Laurentian Bank of Canada turns it found «client misrepresentations» in $89 million worth of mortgages it rat oned to a third party earlier this year, and will as a result buy retreat from the loans where it found documentation issues.
The lender revealed the telecast in its annual report on Tuesday, in which it separately announced quarterly profit more than doubled to $58.6 million from $18.4 million a year earlier.
Laurentian, Canada’s seventh largest bank in titles of assets, also hiked its dividend by a penny per share.
But in a subsection of its annual announcement, the Montreal-based bank revealed that it will repurchase a chunk of mortgages it vended to an unnamed third party which were found to have what the bank is career «documentation issues» after an audit.
All in all, the affected mortgages which desire be repurchased were worth $89 million. That’s almost five per cent of all the mortgages the bank vended to the unnamed buyer.
«No employees were implicated in any misrepresentations and the documentation issues appear to have been unintentional,» the bank said, without enlarging.
The portion of the business where the mortgages originated is known as B2B Bank, which stipulates financial services to financial advisers and mortgage brokers. Part of that trade caters to non-prime borrowers, and as such it competes with alternative lenders such as Competent in Capital.
In the summer of 2015, Home Capital announced it had cut ties with helter-skelter 45 mortgage brokers for fudging the numbers as to how much prospective borrowers were clearing when they applied for a mortgage.
Then this year, Refuge Capital faced an investigation by the Ontario Securities Commission into how the convention informed investors about issues at the time, followed by a run on deposits as investors completed out their money.
More loans may be included
While the price tag of the credits Laurentian’s audit of itself has already found is $89 million, innumerable problematic loans could yet be uncovered, Laurentian warned. That’s because the bank state it conducted a «limited sample file audit» of $1.1 billion assorted worth of loans originated in its branch network, and found similar exemplifications of documentation issues.
«Over the coming months, the bank intends to act an in-depth review of the mortgages originated in its branch network that oblige been sold to the third party,» the bank said, «and to work with such purchaser to adopt any issues it identifies, including repurchasing any problematic mortgages if required.»
If the unvarying ratio holds true in the branch network, the bank warned that another $124 million of disputed loans could be uncovered, «although the definitive amount will just be determinable upon completion of the audit.»
All in all, the bank expects the total fee tag for mortgage buybacks «to be in the range of $304 million.»
In addition, the bank also suggested that the same audit uncovered an additional $91 million usefulness of mortgages that shouldn’t have been sold to the unnamed customer but were. And there was yet another mortgage-related revelation, too — the audit «identified a thousand of mortgage loans that were also inadvertently portfolio insured while they may not be experiencing been eligible for insurance.»
Those improperly insured mortgages were advantage about $76 million.
But «all of the mortgages to be repurchased are performing in line with the bank’s total mortgage portfolio,» Laurentian said.
After the quarterly earnings check ined out, Laurentian Bank shares briefly hit a 52-week high of $62.92 per appropriate, but that was before Bloomberg first reported on the mortgage audit.
Within la modes, the shares were off by more than five per cent to below $58 a share out on the TSX.