Players fear further tightening

Players fear further tightening

Players fear further tightening Despite a number of industry players allegedly falsifying income documents, brokers don’t believe guidelines need to be tightened.

“The requirements for income verification aren’t bad right now – they used to be much easier and required less paperwork,” Blair Anderson of Anderson and Associates told “It’s not that the lenders aren’t asking for enough or for the right stuff, it’s that there is some funny business going on with manufacturing the documents and obviously people are altering documents to show what they want them to say.”

According to OSFI’s B-21 guidelines, lenders are required to obtain third-party verification of income for all borrowers, “including substantiation of employment status and income history.”

Lenders don’t necessarily phone and verify income if the documents appear legitimate. That honour system works, argue brokers. They’re resisting calls for tighter guidelines.

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.

And if it comes to light that more lenders have dealt with inaccurate income verification, Anderson believes regulators could step in and impose stricter guidelines for verification.

“I wouldn’t single out Home Trust as the only company with a problem and (OSFI) saw this as an industry-wide problem they may step in,” Anderson said. “It’s possible that it’s a wide-spread problem and there is a worry that it could have a ripple effect; it doesn’t seem like it takes too much for the regulators to get involved, so that’s a legitimate worry.”

If OSFI does determine income verification accuracy is an issue plaguing lenders, it could impose stricter guidelines that do require more investigation on the underwriters’ part, which would add another step to the underwriting process and could potentially increase wait times for applications.
  • Mike 2015-08-06 1:48:52 PM
    Perhaps it is supervision at the brokerages that create this problem. How does a principal broker control and monitor 30 or 40 brokers not to mention the 100's at the super brokers. Maybe requiring a every form to have one broker for every ten agents and a broker at every location that is responsible for compliance would protect from fraud. Mortgage brokerages need to take the lead, not wait for OFSI.
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  • Arthur 2015-08-06 1:52:45 PM
    Let's be real - it's been happening, is happening and will be happening with many more lenders other than and including HT.

    There is always some greedy enough and ready to do whatever it takes to get the deal done. No need to make this the hottest mortgage news headline that has ever been published. For anyone in the industry - it's not news at all.
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  • Blair Anderson 2015-08-06 2:24:47 PM
    With all due respect Arthur, you sound a bit too dismissive and complacent, almost accepting of the status quo. That will not help the fight against mortgage fraud. I for one am grateful this industry finally has a public forum to discuss issues that matter. Yes, mortgage fraud matters!
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