HCG’s operations resemble those of a Wolf of WS boiler room “Underwriter S” had a loan approval rate of over 150 per month, implying he approved almost one loan per hour of each workday. The EVP and SVP of Mortgage Lending were informed by ERM of the deteriorating quality of Accelerator loans by “Underwriter S” in May 2014, but this issue was not discussed at either the Credit or Operational Committees where both were members. [Contrast this finding with Martin Reid’s July 30, 2015 statement that “no employees were complicit in any of this (income verification fraud)”] Underwriter S was terminated as part of Project Trillium.
The KPMG report in its totality is devastating. Its description of HCG’s operations resemble those of a Wolf of Wall Street-worthy boiler room operation rather than a Schedule 1 bank. All the normal business functions of a financial institution were subjugated to growth objectives. Red flag warnings were routinely ignored, internal credit and quality control processes were either non-existent overridden or outvoted, and the IT systems were either dysfunctional or simply turned off. Home Capital was a $20+B bank run on spreadsheets and SalesForce.com. Finally, the report removes any remaining mystery as to why HCG, despite trolling the length of Bay Street for financing, could only raise money on loan shark terms in its deals with HOOPP and Warren Buffett. Quite simply, no one trusted the quality of loans produced by a culture and an organization with these glaring flaws.