Home Capital Group (Symbol-HCG)

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adrian2
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Re: Home Capital Group (Symbol-HCG)

Post by adrian2 » 28 Apr 2017 21:36

ig17 wrote:
28 Apr 2017 07:55
leoc2 wrote:
28 Apr 2017 07:44
Zero Hedge posted this last night:

Crashing Canadian Mortgage Lender Bailed-Out By 321,000 Retired Ontario Healthcare Workers
http://www.zerohedge.com/news/2017-04-2 ... care-worke
Typical inflammatory click-bait from Zero Hedge.
Zero Hedge has zero credibility in my eyes.

Canada's Housing Bubble Explodes As Its Biggest Mortgage Lender Crashes Most In History
Biggest mortgage lender?
They are/were not even in top 10.
Zero credibility.
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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 28 Apr 2017 22:12

adrian2 wrote:
28 Apr 2017 21:36
Zero Hedge has zero credibility in my eyes.

...

Zero credibility.
:thumbsup:

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Re: Home Capital Group (Symbol-HCG)

Post by randomwalker » 29 Apr 2017 06:18

randomwalker wrote:
28 Apr 2017 20:40
Home Capital not a risky investment for us: HOOPP CEO

Healthcare of Ontario Pension Plan CEO Jim Keohane resigned from Home Capital's board after the pension fund agreed to provide a $2-billion line of credit to the embattled lender. BNN sits down with Keohane to discuss the deal, concerns about conflict of interest and the investment thesis.

http://www.bnn.ca/video/home-capital-no ... eo~1111585
‘Better not to sit in two places’: HOOPP board overlaps raise concerns
Barbara Shecter, the National Post, April 28, 2017
http://business.financialpost.com/news/ ... e-concerns

============================================================================================================================
A house of woes: How Home Capital went from market darling to the brink
Armina Ligaya, the National Post. April 28, 2017
http://business.financialpost.com/news/ ... st-one-day

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Re: Home Capital Group (Symbol-HCG)

Post by gsp_ » 29 Apr 2017 08:14

adrian2 wrote:
28 Apr 2017 21:36
Biggest mortgage lender?
They are/were not even in top 10.
Zero credibility.
Not debating credibility or click bait but aren't they listed as #5 in your link of broker channel mortgage providers?

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Re: Home Capital Group (Symbol-HCG)

Post by SQRT » 29 Apr 2017 10:21

randomwalker wrote:
28 Apr 2017 14:07
squid wrote:
28 Apr 2017 13:14
From the point of view of a mortgagor with HCG, what are the chances of renewal with HCG or another sub-prime lender? If a big 5 takes over the book, will the mortgage renew automatically or will it be necessary to requalify under CMHC guidelines?
I don't think the Big 5 would be interested as they seem to be busy trying unload their own uninsured mortgages.

http://ca.reuters.com/article/businessN ... J1TN-OCABS
Big banks may be interested. Securitization is a funding transaction, not an "unloading".
Last edited by SQRT on 29 Apr 2017 11:28, edited 1 time in total.

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Re: Home Capital Group (Symbol-HCG)

Post by adrian2 » 29 Apr 2017 10:51

gsp_ wrote:
29 Apr 2017 08:14
adrian2 wrote:
28 Apr 2017 21:36
Biggest mortgage lender?
They are/were not even in top 10.
Zero credibility.
Not debating credibility or click bait but aren't they listed as #5 in your link of broker channel mortgage providers?
Sorry, not familiar with their capital structure, as it's a different name on the list. My point remains, they are still quite far from the biggest mortgage lender in Canada, whether being #11 or #5.
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Re: Home Capital Group (Symbol-HCG)

Post by SQRT » 29 Apr 2017 11:32

Interesting perspective. There will be a lot of investment bankers working through the weekend, I expect.

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Re: Home Capital Group (Symbol-HCG)

Post by AltaRed » 29 Apr 2017 11:53

This kind of stuff continues to reinforce public distrust in the 'big money' game. The big guys take care of themselves at the expense of the little guy, i.e. potentially the taxpayer via CDIC, if the best assets have been skimmed off by a loan shark (with pension fund backing). I agree with SQRT that the regulator needs to work hard on this one.
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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 29 Apr 2017 12:00

adrian2 wrote:
29 Apr 2017 10:51
gsp_ wrote:
29 Apr 2017 08:14
adrian2 wrote:
28 Apr 2017 21:36
Biggest mortgage lender?
They are/were not even in top 10.
Zero credibility.
Not debating credibility or click bait but aren't they listed as #5 in your link of broker channel mortgage providers?
Sorry, not familiar with their capital structure, as it's a different name on the list. My point remains, they are still quite far from the biggest mortgage lender in Canada, whether being #11 or #5.
The article in Adrian's post talks about broker channel mortgages. This is not the whole mortgage market. Further, the article doesn't make it very clear what exactly they measured. It sounds like they reported the share of volume in one quarter, Q4 2016.

