The credit crisis has a way of flushing out the more reckless and unscrupulous operators in the lending industry.

Since October when the credit crisis started to bite, Mortgage & Finance Association of Australia (MFAA) has expelled six of its members for misconduct, compared to only two in the same period a year earlier.

Last week, Stephen Cleary of Queensland became the 14th member to be expelled by the MFAA tribunal after it was proven his conduct was contrary to the MFAA code of practice.

Mr Cleary had advised a consumer that supporting documentation for a loan application was able to be ‘made up’ before it was submitted to a lender.

Earlier in March, MFAA expelled Xue Mei Mary Zhao for five breaches of the MFAA Disciplinary Rules after she submitted four loan applications to a lender without having seen the borrowers.

Phil Naylor, MFAA chief executive officer, admitted there had been more mortgage brokers expelled in the past year than ever before.

As the peak industry body for mortgage lenders, MFAA is very serious about cleaning up the industry of “unscrupulous operators”, and will investigate thoroughly any report they receive about members doing the wrong thing.

Since 2002, MFAA has been working on uniform national legislation, making MFAA membership compulsory for mortgage brokers, which means non-members such as Hazel Bucello, who is facing court on May 13 on 10 counts of fraud and who is giving the industry a bad name, will not be able to operate.

Ms Bucello, 63, entered the lending industry in 1998 and operated a mortgage broking business, Victorian Finance Broking Services (VFBS), in the Melbourne suburb of Kew, with two sons and another consultant, specialising in low-doc loans.

She promoted herself and VFBS as a specialist home loan lender for borrowers with credit problems, discharged bankrupts or borrowers who did not “fit in with the normal banking requirements”, offering 106% loans for “people who fit the criteria”.

After receiving several complaints from investors, the Australian Securities & Investment Commission (ASIC) investigated the matter and referred it to the Commonwealth Director of Public Prosecutions.

Ms Bucello allegedly obtained more than $2.2 million through misleading statements that the money would be lent on to clients of VFBS and used to provide bridging finance. ASIC also alleges the loans provided were secured against property owned by the clients.

Lending Central