trending Market Intelligence /marketintelligence/en/news-insights/trending/gbkwotcwnfxhhz1ugr4ola2 content esgSubNav
In This List

Laurentian Bank says it settled mortgage loans issue

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Laurentian Bank says it settled mortgage loans issue

Laurentian Bank Financial Group said it has resolved certain issues related to mortgage loans the bank sold to an unnamed third-party purchaser.

Pursuant to an agreement, the third-party purchaser will continue to consider future purchases, including a pre-funding audit of the mortgages to be bought. In addition, the bank will repurchase an additional C$115 million of branch-originated ineligible mortgages in the third quarter, which is slightly lower than the bank's previous estimate.

Moreover, of the C$61 million cash reserve deposit the bank provided to the third-party purchaser, C$6 million will be released to the bank as part of the agreement. The third-party purchaser will keep the remaining amount as additional credit enhancement to the program. Over time, the remainder will be remitted to the bank as the branch-originated mortgage loans amortize.

Laurentian Bank Financial Group — the collective name for Laurentian Bank of Canada and its entities also reached an agreement with the Canada Mortgage and Housing Corp. on an action plan toward resolution on the CMHC securitization program. A normal course audit of the bank's portfolio-insured mortgage loans — conducted by CMHC in the second quarter — found that certain mortgage loans were inadvertently portfolio-insured but did not meet CMHC portfolio insurance eligibility criteria. Similar issues were identified in the fourth quarter of 2017.

As a result of CMCH's audit, aside from the mortgage loans already repurchased from the CMHC securitization program at the beginning of 2018, the bank will buy back those other mortgage loans that were inadvertently portfolio-insured and sold to the CMHC securitization program. CMHC will concurrently cancel out insurance on those mortgage loans. Based on the results of CMHC's audit, the total amount of such mortgage loans the bank will repurchase is expected to be between C$125 and C$150 million.

Laurentian Bank Financial Group is also reviewing all B2B Bank and branch-originated mortgage loans portfolio insured by CMHC but not sold to, as well as portfolio insured mortgage loans sold to the CMHC securitization program. The review is expected to be concluded before the end of the fiscal year, and an independent third party will verify the review process and results.

Meanwhile, the bank will provide CMHC with a C$20 million cash reserve deposit, pending the conclusion of the review.