With ANZ and Westpac being hit by hundreds of Chinese home loan frauds, banking and insurance consultant Pat McConnell questioned the diligence of these banks in granting these loans in the first place.

"Where was the due diligence on those loans? It is not as if mortgage fraud is unknown (in fact it has been around as long as mortgages) not it is rare," he wrote in an article in Finder.com.au.

However, it seems like credit assessors and bank officers themselves have long been in the practice of creating fraudulent mortgage documents. LF Economics reports, "Credit assessors and bank officers have illegally altered borrower details by falsely inflating the value of assets and incomes to justify issuing much larger mortgages than would otherwise be the case." Such practices make mortgage easier to securitise.

But most of the time, banks are cast as the innocent party, falling for an elaborate 'sting' by cunning brokers. They do not receive huge fines, but rather lots of sympathy.

"But how could so many of Australian's finest bankers be conned by so few?" McConnell asked. "Could it be that they weren't looking but just securitising the garbage and dumping it into unwitting super funds as highly rated RMBS?" He also worried about the compensation for investors that were not scrutinised properly.

But McConnell expressed confidence in the "tough, but also very knowledgeable" new interim head of ASIC, Greg Medcraft.

"He should be able to direct his troops to finding any instances of RMBS containing fraudulent mortgages if ASIC cares to look," he said.