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Mortgage lender Home Capital cuts ties with 45 brokers for bogus documentation

07/30/2015 09:18 EDT | Updated 07/30/2016 05:59 EDT
Trading in shares of alternative mortgage lender Home Capital Group was halted on the TSX after the company revealed it had cut ties with several dozen mortgage brokers for falsifying income details about borrowers.

The lender launched an investigation after an anonymous tipster warned them that some of their brokers were fudging the numbers as to how much prospective borrowers took in as income.

"There was no evidence of falsification of credit scores or property values," the Toronto-based company said in a statement.

The Toronto-based company said in a statement that it is releasing the information after a request from the Ontario Securities Commission.

In an investigation spanning from September 2014 to this past March, Home Capital said it suspended 53 brokers in the probe. That's out of a total of more than 4,000 brokers the company works with at any given time.

All in all, the company said the brokers it has cut ties with brought in $960 million worth of mortgage loans last year — about 12 per cent or all the mortgages the company has, and five per cent of all loans the lenders has on its books. 

"During the course of its review, Home Capital did a broader test to ensure that this was not a widespread issue in its portfolio and the company is comfortable that it is not."

Home Capital has about 65,000 mortgages on its books — 40,000 are uninsured and the remainder are insured.

"We are confident that these measures, in spite of their short-term impact on volumes, were essential to the long-term health of our business."

Home Capital's stock has fallen more than 43 per cent in the last 12 months. The company's shares have been sliding since it warned investors on July 10 that mortgage originations fell by $600-million during the quarter.

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