Laurentian Bank looks to leave mortgage loan review woes behind

MONTREAL _ Laurentian Bank Financial Group expects to put troubles related to a mortgage loan review behind it this year, chief executive Francois Desjardins said Friday as the bank raised its dividend and reported a better-than-expect profit in its second quarter.

“I am pleased with the progress we have made, and although not yet complete, management is confident that we have a clear path to resolution,” Desjardins said on a conference call with financial analysts.

“Managing this file has been a learning experience that will help us better manage our business, implementing enhanced quality control and origination processes throughout the group, strengthening our compliance and risk management practices.”

The bank said earlier this week that it has successfully resolved issues related to mortgage loans sold to an unnamed lender that was first disclosed last year.

However, Laurentian also said Tuesday a CMHC audit during the bank’s most recent quarter found mortgages that were inadvertently portfolio insured while they did not meet CMHC portfolioinsurance eligibility criteria.

As a result, the bank said it will repurchase those other mortgage loans that were inadvertently portfolio insured and sold to the CMHC securitization program. Based on the results of CMHC’s audit, the bank estimates the total amount to be repurchased at between $125 and $150 million.

Laurentian shares closed up $1.29 or 2.85 per cent at $46.49 on the Toronto Stock Exchange Friday after the bank announced it will now pay a quarterly dividend of 64 cents per share, up a penny from its previous rate. It also reported it earned $55.9 million attributable to common shareholders or $1.34 per share in its second quarter ended April 30.

That compared with a profit of $40.3 million attributable to common shareholders or $1.19 per share a year earlier when the bank had fewer shares outstanding.

On an adjusted basis, Laurentian said it earned $1.47 per share for the quarter, up from an adjusted profit of $1.39 per share a year ago.

The adjusted result topped the $1.38 per share that analysts on average had expected for the quarter, according to Thomson Reuters Eikon.

Mortgage rate increases at Big Six banks could trigger rise in qualifying rate

By Armina Ligaya


TORONTO _ Canada’s Big Six banks have all increased their benchmark fixed-rate mortgage rate, a move analysts say could trigger a rise in the Bank of Canada’s qualifying mortgage rate as early as Wednesday, making it more difficult for some to take on home loans.

The Bank of Nova Scotia on Tuesday became the last of Canada’s biggest lenders to raise its posted rate for a five-year fixed-rate mortgage  from 5.14 per cent to 5.34 per cent. They also increased the posted rates for other fixed-rate term lengths.

Such rates are different from the actual mortgage rates offered by banks to borrowers, which are not seeing the same increases. But the Bank of Canada uses the posted five-year fixed mortgage rates at Canada’s biggest banks to calculate the rate used in stress tests to determine whether borrowers can qualify for both uninsured and insured mortgages.

The central bank’s conventional mortgage five-year rate, which is updated weekly, was 5.14 per cent as of May 2. It posts the rate every Wednesday.

“This will raise the qualifying rate,” said Cormark Securities analyst Meny Grauman.

“On the margin, every time that goes up, you’re excluding more people from being able to get mortgages, all else equal… But people have different strategies to bring themselves on side.”

Homebuyers with less than a 20 per cent down payment seeking an insured mortgage must qualify at the central bank’s benchmark five-year mortgage rate. And as of Jan. 1, buyers who don’t need mortgage insurance must prove they can make payments at a qualifying rate of the greater of two percentage points higher than the contractual mortgage rate or the central bank’s five-year benchmark rate.

Nearly half of all existing mortgages in Canada will need to be renewed this year, according to a CIBC Capital Markets report released earlier this month.

In late April, TD Bank was the first of the Big Five lenders to raise the benchmark rate, increasing it from 5.14 per cent to 5.59 per cent, due to factors including the “competitive landscape, the cost of lending and managing risk.”

Royal Bank later raised its benchmark rate to 5.34 per cent, followed by CIBC which raised its posted rate for five-year fixed term mortgages to 5.14 per cent. Earlier this month, National Bank of Canada raised its posted five-year fixed rate to 5.34 per cent while the Bank of Montreal upped the benchmark rate slightly to 5.19 per cent.

