Home Capital Group (Symbol-HCG)

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Arby
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Re: Home Capital Group (Symbol-HCG)

Post by Arby » 26 Apr 2017 20:33

Genworth (TSX: MIC) issued a statement today on it's exposure to Home Capital. Genworth was down 8% today. Based on Genworth's minimal exposure to Home Capital, it might be a good opportunity to buy Genworth at a substantial discounrt
TORONTO, April 26, 2017 /CNW/ - As an insurer of prime mortgages, Genworth Canada insures lenders against losses that are incurred as a result of borrower defaults with respect to their mortgage payments. As a result of recent disclosures by Home Capital Group Inc. ("Home Capital"), Genworth Canada would like to clarify its exposure to Home Capital originated mortgages. As at March 31, 2017, Home Capital originated mortgages represent approximately 1% of Genworth Canada's overall business. At present, our delinquency rate with respect to Home Capital originated mortgages is less than our overall business delinquency rate of 0.21% as at December 31, 2016.

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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 26 Apr 2017 20:45

SkaSka wrote:
26 Apr 2017 10:32
This is just more of a general observation: after watching from the sidelines what happened with VRX and now with HCG, if management is not trustworthy, stay the hell away from the company as there are most likely more cockroaches underneath the sink than what is being led on.

Nothing new as an investing axiom, just a vivid way in real time to reinforce the axiom.
The problem is, management trustworthiness is easy to evaluate in retrospect when all the dirty laundry is exposed. It's much harder to do in real time. VRX and HCG managed to fool very sophisticated institutional investors who had direct access to the management. And no, I'm not talking about Bill Ackman.

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Re: Home Capital Group (Symbol-HCG)

Post by patriot1 » 26 Apr 2017 20:58

Arby wrote:
26 Apr 2017 20:33
Genworth (TSX: MIC) issued a statement today on it's exposure to Home Capital.
Genworth is not exposed to HCG or any other lender for that matter. It's exposed to the borrowers - from any lender using their insurance. If they don't pay back the mortgage Genworth has to.

That's the big picture - is this the shot that begins a bust?

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Re: Home Capital Group (Symbol-HCG)

Post by Thegipper » 26 Apr 2017 21:14

This falling knife is pretty close to toe nail level.

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Re: Home Capital Group (Symbol-HCG)

Post by doom_diver » 26 Apr 2017 21:27

History is being made here. This was unexpected.

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Re: Home Capital Group (Symbol-HCG)

Post by scomac » 26 Apr 2017 21:52

patriot1 wrote:
26 Apr 2017 20:58
Arby wrote:
26 Apr 2017 20:33
Genworth (TSX: MIC) issued a statement today on it's exposure to Home Capital.
Genworth is not exposed to HCG or any other lender for that matter. It's exposed to the borrowers - from any lender using their insurance. If they don't pay back the mortgage Genworth has to.

That's the big picture - is this the shot that begins a bust?
This is what I'm thinking.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830

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Re: Home Capital Group (Symbol-HCG)

Post by gsp_ » 26 Apr 2017 22:18

StuBee wrote:
26 Apr 2017 18:55
Who would calmly purchase a GIC from them at this time?
I would if they had the best rate and I wanted to buy a GIC. As it is I'm already at the 200k CDIC max there. Of course all within CDIC limits, wouldn't go near them beyond that protection.

Good post by Hammerer, roughly $7B of their GICs are due within a year.😱 That's going to be a tough road, don't think most are going to be as open to renewal as I am.

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Re: Home Capital Group (Symbol-HCG)

Post by randomwalker » 27 Apr 2017 06:41

doom_diver wrote:
26 Apr 2017 21:27
History is being made here. This was unexpected.
No it wasn't, this is history repeating. Go back listen/ read what the "shorts" have been saying for two years now.

