a little ironic that an alternative housing lender blows up during the greatest housing bull market of the last 100 years - in toronto. basically a funding crisis - they rely alot on brokered loans from smaller investors - due to investigation of company practices. so it's the the timing isn't that illogical

i remember in one of the threads here the talk of some rogue brokers doing huge business for them......... seems like the rule of "where there's smoke, there's fire"... HCG and before it Valeant. much different situations and i think the scale/scope of wrongs will be much more extreme for Valeant no matter how this pans out.

HCG had been a hot stock for my much of the past 20 years. big USA HF short too.....

FYI, i've found G&M paywall as very hit-miss like WSJ used to be. i have subscription but too lazy to register it so far. tell me if you want an article and it may be motivation to register my subscription... G&M = Globe and Mail, canada's dominant business newspaper.

https://www.google.com/search?hl=en&....1.HFYS10MDJfg

given housing market, wouldn't their mortgages have solid value no matter how they were obtained?

liquidation and/or acquisition value?

not sure if this had partial growth multiple any time recently... obviously that is permanently gone - to say the least.

i guess the mortgages were have more solid value if they could force refi and thereby repayment. but of course they can't.

down enormously yesterday...

not completely sure but it looks like they secured some high cost financing to be able to pay out their GIC financing.

once again goes to show the risk of financing short-term with brokered loans i.e. hot money.......... of course, i'm sure they would have done more permanent longer term capital if they could have got it....... i could be off on some of this stuff but it does seem like their funding base was not that stable - even when times were good.

people suggesting this could be event to slow down toronto housing market. i don't totally understand that narrative other than often crazy bubbles end with a reasonably innocuous pin prick that ends the excess greed/panic and starts the decline. not sure why this would be pin prick though.

BTW, just for people's edification, i think the financing was/is C$2B, 10% interest, 2.5% stand-by fee, 10% fee somewhere near the very start. so i saw that they'd pay 22.5% on the 1st billion of financing...... "nice work if you can get it" although i presume it was at least semi-competitive process to get it.

very interesting situation on the stock...

some very big long time holders have bailed recently ... "don't trust management any longer" etc. etc.

lots of new holders.

one holder - not sure if new or existing - suggested there is as much as $25 of value in this if they can run down their mortgage portfolio in an orderly way.

it's ironic that the real estate market has been incredibly strong. suggests that if you take today's prices - or even a reasonably big haircut i think - that the mortgage book should be fine.

seems almost too easy and/or good to be true........... i guess one big thing is that home capital was doing these loans - $25 B mortgage book i think i read - because most large traditional lenders won't do them. and if hcg's competitors get in some trouble too then maybe not that many people to refinance with. not sure what happens when you can't refinance a very valuable home. i'm guessing something will happen before that. either house no longer nearly as valuable or financing co's will be fine.

fyi, i almost forgot, i think stock is around $7. in relation to the potential $25 value.

one of the few hairy situations that i think may have a chance. usually these things are toast as there are more and more problems, coupled with debt financing...

stock is way up today with the berkshire investment... but was way off its bottom before today.

so i guess it's book value which i think is very substantial is solid or semi-solid.... the hot toronto real estate market should have been good for their existing assets. i would think you'd need a massive collapse in southern ontario real estate prices for those mortgages to go bad.

anyway, this is all hindsight on my part as i don't know enough about the exact situation.