Brokers applaud Home Trust

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Mortgage professionals have been quick to praise Home Capital (Home Trust's parent company) after it suspended 45 brokers for allegedly falsifying documents. Still, they've been just as quick to put the case in context.
 
“I don’t think there is ever an excuse for taking shortcuts; there has certainly been some mortgage rule tightening and the guidelines can be difficult to get a client qualified, but they are there for a reason,” Janet McKeough of Verico Success Mortgages told MortgageBrokerNews.ca. “Whether or not we agree with the guidelines, we have to abide by them and I applaud Home Trust.”
 
Home Capital announced Thursday it had severed ties with 18 independent brokers and two brokerages – a total of 45 brokers – after an investigation pointed to falsified information about borrowers’ income.
 
The contracts were suspended between September and March and the lender attributes these suspensions to a loss in mortgage originations. Still, the company is not alleging brokers falsified property values or credit scores.
 
But while tightened guidelines – especially for certain borrowers requiring alternative mortgages – may have enticed brokers to take shortcuts, industry players believe that is no excuse.
 
“Doing this is doing a disservice to your clients by putting them in a mortgage they can’t afford,” said McKeough, one of the founding members of the Canadian Mortgage Brokers Association.
 
Gary Mauris, president of Dominion Lending Centres, said in a release early Friday that it is not an industry-wide issue.
 
“The fact is, Canada has the most highly regulated lending sector in the world,” Mauris said. “This clearly appears to be an issue of a small group of people choosing to go outside of the laws that govern the lending space and the system did what it is designed to do – it caught them before any losses were sustained. I think this underpins the high level of oversight and stability of our industry.”
 
Brokers are already applauding Home Trust for its due diligence. Its announcement was made along with the release of its second quarter earnings.
 
Home Trust made a net income of $72.3 million in the first half of 2015, down 1.9 per cent year-over-year.
 
FSCO has yet to release the names of the brokers Home Trust has suspended.
 
MortgageBrokerNews.ca has called both Home Trust and FSCO and we will update the story as it develops.
  • james on 2015-07-31 12:21:02 PM

    Bravo. No room for roaches.

  • knowwhoyourehiring on 2015-07-31 2:02:42 PM

    Will they ever publish a list of those suspended?

  • KC on 2015-07-31 3:24:37 PM

    Well, I'm not sure about this. There is always two to tango and this one sure looks like a damage control by Home Capital as their publicly traded stock has fallen from peak last November at $55.57 to about $32 today, which represents about 41% today and as much as 45% decline only few days ago. (http://www.bnn.ca/Stock.aspx?pi_symbol=HCG.TO). Negative news in conjunction with short sellers in CDN & US betting against overpriced RE market and economy in general and Home Capital with majority of uninsured and subprime mortgages on books in this overheated market is expected to belly up among the first. Our government does NOT have any interest in bailing out Home Capital like they secretly bailed out major banks/"most stable banking system" between 2008-2010.
    http://www.huffingtonpost.ca/2012/04/30/canada-bank-bailout_n_1466219.html

  • Anthony C. on 2015-07-31 3:47:52 PM

    Read the original Financial Post article by John Schmuel, posted on the July 18 2015 edition...

  • Paul Mangion on 2015-07-31 5:16:41 PM

    45 down. Hundreds to go!

  • Mr. Gotham on 2015-08-02 12:20:24 PM

    "Brokers are already applauding Home Trust for its due diligence."

    Really? They were notified of the problem by a whistleblower. They had underwriting and sales housed in the same unit in the company. They became aware about the problem nine months ago and only reported it to their shareholders when the origination miss was so big they couldn't hide it any more. Go back and look at their Q1 conference call for the nonsense they were spewing about originations being down. The details of the problem were only spelled out when OSC compelled them to do that, not in their original disclosure of the problem. They still, nine months into it, do not know how far back in time the problems with these brokers go.

    What exactly are we applauding?

    Their due diligence and transparency is a joke. Why does the CEO still have his job?

  • Tim on 2015-08-02 12:48:57 PM

    You are kidding right? This is just the beginnings

  • Walid Hammami on 2015-08-02 5:31:17 PM

    We need this more than ever, it's easy to become a broker these days.
    If you can't play by the rules then leave. What's the point in endangering the lender? That is really shortsighted. If a virtual lender goes bust then we all suffer from it (clients, brokers and even banks)

    I heard some troubling rumours that you can even fake a credit bureau. I once refused a deal because the NOAs looked too good, the quality of the paper was superior to what the government uses.

    We need a cleanup. Also let's not forget the bank mortgage reps they're in to their necks. I was surprised to see a client getting accepted at a bank with 560 credit score and a property that has leaking roof. Insane!!

  • Diane McDonald on 2015-08-03 8:01:05 PM

    Good for Home Trust. There is no room for fraud in this business.

  • okay on 2015-08-03 10:58:40 PM

    Applaud Home Capital? What for? This is all public damage control as Home Capital stock is down from 2014 peak at almost $56/share to bit more than $31 and that's 45%. Home Capital is obviously in trouble and it supposed to belly up among the first in the mortgage industry with upcoming real estate crash (not for those in denial) as their portfolio consists mainly of uninsured mortgage securities. The fed have no interest in bailing them out as they secretly bailed our "most secure banking system in the whole world" between 2008-2010.

    http://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997

    Despite suggestions in this article HCI stock share is in constant decline and I refuse to prioritise positive industry interaction before the truth.

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