HomeTrust On Sale (Oaken Financial) | Page 6 | Oaken Financial | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

sp_Feed Topic RSS sp_TopicIcon
HomeTrust On Sale (Oaken Financial)
May 15, 2017
10:01 am
frank87
Member
Members
Forum Posts: 60
Member Since:
April 22, 2017
sp_UserOfflineSmall Offline
101sp_Permalink sp_Print

NorthernRaven said

frank87 said
An aside: it was made known in the weekend Globe article on the Home crisis that the Big Banks in fact did have a LOC option available for Home similar to that of Equitable's, but it just couldn't be done fast enough given how fast the HISAs were running down. I still feel like it was a major mistake for the company to take on the HOOPP-led LOC as it dramatically accelerated withdrawals.  

It's hard to know how to take that report. If they just needed a little time to negotiate with that other (better) LOC option, should they not have been able to continue doing so and have replaced the HOOPP facility by now (at the cost of that $100 million non-refundable HOOPP fee)?  

I think they may well still be able to get a new LOC.

But once the HOOPP-deal was announced and the subsequent aftermath followed, all bets were off. I don't think the Big Banks would do a deal facing the new reality, they would likely want to see some stabilization first.

May 15, 2017
11:28 am
Loonie
Member
Members
Forum Posts: 9391
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline
102sp_Permalink sp_Print

I don't think we should assume we know what GIC investors will do.

Some people just let their GICs roll over because they forgot, had no other plan, or became cognitively impaired in the interim.

Some will consciously let them roll over because the current rate offered is good and they either don't think HCG will fail or know they are well covered by CDIC and think rates will likely go up anyway so they can do at least as well elsewhere if push comes to shove. There seems to be a bit of a consensus that the most likely scenario may be a takeover, which is just fine with GIC investors.

On the other hand, Oaken is one of the few FIs which pro-actively asks you, when you take out a GIC with them, what you want done with it when it matures. Rollover is only automatic if you set it up that way intentionally. Of course, you can always reverse your decision. For non-registered GICs, if you choose in advance not to roll over, the money goes back to its source automatically.

I have GICs there, but none maturing in the foreseeable future. If they were, I would not rule out rolling them over. Where else would I get a better rate? They're all CDIC protected. And I think that if HCG doesn't survive, another FI will take over the GIC obligations.

It's true that GIC investors may be risk averse. However, for many it is just a piece of their overall portfolio, some of which is significantly riskier. Further, the kind of person who seeks out an alternative bank is probably better informed than the majority and may have a more shrewd analysis of risk and reward. The details will of course vary with the individual.

I am as risk averse as any (as regular readers will know), and I would not rule out another Oaken GIC. It's all about the rate, as usual. Any bank could collapse unexpectedly due to things unforeseen or undisclosed, but we happen to know more about this one as it's been thoroughly raked over by the short sellers. I hope HCG survives, just to spite them. I'm not worried about my own GICs as they will be covered one way or another. The risk of needing CDIC bailout is small from what I can see, and, if it comes to that, CDIC claims to have speeded up its processes for reimbursement over what they were 30 years ago.
If HCG is allowed to fail, other walls will also shudder. Nobody of good faith wants this, I don't think, least of all the minister of finance, who would then have a new mortgage headache on his hands; only the short sellers want it as far as I can see.

I claim no special expertise. Just my opinion as a lay person in these matters

May 15, 2017
3:00 pm
AltaRed
BC Interior
Member
Members
Forum Posts: 3131
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

NorthernRaven said

The point would be that they can't "sell additional mortgages", because they don't have the free cash to fund them. The principal from expiring mortgages has to flow out to GIC redemptions, and their balance sheet shrinks as both an asset and a liability are removed. They can avoid this to the extent they hold onto GIC deposits, but they also have to find new funding to replace the horrible HOOPP loan.
  

Indeed they do need to replace that HOOPP loan and I am pretty convinced they will, but I am not worried about HCG's business shrinking per se, i.e. not able to write new mortgages or retain expiring ones.

As long as they can flow expiring mortgage money back to depositers fast enough, they will maintain liquidity. It's when that disappears that the house of cards collapses suddenly. A shrinking balance sheet can, in theory, be turned around if the hemorrhaging stops soon enough, or at least provide some business value to facilitate a sale. Fun times....

May 16, 2017
4:59 am
Top It Up
Member
Members (temp break)
Forum Posts: 1363
Member Since:
December 17, 2016
sp_UserOfflineSmall Offline

HCG must still be seeing an uncomfortable outflow of money, resulting in Oaken again raising their rates - 2nd time this week.

