The Bull

Monday 18

February, 2019 5:09 AM

NAB hit by fraudulent mortgage claims

NAB hit by fraudulent mortgage claims

The National Bank of Australia (NAB) has revealed that it is the victim of an alleged mortgage fraud operation that resulted in criminal charges.

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05.10.2018 09:30 PM

The National Bank of Australia (NAB) has revealed that it is the victim of an alleged mortgage fraud operation that resulted in criminal charges.

The fraud scheme, known as “liar loans,” centers around husband-and-wife team Shilpa and Shrikrishna Karandikar, who separately stood charged with defrauding NAB at the Magistrates Court as part of their trial.

Their arrests and subsequent trial are a precursor to what many market analysts predict could only be the tip of the iceberg regarding mortgage fraud and liar loans, with more expected to surface in the coming months.

Home loan fraud is a major issue for the big banks, and with house prices continuing to be unaffordable for many Australians, a spate of people taking illegal measures to try and get on the property ladder and make investments has occurred.

Liar loans involve people being untruthful about their employment status and wages to secure a mortgage, which the borrower then issues without being able to effectively prove if those applying for the loan are honest about their circumstances or not. This has led to many people receiving mortgages at rates that they struggle to pay back due to repayments being too high compared to their actual income.

The issue of liar loans appears to be widespread among Australia’s Big Four banks, as analysts at UBS warn that the total worth of loans around the country is $500bn. This high figure is sure to lead to many predictions of an imminent housing market crash if a large number of people default on their mortgages and the banks struggle with having the financial clout and backing to secure all of them at once.

NAB’s case has a landmark feeling as experts and market analysts keep watch to see how this increasingly worrying issue could affect the Australian economy in the long run.

The Royal Commission’s investigation into misconduct in the financial sector revealed a whole host of negligent procedures and policies. which many believe have gone some way toward encouraging people to try and obtain mortgages despite lacking the traditional background requirements. 

Since the Royal Commission’s inquiry and interim report revealed many of the major banks’ dubious decisions to the Australian public, increased scrutiny and the threat of tighter regulation has led to more checks taking place to prevent the granting of liar loans. However, it may be too late to reverse some of the precarious lending that has already taken place. 

There have been clear warnings in the past, as a mortgage fraud ring came to light in Melbourne in 2015, when $100m worth of fraud affected Westpac, NAB and the Commonwealth Bank of Australia (CBA).

Another fraud ring involving some of NAB’s Western Sydney branches also surfaced recently, through which potential NAB clients were introduced to the bank by non-staffers, who received commission to secure more mortgage lending. The current charges surrounding the Karandikars do not have a connection with either of these rings.

NAB said that this case going to court shows the bank’s “surveillance systems working.”

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