Nerfonomics

Flow-Rider said:
@Squidfayce Have a look at this.

We lost everything': Couple breaks down in tears as they sue Westpac over claims the bank wrongly gave them a $1.8million loan

  • Westpac is accused of wrongly assessing its clients' financial situation
  • A class action lawsuit was filed by law firm Maurice Blackburn on Thursday
  • Queensland couple Michelle and Ian Tate are named as the lead plaintiffs
  • They say they were issued a $1.8m loan despite having one source of income
Click to expand...
Take a look at the details - https://www.afr.com/property/reside...stpac-s-irresponsible-lending-20190526-p51r8k

Lied on application.

Bank used the higher benchmark than stated living expenses. Which is what they're supposed to do.

The failure is that they didn't asses the actual expenses in the statements that were made available.

There is a balance between getting loans out the door and looking at documentation. That's why the bench maRks exist.

Couple had living expenses of almost 10k per month...they're not poor. They're not stupid (except for maybe the bad multiple investments). They lied on an application, SIGNED IT, and the bank took the info at face value. Not great but not exactly entirely their fault.

Now they want somone to pay for their poor investment outcomes and they've got a smoking gun which they contributed to. 100% would not have brought it up if they made money. Bit snakey if you ask me.
 
When the royal commission made all the lenders tighten their citeria and processes, people couldn't get into homes despite having money, then the regulators told banks to losen up lending criteria and processes, so they do, then people lie and get around loosened criteria and it's the banks fault they're fucked.
Can't wait for full integration of open banking.
 
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So I mentioned open banking in a post last night. I realised some of you may not know what that is or what's in store. So just wanted to give you some insight, because it's already happening to a degree.

Previously your credit file used to operate on the basis of negative reporting - ie if you defaulted on your loans, you'd get a default listing. If you let that progress and went to court all that information would be captured. The idea was that bad credit risks would be visible and give lenders comfort as to a person's position. No defaults or judgements, must be good. Right?

Well, maybe a long time ago. What happened is that people could be in trouble Nd still have clean credit files. The trouble could be in their utilities, or they were constantly late on payments or just shifting debt around. Just delaying the inevitable. Sometimes people would be able access credit becauae their default listing would take up to 90 days to be added to their file. It's partly what contributed to people being able to get like 10 credit cards, a carloan for a mustang and a 50 grand personal on a 50k wage.

Open banking sets out to achieve a change to how your credit worthiness is reported. There are two fundamental changes.

Positive credit reporting - this is where all your obligations are captured on your credit file and a history of your payments is captured. So if you're late, it's marked against you. And not just once, but over a 24 or 36 month period. A timeline and a result for each month is recorded, including how late you were. This includes, not just your loans, but other liabilities like your energy bills and phones etc. looks like this for every single liability-
1670882220902.png


Open banking - the concept is about standardising the information that feeds into positive credit reporting via APIs so that there are no discrepancies in how companies define "late", "default", "hardship" etc.

The idea is that this brings about an ability to automate and build decisioning systems that can accurately and efficiently provide customer insights on an individual level that are up to date and meaningful. Catch liars, poor payers and higher risk customers out before they fuck themselves or the lender. There's also long term savings via modernisation and automation for the industry

Open banking has had a number of milestone dates. Some have been met, some have been extended etc. Open banking and positive credit reporting has been built into regulations, so all providers must comply.

The future will be where you don't even have to provide statements. Lenders will run a report that tells them your paying, spending and saving habits, across all institutions and credit providers, what sort of spending you do do - is it gambling, do you eat out every night, lots of cash out at ATMs close to gaming venues at 2am on a Thursday, even if you spend tonnes of money on bike shit. You know that question on homeloan applications around expenses that asks if you spend money on hobbies, recreation etc that you all say "ugh, I spend max 100 bucks a month"? Yeah well the future computer will know you're full of shit. All those wiggle and chain reaction hits will tell another story. While that's discretionary spending and can be changed to meet your obligations, the point of data at this level is to cross check against whether you fall into a bucket of customers that bend the truth or are honest. At which point, bank policies may be so granular that you won't qualify for the advertised rate but the risk weighted rate.

But the point I'm making by writing this is that people like the ones in the above article simply won't be able to get away with misstating their expenses, brokers will be dead in the water and in the faraway future (next 15 years?) You'll be able to do all of this by just clicking a button "apply for homeloan" and not have to fill anything out. Banks won't need to use benchmarks and they will be able to tailor outcomes on the fly. Expect a homeloan application to take a minute to be assessed by a robot and no secondary review by a person in the event of a failure to meet the credit criteria. This is already happening in very specific circumstances - i.e. people who bank with one institution only and have only liabilities with that institution already often pass straight through a robot. The technology exists, just the input APIs dont all exist yet for ability to share this across institutions at scale.

