Amid continuing fallout from the US sub-prime meltdown, the Australian Securities and Investments Commission(ASIC) has prosecuted a Canberra-based mortgage broker for providing a low-doc home loan to a man in his early 20s who did not have the capacity to repay the debt.
The Federal Court of Australia declared that the broker, Kelvin Skeers, and his employer Tondale —trading as ACT Mortgages, engaged in unconscionable, misleading and deceptive conduct after arranging two loans for the same client in August 2004 and November 2005.
At the time, the client was unemployed and of no fixed address according to ASIC, which alleged that Skeers was in breach of the ASIC Act for arranging the loans, valued at $356,025 and $401,897.
A low-doc loan is one that a lender determines eligibility by relying on statements by the borrower that they can meet repayments, rather than requiring documents to prove income, assets and liabilities.
ASIC alleged that Skeers misrepresented the borrower’s financial position to the lender in the application forms and misrepresented to the borrower what would be included in the borrower’s loan application forms.
The client, who had inherited $240,000, had been refused finance from a number of lenders prior to contacting ACT Mortgages and Skeers.
ASIC executive director of enforcement Jan Redfern said: “This case highlights that unscrupulous conduct in the mortgage industry is not acceptable and that mortgage brokers can be held responsible for arranging loans which the borrower has no capacity to repay.”
The prosecution came as plenty of Australians with low-doc loans were slugged with rate rises after a string of non-bank lenders upped their mortgage rates. This may be an indicator that the global funding crisis is continuing to hurt Australians.