Oaken 5-year GICs @ 2.85% this morning, while brokers are offering Home Bank/Home Trust 5-year GICs @ 2.30 - 2.35%.

May 16, 2017
5:31 am
Nehpets
Ontario
Member
Members
Forum Posts: 994
Member Since:
December 20, 2016
sp_UserOfflineSmall Offline
105sp_Permalink sp_Print

Top It Up said
Oaken 5-year GICs @ 2.85% this morning  

Looks like Oaken is at the top of the pack today with:
2.350 2.550 2.650 2.750 2.850
GIC rates 1 to 5 years respectively

May 16, 2017
10:56 am
ReX
Member
Banned
Forum Posts: 74
Member Since:
April 28, 2017
sp_UserOfflineSmall Offline
106sp_Permalink sp_Print

Top It Up said
HCG must still be seeing an uncomfortable outflow of money, resulting in Oaken again raising their rates - 2nd time this week.
 

.....negative as usual....
I see it rather as a smart investment incentive strategy whereby laddering offers in time would to a point minimize losses in interest earnings pay out.....hence, they probably do not see an influx of GIC investors at the rate they wish to see.

...sitting on the fence myself, will invest slightly under 100k once the rate hits 3%

May 16, 2017
11:03 am
Top It Up
Member
Members (temp break)
Forum Posts: 1363
Member Since:
December 17, 2016
sp_UserOfflineSmall Offline
107sp_Permalink sp_Print

Hmmmm ... I wonder why HCG hasn't posted their usual daily Update on Liquidity and Deposits? It's usually been available on their website before the sun rises!

May 16, 2017
11:08 am
Loonie
Member
Members
Forum Posts: 9391
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline
108sp_Permalink sp_Print

It will be interesting to see if any other FIs feel the need to increase their rates.

May 16, 2017
1:43 pm
Top It Up
Member
Members (temp break)
Forum Posts: 1363
Member Since:
December 17, 2016
sp_UserOfflineSmall Offline

Todays Liquidity and Deposits update from HCG - just posted on their website -

http://www.homecapital.com/pre.....0Final.pdf

May 17, 2017
10:03 am
Top It Up
Member
Members (temp break)
Forum Posts: 1363
Member Since:
December 17, 2016
sp_UserOfflineSmall Offline

From today's National Post

How Home Capital’s perilous turnaround is about to get harder

Once the bank has properly replaced the funding lost from fleeing depositors, it faces its next big hurdle: figuring out how to finance new loans so it can stay in business. Home Capital used to hold onto just about every mortgage it makes, but the bank will probably now have to sell them to investors at least for the near term, executives said on a conference call last week. The problem is, Canadian money managers don’t tend to buy the kind of mortgages that Home Capital offers ...

Home Capital’s loans are usually made to borrowers that big banks shy away from, such as people who are self-employed and have irregular income. These loans tend not to be insured by the government, and there really isn’t a market for them in Canada now whether they are sold outright or packaged into bonds ...

“They want to create a market for these mortgages, and they’re coming at it from a position of urgency and weakness,” Kilgour said. “It’s going to be tough.”

http://business.financialpost......get-harder

-------------------------------

EXACTLY what I said back on May 8th, in post 38 and May 11th, in post 79.

May 17, 2017
1:58 pm
Top It Up
Member
Members (temp break)
Forum Posts: 1363
Member Since:
December 17, 2016
sp_UserOfflineSmall Offline
111sp_Permalink sp_Print

Todays Liquidity and Deposits update from HCG

https://web.tmxmoney.com/article.php?newsid=7562372165251850&qm_symbol=HCG

---------------------------------

In the words of Paul Simon - that cash is just slip slidin' away

May 17, 2017
3:59 pm
Loonie
Member
Members
Forum Posts: 9391
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Perhaps I'm wrong, but as I understood it from earlier information, the default rate on these unwanted mortgages was very low.
Surely there is some capitalist out there who understands that mortgages that other people don't want which are being paid down are a good deal?
Are these first, or second, or third , or do we even know? It makes a difference. If they are second or third, perhaps the real issue is fear of a declining housing market.
A mortgage that is secured by a house is usually a pretty good deal for an investor.

It will probably take until next week to know if the increase in GIC rates will result in more deposits, by the time people get their money moved around. Good deals for some. If they default, you won't have lost hardly anything because you won't have held it very long before CDIC jumps in, and they will pay the rate up to date of default. And if they do make it, or another FI takes it over, you win with the higher rate.

There may not be any free chocolates next Christmas, however.sf-frown

May 17, 2017
8:41 pm
frank87
Member
Members
Forum Posts: 60
Member Since:
April 22, 2017
sp_UserOfflineSmall Offline
113sp_Permalink sp_Print

Home deals with first liens mortgages.