Reporting a share of volume in a given time period exaggerates Home's market share. As I mentioned upthread, they turn their mortgage book very quickly by writing a ton of short-term mortgages.

Here's an older article that reports a different metric: lender share as measured by the size of mortgage book, i.e. the total dollar value of all mortgages outstanding. Home is #10 on the list, with just 1.36% market share.

https://www.canadianmortgagetrends.com/ ... nders.html

I couldn't find a more recent breakdown.

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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 29 Apr 2017 12:01

AltaRed wrote:
29 Apr 2017 11:53
This kind of stuff continues to reinforce public distrust in the 'big money' game. The big guys take care of themselves at the expense of the little guy, i.e. potentially the taxpayer via CDIC, if the best assets have been skimmed off by a loan shark (with pension fund backing). I agree with SQRT that the regulator needs to work hard on this one.
In this case, pension fund *is* the loan shark.

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Re: Home Capital Group (Symbol-HCG)

Post by AltaRed » 29 Apr 2017 12:04

Yeah, but most likely at the insistence of Keohane...who as CEO has disproportionate influence. He is just using the pension fund as his bank.
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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 29 Apr 2017 12:08

His loyalty is 100% to the pension fund. The main concern about his conflict of interest comes from the HCG side, not from the fund side. He threw HCG under the bus, and thus skirted his fiduciary duties as a HCG director.

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Re: Home Capital Group (Symbol-HCG)

Post by SQRT » 29 Apr 2017 12:47

ig17 wrote:
29 Apr 2017 12:08
His loyalty is 100% to the pension fund. The main concern about his conflict of interest comes from the HCG side, not from the fund side. He threw HCG under the bus, and thus skirted his fiduciary duties as a HCG director.
That would be my interpretation as well. A little surprising that HCG couldn't have found a better deal. Maybe timing was too tight?

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Re: Home Capital Group (Symbol-HCG)

Post by AltaRed » 29 Apr 2017 13:03

I recognize his loyalty is to the pension fund, but questionable judgement as a director of HCG. He is still a loan shark in this event.

The worst thing (that regulators may seek to unwind) is the excessive commitment of mortgages as collateral. Should HCG go under, CDIC may be handicapped from 'accessing' those mortgages (at least on a timely fashion) to pay off maturing GICs. If the worst happens, I can imagine the regulator would bring litigation against that loan shark deal if it is 'damaged'. Who knows? Maybe this loan shark deal has potentially broken the terms and conditions of HCG's contract with CDIC in the first place.
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Re: Home Capital Group (Symbol-HCG)

Post by adrian2 » 29 Apr 2017 13:07

Very good read. Here is a piece of it:
John Hempton, with my underlining, wrote:If I were the regulator

If I were the regulator I would be doing my duty here. My duty here is to protect the taxpayer.

Very rapidly Home Capital needs to find a buyer to assume the government insured obligations. It does not matter if this happens at 20c per share. Indeed from a regulatory perspective it is better if it happens at a low share price because it gets rid of claims of bailouts inducing moral hazard.

If Home Capital cannot find a buyer then it should be liquidated. Immediately. And the transaction with HOOP should be reversed under standard bankruptcy rules for reversing fraudulent conveyance. There is no reason that taxpayers should accept subordination to a loan yielding 15-20 percent.

Indeed regulators have a duty to stop that sort of thing.

[...]

It is also worth noting that Wikipedia give a standard list of indicators that fraudulent conveyance has taken place. Most appear to be triggered here.

* Becoming insolvent because of the transfer;
* Lack or inadequacy of consideration;
* Family, or insider relationship among parties;
* The retention of possession, benefits or use of property in question;
* The existence of the threat of litigation;
* The financial situation of the debtor at the time of transfer or after transfer;
* The existence or a cumulative effect of a series of transactions after the onset of debtor’s financial difficulties;
* The general chronology of events;
* The secrecy of the transaction in question; and
* Deviation from the usual method or course of business.
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Re: Home Capital Group (Symbol-HCG)

Post by StuBee » 29 Apr 2017 20:45

Indeed, a lot of interesting perspectives one of which is worrisome :( :
AltaRed wrote:
29 Apr 2017 13:03
Who knows? Maybe this loan shark deal has potentially broken the terms and conditions of HCG's contract with CDIC in the first place.
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Re: Home Capital Group (Symbol-HCG)

