Bank of Montreal Doesn't Expect More Costs From Alleged Mortgage Fraud
Canada’s fourth-biggest bank is suing hundreds of people in Alberta including lawyers, mortgage brokers and four employees over the fraud, CBC reported yesterday, citing legal documents. Bank of Montreal estimated it lost as much as C$30 million ($29 million) from the alleged scam dating back to 2006 that included C$70 million in fake mortgages, the CBC said.
“The losses were recorded in prior periods,” Marranca said in an e-mailed statement today. He declined to quantify the costs and wouldn’t comment on the estimates in the CBC report. “We do not expect any material negative financial implications from the legal action.”
Bank of Montreal recorded the “majority” of losses from the incident in the third quarter of 2007, Marranca said. The Toronto-based bank said at the time that it set aside money for bad loans in part due to a loss in its Canadian mortgage business unrelated to subprime mortgages.
Bank of Montreal aims to recover the costs through legal action, said Marranca, who confirmed the bank filed a lawsuit.
“We operate the bank prudently with a high degree of diligence,” Marranca said. “When we do discover something like this, we take appropriate action.”
According to the CBC, the ringleaders of the scheme would buy the cheapest house in a good neighborhood, take out a mortgage based on an inflated value and pocket the difference.
The Royal Canadian Mounted Police has been called to investigate the alleged mortgage fraud, the Canadian Press reported from Calgary, citing Sgt. Patrick Webb.
Bank of Montreal fell C$1.36, or 2.2 percent, to C$60.93 at 4:10 p.m. on the Toronto Stock Exchange, the biggest decliner among the nation’s six biggest banks.
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