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Re: Home Capital Group (Symbol-HCG)

Post by randomwalker » 27 Apr 2017 06:56

patriot1 wrote:
26 Apr 2017 20:58
Arby wrote:
26 Apr 2017 20:33
Genworth (TSX: MIC) issued a statement today on it's exposure to Home Capital.
Genworth is not exposed to HCG or any other lender for that matter. It's exposed to the borrowers - from any lender using their insurance. If they don't pay back the mortgage Genworth has to.

That's the big picture - is this the shot that begins a bust?
In a word yes. As I said up thread this is a publicly traded company and relatively transparent. Plenty bubbling below surface.


Toronto lawyer says $1B of Ontario investors' money lost in syndicated mortgages
$9M in Black Bear Homes projects is 'smallest' set of deals lawyer David Franklin has seen

http://www.cbc.ca/news/canada/toronto/s ... -1.4083261
==============================================================================================================================

The high-risk world of syndicated mortgages

Syndicated mortgages were once the preserve of sophisticated investors, but are now being pitched to ordinary consumers with promises of low risk and high returns.

https://www.thestar.com/business/2016/0 ... gages.html

==============================================================================================================================Stricter mortgage regulation could spur growth in Canada’s risky shadow banking, analyst warns

http://business.financialpost.com/news/ ... lyst-warns

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Re: Home Capital Group (Symbol-HCG)

Post by Taggart » 27 Apr 2017 08:54

Someone on another site gave mention of the movie "The Big Short". What was that all about? Watched the online trailer and realized I've got to order this movie from the library. I'll release it when I have enough time to watch it.

Flash forward to today in the Canadian housing market and I'm starting to notice, albeit a little too late, similarities. It's never exactly the same of course. American short-seller of HCG, Marc Cohodes is just like one of the characters in the above movie. You know the scruffy looking guy who the suits just ridicule and laugh at. Another person I only discovered just yesterday Jerome Hass who also has a short out on HCG. I'll be keeping an interest on both these investors and any others who may crop up as the housing storyline here in Canada moves forward.

As usual, no predictions on my part. I don't have the intellect, and the future always looks too foggy through my eyes.


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Re: Home Capital Group (Symbol-HCG)

Post by NorthernRaven » 27 Apr 2017 09:16

Taggart wrote:
27 Apr 2017 08:54
Someone on another site gave mention of the movie "The Big Short". What was that all about? Watched the online trailer and realized I've got to order this movie from the library. I'll release it when I have enough time to watch it.

Flash forward to today in the Canadian housing market and I'm starting to notice, albeit a little too late, similarities. It's never exactly the same of course.
One thing to remember is that in the US, there was underlying toxic derivative sludge, and some pretty rampant fraud/negligent due diligence in originations, and those wacky option-ARM reset type mortgages, etc. While our subprime sector may have things like Home's fraudulent mortgage brokers, or bundled loans skirting loan-to-value guidelines, etc, it is hard to believe this would approach the scale in the US, and I suspect our subprime sector is much smaller proportionally than the US had, as well. So if there is some sort of correction, the underpinnings probably aren't as rotten.

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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 27 Apr 2017 09:23

Yesterday's PR:

"Home Trust's Guaranteed Investment Certificate (GIC) deposits remained essentially unchanged over that time. Total GICs, including both Oaken and broker GICs, stood at $13.01 billion as at April 24, compared to $13.06 billion as at March 28."

Today's PR:

"Total Guaranteed Investment Certificate deposits, including both Oaken and broker GICs, stood at $12.98 billion as at April 25."

They lost ~30M GIC deposits in one day.

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Re: Home Capital Group (Symbol-HCG)

Post by adrian2 » 27 Apr 2017 09:41

ig17 wrote:
27 Apr 2017 09:23
Yesterday's PR:

"Home Trust's Guaranteed Investment Certificate (GIC) deposits remained essentially unchanged over that time. Total GICs, including both Oaken and broker GICs, stood at $13.01 billion as at April 24, compared to $13.06 billion as at March 28."

Today's PR:

"Total Guaranteed Investment Certificate deposits, including both Oaken and broker GICs, stood at $12.98 billion as at April 25."