Post by NorthernRaven » 29 Apr 2017 20:55

StuBee wrote:
29 Apr 2017 20:45
Indeed, a lot of interesting perspectives one of which is worrisome :( :
AltaRed wrote:
29 Apr 2017 13:03
Who knows? Maybe this loan shark deal has potentially broken the terms and conditions of HCG's contract with CDIC in the first place.
No worrisome. CDIC is designed to protect depositors. There's probably very little a bank can do that would "break" CDIC coverage (aside from being given a death penalty by the regulators), and in any case deposits continue to be covered.
CDIC Act 34(1) wrote: 34 (1) If the policy of deposit insurance of a member institution is terminated or cancelled by the Corporation, the deposits with the institution on the day the termination or cancellation takes effect, less any withdrawals from those deposits, continue to be insured under the terminated or cancelled policy of deposit insurance for a period of two years or, in the case of a term deposit with a remaining term exceeding two years, to the maturity of the term deposit.

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Re: Home Capital Group (Symbol-HCG)

Post by AltaRed » 29 Apr 2017 21:59

I'm talking (perhaps optimistically) about the regulator voiding the loan shark deal, not the termination of CDIC's insurance with HCG..... per the list Adrian posted. I suspect there is more to come this week...if the regulator has any balls.
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Re: Home Capital Group (Symbol-HCG)

Post by adrian2 » 29 Apr 2017 23:22

AltaRed wrote:
29 Apr 2017 21:59
I'm talking (perhaps optimistically) about the regulator voiding the loan shark deal, not the termination of CDIC's insurance with HCG..... per the list Adrian posted.
The link was posted by ig17. :)
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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 01 May 2017 07:55

Home Capital Reports Initial Draw Down on $2 Billion Credit Line
TORONTO, May 1, 2017 /CNW/ - Home Capital Group Inc. ("The Company" TSX: HCG) announced that its subsidiary, Home Trust, expects to receive an initial draw today of $1 billion from its $2 billion credit line provided by a facility led by the Healthcare of Ontario Pension Plan, the terms of which were previously announced by the Company on April 27, 2017.

Access to these funds is intended to mitigate the impact of a decline in Home Trust's High Interest Savings Account (HISA) deposit balances.

The balance of HISA deposits is expected to be approximately $391 million on Monday, May 1 after settlements of Friday's transactions.

Total Guaranteed Investment Certificate (GIC) deposits, including Oaken and broker GICs, stood at $12.86 billion as at April 28.
Changes from Apr 28 to May 1:

HISA: 521M --> 391M

GICs: 12.97B --> 12.86B (down 110M)

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Re: Home Capital Group (Symbol-HCG)

Post by Shakespeare » 01 May 2017 09:40

And down we go again (5.90, -26.62%).

But I've had my fun on this one....
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Re: Home Capital Group (Symbol-HCG)

Post by AltaRed » 01 May 2017 09:44

Once the run on HISA deposits is complete, this stock may settle down. All eyes will then be on month-to-month changes in GIC deposits. A draw down of 1/60th of the funds (circa $200 million) on deposit month by month without relief would not be a good sign.
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Re: Home Capital Group (Symbol-HCG)

Post by ig17 » 01 May 2017 09:52

The ironic parts of the story:

1. Contrary to what shorts are saying, we haven't seen any evidence of systemic fraud or corruption in the company.
2. Liar loans were discovered in 2014. Most of those loans are off the books by now.
3. Company took several steps to tighten their internal controls. The most important one: they separated the sales and the underwriting teams.
4. OSC investigation is about management disclosure to investors, not about the quality of the mortgage book or anything else.

Of course, none of that matters now. The bank run took a life of its own.

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Re: Home Capital Group (Symbol-HCG)

Post by SoninlawofGus » 01 May 2017 09:54

AltaRed wrote:
01 May 2017 09:44
Once the run on HISA deposits is complete, this stock may settle down. All eyes will then be on month-to-month changes in GIC deposits. A draw down of 1/60th of the funds (circa $200 million) on deposit month by month without relief would not be a good sign.
I withdrew from the HISA but for GICs, especially my RRSP GIC, which are longer-term savings instruments anyway, I might renew if their rates remained high enough. If we can't trust that CDIC coverage, then why bother with GICs at all -- since most/many of the higher paying institutions are not big 5? The only question I have is how long it will take for CDIC to pay out an RRSP GIC (the three-day goal does not seem to apply) and then how much time would be lost in the transition -- opportunity cost lost in the transition. This is one area where a holding a Home Trust GIC in a discount brokerage would be advantageous to holding one at Oaken.

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