Twenty NAB bankers have been sacked and a further 32 disciplined after the bank found they had been granting home loans based on incorrect information.
NAB’s action follows reports of a surge in so-called ‘liar loans’, whereby borrowers provide mortgage lenders with inaccurate information about their income, net worth and expenses.
The problem is particularly rife among borrowers who use third-party mortgage brokers, and last month led Westpac to introduce rigorous new processes to ensure these brokers obtain all the relevant information.
In a statement on Thursday, NAB said it had identified 2300 home loans that had been granted “without accurate customer information and/or documentation, or correct information in relation to NAB’s Introducer Program”.
NAB’s Introducer Program pays commissions to third-party mortgage brokers who introduce new clients to the bank. NAB said it would now make changes to this program, introducing stricter eligibility requirements and “enhanced governance”.
The sacking of the 20 bankers – all of whom were based in Victoria or New South Wales – comes at the end of a two-year investigation by the bank, in collaboration with the corporate watchdog ASIC.
The bank said a further 32 bankers had had their pay docked.
NAB will now write to the 2300 home loan customers and ask them to participate in a “detailed review” of their loan.
This, the bank said, “may include verification of documents submitted at the time of their home loan application”. Some customers may be offered compensation, the bank said.
“What occurred was unacceptable. We have investigated this matter thoroughly, and, as we have always said, whenever we find issues we will investigate them, fix them, and hold people to account – and we did,” NAB’s head of customer banking and wealth Andrew Hagger said.
“I want to assure all of our customers that we have improved our systems, processes and programs as a result of what occurred here.”
The news comes two weeks after NAB announced it was slashing 6000 jobs as part of a move to refocus away from home loans and towards business banking.
It also comes as the banks attempt to improve their battered public image, in an effort to shake off a slew of scandals, and fend off growing calls for a royal commission into the sector.
This effort included the launch this week of an advertising campaign in which banks claimed to be owned by and run for the benefit of “everyday Australians” – a claim The New Daily examined here.
Liar loans epidemic explained
The so-called liar loan epidemic originally drew media attention when investment bank UBS published a startling report that appeared to show a third of Australians were lying about their circumstances when applying for a home loan.
In dollar terms, UBS estimated that meant banks had $500 billion of potentially dodgy mortgage debt on their books.
In UBS’s latest report, almost 1000 mortgage borrowers were asked whether the information they provided when applying for a home loan was “completely factual and accurate”.
Just 67 per cent ticked this box. That was lower than in 2015, when 73 per cent ticked this box, suggesting the problem is getting worse.
The percentage of people who said the information was “mostly factual and accurate”, meanwhile, stood at 25 per cent – up from 23 per cent in 2015.
Perhaps most startlingly, the percentage of respondents who said the information provided was only “partially factual or accurate” jumped from 3 per cent to 8 per cent.
The report found misrepresentation was much more likely with borrowers who went through a broker.
UBS said this trend was statistically significant, and described it as “disappointing”.
Banks and regulators, however, have questioned the accuracy of UBS’s report, with ANZ recently telling The New Daily that the sample was too small.
But the recent action of NAB and Westpac appeared to demonstrate the banks were taking the ‘liar loan’ risk seriously.