A WA mortgage broker who got rich by “fudging figures” has blown the whistle on the banks that conspired in Australia’s own sub-prime mortgage scandal.
In 2007 Kate Thompson was WA mortgage broker of the year. Now she is facing fraud charges.
It is alleged Mortgage Miracles, in Canning Vale in Western Australia, obtained investment loans for customers by using falsely inflated earnings and assets.
Ms Thompson admits that is exactly what she did.
“I would get upfront commission, I would get a trailing commission. I was probably earning about $5 million a year. It was great. It was wonderful. But it was all a lie,” she said.
But she was not alone.
“Hook me up to a lie detector test and hook them up. I’ll lay my evidence on the table. They will fail a lie detector test miserably. They are corrupt. They are protecting each other,” Ms Thompson said.
Along with similar claims before a parliamentary inquiry in Canberra last week, her evidence has the potential to rock the finance industry.
“Through a series of emails from banks to brokers how to get their deals across the line, make the deal fit. They targeted older people, people on carers allowance, age pensions,” Denise Brailey, from the Banking and Finance Consumers Support Association, told the inquiry.
I would get upfront commission, I would get a trailing commission. I was probably earning about $5 million a year. It was great! It was wonderful! But it was all a lie.Kate Thompson
The evidence suggests that banks and other lenders tacitly encouraged mortgage brokers en masse to make up fictitious stories about customers so they could get loans and to falsify their income.
“I do not think there was a bank or non-bank lender that wasn’t doing it. From my files alone, I am certain I could evidence every single bank,” Ms Thomson said.
The allegations centre on low-doc loans.
They were initially designed for the self-employed and small business people – recognising that they can lack documents such as pay slips, group certificates and the certainty of income banks demand for conventional lending.
But low docs became a free-for-all.
“They were very tight to begin with but eventually they were absolutely shocking, no rules at all, tell us what we want to hear, tell us anything,” Ms Thompson said.
As banks competed aggressively to sell their loans, the pitch to the brokers was persuasive.
“I received 4,000 emails, and in those emails from the banks to the brokers you’d see clearly bank officers instructing the brokers how to have no-loan mortgage insurance, no income necessary, no assets and liability, virtually just get a signature on a document, send it in and we’ll give this person, no matter what their income or affordability criteria is, give them a $500,000 loan,” Ms Brailey said.
Ms Brailey says it is a “roll call” of all the major banks.
“We’ve got Macquarie in there, we’ve got Westpac, NAB, ANZ, Commonwealth,” she said.
Ms Brailey has dedicated herself to exposing the scandal.
I received 4,000 emails and in those emails from the banks to the brokers you’d see clearly bank officers instructing the brokers how to have no-loan mortgage insurance, no income necessary, no assets and liability, virtually just get a signature on a document, send it in and we’ll give this person, no matter what their income or affordability criteria is, give them a $500,000 loan.Denise Brailey
She says people could have an ABN number for one day and get low-doc loans which were meant for business people.
“That is the whole point of why we are saying it was so fraudulent; low docs were supposed to be for two years, self-employed and here they are saying ignore that, even if they are a pensioner, by going online and getting them an ABN number and putting that number on the form,” she said.
“They can get these low-doc loans supposedly for business people… Yes, the bank would automatically approve it.”
Ms Thomson says in her eight years of finance broking, she only ever met one person who was genuinely self-employed for one day.
“In reality they were nothing of the sort,” she said.
“They were just old people who didn’t do much more in their day than cook their dinner and do a bit of gardening, and yet I had to present them as a professional something, anything.”
On the Pacific Highway just south of Newcastle in New South Wales is the home of Michelle Matheson, a single mother of three.
A few years ago, juggling bills, she contacted a local business that said it could help people manage their money. The adviser who saw her was in fact a mortgage broker.
“He took me down the path of purchasing a home I guess, unfortunately, the journey along the way has been quite abhorrent,” Ms Matheson said.
She says she was told to buy a home, despite at the time being a single parent, working part-time, and earning around $24,000 a year.
The loan application, which she only received recently, said Ms Matheson was a self-employed professional and grossly overstated her income.
“My income has been stated, not obviously by myself, but either by the broker or somebody at the bank, has been stated to be $75,000 per year,” she said.
Ms Matheson named her house Hope, but she admits her situation was hopeless.
I’ve taken on two to three jobs at a time, I work up to 90-hour weeks. I’ve sold everything to make mortgage payments. I’ve got credit card debt of close to $30,000 because I’ve had to put mortgage repayments on them.Michelle Matheson
“I’ve taken on two to three jobs at a time, I work up to 90-hour weeks. I’ve sold everything to make mortgage payments,” she said.
“I’ve got credit card debt of close to $30,000 because I’ve had to put mortgage repayments on that.”
Ms Matheson’s mother took out a second mortgage on her home to help Michelle get the loan. She has had to sell and now lives in a demountable in a caravan park.
The stories of other people caught up in the low-doc loan scandal all have similar themes.
“If you can’t trust your bank manager, then who can you trust?” Barbara Flowers of Brisbane said.
“Exactly the same thing’s happened to all of us.
“Somebody in the head office said, ‘Mrs Flowers, I’ve no idea how you got into this mess, you have $750,000 worth or shares and you have got $13,000 worth of income from rental properties you have rented out’.
“And I said, ‘well if you can find it, I’ll give you half of it because it doesn’t exist’.”
Ms Brailey says there needs to be a royal commission into the banking sector.
She says she has received about 500 loan application forms from people in trouble with low-doc loans and not one is clean.
“The figures fudged, the details forged, by brokers or bank officers themselves,” she said.
These people are losing their homes. There is nothing I can do now except tell it like it is.Kate Thompson
Ms Thompson recalls the tricks banks taught brokers to get loans across the line, such as calling rising house prices “income”.
“So when we were putting down a customers income we are – we were – allowed to use capital growth. It’s projected income, it’s not disposable income but we were allowed to use it,” she said.
She says banks were targeting pensioners, people who were asset rich, but income poor.
“Six or seven of those bank officers actually used to come into my office and write up the applications themselves,” Ms Thompson said.
“Fudged figures… they make it fit, and that’s what they were telling us to do and they were prepared to it themselves, they were doing it themselves, they knew the game.
“These people are losing their homes. There is nothing I can do now except tell it like it is.”