Mortgage problems are now resolved: Laurentian

Laurentian Bank says it has successfully resolved issues related to mortgage loans sold to an unnamed lender.

Laurentian said in December that an audit found that the mortgages in question did not meet documentation and eligibility requirements and would need to buy back as much as $304 million in mortgages.

Laurentian revised that amount a month later to $392 million and said it had repurchased $180 million in loans, with another $88 million expected by the end of the fiscal second quarter.

As part of an agreement with the lender, the bank will repurchase an additional $115 million of ineligible mortgages during the third quarter of 2018, slightly lower than the bank’s initial assessment.

The bank says any future purchases by the lender will be subject to terms and conditions to be agreed upon at the time of each purchase, including a pre-funding audit of the mortgages.

Laurentian’s chief executive Francois Desjardins said last December that the issues largely involved loans that were misflagged and it found no evidence of wilful wrongdoing.

He said some problem mortgages involved a failure to obtain or properly store documentation such as proof of income needed to adjudicate the loan, and to a “lesser extent” Laurentian found “client misrepresentation” which involved embellishing assets or revenue.

“We have made important headway in addressing this situation, which has no impact on our clients, and are confident that it will be completely resolved by the end of the fiscal year,” Desjardins said in a statement released late Tuesday.

“This has been a learning experience and since November 2017, we have been implementing enhanced quality control and origination processes throughout the bank. We firmly believe that this significantly strengthens our mortgage origination and securitization activities.”