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Email this6:23 am
April 22, 2017
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Top It Up said
I'd rather it not be CIBC throwing money after the hapless / doomed Home Capital Group - a company most assuredly in a death-spiral.
Does anyone know if MCAP paid full price for those mortgages they purchased from HCG? or did they get a discounted price?
I don't think you know much about what you're talking about.
1) The company is not in a death spiral. They are facing a liquidity issue not a solvency issue. The liquidity issue can be mitigated by running off some of their mortgages that are maturing. In time, the liquidity issue may well prove temporary as the company gradually regains confidence. This is supported by the fact that the company's loan book is excellent.
2) MCAP is not just buying up mortgages but also committing to new originations or taking on renewals. If it's either of the later then MCAP will take on the whole mortgage balance. Plus, it was announced that Home will take a fee for originating and servicing.
7:28 am
December 17, 2016
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HCG, as an entity, is in a downward spiral - hell they can't even stanch the daily run on deposits - even Oaken is facing daily withdrawals.
You can cheerlead and baton twirl to your heart's content but please don't purport to be an expert on an anonymous forum, K.
How much on a dollar did MCAP pay HCG for those mortgages?
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From BNN.ca
Canada's biggest non-bank lender Home Capital Group Inc said on Thursday its high-interest savings deposits were expected to have fallen to about $128 million following the completion of Wednesday's settlements.
Deposits were expected to have fallen to about $134 million following completion of Tuesday's settlements.
Depositors have withdrawn more than 90 per cent of funds from Home Capital's high-interest savings accounts since March 27...
7:44 am
April 22, 2017
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Top It Up said
HCG, as an entity, is in a downward spiral - hell they can't even stanch the daily run on deposits - even Oaken is facing daily withdrawals.You can cheerlead and baton twirl to your heart's content but please don't purport to be an expert on an anonymous forum, K.
How much on a dollar did MCAP pay HCG for those mortgages?
------------------------
From BNN.ca
Canada's biggest non-bank lender Home Capital Group Inc said on Thursday its high-interest savings deposits were expected to have fallen to about $128 million following the completion of Wednesday's settlements.
Deposits were expected to have fallen to about $134 million following completion of Tuesday's settlements.
Depositors have withdrawn more than 90 per cent of funds from Home Capital's high-interest savings accounts since March 27...
If you would so like, I would like to place a bet that Home remains a viable entity, either on its own or as part of a unit of another financial institution. You can take the other side and we can do it on Longbets.org if you'd like.
8:02 am
December 17, 2016
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Not a chance that I'm going to register on some wacky paranormal, Ouija board reading, tarot card reading website. You have your view, I have mine.
9:45 am
October 27, 2013
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frank87 said
I don't think you know much about what you're talking about.
1) The company is not in a death spiral. They are facing a liquidity issue not a solvency issue. The liquidity issue can be mitigated by running off some of their mortgages that are maturing. In time, the liquidity issue may well prove temporary as the company gradually regains confidence. This is supported by the fact that the company's loan book is excellent.
2) MCAP is not just buying up mortgages but also committing to new originations or taking on renewals. If it's either of the later then MCAP will take on the whole mortgage balance. Plus, it was announced that Home will take a fee for originating and servicing.
+1
The liquidity issue is being addressed. Demand deposits such as HISA accounts are not fundamental to HCG's business though they do serve as the elasticity (shock absorber) between assets and liabilities as/when needed. They will get it figured out as they generate liquidity from the mortgage sale. That is a brilliant decision to (likely) get out from under the shark loan too.
HCG may well be sold but not because it is about to become insolvent. It is a going concern that can (and will) attract a buyer, most likely once they get their house in order.
9:48 am
December 17, 2016
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The question remains
While Home Capital added that the deal includes up to C$1 billion of uninsured mortgages and C$500 million of insured mortgages, or about 10 percent of the company’s total mortgage book, it did not provide the most important information: at what price it sold the mortgages.
9:51 am
April 22, 2017
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Top It Up said
The question remainsWhile Home Capital added that the deal includes up to C$1 billion of uninsured mortgages and C$500 million of insured mortgages, or about 10 percent of the company’s total mortgage book, it did not provide the most important information: at what price it sold the mortgages.
You must be quite dense. As mentioned in an earlier post, they are not entirely sales. A lot of that $1.5 billion will come in the form of renewals, which are essentially new mortgages that replace maturing mortgages. Renewals are provided on the remaining mortgage balance, or 100% of the current carrying value of the mortgage.
