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Thread: the collapse of Home Capital Group

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    Default the collapse of Home Capital Group

    Some thoughts.

    - We're in deep shit in Canada. The housing bubble, finally, looks like it might be ready to tilt.

    - There was a large market for depository funds to finance non-bank mortgage lenders. Essentially the "high interest" savings accounts you see advertised are guys seeking equity to lever up into the mortgage market. But like any leverage, if the underlying assets move a bit, then your position moves a lot. If people start pulling their cash (and they are, a lot), then the same psychological phenomenon that creates bubbles works in reverse.

    - Canada does not have the policy bullets left to handle a severe mortgage crisis. We either take it on the chin, and allow the correction in Canada to occur fast (ouch), we try to re-flate the bubble with cheap credit (and see CAD go to... 50 cents?), or we see Snowboarder buy up the paper. I think the last is actually quite likely. May god have mercy on our souls.

    - Canadians are pretty dumb, on average. But they think they are smart. Which is worse than the average American who probably knows they are dumb.

    - Will the shit-show that is the Vancouver and Toronto RE markets kill the other markets, or have we in Calgary already had all the meat flayed from the bones? Probably see a bigger impact than I would like.

    - the Canadian banks are going to rip us a new a-hole in the coming years collecting their pound of flesh.

    - Home Capital is not the problem, it is a symptom of the problem. Those underlying assets are starting to stank up the joint. But the real problem is the Price to Income ratio for homes in Canada. If the majority of the market can't afford their mortgage payment, then all of the discussion of foreign capital is moot.

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    are you an economist?

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    Originally posted by b_t
    are you an economist?
    Negative, he is a meat popsicle.

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    The lenders will be more Leary and may tighten their lending policies. This and interest rate increases may slow the market based on what people qualify for.

    Calgary has had a lot of downward pressure already for the last 2 years but stayed remarkably flat in residential RE. We still have highest GDP per capita in Canada and highest wages. The lower Canadian dollar helps our energy sector realise more profits. We are not far off 2000 to 2008 market parameters where Alberta did very well.

    I do see a problem with Vancouver and Toronto for sure though.

    The crap assets HCG has will be sold off for a loss and their investors are the ones that are hurt. Day to day people will feel little impact.

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    Originally posted by Rarasaurus
    The lenders will be more Leary and may tighten their lending policies. This and interest rate increases may slow the market based on what people qualify for.

    Calgary has had a lot of downward pressure already for the last 2 years but stayed remarkably flat in residential RE. We still have highest GDP per capita in Canada and highest wages. The lower Canadian dollar helps our energy sector realise more profits. We are not far off 2000 to 2008 market parameters where Alberta did very well.

    I do see a problem with Vancouver and Toronto for sure though.

    The crap assets HCG has will be sold off for a loss and their investors are the ones that are hurt. Day to day people will feel little impact.
    I think this is a rather generous interpretation of what is going on. Although I certainly hope you are right.

    I think Calgary's soft landing over the last couple of years is somewhat to do with the same policies that have inflated GTA/GVA prices. (I'm of the view that foreign capital is over-represented as factor in the actual pricing. Not absent, but over-stated.)

    Even so, if this is the tip of the iceberg, then Calgarians will be dragged down by the policy decisions, which happen at a national level.

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    For sure on the side of optimistic and agree there is a risk we get dragged down by future national policies.

    I do not know what policies inflated the other markets as I only remember policies that have tried to cool the market get imposed the last 2 years.

    If oil and Nat Gas can climb a bit more I think Calgary will be in a position to weather it the best country wide. If CAD dollar goes down a bit more to 0.65 this helps us on the corporate profit and GDP side.

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    Imminent Housing Crash Thread 2.0

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    Originally posted by roopi
    Imminent Housing Crash Thread 2.0
    No kidding.

    Would be great if it would just crash and get it over with. Quit fucking around.

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    Originally posted by roopi
    Imminent Housing Crash Thread 2.0
    Beat me to it.

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    Bubble is relative. Houses tend to be priced in dollars, dollars, yen, yuan and other currencies that are constantly being printed in ever greater quantities.

