Second Cockroach: Canadian Mortgage Lender Crashes After Admitting Mortgage Fraud

Tyler Durden's picture

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:

“The bank intends to perform an in-depth review of the mortgages originated in its branch network that have been sold to the third-party purchaser and to work with such purchaser to resolve any issues it identifies," Laurentian said in the annual report.

A spokeswoman for Canada’s Office of the Superintendent of Financial Institutions said it doesn’t comment on specific companies it regulates... that is until it absolutely has to engender some confidence and forestall a bank run.

So while this could be another tempest in a teapot, given the recent collapse in Canada's housing bubble, we suspect this could escalate a lot quicker than the Laurentian CEO hopes.
 

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Cognitive Dissonance's picture

There is never just one cockroach. By the time you see the first, you are fully and totally infested.

At that point, either you share the living space or you burn it down to the ground.

lasvegaspersona's picture

'accidently sold'...91 million of 'em....sure....

...we dumb as shit and believe whatever we told....

skbull44's picture

The common refrain by Canadians after the 2008 subprime fiasco in the US was that it would never happen in Canada because of much tougher standards and regulations. That myth seems about to be shown for what it is...hubris.

https://olduvai.ca

Joyo Bliss's picture

And the hubris is still strong; it’s human nature to not want to lose wealth.

I’m waiting for the the other shoe to drop. My guess it’ll be the beginning of February when the TREB numbers show January sales went off the cliff, and they can’t hide the yoy statistics any longer.

[now renting]

sodbuster's picture

Cockroaches love the dark. They flourish in the dark. They hate the light. Just like the Deep State.

Sages wife's picture

My upvoting finger is getting tired.

Buck Johnson's picture

Canada is going to get hit hard.

 

 

AUD's picture

It's not until you have to get up & take a piss in the middle of the night that you realise the extent of the problem

 

Davidduke2000's picture

do not get too excited , we have regulations to protect the depositors against such small adventure by the CEO, I am convinced he will be asked to resign and he will. we do not sell mortgages to third party, this is a new stunt by the ceo.

American Psycho's picture

Nothing to see here, move along.

Bastiat's picture

Too bad he didn't make the right campaign contributions like Munchkin did (when Kamala Harris was CA AG).

ted41776's picture

banking fraud, isn't that a little redundant?

FullHedge1's picture

Not as much as "Crooked Hillary".

Davidduke2000's picture

What collapse in Canada's housing bubble? I am Canadian and never heard of such collapse. of course both Ontario and BC where the speculation was happening , provincial governments enacted laws to discourage speculation, prices dropped a bit but there is no collapse. would like to have real numbers where this shit collapse came from? FAKE NEWS ??

asscannon101's picture

Holy shit Gord, lean back a little!! 4 patriotic and passionate posts defending the Realtwhores (TM) right in a row?!? Don't get your knickers in a twist- everyone knows that "its different in Canada" because of the snow and the air and the dirt and whatnot. There could never be an overpriced housing crash there because... well, because its fuck-all Canada!! Besides, C$1.16 billion is like $426 USD, so... no harm no foul.

Davidduke2000's picture

who is Gord? this fake story insult us Canadians, we do not appreciate fake news calling our banks fraudsters , yet the whole story was in the quater's results, it's not like zerohedge discouvered a fraud, it was admitted in the financial statement, of course you did not read the story from the Canadian broadcasting corporation.

pitz's picture

Canadian housing peaked in 2013, stagnated for the past 3-4 years and has now been fallling quite significantly as sales mix changes run out of steam and go into reverse.

The Real Tony's picture

Resale townhouses and resale condominiums in Edmonton, Alberta Canada are selling for less than fifty percent of what they sold for ten years ago. If you factor in ten years of inflation they've fallen over sixty percent from 2017 to 2017. This is the total collapse no one talks about. A sixty plus percent collapse in the resale market in Edmonton. The exact same townhouses and condos from 2007 selling at a 60 plus percent reduction in the year 2017.

Davidduke2000's picture

The Laurentian bank is a small bank it is not among Canada 5 largest banks, not sure even it has a federal charter.

BandGap's picture

Your point being? It's OK? What does the size of the bank have to do with fraud?

Just wondering, eh.

Davidduke2000's picture

Tyler is making it a big story, like the fake gold bar that he attributed to the Canadian mint.

