A report in the Australian Financial Review has claimed that foreign borrowers are purchasing fraudulent bank income and spending statements for as little as $200.
According to the AFR, recent instances of fraud include a “ludicrously obviously” fake loan application from Chinese investors hoping to borrow $960,000 to purchase an apartment in Sydney.
The revelation of the black market documents seemingly justifies the recent decisions from a range of Australian lenders to restrict their lending to foreign borrowers or people relying on foreign income or currency.
Major lenders ANZ and Westpac, among those who have pulled back their foreign lending, have also announced they are investigating mortgages they have written that were likely backed by fraudulent foreign-income documentation.
While the issue of mortgage fraud by foreign borrowers had been in the headlines already, Ken Sayer, chief executive of non-bank Mortgage House, told the AFR the latest developments likely mean the issue is more widespread than many first thought.
“This is huge,” Sayer told the AFR
“It is much bigger than everyone is making it out to be. The numbers could be astronomical,” he told the AFR.
But not everybody believes the issue is a prevalent as Sayer does, with Finance Brokers Association of Australia (FBAA) spokesperson claiming mortgage fraud involving foreign investors is not a systemic problem.
White said any fraud involving foreign investors is likely quarantined to the actions of a small subset of people in the mortgage industry.
“Ninety nine per cent of brokers are doing the right thing but unfortunately, like in any industry, there is a tiny element who cross the line, particularly when it comes to the repayment of loans that rely on foreign income from certain countries,” White said.
White’s sentiment is echoed by Gavin Norris, head of Australia for Juwai.com, an online platform that markets foreign real estate to Chinese buyers, who said concerns about the apparent danger of lending to foreigners may be overblown.
“It is true [some lenders] found ‘some’ loans backed by ‘questionable documentation,’ but it appears those loans are still safer and less likely to default than loans made to Australian citizens,” Norris told Your Investment Property.