Research Update: Laurentian Bank of Canada Ratings Affirmed; Off CreditWatch; Outlook Negative On Concentrated Mortgage Exposure

On Dec. 5, 2017, Montreal-based Laurentian Bank of Canada disclosed mortgage documentation and client representation issues in connection with mortgages sold to a third-party purchaser, which resulted in some repurchase actions and raised concerns around the rigor of the company's underwriting procedures and risk control functions. Since then, the bank has undertaken a sample review of its mortgage portfolio. While the review is still ongoing, company disclosures available so far suggest to us that widespread underwriting lapses or mortgage document falsification issues are unlikely to emerge. We understand that the documentation issues largely pertain to documentation deficiencies as opposed to intentional client fraud and misrepresentations. We expect the bank's recent remedial initiatives to enhance its quality control functions and underwriting

...+ On Dec. 5, 2017, Montreal-based Laurentian Bank of Canada disclosed mortgage documentation and client representation issues in connection with mortgages sold to a third-party purchaser, which resulted in some repurchase actions and raised concerns around the rigor of the company's underwriting procedures and risk control functions. + Since then, the bank has undertaken a sample review of its mortgage portfolio. While the review is still ongoing, company disclosures available so far suggest to us that widespread underwriting lapses or mortgage document falsification issues are unlikely to emerge. + We understand that the documentation issues largely pertain to documentation deficiencies as opposed to intentional client fraud and misrepresentations. We expect the bank's recent remedial initiatives to enhance its quality control functions and underwriting procedures, and note the company has not recorded any deterioration in loan performance. + We are therefore removing the long- and short-term...

Research Update