9:57 am
December 17, 2016
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From HCG, this morning
Liquid assets stood at approximately $1.02 billion as of end of day May 10, 2017 and combined with the undrawn amount of $600 million under the Company’s $2.0 billion credit facility led by HOOPP, the Company’s aggregate available liquidity and credit capacity totaled approximately $1.62 billion.
What's that "liquidity" costing HCG?
10:18 am
August 4, 2010
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Top It Up said
From HCG, this morningLiquid assets stood at approximately $1.02 billion as of end of day May 10, 2017 and combined with the undrawn amount of $600 million under the Company’s $2.0 billion credit facility led by HOOPP, the Company’s aggregate available liquidity and credit capacity totaled approximately $1.62 billion.
What's that "liquidity" costing HCG?
If these are real questions and you aren't just posting out of some unexplained feeling of schadenfreude towards Home, perhaps you could start providing the answers yourself? As you are surely aware, they paid $100 million to HOOPP to establish the $2 billion facility, are paying an annualized 10% on the $1.4 billion drawn so far ($11.7 million/month) and 2.5% on the $600M undrawn balance ($1.25M/month).
This is effectively a very heavy price they have chosen (albeit probably with few other options) to pay to replace the demand deposits, and hopefully have enough time to see where the term deposit situation will stabilize at and what sort of balance sheet and business model they can morph to and other acquisition/wind-down opportunities that arise.
10:22 am
December 17, 2016
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frank87 said
As mentioned in an earlier post, they are not entirely sales. A lot of that $1.5 billion will come in the form of renewals, which are essentially new mortgages that replace maturing mortgages. Renewals are provided on the remaining mortgage balance, or 100% of the current carrying value of the mortgage.
From HCG
The Third Party has indicated its non-binding intention to
• Purchase as much as $1 billion in qualifying uninsured mortgages, with an immediate interest in purchasing or accepting commitments and/or renewals for up to half of that amount, or $500 million; and
• Purchase or accept commitments for up to $500 million in insured mortgages, subject to appropriate documentation.
Maybe you could provide readers with your "insider" definition of "... they are not entirely sales. A lot of that $1.5 billion will come in the form of renewals" and how it jives with HCG's press release?
10:32 am
December 17, 2016
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NorthernRaven said
If these are real questions and you aren't just posting out of some unexplained feeling of schadenfreude towards Home, perhaps you could start providing the answers yourself?
Of course some of the questions are rhetorical - with the exception of how much MCAP paid HCG. The speed of the deposit withdrawals, the cost of the credit facility as replacement funds, goes to the heart of HCG's existence - it is incredible how dismissive some can be on those IMPORTANT points.
CIBC buying stock is nothing more than vultures in action and does nothing to help HCG out of it's conundrum. CIBC ain't no white knight.
3:38 pm
October 21, 2013
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CIBC seems to be betting on HCG twice. It was my understanding that they were part of the loan consortium, no? And they're also propping up the stock by buying it up. They will say these were different divisions of their company, but it's all the same to me.
But with cautious successful Mawer selling out, one wonders why CIBC is taking on this degree of risk. It must be their "play money", or, rather, OUR play money, the kind of thing that is high risk and they know only a few of their horses will place and some will break their legs and have to be put down - to mix my metaphors.
5:04 pm
September 5, 2013
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Loonie said
CIBC seems to be betting on HCG twice. It was my understanding that they were part of the loan consortium, no? And they're also propping up the stock by buying it up. They will say these were different divisions of their company, but it's all the same to me.
But with cautious successful Mawer selling out, one wonders why CIBC is taking on this degree of risk. It must be their "play money", or, rather, OUR play money, the kind of thing that is high risk and they know only a few of their horses will place and some will break their legs and have to be put down - to mix my metaphors.
I believe that it will be their money if win, and OUR (unit holder) when loss:-( I like your metaphone.
My wish all these mess can somehow to force BOC to raise the rate a bit to benefit the savers here.
....
Canada Should Signal Rate Increase to Cool Lending, BofA Says
https://bloom.bg/2r6Plq7
5:42 pm
April 6, 2013
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Loonie said
CIBC seems to be betting on HCG twice. It was my understanding that they were part of the loan consortium, no? And they're also propping up the stock by buying it up. They will say these were different divisions of their company, but it's all the same to me.
That's the other syndicate. CIBC is among the six banks in the syndicate for the $2 billion backstop to Equitable Bank.
I don't think CIBC is part of the syndicate, led by the Healthcare of Ontario Pension Plan, that is providing $2 billion to Home Capital Group. The Bloomberg article says the only banks in the HOOP syndicate are Credit Suisse and Goldman Sachs.
