Laurentian Bank says it expects to finish its review of problematic loans sold to an unnamed lender by the fiscal second quarter, and will fix or repurchase any mortgages that failed to meet the proper criteria.
The Montreal-based lender said in December that it had discovered mortgages sold to an unnamed third party purchaser that did not meet documentation and eligibility requirements, and would need to repurchase as much as $304 million in mortgages.
In January, Laurentian upwardly revised that amount 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.
The bank’s chief executive said in December that the issues largely involved loans that were misflagged and it found no evidence of wilful wrongdoing. He also said a smaller percentage of the problematic mortgages involved a failure to obtain or properly store documentation such as proof of income needed to adjudicate the loan.
Laurentian Bank says today that it has already identified and purchased $268 million in ineligible mortgage loans and is conducting a review of approximately 1,900 branch-underwritten mortgages sold to the third party purchaser, fixing or repurchasing any loans as needed.
Laurentian also says it agreed with the Canadian Mortgage Housing Corporation, another third-party purchaser of loans from the bank, that it did not have to perform a full review of mortgages sold to CMHC securitization programs and is working with Canada’s federal housing agency to ensure solid controls are in place going forward.