The extensive use by banks of mortgage brokers and "embellished loan applications" is the rationale shared by one fund manager for leaning towards lightening an already underweight position in Australian banks.Damien Wood, principal of Spectrum Asset Management, used a commentary on the firm's website yesterday to explain "why we worry about mortgage brokered loans".Spectrum is a credit investor.The now entrenched reliance of banks on brokers for mortgage product "will cause financial pain among lenders when borrowing conditions in Australia deteriorate," Wood wrote.Wood pointed back to a 2016 study by UBS, derived from market research, that dubious and deceitful disclosure by applicants for home loans may be common. "The level of factual inaccuracy in mortgage applications was highly skewed to customers who secured finance via a mortgage broker," UBS said at the time.Wood underlined one finding, that more than 40 per cent "of those who lied in their applications did so at the encouragement of their brokers."At Spectrum, he said, "should we foresee mortgage stress rising, we will look to further scale back our underweight position."