It is CIBC Asset Management and their funds under management that are taking the position in Home Capital Group stock. CIBC may not have much exposure.
But with cautious successful Mawer selling out, one wonders why CIBC is taking on this degree of risk. It must be their "play money", or, rather, OUR play money, the kind of thing that is high risk and they know only a few of their horses will place and some will break their legs and have to be put down - to mix my metaphors.
We are seeing here what Templeton's investing "at the point of maximum pessimism" looks like! Could be CIBC Asset Management did some calculations and the risk is low because they could recover their investment from selling the resulting horse meat. 
Mawer may not know how to value the "horse meat".
5:52 pm
October 21, 2013
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I see...
I think we need some heavy hitters to "pony up" to "beef"" up the deposits. lol
6:28 pm
December 17, 2016
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From HCG's latest business update and Q1 2017 results -
The interim consolidated financial statements for the first quarter ended March 31, 2017 were prepared on a going concern
basis; however, management believes that material uncertainty exists regarding the Company’s future funding capabilities as a result of reputational concerns that may cast significant doubt upon the Company’s ability to continue as a going concern.
http://www.homecapital.com/pre.....202017.pdf
And still no further explanation of the MCAP deal.
8:38 am
December 17, 2016
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HCG addressing the sale of mortgages to MCAP - from the G&M -
Home Capital also addressed its recent agreement where an “independent third party” intends to buy up to $1.5-billion of its commitments to new mortgages, as well as some existing mortgages and home loans that are up for renewal. That deal will be facilitated by mortgage finance firm MCAP Corp. It’s an agreement that the company said is not ideal and will have an impact on its business, but was a necessary step to keep Home Capital’s ties to the mortgage broker channel.
One bad bridge-financing deal, followed by yet another ... shan't be long now.
9:06 am
August 4, 2010
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Top It Up said
HCG addressing the sale of mortgages to MCAP - from the G&M -Home Capital also addressed its recent agreement where an “independent third party” intends to buy up to $1.5-billion of its commitments to new mortgages, as well as some existing mortgages and home loans that are up for renewal. That deal will be facilitated by mortgage finance firm MCAP Corp. It’s an agreement that the company said is not ideal and will have an impact on its business, but was a necessary step to keep Home Capital’s ties to the mortgage broker channel.
One bad bridge-financing deal, followed by yet another.
One drive-by disparagement, followed by yet another.
I doubt there's anything that Home can do right now that is "ideal". But what this does is take some of the mortgages that Home is either getting fresh, or renewing, and sell them off to a third party. Home's financing isn't going to be able to support their current balance sheet levels, so some of the stream will be disposed off. Obviously they would prefer to earn the spread from the entire book, and shrinking it is "bad" in the sense that they can't make as much money as they would by funding and holding the mortgages themselves, but at least this way they don't limit their broker-facing appetite as much. It is not even in the same universe of "bad" as the HOOPP financing, and even that may have been a necessary "best of bad choices", as it is giving them the time to look at various alternatives for what sort of business model they can stabilize on.
9:33 am
December 17, 2016
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NorthernRaven said
One drive-by disparagement, followed by yet another.
Really ... WOW ... HCG trying to sell off mortgages (assets) with a higher degree of risk than those sold and insured by CMHC, in a housing market that the Federal government has already said it doesn't like, the Ontario government says it doesn't like, and the BC government says it doesn't like - forget HCG's historic default rate, there is NO positive for them.
There are NO white knights on the horizon ONLY vultures . sometimes reality is a b****.
10:12 am
August 4, 2010
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The old joke goes that on the internet, nobody knows you're a dog. Constant howling, however, does tend to give away the secret!
As a wise observer noted upthread, "I don't think you know much about what you're talking about."
For anyone else interested, of that $1.5 billion third-party agreement they've got lined up to take renewals and new originations, $1 billion is for the uninsured line, and half of that is "an immediate interest in purchasing". If that can do that, it will give them some cash to cover GIC redemptions, pay back part of the HOOPP advance, etc. Whether they can do enough tapdancing to reconfigure as a smaller going concern, or get acquired, or wind down or whatever, time will tell. I'm not interested in the stock price as such, but I'd suspect they won't wipe out.
From their analyst call this morning, it sounds like they'll have to take a small loss on the mortgage sell-throughs, since rates have gone up since all this started, while Home's current renewals and recent originations carry the rates in effect back when they were finalized. They'll have to cover the difference in the rates, but that's likely a small "mark to market" on the rates, not a discount on the underlying mortgage.
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