Mortgage planner and rate comparison website founder Robert McLister said after the recent string of rate increases, he expects the central bank’s minimum mortgage qualifying rate will jump 0.20 points to 5.34 per cent on Wednesday.

Grauman said a higher qualifying rate will make it more difficult for some borrowers to qualify for a mortgage, but expects that some may make some adjustments such as seeking a smaller home as a result. He anticipates that this will have a “small impact” on the banks’ mortgage portfolios.

The mortgage rate increases from Canada’s biggest lenders come as government bond yields rise, signalling higher borrowing costs for corporations. The yield on the Government of Canada benchmark five-year bond was 2.14 per cent on Monday, compared to 1.01 per cent roughly one year ago.

Grauman said there are a number of factors which are driving these increases, including higher funding costs.

“There’s that element which motivates the banks to raise the rates at which they charge their clients,” he said. “But you also have competitive dynamics as well that are at play.”

At the same time, several of Canada’s biggest banks have cut their posted variable mortgage rates, which are more directly tied to changes in the Bank of Canada’s interest rate.

BMO is now offering a five-year variable closed mortgage rate of 2.45 per cent until the end of May.

“Our five year variable rate is reflective of the competitive environment and is a great rate for customers seeking a variable mortgage,” said a BMO spokesperson in an emailed statement.

“Customers that choose this product can also renew to a fixed rate mortgage with the same or longer term at any time with no fees.”

RBC late last month said it will reduce its offered rate for a five-year variable closed mortgage to 3.3 per cent from 3.45 per cent.

TD Bank last month cut its five-year variable closed rate offering for new and renewed mortgages earlier this month to 2.85 per cent which is 75 basis points less than its prime rate. Previously it was 2.95 per cent.

McLister said in a rising rate environment, banks are inundated with demand for fixed rates and these discounts in part reflect banks’ efforts to balance their books.

As well, the margins or profit made on loans on variable rate mortgages will improve if interest rates rise, he added.

Still, the difference between mortgage rates banks offer and their funding costs for a given term, known as the spread, is shrinking, McLister said.

“This is true for both fixed-rate mortgages and variable rates,” he said in an email.

“In short, banks are accepting less profit as competition gets more aggressive for the fewer and smaller prime mortgages that now exist.”

New mortgage rules behind slide in B.C. home sales: real estate association

VANCOUVER _ The British Columbia Real Estate Association says tough mortgage qualification rules are a key reason for a provincewide drop in housing demand last month compared with February 2017.

The association says home sales fell 5.7 per cent in February, with about 6,200 properties changing hands.

Chief economist Cameron Muir says on a seasonally adjusted basis, sales have plummeted more than 26 per cent since new federal mortgage rules took effect at the beginning of the year.

But the association says prices continue to climb, with the average home selling for just over $748,000, an 8.8 per cent jump over February of last year.

The Office of the Superintendent of Financial Institutions implemented new lending guidelines in January that require borrowers who don’t need mortgage insurance to show they would still be able to make payments if interest rates rise.

In order to get insurance, homebuyers must prove they can service their uninsured mortgage at a qualifying rate two percentage points higher than the lender’s rate or the Bank of Canada’s five-year benchmark rate, currently set at 5.14 per cent.

Mortgage 101 For First-Time Homebuyers

Article by The Ross Firm

Entering the housing market for the first time can be a bewildering experience, especially where financing is concerned. Our post this week looks at the bare basics of residential mortgages and how a real estate lawyer can help ensure that a housing newbie’s first go at financing is a smooth one.

Mortgage Types – Conventional vs High-Ratio

Mortgages fall into two categories depending on the amount of home that a buyer finances. Those able to finance less than 80 per cent of a property’s value can apply for a conventional mortgage.

High-ratio mortgages are for purchasers who finance between 80-95 per cent of the property’s value. These mortgages allow more individuals to join the housing market, but with the higher risk involved, the law imposes mandatory mortgage loan insurance on these transactions as a safeguard against mortgage default. Read more about mortgage loan insurance in one our previous post.

It Pays To Shop Around

The first place that first-time homebuyers logically turn to for mortgage help is their own bank. This can be a good starting point to obtain information and do some number crunching, but a number of alternative options exist. These include trust companies, insurance companies, credit unions and private lenders.

