Laurentian Bank says that its residential mortgage loan book as of July 31, 2018 was $17.5 billion, down $1 billion from October 31, 2017.
The decrease was due to a gradual reduction in origination volumes as part of the bank’s strategy to focus more on higher yielding commercial loans “in order to optimize product mix.”
There was also an impact from the Retail Services division to only originate new residential mortgages through branches and not through the broker channel in Quebec (as of Nov. 2017).
A further impact was the tightened B-20 mortgage guideline which introduced the stress test requirement.
However, these combined impacts were offset by a rise in originations through Laurentian’s third-party program which was initiated in 2016 to optimize the usage of National Housing Act mortgage-backed securities (NHA MBS) allocations.
CMHC programs, TPP
The bank says that it does not believe that there has been a material impact on its business, capital, operations, liquidity and funding from the repurchase of $135 million in mortgage loans that were inadvertently portfolio insured and sold into CMHC’s securitization programs.
During the third quarter of 2018 Laurentian repurchased certain ineligible mortgage loans originated through its branch network for an additional $115 million. The identified issues related to mortgage loans sold to the TPP were resolved at the end of the second quarter of 2018.
“We have now completed our mortgage loan portfolio review and have resolved the situation with both CMHC and the third-party purchaser, with no impact on our customers,” said François Desjardins, President and Chief Executive Officer. “The review was completed within the guidance given last quarter. This has been a tremendous learning experience and in the end makes us stronger and more determined than ever to become a renewed financial institution, committed to being different and better and to deliver value to our customers.”
Across all of its business divisions, Laurentian reported net income of $54.9 million, in line with the $54.8 million reported in the same quarter of 2017.