Laurentian reports progress on mortgage situation

by Steve Randall30 May 2018

Laurentian Bank says that it has agreed a resolution with the CMHC over an issue with mortgages sold to third party purchasers.

Last year, the bank’s shares tumbled to a 9-year low after it emerged that some errors had been revealed in documentation concerning the sale of two portfolios of prime mortgages and their eligibility for CMHC portfolio insurance.

The bank reported Tuesday that it has successfully resolved the identified issues related to mortgage loans purchased by the Third-Party Purchaser (“TPP”) and has agreed with CMHC on a clear action plan towards resolution on the CMHC securitization program.

“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,” said François Desjardins, President & CEO of the Bank. “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.”

The lender and the TPP have agreed that the TPP will continue to consider future purchases and Laurentian will repurchase an additional $115 million of branch originated ineligible mortgages during the third quarter of 2018, slightly lower than the Bank’s initial assessment.

New issues identified
During the second quarter of 2018, CMHC completed a normal course audit of the Bank’s portfolio insured mortgage loans which highlighted similar issues as those identified in the fourth quarter of 2017.

Certain mortgage loans were inadvertently portfolio insured while they did not meet CMHC portfolio insurance eligibility criteria. As previously indicated, these mortgage loans do not represent a credit issue as they are all performing in line with the Bank’s overall mortgage portfolio and are secured by valid collateral on a property.

In addition to those mortgage loans already repurchased from the CMHC securitization program at the beginning of 2018, the Bank will repurchase those other mortgage loans that were inadvertently portfolio insured and sold to the CMHC securitization program.

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