St George has informed her that its minimum acceptable return is 65¢.
"St George have always been difficult to deal with," Ms Doube says. "They are not fond of Part 9s."
Administrators typically negotiate agreements that return between 40¢ and 80¢ in the dollar over three to five years. For that, they charge an upfront fee that usually ranges between $600 and $1500 and an ongoing commission.
Ms Southon says each agreement has to ensure that the rent or mortgage is paid, plus provide for utilities, food, essentials, children and the occasional medical visit.
Under the new voting rules, big creditors have increased power and cannot be easily outvoted.
"If St George is your majority creditor, then it is 'shut the gate and file now for bankruptcy', because they are not going to agree to anything," says one debt agreement administrator.
Melbourne debt agreement administrator Melissa Treherne says she is being sandwiched by tough creditors and the new rules, which require her to certify a debtor can afford repayments.
"The new rules are good, they have really cleaned things up but some of the creditors are just not looking at the budget of these people," says Ms Treherne.
"They say they have a new rule, nothing under 55¢ for example, and they won't be flexible about time or rate of return."
A Westpac spokesman says 70¢ "is one of its highest repayment guidelines" and it does apply lower proportions on a case-by-case basis.
A spokeswoman for St George Bank says the bank assesses each proposal individually.
"Most importantly, customers' specific circumstances are taken into consideration, and the final decision is not solely based on the return to the bank."
Digby Ross, the Queensland insolvency registrar, says the system requires goodwill by all parties in the industry if it is to succeed, including the big creditors.
"The major creditors have generally been very supportive, right through (the reform process)," said Mr Ross.
"Yes, definitely, it needs goodwill by creditors to succeed and the contact we've had has been positive." Source: Sunday Mail

Citigroup Sells Crowns Jewels after Subprime fallout

CITIGROUP is in talks to sell a majority stake in Smith Barney, the brokerage firm, to Morgan Stanley in a deal that would create the world's biggest wealth manager.
Picture: APThe negotiations came to light as Robert Rubin, the former US Treasury Secretary, resigned as senior counsellor and director of Citigroup after months of criticism for his role in leading what was once the world’s largest bank to the brink of collapse.
Under the deal being discussed by Morgan Stanley and Citigroup, 51 per cent of Smith Barney will be sold to Morgan Stanley with an option to buy the rest of the business within five years.
Morgan Stanley declined to comment on the talks and Citigroup did not respond to requests for comment. It was not clear how much the deal would cost Morgan Stanley.
The banks are expected to work through the weekend to finalise the terms of the deal. The merger would help Morgan Stanley, which converted to a bank holding company last year and subsequently received $US10 billion ($14 billion) in Government aid, to diversify.
Citigroup, which has taken $US45 billion in government funding, is likely to welcome the additional capital that the deal would provide. The move is also in line with the strategy of Vikram Pandit, the Citigroup chief executive, to downsize the business after the sub-prime debacle. Citigroup is dismissing 52,000 of its workers after it made $US20 billion in credit-related losses.
The bank also announced the resignation of Mr Rubin, who was Treasury Secretary from 1995 to 1999. In a letter to Mr Pandit, Mr Rubin said: “My great regret is that I and so many of us who have been involved in this industry for so long did not recognise the serious possibility of the extreme circumstances that the financial system faces today.”
Mr Rubin, who joined Citigroup in 1999, has been excoriated in the media as the force behind the bank’s decision to chase profits by pushing into risky credit-related products. His duties at the bank, other than using his network to attract clients, were not clear, but insiders said that his influence was pervasive.
In his time at Citigroup, Mr Rubin collected about $US150 million in remuneration.
Before becoming Treasury Secretary, Mr Rubin, who is a graduate of Harvard and Yale Law School, had a long career at Goldman Sachs, where he started on the arbitrage trading desk and worked his way up to become co-chairman of the elite bank.
Shares in Citigroup closed in New York at $US6.75, down by 5.7 per cent.