Justin Case's picture

Was it even 20 mortgages? It's certainly not the mortgage fraud the merican banks pulled off with MBS sold to pension funds and abroad worth billions. Then having Golden sacks taking short positions on the MBS sold as "AAA" mortgages. That's fraud.

DRAMA.

The Real Tony's picture

I used to have money and accounts with them thankfully I don't presently.

buzzsaw99's picture

let the shoosting (lawsuits) begin!

Davidduke2000's picture

we never had the practice of selling mortgages to third party , this tiny bank learned this from the us fraudsters. The ceo will be kicked out for ruining the trust the people had in this small bank.

but as he said the bank will repurchase all the loans it sold and since the demand for small houses is high across the country it would not have any problems unloading some homes if any loans are doubtful. as to the borrowers the story does not imply anybody has a problems, in Canada the mortgage and housing corporation insure all homes that have less than 25% cash down with a large premium, I do not see any financial issue following this american borrowed trend. 

LetThemEatRand's picture

"but as he said the bank will repurchase all the loans it sold and since the demand for small houses is high across the country it would not have any problems unloading some homes if any loans are doubtful."

That was exactly the reasoning that led to the first banking crisis.  Pension funds and others bought fraudulent mortgages because they seemed virtually risk free in a rising housing market.  Then the market went down and the shit hit the fan.  Fortunately, the market will never go down in Canada so you're right, no worries.  Party on, Wayne.

Davidduke2000's picture

Just read another bullshit, Back in April/May, Canada's biggest mortgage lender, Home Capital Group, crashed its way into the headlines, this company is a tiny company in Alberta not known in the other 9 provinces, how it became the largest mortgage lender? what's with the propaganda tyler? you have been at it since 2008 when the us mortgage fraud caused a worldwide credit meltdown while in Canada we did not have the problem the us had, nobody lost his home because we did not have the subprime issue.

FullHedge1's picture

If you take everything on ZH at face value, you are no better than the average libtard taking everything from the MSM at face value.

opport.knocks's picture

True, way too many ZH headlines are just click bait. I clicked because I am Canadian and once I saw Laurentian I just moved on.

Davidduke2000's picture

http://www.cbc.ca/news/business/home-capital-faq-1.4090098

 

Canada's housing market is always a hot topic, but this week it was a heretofore little-known mortgage lender called Home Capital that made headlines as clients withdrew hundreds of millions in savings in a matter of days.

Largest mortgage lender in Canada??? LOL

 

https://globalnews.ca/news/3370937/canadian-housing-prices-similar-us-na...

stats about Canada housing market.

The Ingenious Gentleman's picture

The Zerohedge Headline said "biggest alternative mortgage lender", and paragraph 1 said "Canada's largest non-bank mortgage lender".

It couldn't be clearer that ZeroHedge did NOT say Canada's biggest mortgage lender. So why are you saying it did. What is your motive here?

FullHedge1's picture

Canadian real estate broker not wanting to see the bubble pop

buzzsaw99's picture

it always throws me for a loop when i see "percent" written as "per cent".  the commas instead of decimal point euro thing has a similar effect.  from the article:

All in all, the bank expects the total price tag for mortgage buybacks "to be in the range of $304 million...

LetThemEatRand's picture

Give these Canadians an inch, and they'll take a kilometer.

kiwigal's picture

The person writing these comments has English as a second language. 

buzzsaw99's picture

the "per cent" thing was in the linked article.  i see it here on zh sometimes too.  are you saying that it is a google translate thing?

kiwigal's picture

Not sure, can tell from the sometimes odd phrasing in all of the person's comments that he/she is not a native speaker of English. Possibly Chinese..Mandarin.

asscannon101's picture

Yeah, and HEAVILY invested into REALTWHORES(TM) and their only product- bullshit promises. Everyone knows that in the magical land of CANADA (where we hide our stolen yuan) realestate values can only go upwards, indefinitely, to the sky, forever, and no matter how many millions it costs for a small, shitty apartment with a view of the parking lot, the value can only increase, forever, infinitely, and we will always profit, because everyone wants to live in Canada and someone will always pay more for it than we did, and that realestate values can only go upwards, indefinitely, to the sky, forever, and no matter how many millions it costs for a small, shitty apartment with a view of the parking lot, the value can only increase, forever, infinitely, and we will always profit, because everyone wants to live in Canada and someone will always pay more for it than we did, and that realestate values can only go upwards, indefinitely, to the sky, forever, and no matter how many millions it costs for a small, shitty apartment with a view of the parking lot, the value can only increase, forever, infinitely, and we will always profit, because everyone wants to live in Canada and someone will always pay more for it than we did, and that realestate values can only go upwards, indefinitely, to the sky, forever, and no matter how many millions it costs for a small, shitty apartment with a view of the parking lot, the value can only increase, forever, infinitely, and we will always profit, because everyone wants to live in Canada and someone will always pay more for it than we did. Yes. Hail the magic of realestate.

