Westpac Banking Corp (ASX: WBC) will face the news again this week after the bank admitted it had breached its lending obligations and should not have approved 10,500 loan applications. It will pay a $35 million civil penalty.
“The litigation related to Westpac’s home loan assessment process during the period December 2011 and March 2015, during which approximately 260,000 home loans were approved by Westpac’s automated decision system,” the financial watchdog, ASIC, said in a media release.
Westpac approved 100,000 of these loans using either incorrect automated expense estimates or without assessing the loan applicant’s ability to service the loan at the end of the interest-only period.
“Of these approximately 100,000 loans, Westpac should not have automatically approved approximately 10,500 loans,” ASIC stated.
Ultimately, it comes back to responsible lending practices, ASIC Chair James Shipton said.
“Responsible lending in the home lending market is absolutely vital to consumers, banks and our economy.”
Westpac admitted to the contraventions and will pay ASIC’s legal fees in addition to the $35 million penalty.
If it is approved by the Federal Court it will be the largest civil penalty under the National Credit Act.
Property Concerns Mounting
As we reported this week, mounting pressure is being placed on homeowners and property investors as banks, such as Westpac and Suncorp Group (ASX: SUN), increase their home loan interest rates ‘out-of-cycle’.
With property prices falling for the 11th month in a row, according to CoreLogic data, analysts and economists are also growing concerned about the rising number of failed refinancing attempts by consumers and investors.
Data from Digital Finance Analytics and UBS suggest a year-over-year increase in the number of defaults. “About 40 per cent of people who tried to refinance were unable to do so,” Digital Finance Analytics principal Martin North wrote in a blog. “If you go back a year it was 5 per cent.”
So far in 2018, shares of Westpac and Commonwealth Bank (ASX: CBA) have come under selling pressure as investors react to retreating property prices, the Royal Commission and media scrutiny.
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