Welcome to China Motherfuckers.
 
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fjohn860 said:
Bank lending has changed since I last got a loan it seems...
Click to expand...

yes and no. The fundamentals are still "Can you pay the loan with your remaining cash after expenses" and "can you afford multiple rate rises above the rate being applied for". Almost everything that is considered an input into these two questions is subjective, hence the drive to automate and standardise.

Banks don't even always ask for statements. Especially when stuff comes from brokers. There is a level of trust that what's provided is accurate. And if the broker hasn't been found to be dodgy, there is less scrutiny on what they submit. Its a balancing act. you may not agree with it, but its just risk appetite. not 100% of the loans will be fraudulent, or inaccurate in a way that changes the decision, so why spend time looking? Ever sent a feature without a second thought?

So this would have been a scenario of a client - probably considered prime (you know cos investment properties, high income etc.) that didn't need statements to progress the loan, but the statements were were provided none the less. SO any credit assessor would have looked at the system and realised they don't need to check the statements and moved passed them. My old workplace often didn't ask for statements, but had a policy that if the client did however provide them even if not required, they had to be assessed - you know, so what happened here could be avoided and liability solely shifted back to a lying customer/broker combo buster.

Most people doing this manual job are looking for big outliers in key areas, and only will delve deeper if there is any reason to do so. Not to mention some lenders have these roles performed by juniors that dont require any formal education to perform as the systems do most of the heavy lifting. The employees just check off any flags the system spits out and follow up the exceptions. In this case, the broker provided a below bench mark living expense of 3000, that would have flagged, so staff would have adjusted the expense to the bench mark. Next!

One of my old colleagues in his time at a lender i worked for had assessed and approved in excess of 8B worth of home lending in about 5 years. The default rate of his assessments was around 1.2%. His peers over the same period were running at between 3-4%. Sometimes you have a knack for knowing when to look, etc.

There was also previously an issue with conflicted renumerations - bonuses paid for volume processed which forces people to speed through rather that be accurate. That historically added to poor outcomes too. But as a whole you need to understand that these outcomes are not the norm. Even for 100 people this happens to, there are literally thousands of people who arent in this position. If the banks were wantonly doing the wrong thing, the number of poor outcomes would be more significant.

I agree that too heavy a reliance on benchmarks is bad, that's been an ongoing debate. Banks do it one way, they get slammed, they do it another way, they get slammed. The bank is always the problem, not the continually shifting regulatory environment or the lying customer or broker (up to what, 50%?).

If you've ever had to asses some ones actual expenses from statements, you'll know the effort involved and the potential pitfalls and inaccuracies from doing so. Not all statements and habits are the same. Infact they are almost as individual as finger prints. What do you question? What if all the expenses are paid in cash after it is withdrawn from the account? Those would just look like discretionary spending, people do this all the time to hide loans, children, gambling, alcoholism, infidelity etc.. People also do this over a 6 month period to sanitise their spending so banks CANT tell what they are doing before applying for loans. Ive know brokers to give this advice to their clients. Is the occasional expense at a baby store an indicator that the client is lying about having a child or are they really buying baby shower gifts (discretionary). You can ask, but they can lie and you're back to square one. You cant fathom the level of complexity that goes into assessing somones statements until you've done it for a bit and realise that every time you do it, its never clean cut. Ever. That's why stuff like open banking and positive reporting is the future.

Dont feel sorry for the lead plaintiffs in this case.
 
Squidfayce said:
yes and no. The fundamentals are still "Can you pay the loan with your remaining cash after expenses" and "can you afford multiple rate rises above the rate being applied for". Almost everything that is considered an input into these two questions is subjective, hence the drive to automate and standardise.

Banks don't even always ask for statements. Especially when stuff comes from brokers. There is a level of trust that what's provided is accurate. And if the broker hasn't been found to be dodgy, there is less scrutiny on what they submit. Its a balancing act. you may not agree with it, but its just risk appetite. not 100% of the loans will be fraudulent, or inaccurate in a way that changes the decision, so why spend time looking? Ever sent a feature without a second thought?