British rate cut awaits London investors next week

British rate cut awaits London investors next week
Market watch top headlinesAustralian reportsAust markets: Australian share market closes higherAust dollar report: Aussie dollar closes at eight-week lowAust credit close: Aussie bonds closes mixedWorld reportsWorld commodities: Oil prices mixed, gold higherWorld markets: US stocks fall sharplyStocks to watchERA, AXA, COF, OZL, ORI, HVN, TAH, REU, RAT, AFG, HGG, GNS,
LONDON, Jan 30 AFPJanuary 31 2009, 06:33AMBritain is next week braced for yet another cut in interest rates to record low levels but it may not be enough to boost the London stock market as recession weighs on the economy, traders said.
The FTSE 100 index of leading shares closed on Friday at 4,149.64 points, up 2.39 per cent or 97.17 points from a week earlier.
The Bank of England (BoE) is widely expected to slash British borrowing costs by a further 50 basis points to 1 per cent at a meeting on Thursday.Now at 1.5 per cent, interest rates are at the lowest level since the British central bank was formed in 1694.
Next week also sees earnings results from energy giant BP, telecommunications group Vodafone and pharmaceutical company GlaxoSmithKline.
This week, a statement from Barclays bank stressing it did not need a government bailout following speculation to the contrary sent its share price and those of its peers rocketing.
Some of the gains were lost as the weekend approached due to "poor earnings and bleak labour and housing market data from the US, heightening fears of a deeper global recession", said City Index market strategist Nick Serff.
"This ended a four-day surge for the major indexes, their best performance in two months," he said.
Another notable British corporate announcement this week came from Anglo-Dutch energy giant Royal Dutch Shell, which said it had made a net loss of $US2.81 billion ($A4.3 billion) in the final quarter of 2008 on plunging oil prices.
The loss compared with a net profit of $US8.47 billion ($A13 billion) during the fourth quarter of 2007, when crude prices were far higher, Europe's largest oil company said.

Mortgage Relief: Banks agree to help homeowner battlers save their homes

While American homeowners families lose their homes to foreclosures at a rate of 10,000 homes a day, the Australian Government has negotiated with the big four Australian banks for struggling homeowners to allow up to 12 months forbearance on home loans, with the interest to capitalise on the loans,and the waiving of penalty rates.
Agreement by the banks to these requests from Treasurer Wayne Swan gets a big tick from even the most ardent bank bashers.
Maybe the long suffering American jobless homeowners will also get this kind of support, security and peace of mind, and hopefully soon.
Kevin Rudd, Australia’s Prime Minister is to announce his mortgage relief plan that will freeze mortgage payments for up to 12 months for financially stressed homeowners.


Australia's big-four banks have reached the landmark agreement to help prevent struggling families from losing their homes. 


As part of a comprehensive package of assistance for working families with mortgage commitments, the Commonwealth Bank, the National Australia Bank, Westpac Banking Corporation and ANZ Bank will put a freeze on mortgage payments in hardship cases.

 That could mean waiving any penalty rates and fees and charges for late payments.
Banks also indicated that on other loans, including car loans, where appropriate, they would consider interest-only repayment options, and will also consider waiving fees in hardship cases. 

 The Government's purpose in its negotiations with the banks has been clear - to ask the banks to provide maximum flexibility for borrowers suffering temporary hardship, through loss of income from work.
Kevin Rudd gave credit where credit was due and praised and thanked the banks for the goodwill they have demonstrated in this area, and gave credit to Treasurer Wayne Swan for his efforts in negotiating the agreement.

This is just another demonstration Kevin Rudd is doing such a great job at keeping the economy ticking over in a business as usual mode, underpinning property values for all of us, whilst the rest of the World struggles to get out of the global financial crisis.
Good one Kevin.

Mortgages. Why people are dissatisfied with the banks, and why the banks don't care..

Mortgage rates may rise above any official cash rate increase, according to many banks. The Government does like it, customers don't like, but the banks don't care. They have us "by the short and curly's."

You may have read the recent report by Choice that the big banks in Australia are on the nose with their customers.

People like the fact that we have a stable banking and financial system, and that their banks have been the rock in the global financial crisis.

But I guess its something that Australians expect from their banks.

The thing that gets under our skin is that Australia's Banks are the most profitable in the World, and while we can't deny they are well run, the real reason for this is the lack of mortgage competition that Banks face in Australia.

