By Alexandra Posadzki, The Canadian Press
Toronto: Home Capital Group Inc. 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.
“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. We’re putting it on with a belt and suspenders and making sure they stay up and it works well.”
Shares in mortgage lender Home Capital Group Inc. (TSX:HCG) were up more than 10 per cent a day after it revealed details about the broker suspensions. The Ontario Securities Commission had requested the information be publicly released.
The suspensions occurred between September 2014 and March 2015 after a tip from an external source prompted an investigation.
Shares in the company, which has been beat down in recent weeks, was up $3.54 or 12.5 per cent at $31.94 in trading on the Toronto Stock Exchange on Thursday morning.
Out of the 45 brokers the company cut ties with, 18 were independent brokers while the remainder came from two separate brokerages.
The company said it is monitoring the mortgages in question and that it is unlikely the loans will result in credit losses.
“We’ll look at them on a file-by-file basis, and in some cases we may require additional income verification,” Soloway said. “We’ll be looking at these files very carefully when they come up for renewal.”
The company said it has also conducted a broader investigation and determined that income falsification is not a widespread issue across its portfolio of mortgage loans.
© 2015 The Canadian Press