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Wizard branches accused of fraud
The Serious Fraud Office is investigating two branches of home loan company Wizard for alleged mortgage fraud.
Investigations into the Henderson and Lower Hutt branches have started after complaints from Wizard's parent, the finance company GE Money, according to a front-page story in the NZ Herald.
7 Comments
The alleged fraud is based
The alleged fraud is based on the issuing of Lo-doc mortgages.IMO in the next 24 months growth in negative equity/unemployment will reveal widespread misuse of the Lo-doc system during the late unlamented housing boom. Lo-doc will have been used by desperate loans officers/mortgage brokers to get people loans who should not have recieved them (their issuance grew most strongly at the peak of the boom in 2005-2007 - now ask yourself why would that have been?). The Wizard case is the tip of the iceberg and will prove to be NZ's home grown version of subprime. I have been expecting news such as this for some time.
Right on the money andy,
Right on the money andy, I suspect that there are alot of similar loans in "The deep freeze list" http://www.interest.co.nz/deepfreeze.asp . Currently being funded by investors waiting for thigs to "come right". Wizard/GM just couldn't hide them anymore.
"We're all subprime now." -calculated
"We're all subprime now." -calculated risk.
geografree, We have always been,
geografree,
We have always been, the lenders just change some of the calaulations to hide the risk. It is a shame for the frozen funders that the compounding interest is quietly eating up their capital faster than the housing market is falling as the reducing security. The same is true for the primary production sector, production costs, and debt servicing are unservicable on a reducing commodity price.
You will find that despite
You will find that despite the conspiracy theory being talked about in this blog, the loans in question are not low-doc but standard loans with alleged doctoring of borrowers financials. Low Doc lending has been done in NZ for years it's just not been identified under this banner. It's where a lender is prepared to look at the balance of information and make a decision on the ability of someone to repay a loan where they don't have full supporting financial information. Nothing new here.
The piece is pretty specific:
The piece is pretty specific:
A former employee told the Herald some Wizard branches had a "cowboy culture", with "rampant over-declaration" of customers' incomes enabling them to qualify for loans.
Wizard wrote a lot of "lo-doc" loans - loans that are supposed to be for self-employed people who can't provide financial statements.
But in many cases the customers weren't self-employed and the company "knew it, or at least suspected it", the ex-employee said.
"As long as people were writing business they'd look the other way.
"There were people with bad credit, poor properties, self-certifying income that really couldn't afford the loans."
It was only when the business climate turned sour that a clamp-down came, the former employee claimed.
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