They lost ~30M GIC deposits in one day.
30M per day x 250 working days per year = 0.75 billion per year.
Assuming GIC median term of 3 years, it works out to about 1/6 of depositors not renewing, and 5/6 renewing.
With 365 days per year, 1/4 of depositors not renewing, and 3/4 renewing.
Inertia?
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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Re: Home Capital Group (Symbol-HCG)

Post by Profit not Prophet » 27 Apr 2017 09:48

For the adventuresome, TD spit out a paper today calling it a Speculative buy with one year outlook of 150%.

I am thinking that the difference between an adventure and an expedition is planning :)

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Re: Home Capital Group (Symbol-HCG)

Post by Thegipper » 27 Apr 2017 09:51

NorthernRaven wrote:
27 Apr 2017 09:16
Taggart wrote:
27 Apr 2017 08:54
Someone on another site gave mention of the movie "The Big Short". What was that all about? Watched the online trailer and realized I've got to order this movie from the library. I'll release it when I have enough time to watch it.

Flash forward to today in the Canadian housing market and I'm starting to notice, albeit a little too late, similarities. It's never exactly the same of course.
One thing to remember is that in the US, there was underlying toxic derivative sludge, and some pretty rampant fraud/negligent due diligence in originations, and those wacky option-ARM reset type mortgages, etc. While our subprime sector may have things like Home's fraudulent mortgage brokers, or bundled loans skirting loan-to-value guidelines, etc, it is hard to believe this would approach the scale in the US, and I suspect our subprime sector is much smaller proportionally than the US had, as well. So if there is some sort of correction, the underpinnings probably aren't as rotten.
Not sure the Canadian situation is comparable. In it's own way it may be as bad. The Vancouver and Toronto markets are insanely inflated. A second concern is an awful lot of the Canadian residential mortgage market is insured by the Federal government.

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Re: Home Capital Group (Symbol-HCG)

Post by Shakespeare » 27 Apr 2017 10:21

Out at 7.14. That, plus the BMOIL $1K bonus, pays for a vacation. 8)

But trading isn't my thing, so I think I'll go back to sleep.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

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Re: Home Capital Group (Symbol-HCG)

Post by NorthernRaven » 27 Apr 2017 10:23

They've hired investment bankers to "consider strategic options" - read, "find a buyer"... :)

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Re: Home Capital Group (Symbol-HCG)

Post by Taggart » 27 Apr 2017 11:09

From Scotiabank via BNN

“With the market cap of HCG having dropped to ~$400m we are skeptical that any of the banks will step up as a buyer of the company,” said the note to clients. “At this stage of the HCG fallout a purchase of the underlying loan book would be a more straight-forward process than an acquisition of the common equity.”

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Re: Home Capital Group (Symbol-HCG)

Post by randomwalker » 27 Apr 2017 11:45

Taggart wrote:
27 Apr 2017 11:09
From Scotiabank via BNN

“With the market cap of HCG having dropped to ~$400m we are skeptical that any of the banks will step up as a buyer of the company,” said the note to clients. “At this stage of the HCG fallout a purchase of the underlying loan book would be a more straight-forward process than an acquisition of the common equity.”
The banks did want to lend money HCG clients in the first place hence the development of the subprime market. Just what is the value of a portfolio of subprime mortgages? I guess if you hold enough of them diversification reduces the risk lol. pennies on the dollar maybe?

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Re: Home Capital Group (Symbol-HCG)

Post by NorthernRaven » 27 Apr 2017 12:00

randomwalker wrote:
27 Apr 2017 11:45
Just what is the value of a portfolio of subprime mortgages? I guess if you hold enough of them diversification reduces the risk lol. pennies on the dollar maybe?
From their 2015 annual report, Home had about $12 billion in "uninsured single-family residential mortgages". The average income interest rate was 5% (their balance sheet also has conventional CMHC mortgages, multi-family and commercial mortgages, a small credit-card business, etc). There were about 70,000 mortgages; they don't seem to break that out, but presumably 40-50000 of the uninsured that is the core niche?