    Now, if you look at it compared to raw dollar printing - the one thing that is in a bubble compared to the 1970's is post secondary education in some parts of the world (like the US)

    Rap, rock and country singers along with some football players might also be bubble-ish, but that is a micro economic factor as there are so few of them percentage wise compared to the bulk of the economy.

    http://www.sportingintelligence.com/...-wages-200101/

    Baller! Compared to 1960, the average wage of a footballer has gone up 1,693x. Now that is what you call wage mobility. If the trend continues in about 50 years a footballer should probably be making about $100 million per week.
    Last edited by ZenOps; 04-27-2017 at 10:33 AM.
    Trade war!

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    Canadian mortgage default numbers are rising somewhat, but not at their peak of the past 10 years. We were at 0.28% back in February - down from the peak of 0.45% of Feb 2010.

    http://www.cba.ca/Assets/CBA/Files/A...e_db050_en.pdf


    The collapse of a a lender due to loss of liquidity - how does that affect the rest of the PRESENT mortgage holders through other institutions?
    Last edited by revelations; 04-27-2017 at 10:23 AM.

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    Talk about fear mongering.

    Home Capital is tanking because of allegations of fraud in their lending practices and loss of trust in their management. Not because their home loans are going bad. Their deposits were being cashed out at a high rate because of the scandal and they were more or less forced to take on some very burdensome financing.


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    Rules are already way tighter than they use to be... don't believe me? Go try and shop around for a mortgage for a purchase price of over $1.5m with ONLY 20% down

    It's amazing how tight lenders get when they actually need to have the loan on the balance sheet and can't insurance and sell it off

    Between that and the new qualifying rules for regular high ratio, I think we are being very proactive for any crash van or Toronto may see

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    A bubble isn't really relative. If you look at simply a bubble as it relates to the value of a currency (ie inflation), then you would presume that asset prices would correlate to other areas - labour, etc. This isn't happening. Personal cash-flow to price ratio is more important than simply nominal home prices inflating.

    What is happening with HCG is less important than why it is happening. If it is an indicator in a turn of confidence...well confidence goes down just as fast as it goes up. This is very similar to the US mortgage crisis in that respect. With people saying almost identical things in response to the New Century crisis.

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    HCG has $20 billion in mortgages. Wow, that's a lot!

    The total mortgage market in Canada is...








    $1 TRILLION.

    This like if your house burned down to the ground and people then said Calgary's housing market is going to shit.

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    Originally posted by ercchry
    Rules are already way tighter than they use to be... don't believe me? Go try and shop around for a mortgage for a purchase price of over $1.5m with ONLY 20% down

    It's amazing how tight lenders get when they actually need to have the loan on the balance sheet and can't insurance and sell it off

    Between that and the new qualifying rules for regular high ratio, I think we are being very proactive for any crash van or Toronto may see
    Agree strongly.

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    Not to mention HCG is already rebounding and have access to a new $2b balance sheet...

    And genworth claims that HCG actually has less defaults than average

    https://www.google.ca/amp/business.f...-of-credit/amp

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    Originally posted by suntan
    This like if your house burned down to the ground and people then said Calgary's housing market is going to shit.
    The question is nobody knows how deep this goes and whose money is tied up in this.
    click for larger version
    » Click image for larger version
    Last edited by Xtrema; 04-27-2017 at 11:26 AM.

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    Originally posted by ercchry
    Not to mention HCG is already rebounding and have access to a new $2b balance sheet...

    And genworth claims that HCG actually has less defaults than average

    https://www.google.ca/amp/business.f...-of-credit/amp
    Their "rescue package" is of a nature it looks to me like they are trading the remaining value of their assets for an opportunity for insiders to get out.

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    Originally posted by suntan
    HCG has $20 billion in mortgages. Wow, that's a lot!

    The total mortgage market in Canada is...








    $1 TRILLION.

    This like if your house burned down to the ground and people then said Calgary's housing market is going to shit.
    You're making an argument that this is an isolated incident, with an isolated company, and that systemic issues in the RE market and the residential mortgage market had nothing to do with it. fine. I'll listen to that argument.

    But this isn't a situation in isolation. there is plenty of data to support the notion that this is a symptom of greater systemic issues.

    Look at it another way. If there WERE issues with the RE market and home mortgage market in Canada, and those issues were to bubble to the surface at the head of various serious issues....it would look exactly like this at the start. If you were to play a thought experiment about what a mortgage/RE crisis in Canada would look like in its nascence....you might dream up this scenario.

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