Canada’s Housing Bubble Explodes As Its Biggest Mortgage Lender Crashes Most In History

Wednesday, April 26, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Apr 26, 2017

Call it Canada’s “New Century” moment.

We first introduced readers to the company we said was the “tip of the iceberg in Canada’s magnificent housing bubble” nearly two years ago, in July 2015 when we exposed a major problem that we predicted would haunt Home Capital Group, Canada’s largest non-bank mortgage lender: liar loans in particular, and a generally overzealous lending business model with little regard for fundamentals. In the interim period, many other voices – most prominently noted short-seller Marc Cohodes – would constantly remind traders and investors about the threat posed by HCG.

Today, all those warnings were justified, when the stock of Home Capital Group cratered by over 60%, its biggest drop on record, after the company disclosed that it struck an emergency deal for a C$2 billion ($1.5 billion) credit line to counter dwindling deposits, at terms that will leave the alternative mortgage lender unable to meet financial targets.

As part of this inevitable outcome, one which presages the company’s eventual disintegration and likely bankruptcy, Bloomberg reports that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday. Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders. Equitable Group Inc. fell 17 percent, Street Capital Group Inc. fell 13 percent, while First National Financial Corp. declined 7.6 percent. In short, the Canadian mortgage bubble has finally burst.

The Rest…HERE

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