Fasco-housing complex guts ASIC HEM push

By Houses and Holes in Australian banksAustralian PoliticsAustralian Property

September 26, 2019 | 19 comments

Scott Morrison has urged banks to keep the economy alive by continuing to offer credit.

Photo: Canberra Times

Yesterday Generalissimo ScoMo ordered more mortgages, at the AFR:

Photo: AFR

Scott Morrison says Australia’s banks must not shy away from lending after the Hayne commission as he pushes back against what he calls an “instinctiveness” in society towards responsible lending standards that are too onerous.

Speaking to the Australian American Association in New York, the Prime Minister said that while it was important to implement the findings of the royal commission, as well as other reforms such as the Banking Executive Accountability Regime, “we need our banks to keep lending”.

“We can’t be scared of our own shadows in our economy, the animal spirits in our economy and the role of the banking and financial system in extending credit.

Photo: AFR

Today we get the result, also at the AFR:

Treasurer Josh Frydenberg has pushed back against regulators being too stringent in enforcing responsible lending rules, warning that this could penalise “hard-working families” trying to get a housing loan and hurt the economy.

In a speech to be delivered at The Australian Financial Review’s Property Summit in Sydney on Thursday, Mr Frydenberg will welcome the pick-up in capital city housing prices, citing Treasury research that a 10 per cent increase in house prices could boost GDP by 0.5 per cent.

“It’s in everyone’s interest that the aspirations of hard-working families are not collateral damage in this regulatory process,” Mr Frydenberg will say.

With a co-ordinated assault from the oligarchs, also at AFR:

Westpac Banking Corp CEO Brian Hartzer backed Mr Morrison’s comments, telling The Australian Financial Review Westpac “is open for business and we are committed to extending finance across all sectors of the Australian economy”.

NAB CEO and chairman-elect Philip Chronican said business investment is key to improving productivity and driving growth and NAB is growing market share lending to business customers.

ANZ deputy chief executive officer Alexis George also said the bank is open for business and agrees with the Prime Minister “it is important for the banking industry to continue providing credit to help the economy keep moving. We understand that our role in society is to provide credit to businesses and individuals. ANZ takes that role very seriously, including ensuring that we do so responsibly.”

What the fasco-housing complex has in its sights is, of course, the following from the ABC:

Westpac Bank logo on a tall office tower.

Photo: ABC

The corporate regulator is appealing a landmark Federal Court ruling in favour of Westpac that validated the bank’s automated home loan approval process for hundreds of thousands of mortgages.

Last month, Justice Nye Perram of the Federal Court found in the bank’s favour in a case brought by the Australian Securities and Investments Commission (ASIC) as a test of the responsible lending laws.

ASIC had alleged that Westpac breached the laws by failing to properly take account of customers’ individual declared expenses when they were applying for home loans, instead relying on a benchmark ‘Household Expenditure Measure’ (HEM), which was widely criticised at the banking royal commission for being set too low for many customers.

By using the benchmark, thousands of customers were given loans larger than they would have been granted had the bank assessed them on their actual living costs.

However, many more customers were granted loans smaller than they would have been eligible for had the bank used their declared expenses which, in a large number of applications, were lower than the HEM.

The National Consumer Credit Protection Act requires lenders to make reasonable enquiries about the financial circumstances of prospective borrowers and not to grant them a loan if they could not afford to repay it, or could only afford the repayments by being pushed into “substantial hardship”.

In the most famous line of his judgment, Justice Perram found that knowing a customer’s current living expenses was immaterial to deciding whether they could afford repayments on a loan.

“Knowing the amount I actually expend on food tells one nothing about what that conceptual minimum [of how much one can spend without going into “substantial hardship”] is. But it is that conceptual minimum which drives the question of whether I can afford to make the repayments on the loan.”

Justice Perram’s judgment, should it stand, effectively validates the bank’s use of the HEM benchmark in assessing loan applications — a benchmark used in some way by most home lending institutions.

ASIC commissioner Sean Hughes said the regulator felt compelled to appeal after Justice Perram ruled that a lender “may do what it wants in the assessment process”.

“The Credit Act imposes a number of legal obligations on credit providers, including the need to make reasonable inquiries about a borrower’s financial circumstances, verifying information obtained from borrowers and making an assessment of whether a loan is unsuitable for the borrower,” he said in a statement.

“ASIC considers that the Federal Court’s decision creates uncertainty as to what is required for a lender to comply with its assessment obligation, nor does ASIC regard the decision as consistent with the legislative intention of the responsible lending regime.

“For those reasons, ASIC will appeal to the Full Court of the Federal Court.”

But the fasco-housing complex is not only above the law, it is the law. Generalissmo SocMo and his banker cronies have gotten together to neuter what’s left of a well-meaning executive following the Hayne RC.

APRA has been show-trialed and corrupted. The RBA has been summoned to the palace to explain why interest rates are not lower. Now the corporate regulator will be publicly shamed and legal process perverted to ensure that nothing prevents a return to mortgage fraud as quickly as possible.

Heil fasco-housing complex!

SOURCE: https://www.macrobusiness.com.au/2019/09/fasco-housing-complex-guts-asic-hem-push/