And that will lead to the banks taking their customers for granted. And in my opinion they do just that.

The fees and charges that they have been charging us for the last ten years or so, have in fact been in my view unlawful.

But we have let them get away with it, so they get on adding them.

Building societies and credit unions on the other hand are well liked by their customers.

They treat their customers as if they owned the business, and they do. Once you have an account with a building society or credit union, you become a joint owner of that organisation.

Banks do have mission statements that make their customers 'stakeholders'. This however is often meaningless when the share prices take a hit, and the the top officers of the banks get rewarded when share prices rise. And the easiest way to do that is to make more profit on every customer.

What we need to do is to tell the banks when we are not happy, and if you are not heard, then to move your account.

More competition in the Mortgage space is required.

The Treasurer Wayne Swan has been sniping at the banks about mortgage rates, and trying to hold them to official rate rises only.

But customers making a stand and competition are the key to lower mortgage rates.

You probably didn't notice, but Australia's mortgage brokers and securitised mortgage lenders have become largely irrelevant leading up to, and during the Global Financial Crisis. They just couldn't rise the funding to remain competitive with the banks.

Wayne Swan is trying to support the securitised mortgage lenders and has just pledged a further $8 billion dollars for mortgage funding. But that is just a drop in the bucket.

We need to understand that more is required.

Mortgage competition has collapsed in Australia

Mortgage brokers have gone from 40% share to 20% share of the mortgage market, and worse, mortgage originators have fallen from around 25% to just 2.5% of the mortgage business in recent times, and that is the issue.

There is no reason for banks to worry over the next two or three years. The competition has been vanquished and there is no one on the horizon to challenge them.

So what will you do about it? Get your bank to reduce your fees, move to a building society or credit union, get your loan refinanced by a mortgage originator, or just cop it sweet?

ANZ leads the charge of the bank brigade in mortgage interest rate increase

Was it their turn to go first? No one is saying, but the ANZ lead the other three major banks in increasing their variable mortgage home loan rates by a quarter of a percent after the Reserve Bank raised the cash rate by a similar amount.

ANZ was the first of the major banks to move in late morning, the National Australia Bank following by mid afternoon, and the Commonwealth Bank and Westpac by days end.

All four banks are raising their variable mortgage home loan rate by the same amount of the official rate rise of quarter of one percent, that was announced by the RBA this week.

These same banks had recently stated that they will raise rates even without RBA official increases so I guess we should be grateful the rises were not higher.

In my view we need more competition in the Australian mortgage market. But instead we have less as most of the big non bank mortgage lenders are being gobbled up by the banks in the wake of Global Financial Crisis.

Author: Rick Adlam, Mr Mortgage

Do Australian house prices need US style market collapse?

Is the Australian Dream Fading away? Many believe that without a US style housing market collapse it will soon become a distant memory.

Some are saying that the Australian dream of home ownership is slipping away, leaving a threat of a US-style collapse in house prices, according to a team of university researchers from South Australia's Flinders University.

They have discovered that home ownership in the 10 years from 1996 rose only 0.8 per cent despite strong economic growth and low interest rates in that period.

The Flinders Institute for Housing, Urban and Regional Research analysis found home ownership fell by 15 per cent over the two decades to 2006 for low income earners over 45 years of age and medium-high income earners under 45 years.

Problems cited were that large gains in national income from the resources boom were "wasted" by increasing house prices and accumulating debt to unreasonable levels.

They also found the first home owners scheme boosted home purchases for people under 25 years of age, but many lower income earners in the 25-44 age bracket were unlikely to ever own their own homes because their parents were spending their inheritances and prices remained high.

We are going for either:

1. A sudden price crash of 50% or more US Style
2. A slow long drawn out price decline over 10 years or more Japan style.
3. A massive drop in aspirations of home-ownership

The Mr Mortgage point of view.

I don't think that this tells the real housing market story, research or no. I don't have have any research papers to back up my view, but here's what I think about the housing markets.

Firstly the US collapse happened because of the bubble caused by giving home loans at unsustainable low interest rates to people with poor credit and uncertain employment. The US housing market and mortgage lending business was a train wreck waiting to happen.

That wreck happened when the bankers that set these loans could not sell them on as investments to suckers anymore.

