Every day that goes by we come to realize we weren't that 'different' to our American friends after all. It's just because our slowdown was delayed by fiscal stimulus and resource sector expansion that the cracks took longer to appear. A work friend of mine use to securitise WA home loans from a local credit union into Residential Mortgage Backed Securities then flip them through an national bank onto the market, investors were hungry for them, they came with good investment grades from the ratings agencies also. The credit union got all the cash in up front for the mortgages that were written and kept a margin for the life of the RMBS to administer the collection of the repayments. Let's just say there were some nice incentives to make sure the loan targets were hit so they could be securitised and gotten off the balance sheet.
I think another piece of dirty laundry in this issue is the 15 or so billion Wayne Swan ordered the AOFM inject into the market for the small players via buying up Aussie RMBS which gave the liquidity needed to these small players to keep flipping these low doc loans post gfc. BOQ was a big user of this cheap government credit and look at their loan portfolio, just took a big write down and they posted a first half fy12 loss.
