Two of Australia’s biggest banks are investigating alleged fraud by several home loan borrowers who rely on foreign funds.
According to the Australian Financial Review, both banks discovered that they have approved hundreds of home loans backed by fraudulent Chinese income documents and allegedly manufactured with the help of mortgage brokers. However, they did not disclose if the suspected fraud was linked to Chinese clients. China is the largest source of foreign investment in Australia.
“We have identified issues with the income documentation of a small percentage of Australian resident borrowers who rely on foreign income,” said an ANZ spokesman. “Policy changes have been made to address this and we are also reviewing a number of brokers.”
Just last month, the two banks, together with Commonwealth Bank, clamped down on mortgage lending to non-residents as a response to regulatory concerns regarding loose lending standards, as well as soaring house prices partly driven by foreign investment.
AFR data shows that the total value of affected ANZ and Westpac loans is less than A$1 billion, or just 0.12 per cent of their combined residential mortgages. Hence, both ANZ Banking Group and Westpac Banking Corp said that the allegations pose no credit risks.
“When fraudulent activity is discovered we take action against those involved, including the broker, which normally results in termination,” said Westpac spokesman David Lording. “Our delinquency rate on foreign income loans is lower than the portfolio average, and a large proportion of these loans are ahead on repayments.”
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