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Canadian mortage banks start to fail: first dominoes falling?

POSTED BY: SIGNYM
UPDATED: Monday, May 1, 2017 17:36
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Monday, May 1, 2017 5:36 PM

SIGNYM

I believe in solving problems, not sharing them.


Are we seeing a "Countrywide" (Angelo Mozilo) moment in Canada?

Quote:

Panic Bank Run Leaves Canada's Largest Alternative Mortgage Lender On Edge Of Collapse
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


http://www.zerohedge.com/news/2017-04-29/furious-bank-run-leaves-canad
as-largest-alternative-mortgage-lender-verge-collapse


Quote:

Contagion: Home Capital Bank Run Spreads To Another Canadian Mortgage Lender
Canada's Equitable Group, another alternative mortgage lender, said Monday it had started seeing “an elevated but manageable” decrease in deposit balances, traditionally a polite way by management to admit a bank jog is taking place. The company said that customers had withdrawn an average C$75 million each day between Wednesday and Friday, and while the withdrawals so far are modest, and represented 2.4% of the total deposit base, the recent HCG case study showed how quickly such a bank run could escalate. And while liquid assets remained at roughly C$1 billion after the outflows, the company also announced that it had taken out its own C$2 billion credit line with a group of Canadian banks, just in case the bank run was only getting started.


http://www.zerohedge.com/news/2017-05-01/contagion-home-capital-bank-r
un-spreads-another-canadian-morgage-lender


I guess the importance of the above events would hinge on how much money is tied up in these two lenders, and whether or not the (even bigger) financial institutions will be able to toss enough money into these companies to keep them afloat, as opposed to having to deal with the aftermath of a messy bankruptcy.

There is no doubt that Canada (and Australia too) are in a housing bubble. Part of that is being fueled by wealthy Chinese who are seeking to stash their ill-gotten gains in Vancouver, and Toronto looks like sheer speculation (fueled by loans from the above-named lenders)

Ontario is seeking to let some air out of the bubble, as is British Columbia.

http://www.reuters.com/article/canada-economy-housing-idUSL1N1HJ1OK
http://www.canadianbusiness.com/economy/how-canadas-real-estate-market
-went-completely-insane
/

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