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Dec 6, 2017

'Do the right thing': Laurentian Bank’s CEO urges honesty on mortgage applications

Laurentian Bank CEO: 'The buck stops with me' on mortgage issue

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Laurentian Bank of Canada Chief Executive Officer François Desjardins is warning of the risks when Canadians fudge the numbers when applying for a loan.

In an interview on BNN, Desjardins, whose bank is dealing with “documentation issues and client misrepresentations” in a small number of mortgages it sold, said lenders are being forced to rely less on income claims made by prospective borrowers and more on information from third-party providers.

“As time has gone by, yes, there is a percentage of people who embellish what they put on their application forms, and it’s the job of the financial institution to weed that out,” he said. “It’s why most of the financial institutions take less and less credence of what’s on the application form and more and more from other means like the credit bureau or other sources.”

Desjardins said he doesn’t think the problem of Canadians lying about their incomes is going away anytime soon, and expressed concern over the erosion of ground-level underwriting expertise now that banks are increasingly reliant on third-party firms to determine creditworthiness.



“This is not going away. There used to be a time where authorizing credit was considered an art,” he said. “The art of authorizing a loan [was] based a little bit on history and a lot on gut, ‘Is that person going to be able to pay back the loan?’”

Desjardins, who has front-line experience at the bank having started as a teller 27 years ago, urged prospective borrowers and financial institutions to be vigilant as new mortgage stress tests come into effect, given borrowers may be more inclined to claim they earn a higher salary to help offset the hit to their borrowing power.

“People think that [the new stress test for uninsured mortgages] is just limiting people’s [ability] to borrow. No, it isn’t, it’s really compliance as well,” he said.  

“I would urge everyone that’s applying for a loan to do the right thing and be disciplined in terms of what they’re writing and what they’re disclosing. It’s better for all of us.”