Why Australia's Housing Market is different.

That has not happened in Australia. Australia's lending practices have balanced home buyers income security, security properly values and large equity or deposits to compensate for patchy credit histories or incomes, to ensure low default rates. [A tiny fraction of the US credit defaults]

And Australians get stuck with the debt if they walk away from the home. This keeps them in when it gets tough.

Also Americans use their home's equity like we use stolen money [they get rid of it as soon as it shows up], and they drew it up to the limit. When you do this you tend to buy cars bigger than you need, and the result is a mortgage you can't afford. That does not happen in Australia. The weather here is kinder to cars.

It should also be pointed out that the US housing market did not collapse across the board. Good quality homes in strong economic regions have held up, whereas many homes in less desirable areas has lost up to 4 times there value. Now the banks have recovered, so will home prices in many more areas. Australia's banks will not have such a collapse in my view. They don't lend and sell on dodgy mortgage loan products and did not run out over money to lend. Australian Banks don't pay each other princely bonuses for failure either.

Some people in the US refinanced up to 9 times a year. That does not happen in Australia. Yes Australians may refinance their homes and debt every few years, not 9 times a year, but they have at least 10% to 20% equity in the home after refinancing, they don't get 125% loans like many US homeowners did.

In the US the loan is on the home. If you can't afford the repayments you just walk away and send the bank the keys "Jingle Mail". Here the loan is on you, and you can't walk away.

In the US people favour the stock market for investment. Australians favour residential real estate.

Japan has a low birth rate and a low immigration rate. The economy has been in recession for decades. Australia has a high birth rate and high migration that constantly pressured home prices and since the early nineties recession has powered on from boom to boom. Australia is a very fast uptake of technology and ideas and a highly mobile population. That is a good recipe for continued growth.

Australia is an extremely well managed country, socially, economically and commercially.

Yes, We haven't got everything right, and housing supply is one thing that does need to be addressed.

But housing shortages lead to price growth, not house price slumps. We don't have an oversupply problem, as in Belgium, where I understand that many homes are vacant.

Whilst Australia has limitless land, nobody wants to live in a desert, and the Outback does not have the infrastructure to take populations out of the capital cities, and regional centres and eastern coastal strip where over 90% of Australia's populations live.

This is the biggest reason that cheap housing and near universal home ownership to all comers now has become the most expensive housing in the world. Because we have not planned housing needs, we are 100,000 housing units short of what is needed. That gap is not closing.

When you have Governments constantly reducing income taxes to win elections, then there isn't the money to build Australia's Infrastructure, and renew what is there already. I am talking roads, power stations, schools, hospitals, shopping precincts, distribution centres and places of work, entertainment and recreation and sport. Not to mention water supplies, new dams and and reservoirs. Part of that money is going into house mortgage repayments instead. So saving taxes is good, but only in the short term in my view.

Also, I agree that first home owner's grants have raised home prices, because it has motivated people and provided the means to buy a home before young home buyers normally would have without addressing housing supply, including land development and infrastructure.

If we were to get things right in these areas, and be able to decentralise the population, and property prices still would not fall. People are living longer, and staying healthier, and staying in their homes longer. As peoples wealth grows they want a bigger home closer to the amenities they value. They invest in many things, but most Australians like and trust property as a wealth store. And their home is their Castle and their Keep.

Author: Rick Adlam Mr Mortgage

How to send your Australian Banks Broke

As the ANZ folded last week to pressure on penalty fees, it brings up a question. How dependent are Australia's banks on fees and charges, and how long could they avoid going under if they could no longer charge these fees, and up them at will?

Have you been caught in the ANZ money trap?

I was an angry victim of ANZ's penalty fees just last Christmas.

I have been caught several times with a $40 penalty fee from ANZ. Often these fees were subtracted on the same day that new funds hit my account, and on some of these occasions I believe that the bank had these funds for several days before declaring them. A double ripoff you might say.

But when on Holidays last Christmas I overdrew my account on a EFTPOS card by less than three hundred dollars.

The ANZ charged me over $40.00 for each time I made a draw. The first charge was on an overdraw of less than $10!

