Home Capital suspends 45 mortgage brokers for falsifying incomes + MORE Jul 31st

TORONTO – Home Capital Group Inc. (TSX:HCG) has taken steps to prevent mortgage brokers from falsifying information about borrowers’ incomes, after it cut ties with 45 brokers over allegations they engaged in such practices, the company said.
The mortgage lender told a conference call Thursday it has created separate teams to handle sales and underwriting and also formed a separate income verification group.
“We’ve got lots of controls in place to prevent this occurring again,” chief executive Gerald Soloway told analysts and investors.
Soloway noted Home Capital was planning to separate its sales and underwriting functions before it learned of the alleged falsifications because it has grown too big for one team to handle.
Am I on track to pay off the mortgage in 10 years? »

“As you get to be a bigger and you get to be a big boy, you can’t wear shorts, you gotta wear long pants,” Soloway said. “This is sort of the long pants of the underwriting process, and we’re putting it on…

For days now, investors and industry types have been impatiently waiting to hear why Home Trust terminated numerous mortgage brokers. Today we got Home’s explanation. The company said the following in a disclosure requested by the Ontario Securities Commission: 45 individual mortgage brokers were cut off (about 1% of the company’s broker relationships) The alleged reason: “Falsification of income information” (i.e., fraud, albeit the company doesn’t refer to it as such) It found no evidence of falsification of property values These shunned brokers originated $960.4 million of single-family residential mortgages in 2014, out of $7.6 billion in total Home Trust READ MORE

The current situation
Colleen and Keith Mountjoy, both 55, have been living and working in Peru for two years but plan to return to Vancouver in September. They would like to finish paying off their home—leased out until this fall—in 10 years so that they can retire. To meet that goal, they plan on actually increasing their remaining mortgage amount from $350,000 to $425,000 to pay for the construction of a two-bedroom basement suite that they will then rent out for $1,800 a month upon its completion. They will then put this additional income directly toward their house payments, on top of the $3,000 a month they’re already paying. “We plan to make $4,800 monthly payments toward the mortgage for the next 10 years,” says Keith.
Assuming that they can finish paying off their home in that time frame, the basement suite will then provide them with an extra source of income when they retire at 65, says Colleen. At that point, the Mountjoys will use the rental income to subsidize their love of adventure travel…

TORONTO — Mortgage lender Home Capital Group Inc. says it has suspended its relationships with 45 mortgage brokers over allegations that they falsified information about borrowers’ incomes.Out of the 45 brokers that the company has cut ties with, 18 were independent brokers while the remainder came from two separate brokerages.Home Capital provided details about the suspensions and its investigation in a news release after markets closed Wednesday.The Ontario Securities Commission had requested the information be released.The company says it is actively monitoring the mortgages in question and that it is unlikely the loans will result in credit losses.Home Capital says it launched the investigation after it received a tip from an external source.The suspensions occurred between September 2014 and March 2015.The company says it has also conducted a broader investigation and determined that income falsification is not a widespread issue across its portfolio of mortgage loans.Home Capital said in a statement that although the suspensions have led to a reduced volume of mortgage originations, the measures taken were “essential to the long-term health” of its business…