Second Cockroach: Canadian Mortgage Lender Crashes After Admitting Mortgage Fraud
Back in April/May, Canada’s biggest mortgage lender, Home Capital Group, crashed its way into the headlines, coming clean over its balance sheet-full of liar loans, suffered a bank run, and was forced to take emergency liquidty from taxpaying pensioners, and was eventually bailed out by good old Warren Buffett.
“Probably nothing…”
Well just when everyone though that crisis was over, a second cockroach in the Canadian mortgage bubble fiasco just emerged…
Laurentian Bank of Canada fell the most in almost nine years after reporting it found customer misrepresentations on some mortgage loans it sold to another firm.
Echoing problems that almost sunk Home Capital Group, Bloomberg reports that:
An audit “identified documentation issues and client misrepresentations” with some mortgages from its B2B Bank unit that were sold to a third-party firm, the lender said Tuesday in its annual report.
Laurentian said it will repurchase about C$89 million ($70 million) of those mortgages in the first quarter, or 4.9 percent of such loans sold to the firm.
It will buy back an additional C$91 million of mortgages “inadvertently” sold to the firm, also in the first quarter.
Just as we saw with Home Capital, the CEO initially shrugged it off as immaterial:
“This is largely a documentation and securitization-eligibility issue,” Chief Executive Officer Francois Desjardins said in a call with analysts.
“It is not material for the bank, its operations, its funding nor its capital. We have worked to change processes to ensure that this issue is resolved.”
However, the total value of the mortgages sold to the third-party issuer was about C$1.16 billion, according to the bank.
Laurentian said it was first alerted of the issue in September by the purchaser and initiated its own audit.
Have no fear though:
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