I feel that a plain liquidation is so unlikely that it shouldn't even be considered. If it ever gets to the point that the company simply can't raise deposits at all, the company will get bought out. This is in OSFI's interest as it will minimize disruption in the market place. The company has a very profitable business and, as the Board recently indicated, plenty of suitors.

May 18, 2017
10:53 am
Rip VanWink
Member
Members
Forum Posts: 10
Member Since:
May 18, 2017
sp_UserOfflineSmall Offline
114sp_Permalink sp_Print

I am a newly registered user and first time poster, not a troll.

We have several registered GICs at Oaken maturing this year and next, all within CDIC limits. I am not concerned about losing the principal, but here are a couple of things I haven't seen discussed:

CDIC guarantees the principal, but does it also guarantee the interest due at maturity?

Suppose HC gets taken over by another FI. Presumably they would honour existing GIC rates until maturity. But what about Oaken's free transfer out policy? New FI owner could demand transfer out fees like all big banks do. Then you have to decide between probable lower interest rates and transfer out fees.

May 18, 2017
11:05 am
Bill
Member
Members
Forum Posts: 4022
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline
115sp_Permalink sp_Print

CDIC will pay interest earned up to day Home goes under, subject to the $100k limit.

Yes, a new FI might do things differently than Home/Oaken did, have to wait and see.

May 18, 2017
11:05 am
NorthernRaven
Moderator
Moderators
Forum Posts: 675
Member Since:
August 4, 2010
sp_UserOfflineSmall Offline
116sp_Permalink sp_Print

CDIC coverage doesn't distinguish earned interest. Amounts up to the $100K limit for each coverage type would be paid out if necessary.

What CDIC might do with a registered account is a little fuzzy (to me). If the GICs are acquired, presumably a registered account would have to be created at the new institution; the GIC terms would probably have to be honoured, but the transfer-out fee might be unavoidable.

CDIC says "CDIC would hold registered deposits in RRSPs, RRIFs and TFSAs for several days while it works with the Canada Revenue Agency to ensure they remain tax-sheltered. CDIC would contact these depositors directly to inform them of next steps.". But that's when they are paying out the guarantee, not the "deposits acquired" scenario.

May 18, 2017
11:54 am
JenE
Member
Members
Forum Posts: 417
Member Since:
May 24, 2016
sp_UserOfflineSmall Offline

After reading the last few posts I decided to call CDIC myself. The information I received was that if a bank failed then P & I on a non-registered GIC would be paid up to the default date and should only take a few days. When I asked what happens if the bank is taken over by another bank, I was told that the new bank would set the rules. I mistakenly thought that a new owner would just honour the prior owner's terms. I was so taken aback I forgot to ask about registered accounts! I guess we just wait and see...sf-frown

May 18, 2017
1:43 pm
Top It Up
Member
Members (temp break)
Forum Posts: 1363
Member Since:
December 17, 2016
sp_UserOfflineSmall Offline
118sp_Permalink sp_Print

Todays Liquidity and Deposits update from HCG

http://www.homecapital.com/pre.....202017.pdf

---------------------------------

Doesn't appear to be any stopping the daily drain on GIC cash BUT Home Trust High Interest Savings Account (HISA) deposit balances are UP $3 Million over yesterday.

May 18, 2017
1:47 pm
Bill
Member
Members
Forum Posts: 4022
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline
119sp_Permalink sp_Print

JenE, CDIC confirmed what I said, i.e. every day your GICs earn another day's interest and CDIC will pay principal and interest earned up to the date of failure, subject to $100k limit. That should be the same for registered accounts as well, aside from the other issues such as maintaining tax sheltered plan status during the transition per Income Tax Act rules, etc.
As well, a successor owner may very well honour the existing terms after the default date, or alternatively it may not - all depends on the terms of the "takeover" re the GICs agreed to by Home and the successor(s).

May 18, 2017
1:48 pm
Loonie
Member
Members
Forum Posts: 9391
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

This may require another phone call. I am unclear what "set the rules" might entail. If they are going to change the terms (i.e. rate), then it seems to me that means a new GIC contract and therefore the customer would be able to say "no thanks" and walk away with their money. Logic may have nothing to do with it, but I think we need more clarity on the scope of the new owner.

I am not a lawyer, but it seems to me that in other areas, when a company acquires another, they acquire the whole shebang, assets and liabilities, as such. They may "set the rules" in terms of selling some of them off, negotiating new terms after the current obligations end, etc., but I don't see how they can mess with the existing obligations. My opinion only.

Please write your comments in the forum.