Equitable Trust investigates $14m in loans for fraud

Equitable Trust’s parent company is now investigating suspected fraud relating to four loans carrying an outstanding balance of $14 million, at the same time it considers taking legal action against “several parties.”

“The amount of the total loss, if any, cannot be determined at this time,” said President and CEO Andrew Moor, in a press release issued Wednesday. “The matter is presently being investigated with a view to minimizing any potential losses to the company.”

While Equitable, a major player in the broker channel’s alternative lending sphere, hasn’t released details, its investigation centres on four loans, with a collective $14 million outstanding. It is unclear whether the deals were residential or commercial, that $14m pricetag hints at the latter. Given the lender's originations model, brokers likely initiated those transactions, although Moor isn't now providing details or confirming if broker are in fact among those under consideration for legal action.

“Equitable is currently reviewing its legal options for commencing claims against several parties to the subject loan transactions,” says Moor, “and is consulting with legal counsel in this regard. In addition, Equitable maintains insurance that is intended to cover such occurrences. There is no assurance that the proceeds or recoveries, if any, will be received in a timely manner, or that such proceeds or recoveries will be sufficient to recover the full amount of the loans.”

E&O insurers are blaming a spate of fraud and negligence claims over the last three years for a steep increase in premiums for many brokerages dealing with alternative lending deals – primarily funded by private investors.

Moor isn’t saying when the four loans were written. 

Equitable experienced a boon in new business during the first quarter, with originations totalling $666.7 million, a 35 per cent increase over the same period in 2010.