So this would have been a scenario of a client - probably considered prime (you know cos investment properties, high income etc.) that didn't need statements to progress the loan, but the statements were were provided none the less. SO any credit assessor would have looked at the system and realised they don't need to check the statements and moved passed them. My old workplace often didn't ask for statements, but had a policy that if the client did however provide them even if not required, they had to be assessed - you know, so what happened here could be avoided and liability solely shifted back to a lying customer/broker combo buster.

Most people doing this manual job are looking for big outliers in key areas, and only will delve deeper if there is any reason to do so. Not to mention some lenders have these roles performed by juniors that dont require any formal education to perform as the systems do most of the heavy lifting. The employees just check off any flags the system spits out and follow up the exceptions. In this case, the broker provided a below bench mark living expense of 3000, that would have flagged, so staff would have adjusted the expense to the bench mark. Next!

One of my old colleagues in his time at a lender i worked for had assessed and approved in excess of 8B worth of home lending in about 5 years. The default rate of his assessments was around 1.2%. His peers over the same period were running at between 3-4%. Sometimes you have a knack for knowing when to look, etc.

There was also previously an issue with conflicted renumerations - bonuses paid for volume processed which forces people to speed through rather that be accurate. That historically added to poor outcomes too. But as a whole you need to understand that these outcomes are not the norm. Even for 100 people this happens to, there are literally thousands of people who arent in this position. If the banks were wantonly doing the wrong thing, the number of poor outcomes would be more significant.

I agree that too heavy a reliance on benchmarks is bad, that's been an ongoing debate. Banks do it one way, they get slammed, they do it another way, they get slammed. The bank is always the problem, not the continually shifting regulatory environment or the lying customer or broker (up to what, 50%?).

If you've ever had to asses some ones actual expenses from statements, you'll know the effort involved and the potential pitfalls and inaccuracies from doing so. Not all statements and habits are the same. Infact they are almost as individual as finger prints. What do you question? What if all the expenses are paid in cash after it is withdrawn from the account? Those would just look like discretionary spending, people do this all the time to hide loans, children, gambling, alcoholism, infidelity etc.. People also do this over a 6 month period to sanitise their spending so banks CANT tell what they are doing before applying for loans. Ive know brokers to give this advice to their clients. Is the occasional expense at a baby store an indicator that the client is lying about having a child or are they really buying baby shower gifts (discretionary). You can ask, but they can lie and you're back to square one. You cant fathom the level of complexity that goes into assessing somones statements until you've done it for a bit and realise that every time you do it, its never clean cut. Ever. That's why stuff like open banking and positive reporting is the future.

Dont feel sorry for the lead plaintiffs in this case.
Click to expand...
Some people just make asses of themselves.
 
Squidfayce said:
Take a look at the details - https://www.afr.com/property/reside...stpac-s-irresponsible-lending-20190526-p51r8k

Lied on application.

Bank used the higher benchmark than stated living expenses. Which is what they're supposed to do.

The failure is that they didn't asses the actual expenses in the statements that were made available.

There is a balance between getting loans out the door and looking at documentation. That's why the bench maRks exist.

Couple had living expenses of almost 10k per month...they're not poor. They're not stupid (except for maybe the bad multiple investments). They lied on an application, SIGNED IT, and the bank took the info at face value. Not great but not exactly entirely their fault.

Now they want somone to pay for their poor investment outcomes and they've got a smoking gun which they contributed to. 100% would not have brought it up if they made money. Bit snakey if you ask me.
Click to expand...
There are few more to come yet I would say, there's always ways for these people to get around the system. I know of people that should never be given 1cent of credit but yet they've borrowed in the 100 of thousands for the banks.
 
Flow-Rider said:
There are few more to come yet I would say, there's always ways for these people to get around the system. I know of people that should never be given 1cent of credit but yet they've borrowed in the 100 of thousands for the banks.
Click to expand...
yes, but the point I've bene making is that in an imperfect system, its not always the banks fault. Id almost argue that more often than not its the clients fault. This class action's lead plaintiffs lied on their application. If they're the lead, what sort of others make up the class?
 
fjohn860 said:
Bank lending has changed since I last got a loan it seems...
Click to expand...
When I got a house loan 20 years ago banks barely checked anything, my employer wasn't giving out payslips and they asked for a letter from the employer, the employer asked if I wanted more than the amount they actually paid written on the letter and said they had done it many times before. I was living with parents at the time, and they didn't even check. A friend of mine had bankrupted themselves about 7 years previously, and later applied for a loan using a deposit from his brother in law, straight after he got the loan he gave it back. He was shocking with money.
 
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