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CIBC’s Mortgage Underwriting Troubles: A Long Road to Full Compliance

The Globel and Mail | James Bradshaw | Jun 20, 2023

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The Canadian Imperial Bank of Commerce (CIBC) continues to face remediation orders over the bank's mortgage portfolio from Canada's banking regulator, the Office of the Superintendent of Financial Institutions (OSFI).

  • Ongoing Regulatory Remediation:
    • These orders have been in place for over a year, after an audit revealed that CIBC had breached rules limiting how indebted borrowers can be.
    • The bank's mortgage portfolio included thousands of clients who, when combining their home-secured lines of credit with CIBC mortgages, exceeded the permitted regulatory ratios for debt.
    • Although these issues did not involve fraud, they have required extensive review and system retooling, with CIBC enlisting the aid of consultants from Deloitte.
    • The bank is still discovering problematic mortgages in its portfolio and anticipates up to two more years to fully rectify the situation. However, these cases are not expected to result in significantly higher losses on loans or have a substantial financial impact on the bank​​.

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  • Regulatory and Leadership Pressure:
    • This protracted resolution process has strained relations with the regulator and increased pressure on CIBC's senior leadership.
    • OSFI expects bank management and boards of directors to identify risks and ensure sound loan underwriting for residential mortgages​​.
    • The issues identified by CIBC and OSFI only affect a small part of CIBC's $266-billion Canadian mortgage portfolio, largely due to administrative oversights and IT system flaws.
    • However, their discovery has generated turbulence in one of CIBC's core businesses, given CIBC's high exposure to Canada's mortgage market, with around 55% of its loan book being mortgages and other real estate-secured loans, these issues have rekindled old investor anxieties.

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