Rates, options, conditions, risks and benefits differ, so it’s wise to treat a mortgage no differently from any other major purchase decision. Shopping around could also sizably impact the total money a buyer saves or loses in interest over the long term.

Working with a mortgage broker instead of a single lender opens up options. These brokers do the shopping for the mortgagee, scouring various institutions to gather the best possible packages to suit the needs in each transaction.

The Role Of A Real Estate Lawyer In Financing

Meeting with a real estate lawyer is the next wise investment, especially for a first-time buyer. Experienced lawyers have reviewed hundreds and thousands of mortgage agreements. They can cut through the fine print and provide clarity to ensure that buyers know exactly what they are signing to.

Real estate lawyers can also spot existing and potential problems that buyers are often not aware of. They can also ensure that legal provisions are in place to protect against possible future risks. With one of life’s largest investments involved, professional scrutiny makes good sense – both financially and practically.

Buying or selling?

Call us.

On behalf of Quinn Ross of The Ross Firm Professional Corporation posted in Residential Real Estate on Wednesday, April 12, 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Alleged key players charged in $17-million mortgage fraud investigation


Toronto police have charged two men with fraud for alleged ties to a sophisticated $17-million mortgage fraud case and the disappearance of a rookie lawyer who fled the country and was central to the alleged scheme.

Arash Missaghi and Grant Erlick, are facing criminal charges of fraud exceeding five thousand dollars, conspiracy to commit an indictable offence and accessory after the fact to an indictable offence. Missaghi was also charged with uttering forged documents. Erlick was charged with money laundering.

The charges come almost four years after the Star looked into the case of the missing millions, the private financing of luxury homes in one of the city’s toniest neighbourhoods, broken business relationships and a young lawyer on the run, Golnaz Vakili.

Toronto Police have named their investigation Project Bridle Path.

Missaghi and Erlick are accused of “enabling (Vakili) to escape” and providing “comfort” to Vakili, respectively, while knowing she was “party to the offence of uttering forced document and obstructing justice,” according to court documents.

Attempts to reach both men for comment were unsuccessful. Toronto police confirmed that Vakili is in Canada and will be a witness in the case.

Speaking to the length of time it took police to lay charges, Det. Alan Fazeli, with the financial crimes unit, pointed to the fact that Vakili has been out of the country. “Obviously there has been a change in that situation. She is co-operating,” and her charges have been dealt with, he told the Star.

Two other men were also charged. Masumeh Shaer-Valaie is charged with fraud over $5,000, conspiracy to commit an indictable offence and accessory after the fact to an indictable offence.

Bob Bahram Azizbeiki, who once worked for Missaghi and accused him of being the “mastermind” behind a string of illegal transactions linked to one of the key properties in the alleged mortgage fraud case as well as making a “direct threat” on his life, has been charged with forgery.

Azizbeiki told the Star he has “no clue” why he was charged.

Police described a “sophisticated and complex mortgage fraud investigation,” where investors were allegedly introduced to people who pretended to be the owners of luxury properties, forged documents were produced to add legitimacy to the transactions, and mortgages that were expected to be secured on the homes were never registered, something that was misrepresented to lenders, according to a news release.

Vakili, the rookie Toronto lawyer, left town in 2013, with $5,000 in cash and a bag stuffed with yoga pants and purses.

She left handwritten notes for her loved ones, confessing she was stressed to the breaking point but offering few clues as to why she abandoned her practice, her husband and her family.

“I’m so sorry to leave in this manner, so suddenly and without a goodbye, but I could not stay a minute longer without completely breaking down,” Vakili, aged 32 at the time, wrote in a letter left to her parents.

Vakili’s husband found the letter on their kitchen table. It went on to say she would be safe in Europe.

Within a month of her abrupt departure, Vakili would be named in a massive civil suit alleging she was a central figure in a sophisticated mortgage scheme worth an estimated $17 million. The courts froze her accounts and the law society suspended her licence.

Then Toronto police charged her with fraud in absentia and issued a warrant for her arrest.

Attempts to reach Vakili through email and messaging apps were unsuccessful. She has previously told the Star she is innocent and did not flee because she had something to hide.

