They were dubbed liar loans, where loan applications inflated earnings and assets and underestimated debts and liabilities, for a large part, brokers copped the blame, but just as many borrowers fudged their figures too.
A UBS study completed last year estimated up to a third of investment loans may have had less than honest declarations in the applications, this was despite the Royal Commission into Banking.
But it seems now banks have wised up that not all loan applicants were being completely honest and lenders are going above and beyond to check you are being truthful on your loan application, according to leading consumer and financial law firm MyCRA Lawyers.
“It’s a case of the banks are sick of being blamed for everything that is wrong in the lending world, so they are now going to the next level of due diligence. Banks are so strict in following procedure, they are catching out people who didn’t even realise they had lied,” MyCRA Lawyers CEO Graham Doessel said.
Mortgage broker Wendy De Graaf says she recently had a client rejected for a loan after the lender checked the Facebook status of her flatmate that had, as a joke, put they were in a relationship together.
“My client is genuinely single but her friend had on their Facebook status that they were partners and the bank saw this information and rejected the loan because it didn’t match what was on her application.
“I was shocked when they told me the reason for the loan rejection, it’s meant my client has missed out on buying her first home, Ms DeGraaf said.
“What’s even crazier is my client is a lesbian and her flatmate is male, but he did gift her some funds towards her deposit which is why the bank has looked at his social media as part of their investigation into approving the loan.
“There may be a lot more people being rejected because of what is on their social media and they don’t know it, the only reason I found out is because I had known the business development manager at the bank for so long and they told me about the social media status issue,” Ms De Graaf said.
Mr Doessel said your bank statements tell a story about you too, and if you don’t estimate your expenses correctly and the bank sees a different story in your expenditure, then you should expect to get rejected.
“There have even been stories where, as a joke, people transfer money to a friend and describe the transaction as a ‘sexual service’ even though it was their half of a dinner bill and the bank has seen the transaction and viewed it poorly when it came to approving a loan,” Mr Doessel said.
“Excessive use of food delivery services like Uber Eats, take away restaurants and online gambling will go against most people who apply for a loan.
“While the Royal Commission may have seemed like a free for all kick at the bank, in reality, a lot of it reflected poorly on borrowers too. Now banks not only are cracking down on their own behaviour but also customers which means it’s getting tougher for all of us to get finance,” he said.
So you can make sure you’re honest on your finance application, check you have clean credit by starting at www.FreeCreditRating.com.au – it’s free and knowing your data in advance could save you thousands in additional interest. If you get stuck, MyCRA Lawyers also offers a free Credit File Analysis and Explanation Service to help you make sense of your credit reports.