CRM114's picture

If you believe the CBC, I have a bridge to sell you...

Davidduke2000's picture

simply read the results of the bank, it is on their website and the story is on paper you do not need anybody to tell you if you know how to read. CBC has no interest in lying on something public record.

I feel sorry that you cannot detect a real story from a fake one.

east of eden's picture

Oh come on. 170 million Canadian and the Hedge is trying to make an issue out of that. Nothing like the Trillions of phoney mortgage paper the US foisted on the world when they broke the global banks system.

Get a fucking life.

buzzsaw99's picture

they may have sensationalised this a bit but they have been reporting on the exponential rise in canadian real estate prices in many areas for years and someday that will become a serious problem.  the bailouts won't as big a problem as the coming stagflation imo.

east of eden's picture

The market cap for LB is 45.5 Billion, so this amounts to 0.374% of assets. And of that, there is no mention of what the state of those 170 Million in mortgages are, they won't all be non performing.

If you want a real story, do a real story about how our former so called Prime Minister Stephen Harper expanded the mortage liability at Canada Mortgage and Housing by 110%, to 525 Billion, most of which were subprime loans that he gave to his buddies in the oil patch to buy McMansions in Fort McMurray for christs sake. Some of them were selling for 4.5 million in an area that is so far north that they get 3 weeks of summer each year and nobody, but other oil field workers would ever have been secondary purchasers, as long as the gravy train lasted. Now those loans may never be repaid, and the government may have to eat a lot of Stephen Harper's folly. But then, something 'magical' happened. They had the worst forest fire EVER in Alberta history, and it conveniently 'mowed down' over 95% of all the homes in Fort Mac. Nothing was ever said about it by the authorities but it doesn't take a genius to consider that one of Harper's hit men did the deed.

Every single time we have elected a conservative government in Canada, provincially or federally they have left us vastly more in debt than we ever were before. Mulroney added half a trillion, and he made things so bad that by the time we booted him out of office we were running annual deficits of 47 Billion dollars, each and every year, and that was at a time when our GDP was less than 800B so they were running deficits at the rate of 5% of GDP, for ten years. Even the fucking IMF threatened to intervene. Harper added 400 Billion. That's why every single conservative government has changed their fucking party name 20 times, and now we have another situation in Alberta where the worst of the worst fucking weasel cabinet members and a fucking fag that still lives with his mother at the age of 58 is trying to stir up radical shit again.

They are not conservatives in any sense of the word, what they are is a bunch of crooks and hoodlums and theives that drove the province right into the fucking ground. After pumping oil for over 100 years, at the end of the 60 year 'conservative reign of terror', they had ZERO MONEY IN THE BANK. ZERO. NADA. They spent ever fucking nickle on tax cuts and bullshit.

Some Canadians (Albertans) just never fucking learn. But they do have the fucking nerve to complain, constantly and loudly, even though their god damned mortgages came from Ontario and Quebec savers.

So, what was the 60 year legacy of these 'geniuses' who couldn't save or invest a penny? Well they raped the land over tens of thousands of hectares, and it was so bad that when people went there they said it looked the moon. They cut the water volume in the Athabasca river by half, and then introduced so many petroleum and heavy metal residues into the water that they used for processisng that tar, that cancer rates for 400 miles downstream spiked by 250%, many of them children who died or are dying of liver cancer, pancreatic cancer, thyroid cancer. Yeah, geniuses, and all of it was enabled by the fucking Koch brothers, who sold out, left and didn't pay a cent for the carnage they caused.

Do you get the sense that I am still a little bit pissed? And when the next Alberta election comes around, I am going to be front and center, blogging my heart out, to remind people of what was done to them.

mvsjcl's picture

Outstanding comment. Thank-you.

Bay of Pigs's picture

Yeah. Its a housing bubble courtesy of corrupt banksters and shitty politicians. Who gives a fuck who is responsible.