Scotiabank defends practices to verify incomes for new mortgages

TORONTO — Scotiabank is defending its income-verification practices in light of a report that said Canadian banks allow foreign borrowers to qualify for mortgages without having to prove the source of their income.

A Globe and Mail report Wednesday said Scotiabank’s internal guidelines don’t require its loan officers to verify foreign clients’ income sources if the down payment on a property is at least 50 per cent.

Scotiabank spokeswoman Diane Flanagan said the bank regularly makes exceptions to accommodate clients who can’t provide standard documentation, such as Canadian tax returns and pay stubs, to verify their income.

Certain types of borrowers — such as non-residents, selfemployed people and new Canadians — simply don’t have those documents, Flanagan said.

“We look at exceptions on a regular basis, because there aren’t one-size-fits-all policies for everybody,” Flanagan said.

The bank still verifies the source of the money being used to fund the purchase and that the borrower is able to service the mortgage, she said. In many cases, the due diligence required for those who can’t provide standard documentation is even more rigorous, she added.

“It is entirely inaccurate to suggest there is preferential treatment” for foreign borrowers, Flanagan said.

The Globe said exceptions to the regular rules for domestic borrowers were outlined in internal documents it reviewed from Scotiabank and the Bank of Montreal. It reported at the Bank of Montreal, foreign clients need a 35 per cent down payment to qualify for mortgages of up to $2 million to avoid having to verify their income.

The bank told the Canadian Press that the types of mortgage applications for foreign clients or newcomers being referred to in the Globe story are for loans of up to $1 million, not $2 million.

It is unclear whether the bank gives preferential treatment to foreign investors when it comes to granting mortgages. “We assess every customer circumstance individually and consider multiple factors which include income and employment, credit bureau score where available, loan-to-value, value of the property and ties to Canada,” a BMO spokesman said.

RBC said it requires non-residents to provide proof of their income, either from an employer or a business, as well as a list of assets. TD Bank said it reviews applicants on a case-by-case basis and has robust processes in place to ensure customers are able to service their debt. CIBC did not respond to questions.

David Eby, B.C.’s NDP Opposition housing critic, said that if banks don’t require foreign borrowers to verify their income, that would make it very easy for those borrowers to purchase multiple homes.