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Re: Home Capital Group (Symbol-HCG)

Post by Arby » 27 Apr 2017 12:07

This article says HOOP is the source of the $2B loan to Home Capital.
As Bloomberg reports, the Healthcare of Ontario Pension Plan (HOOPP) is the lender behind Home Capital Group's C$2 billion loan ($1.5 billion) to shore up liquidity, citing people familiar with the matter.

The Toronto-based pension plan is said to have given the struggling Canadian mortgage lender the loan to shore up liquidity as it faces a run on deposits amid a probe by the provincial securities regulator. Home Capital has retained RBC Capital Markets and BMO Capital Markets to advise on “strategic options” after it secured the loan, according to a statement Thursday. Home Capital didn’t identify the lender.

HOOPP, which represents more than 321,000 healthcare workers in Ontario, was not immediately available to comment. HOOPP President and Chief Executive Officer Jim Keohane sits on Home Capital’s board and is a shareholder. Home Capital’s external spokesman Boyd Erman declined to comment.

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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 27 Apr 2017 12:16

Arby wrote:
27 Apr 2017 12:07
This article says HOOP is the source of the $2B loan to Home Capital.
As Bloomberg reports, the Healthcare of Ontario Pension Plan (HOOPP) is the lender behind Home Capital Group's C$2 billion loan ($1.5 billion) to shore up liquidity, citing people familiar with the matter.

The Toronto-based pension plan is said to have given the struggling Canadian mortgage lender the loan to shore up liquidity as it faces a run on deposits amid a probe by the provincial securities regulator. Home Capital has retained RBC Capital Markets and BMO Capital Markets to advise on “strategic options” after it secured the loan, according to a statement Thursday. Home Capital didn’t identify the lender.

HOOPP, which represents more than 321,000 healthcare workers in Ontario, was not immediately available to comment. HOOPP President and Chief Executive Officer Jim Keohane sits on Home Capital’s board and is a shareholder. Home Capital’s external spokesman Boyd Erman declined to comment.
The article doesn't mention that Kevin Smith (HCG Chair of the Board) is also on the Board of HOOPP. Conflicts of interest all around.

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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 27 Apr 2017 12:30

Arby wrote:
27 Apr 2017 12:07
This article says HOOP is the source of the $2B loan to Home Capital.
As Bloomberg reports, the Healthcare of Ontario Pension Plan (HOOPP) is the lender behind Home Capital Group's C$2 billion loan ($1.5 billion) to shore up liquidity, citing people familiar with the matter.

The Toronto-based pension plan is said to have given the struggling Canadian mortgage lender the loan to shore up liquidity as it faces a run on deposits amid a probe by the provincial securities regulator. Home Capital has retained RBC Capital Markets and BMO Capital Markets to advise on “strategic options” after it secured the loan, according to a statement Thursday. Home Capital didn’t identify the lender.

HOOPP, which represents more than 321,000 healthcare workers in Ontario, was not immediately available to comment. HOOPP President and Chief Executive Officer Jim Keohane sits on Home Capital’s board and is a shareholder. Home Capital’s external spokesman Boyd Erman declined to comment.
Here's the original Bloomberg article that was the source of ZH reporting.

https://www.bloomberg.com/news/articles ... tegic-plan

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Re: Home Capital Group (Symbol-HCG)

Post by NormR » 27 Apr 2017 12:33

Taggart wrote:
27 Apr 2017 08:54
Someone on another site gave mention of the movie "The Big Short". What was that all about? Watched the online trailer and realized I've got to order this movie from the library. I'll release it when I have enough time to watch it.
I was at a conference last week, which reminded me of the long/short argument as per ...

https://www.youtube.com/watch?v=TpCb3xjh-Kk
[url=http://www.ndir.com]www.ndir.com[/url]

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