Mortgage Daily

Published On: August 23, 2004
RBC Discloses Massive Mortgage Fraud at U.S. Unit

$33 million in fraud loans from West Coast office

August 23, 2004


The U.S. mortgage unit of Canada’s largest financial company has a $33 million problem.In documents filed with Canadian securities regulators, Royal Bank of Canada has disclosed that it’s American banking subsidiary — RBC Centura — recorded a $13 million net loss in the second quarter because of $33 million in “fraudulent” mortgages.

The loans were originated through Chicago-based RBC Mortgage, the company’s U.S. mortgage unit, and were made to “fictitious borrowers with inflated appraisals,” company executives have said.

RBC further stated the “certain mortgage loans” were believed to be fraudulently originated in 2001 and 2002.

An insurance claim has been filed, but it has not been settled or paid out.

“Although an insurance claim has been filed regarding this matter, no benefit form this insurance claim has been reflected in the financial statements … due to uncertainty surrounding the timing and final amount of the recover,” RBC said.

For the quarter, RBC Centura’s earnings fell 90 percent, from $45.8 million in 2003 to $4.6 million this year.

The company — which is based in Rocky Mount, N.C. — has issued no other public statements, and representatives could not be reached to comment.

Kel Landis, CEO of RBC Centura, said in an interview the earnings slide can be attributed to structural problems in the bank’s mortgage division.

The difficulties were being worked out when the bad loans were discovered, Landis told the Triangle Business Journal in North Carolina.

“We took a second-quarter charge, and it is behind us now,” Landis told the weekly business paper. “It has been fully provided for, and we are continuing to rebuild RBC Mortgage long term.”

The bogus loans were made through a West Coast office the company has not identified and were identified in May, 2003, the company has said.

Jim Rager, head of U.S. banking operations for RBC, talked about the problems in a phone call with analysts in June, the business paper reported.

“Essentially, (it was) the situation of fictitious borrowers with inflated appraisals and inaccurate or fraudulent information with respect to income levels,” Rager reportedly said. “You’ve always got to be on guard for that sort of thing in business.”

RBC Mortgage touts itself as a top 20 mortgage originator with $34.3 billion in loans originated last year. The company says it has 3,000 employees and more than 200 branches.

The company has been revamping its mortgage operations. In a Power Point presentation posted on the RBC Internet Web site, the company said “bottlenecks in back-office”, “late delivery of loan files to investors” and “poor loan documentation” are being addressed.

RBC Mortgage is “revising loan delivery policies and guidelines” and “streamlining processes and addressing loan documentation issues.”

Some responsibilities and functions were moved to Houston, a major RBC Mortgage outpost, “to allow Chicago staff to focus on clearing the backlog.”

The company is also focusing on a number of U.S. markets for growth, including Houston, Dallas, Phoenix, Las Vegas, Denver, San Diego, Sacramento and Chicago.

In those areas RBC is forming joint ventures to operate as a “full service construction/development loan officer,” it said in the presentation.

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: [email protected]

Tools for Your Next Big Decision.

Amortization Calculator

Affordability Calculator

Mortgage Calculator

Refinance Calculator

FHA Mortgage Calculator

VA Mortgage Calculator

Real Estate Calculator


Pre-Approval Resources!

Making well educated decions in a matter of minutes and stay up to date on the latest news Mortgage Daily has to offer. Read our latest articles to stay up to date on what’s going on…

Resource Center

Since 1998, Mortgage Daily has helped millions of people such as yourself navigate the complicated hurdles of the mortgage industry. See our popular topics below, search our website. With over 300,000 articles, we are guaranteed to have something for you.

Your mortgages approval starts here.

Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here.

Stay Up To Date with Today’s Latest Rates


Today’s rates starting at


5/1 ARM
$200,000 LOAN

Home Refinance

Today’s rates starting at


$200,000 LOAN

Home Equity

Today’s rates starting at


$200,000 LOAN


Today’s rates starting at


$200,000 LOAN