Largest Canadian Mortgage Lender has its t~~~-up moment

[chirParticipant]

After two years of recurring warnings that Canada’s largest alternative (i.e., non-bank) mortgage lender is fundamentally insolvent, kept alive only courtesy of the Canadian housing bubble which until last week had managed to lift all boats, Home Capital Group suffered a spectacular spectacular implosion last week when its stock price crashed by the most on record after HCG revealed that it had taken out an emergency $2 billion line of credit from an unnamed counterparty with an effective rate as high as 22.5%, indicative of a business model on the verge of collapse .

The unnamed counterparty was revealed to be Healthcare of Ontario Pension Plan (HOOPP) aa the lender behind Home Capital Group’s C$2 billion loan ($1.5 billion) to shore up liquidity.

And in case you are one of the 321,000 retirees who are nervous about your pension managers’ actions, don’t worry: The loan is secured by a pool of mortgages originated by Home Trust, and as everyone knows, in Canada home prices never go down.
Which brings us to the most imminent risk facing Home Capital Group, and its subsidiary, Home Trust.

As concerns about HCG’s viability mounted, depositors were quietly pulling their funding from from savings accounts at subsidiary Home Trust. When Home Capital revealed it was seeking a $2-billion loan to backstop its sinking savings deposits, shareholders ran for the exits, driving down the company’s share price by 65 per cent on Wednesday alone, and heightening the sense of panic.

On Friday, the company revealed that high-interest savings account balances fell another 36% to $521-million by Friday morning, down by a whopping $293 million from $814-million Thursday and more than $2-billion a month ago.

We just observed a bank run in Canada. Why? Irrational housing prices. Why did the housing prices skyrocket? Chinese investors looking to launder gains made in china by using Canadian real estate property. Cause and effect.

Can this happen elsewhere?
Hell yes.
And
F~~~ yes.

Eventually this bubble will pop again.

It is by caffeine alone I set my mind in motion, it is by the beans of Java that thoughts acquire speed, the hands acquire shaking, the shaking becomes a warning; it is by caffeine alone I set my mind in motion.

[BlacqueJacqueShellacqueParticipant 6890]

Double plus good Chir. I read an article on this last week and it has been building for years. In McMurray there is a company advertising that they can put a house up, after basement is solid, in 18 hours!

These houses are a minimum of $500,000. Average being $650,000. I live in a 40 year old trailer that is currently for sale for $320,000. Yeah, this bubble needs to burst.

[TaoTheMgtowWandererParticipant 263]

This is precisely how SHTF scenario’s start. For Example:

Here’s how it happens….

1. The pricing bubble pops. People suddenly find out their homes are only worth 1/2 of what they owe on them.

2. Since they have little to no equity in the home, they have zero incentive to stay in them, so they walk away from them, default on them, or BK their way out of them.

3. The banks suddenly have the loss on their books, at which point everyone realizes that the bank never insured these mortgages.

(for example, I think it’s Canadian Imperial Bank of Commerce that has 6x their capital reserves in UNINSURED mortgage loans)

4. The stock price of the bank crashes because they’re now insolvent.

5. Other companies, who use the bank stocks as collateral for their own loans now get margin calls, since the collateral is no longer worth what it was.

6. The price of those companies drop as they all lose their ability to access the capital markets.

7. If the canadian government does nothing, this continues until the country collapses.

8. If the canadian government steps in to fix it, they double your national debt, raise your taxes, and wipe out a generations worth of savings.

All i can say is THANK YOU GOD it was not TD. Im going to take that warning signal and run for the exit.

My peace of mind is worth more then your vagina...cunt.

[hollowtipsParticipant 681]

It’s hilarious because I saw this stock declining and had been buying shares, hoping to score off the rebound. But considering how much it is now I basically threw away money and wish I’d waited longer. The one positive is that the company pays dividends but if they go belly up I’m f~~~ed.

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