This overdrawn amount included the $120 or so "Honour fees". This meant that they charged me nearly 100% interest for a few days! The mind boggles at the actual interest charged on a per annum basis, but it would have been in the Tens of thousands percent interest annualised. As you can imagine I was not well pleased.

How I struck back at the ANZ.

When I rang the bank I pointed out this practice as wrong and I believed unlawful.

The bank officer reminded me that I had "Signed a contract" with the terms and conditions, and that I was stuck with the charges, and that it was therefore legal.

I then pointed out that any contract had to be fair and reasonable, and this obviously was neither, and therefore where I had agreed with the terms and conditions or not, it was unlawful, as it did not meet this implied condition.

I pointed out that they were entitled to charge an default interest in the order of 4% per annum, which is fair and reasonable, and that this would amount to only a few cents. Their charges i said amounted to several thousand percent per annum, and this was I believed predatory interest.

I also pointed out that I had signed nothing. I was given a booklet with the terms and conditions in then, after I signed up for a bank account, and that these charges were not clearly explained to me.

I also pointed out that I was under the impression, and had asked the bank not to allow any overdrawn amount, and because they did, it was their fault not mine, and that had a duty to me to inform me that the amount would be overdrawn and incur penalty rates if I proceeded, and this did not happen. As I had several bank accounts with clear funds in them I could have used another card.

After initially arguing with me they quickly capitulated under the weight of seeming legal argument. I received a reversal of all three honour fees.

One hundred and twenty dollars tax free for five minutes on the phone, I feel was a good investment of time.

In a move that will cost it about $140 million a year, the ANZ abolished 27 fees on personal accounts and cut other account, credit card and loan fees.

I must not have been the only person to complain, and obviously the ANZ was not the only bank to charge these fees.

But I kind of like to think that I was part of the momentum that caused this charge of heart by the ANZ.

If you were one of the ANZ customers who complained as well, thank you. We did a good thing, and saved millions from a nasty surprise.

So will the banks really go broke if they did not charge fees. Of course not. They make billions a years. But they did lose a little icing off the cake.

The ANZ bank and in fact all Australian banks are great services that we cannot live without. They are full of honest and good people. But if you let them they will try it on. Don't let them even think they can with your account.

Plus, all fees will be abolished for accounts of customers on government benefits who have an Access Basic account. If that's you, tell your bank today, and save even more.

Author: Rick Adlam Mr Mortgage

Are Mortgage Brokers honest with home buyers and refinancing homeowners?

Mortgage brokers are in the firing line of late, and now Westpac bank and the Commonwealth bank are putting pressure on accredited mortgage brokers, telling them that if they don’t have a certain number of loans settle with them within a 6 month time frame, they will lose their accreditation with the lender.
The mortgage brokers have responded by saying that their “Independence” is in jeopardy, because many brokers will bow to the pressure and set loans for clients for the home buyers or refinancing homeowner with these lenders, rather than the best loan for the customer.
In my prior article I was a little harsh on these brokers, and this brought up the question of honesty of the Mortgage brokers.
So here is my revised take on this important topic.

The Mortgage Brokers Intent indicates his or her honesty.
Honesty should not be taken on a legal or literal definition of the relationship between the mortgage broker and the lender and the home buyer or refinanced homeowner, but on the intent of the mortgage broker when they are helping their customer select the best loan for them.
If the Mortgage Broker has the intention of always selecting the very best mortgage lender and mortgage loan product for their customer, then its obvious that the mortgage broker can be considered an honest mortgage broker.
If the Mortgage broker explains to the client that they are offering a no cost loan service to them, because the lenders are paying them a commission for introducing the loan to the lender, they are being honest with the customer in my view.
If on the other-hand the mortgage is selected favours the mortgage broker and his or her own personal interest, then the mortgage broker would have to be considered dishonest in my view.
Banks and other mortgage lenders that offer lenders inducements to put loans through them, compromise the brokers’ impartiality.
So do lenders that force lenders to have sales targets. Doing so in my view makes mortgage brokers appear commission representatives of the lender.
That has to be a bad thing for the mortgage broker industry and the customer than place their trust in a Mortgage Broker to do the right thing by them according to Mr Mortgage.