“I did not feel safe speaking to authorities,” she told the Star in 2014, adding that she kept her family in the dark “because I did not want them to be dragged into this and pose a security threat for them …

“I have become paranoid since this situation happened. Ultimately, obviously people you think are good and honest turn out to be the devil incarnate.”

Missaghi, who is also named in the civil case, has faced several previous charges for fraud, uttering threats to two separate women, uttering a threat to cause bodily harm and conspiring to commit murder and arson. He has not been convicted of any of these charges.

In 2014, during a lengthy interview with the Star, he said people either lied about his behaviour, or he was swept up unfairly in a larger investigation.

“This is police. This is their style … where they see smoke they say ‘Let’s just charge everybody, let the judge decide where it goes,’ ” he said.

Missaghi said the accusation made by Azizbeiki is false and was made after a failed extortion attempt.

At the time Missaghi said that he didn’t know where Vakili was, or if she was innocent.

“The face that I saw of that woman, I can’t see her doing any wrongdoing,” said Missaghi. “If I knew of her whereabouts I would convince her to come back. A lot of (this) nonsense could be put to rest.”

The massive $17-million civil suit Vakili is named in was filed by a handful of companies led by businesswoman Tova Markovzki (she goes by the surname Marks), her husband, daughter and a family friend. That case, which the Star has come to call “the Marks case,” alleges that Vakili and others planned to defraud them, and that Vakili forged documents, including postal receipts for an important package that was never mailed, and that she was seen shredding papers in her office.

Missaghi, his associates Erlick and Vakili convinced Marks and her family’s network of companies to make large loans, largely in the form of second mortgages, to people who pretended to own luxury houses, according to a statement of claim in the case.

The “homeowners” used fake identification and posed as self-employed Iranian businesspeople who claimed to have trouble borrowing money from the bank. It also states Marks and her family were provided with counterfeit mortgage and bogus title insurance documents that made it seem like the transaction was insured against fraud.

Vakili was Marks’s lawyer on the deals and the money was deposited into a trust account she controlled, the claim alleges. It also says Vakili hid the fact that some properties already had multiple mortgages and failed to register some of the new ones.

The Marks case also maintains that many of the nearly 30 properties detailed in the claim were “owned or controlled by” Missaghi and Erlick and this was how the group kept, got a cut of or distributed all or some of the loaned money that is alleged to have improperly left Vakili’s account.

Police are asking anyone with information to contact them at 416-808-7300 or Crime Stoppers anonymously at 416-222-8477.

Toronto police allege four men involved in ‘sophisticated’ mortgage fraud

TORONTO _ A guilty plea from a lawyer who had fled the country gave investigators the information they needed to lay charges against four men in a $17 million alleged mortgage fraud involving high-end Toronto properties, police said Tuesday.

The men, who are all from the Toronto area and between the ages of 45 and 53, face charges including fraud, conspiracy, forgery and money laundering, police said.

Police allege the men took part in a “sophisticated and complex” scheme involving “several high-end properties.”

Lawyer Golnaz Vakili’s flight from Canada in March 2013 was the reason it took five years to bring charges against the men, said Det. Alan Fazeli.

“She was the lawyer that was registering a lot of these things,” Fazeli said. “She was a missing piece.”

Vakili has since pleaded guilty to charges related to facilitating the frauds, he said.

Fazeli said numerous different methods were used in the alleged frauds, many of which involved properties in Toronto’s upscale Bridle Path area.

“One of the methods that was used was fake individuals and shell companies had taken mortgages on some of these properties, and for all of them they had produced fake insurance and title insurance,” he said.

Police would not say how many properties were involved in the alleged scheme.

Law Society of Upper Canada documents say Vakili “participated in a massive fraud spree and multiple dishonest acts involving 13 different properties over a two-year period” beginning in 2011.

“She prepared and acted upon fake documents in support of other clearly fraudulent transactions,” a Law society hearing document states. “She repeatedly lied to her clients. She gave false testimony before the Deputy Director of Land Titles. Her clients lost just under $14 million as a result of her activities.”

Police said the four men two from Toronto and two from Richmond Hill, Ont. were arrested and charged last month.

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