{"id":10064,"date":"2015-07-15T06:28:25","date_gmt":"2015-07-15T11:28:25","guid":{"rendered":"http:\/\/olduvai.ca\/?p=10064"},"modified":"2015-07-15T06:28:25","modified_gmt":"2015-07-15T11:28:25","slug":"largest-alternative-mortgage-lender-in-canada-plunges-denies-systemic-problem-in-housing-market","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=10064","title":{"rendered":"Largest \u201cAlternative\u201d Mortgage Lender in Canada Plunges, Denies \u201cSystemic Problem\u201d in Housing Market"},"content":{"rendered":"

Largest \u201cAlternative\u201d Mortgage Lender in Canada Plunges, Denies \u201cSystemic Problem\u201d in Housing Market<\/a><\/h3>\n

Home Capital Group, Canada\u2019s largest non-bank mortgage lender, focuses on \u201calternative\u201d mortgages, as they\u2019re called euphemistically, that is high-profit mortgages to risky borrowers with dented credit or unreliable incomes, such as self-employed folks or new immigrants, who don\u2019t qualify for mortgage insurance and were turned down by the banks. They include subprime.<\/p>\n

Its stock plunged almost 20% on Monday in Toronto. On Tuesday, it dropped another 4% to close at C$32.74, the lowest since September 2013, and down 41% from the halcyon days last November.<\/p>\n

Analysts went into a wild and belated scramble to lower their ratings on the stock. It has been the fourth most shorted stock in Canada, with 20% of its free float shorted, according to\u00a0Bloomberg<\/u><\/a>. Those folks made a bundle over the last two days.<\/p>\n

Friday after hours, when no one was supposed to pay attention, the company issued astatement<\/u><\/a>\u00a0ahead of its second quarter earnings report on July 29 that shocked analysts:<\/p>\n

In the second quarter, originations of high-margin uninsured mortgages had plunged 16% from a year ago, to C$1.29 billion. And originations of lower-margin insured single-family mortgages had plummeted 55% to C$280 million.<\/p>\n

A warning sign flaring up in Canada\u2019s majestic housing market where prices have soared for years, in an economy rattled by the oil price crash and other issues, and now likely in a\u00a0technical recession<\/u><\/a>?<\/p>\n

No way.<\/p>\n

\u201cWe think this is an HCG-specific growth issue,\u201d Royal Bank of Canada analyst Geoffrey Kwan\u00a0wrote<\/u><\/a>\u00a0to clients, \u201cnot an early signal of rising losses or broader housing stress.\u201d However, he did expect industry mortgage loan growth to \u201cslow in the next 2-3 years.\u201d<\/p>\n

Just not yet.<\/p>\n

The company blamed some changes it had made: It had terminated some of its 4,000 or so mortgage brokers, \u201cwhich caused an immediate drop in originations,\u201d according to the statement.<\/p>\n

It suddenly decided to use a \u201cconservative approach to growing its residential mortgage business.\u201d What had spooked it? What does Home Capital know that we don\u2019t? It didn\u2019t say.<\/p>\n

 <\/p>\n

\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Largest \u201cAlternative\u201d Mortgage Lender in Canada Plunges, Denies \u201cSystemic Problem\u201d in Housing Market Home Capital Group, Canada\u2019s largest non-bank mortgage lender, focuses on \u201calternative\u201d mortgages, as they\u2019re called euphemistically, that is high-profit mortgages to risky borrowers with dented credit or unreliable incomes, such as self-employed folks or new immigrants, who don\u2019t qualify for mortgage insurance […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[103,7287,2340,2339,1264,7288,7289,4254,4255],"class_list":["post-10064","post","type-post","status-publish","format-standard","hentry","category-economics","tag-canada","tag-home-capital-group","tag-housing-market","tag-mortgages","tag-recession","tag-subprime-mortgages","tag-uninsured-mortgages","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10064","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10064"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10064\/revisions"}],"predecessor-version":[{"id":10065,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10064\/revisions\/10065"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}