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HomeTrust On Sale (Oaken Financial)
May 21, 2017
4:00 pm
Loonie
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The hand wringing would naturally come from stock holders, short sellers, and those who have above-CDIC limits on deposit.

It was refreshing to see the balance in the recent Bloomberg article - when read in its entirety.

I have virtually nothing to lose either way as my only relationship with HCG is protected by CDIC, but I have liked Oaken as a company to deal with and would like to see them continue.

The next couple of weeks should indicate a direction. It's too soon yet to see a lot of result from their second last rate increase, and the most recent one will take a week or two to see results. There seems to be more appetite for this most recent one, judging by comments on this forum at least. HCG may also be able to refinance their debt if deposits stabilize or improve.

If they win, it will be a legendary turnaround story and an overdue comeuppance for the short sellers. If not, quite frankly, we all lose, especially the self-employed and new immigrants whose mortgages are at risk even though they have almost all been paying their bills. The big players know what the fallout would be, so they are interested in survival from what I can see.

May 21, 2017
5:50 pm
User230
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Loonie said
The security breach at Peoples Trust occurred in 2013 - or at least that's when they notified people. Peoples had offered 3% on HISA TFSAs since inception in 2010 and continued that rate without interruption until 2015. Between Jan 2015 and Feb 2016, they lowered the rate several times, and have never increased it again. By 2015, despite the fallout from the earlier security breach, they obviously felt they could afford to abandon this very high rate.  

Likely the reason they didn't lower the 3%, even as many did lower their rates, was because of the security breach. People came back when they were the only really high option left during that time period (after security breach to when they started to lower their rate).

May 22, 2017
6:07 am
Loonie
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Do you have any data on people moving their TFSAs out of Peoples because of the breach?

They were always the only high rate out there, even before the breach. I don't think lowering it had anything to do with the breach as it did not coincide with it at all. It had to do with meeting their deposit goal. As we've seen with HCG, when bad news creates a run, banks have to respond fairly quickly, not over a year later.

The breach affected all of their accounts, but they didn't pump up the other rates significantly, if at all.

May 23, 2017
7:37 am
Top It Up
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From today's National Post - the continuing saga of HCG and how they got here from there!

In Home Capital’s mortgage mess, blame the ‘unlucky’ brokers

James Thorne, a money manager at Caldwell Investment Management Ltd., doesn’t need to be convinced. He hasn’t held Home Capital stock for at least two years, when the firm first disclosed the broker fraud.

“You usually don’t find one cockroach. If you find one, there are many more,” he said by phone from Toronto. “We have a tendency to assume the negative event is a one-off. History suggests this assumption is incorrect.”

http://business.financialpost......ky-brokers

May 23, 2017
7:45 am
NorthernRaven
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Loonie said
Do you have any data on people moving their TFSAs out of Peoples because of the breach?
The breach affected all of their accounts, but they didn't pump up the other rates significantly, if at all.  

I don't believe the breach affected all accounts. I had a Peoples account at the time, and never received the "oops, we're sorry" messaging and the free credit watch.

I don't believe their actual back-end banking systems were compromised. As I remember it, it was a front-end database on the webserver side, which stored the initial signup information, and only the most recent X months of signups were in their when it was cracked.

May 23, 2017
11:07 am
Typhoon
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After reading the article mentioned by "Top it up" (http://business.financialpost......ky-brokers) it occurs to me that this kind of situation was less prevalent when mortgage lenders used their own salaried staff to vet clients, as opposed to relying on commission based brokers (who have a strong financial incentive to "help" those they are working with be granted a mortgage). The article makes it clear that it's not just Home Capital that's been the victim of such unscrupulous mortgage brokers, and that it can and does sometimes happen to all mortgage lenders (even the big banks).
The article also makes it clear that Home Capital DID report what happened to certain authorities when they first discovered what happened, but those regulatory bodies didn't appear to be too concerned about the lack of "public" disclosure until it occurred to them that they needed to protect themselves from possible liability (otherwise known as CYA). Nice to know those folks had the Public's "best interest" at heart, isn't it?sf-frown
I believe Home Capital did not deliberately "break the rules" and that the OSC should be held to account for their part in this, just as much as they are trying to hold Home Capital to account. I wonder which body oversees the OSC, and will they take action if it turns out that the OSC should have warned Home Capital a lot sooner about being in violation of the rules?
But all that said, Home Capital does appear to be "turning the corner" and once the dust has settled I still believe the company will continue, although possibly under a slightly different business model. I hope so anyway, because I echo the comments of a previous poster that Oaken "is a nice company to work with".

May 23, 2017
11:16 am
frank87
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Typhoon said
After reading the article mentioned by "Top it up" (http://business.financialpost......ky-brokers) it occurs to me that this kind of situation was less prevalent when mortgage lenders used their own salaried staff to vet clients, as opposed to relying on commission based brokers (who have a strong financial incentive to "help" those they are working with be granted a mortgage). The article makes it clear that it's not just Home Capital that's been the victim of such unscrupulous mortgage brokers, and that it can and does sometimes happen to all mortgage lenders (even the big banks).
The article also makes it clear that Home Capital DID report what happened to certain authorities when they first discovered what happened, but those regulatory bodies didn't appear to be too concerned about the lack of "public" disclosure until it occurred to them that they needed to protect themselves from possible liability (otherwise known as CYA). Nice to know those folks had the Public's "best interest" at heart, isn't it?sf-frown
I believe Home Capital did not deliberately "break the rules" and that the OSC should be held to account for their part in this, just as much as they are trying to hold Home Capital to account. I wonder which body oversees the OSC, and will they take action if it turns out that the OSC should have warned Home Capital a lot sooner about being in violation of the rules?
But all that said, Home Capital does appear to be "turning the corner" and once the dust has settled I still believe the company will continue, although possibly under a slightly different business model. I hope so anyway, because I echo the comments of a previous poster that Oaken "is a nice company to work with".  

With respect to the original broker suspension issue, here are some facts that makes what happened even more confounding:

- Home Capital informed OSFI and CMHC very early on when they found out.
- The brokers accounted for $1.9 billion in mortgages at mid-2015. When Home completed the examination of all those mortgages at the end of last year, they found that less than 10% of that $1.9 billion had income verification issues.
- Both CMHC and Genworth have come out and said that the arrears rate on Home's insured mortgages (the kind of mortgages that were mostly originated from the Accelerator program) are less than the arrears rate of their entire portfolio of ~0.2%.
- Home had 2 former senior OSC officials on their Board at the time of the broker suspension issue, one of which was the former OSC chair, who in fact LED the investigation into the broker suspensions. The Board signed off on all company-related disclosures.

May 23, 2017
11:19 am
NorthernRaven
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Typhoon said
The article also makes it clear that Home Capital DID report what happened to certain authorities when they first discovered what happened, but those regulatory bodies didn't appear to be too concerned about the lack of "public" disclosure until it occurred to them that they needed to protect themselves from possible liability (otherwise known as CYA). ...
I believe Home Capital did not deliberately "break the rules" and that the OSC should be held to account for their part in this, just as much as they are trying to hold Home Capital to account. I wonder which body oversees the OSC, and will they take action if it turns out that the OSC should have warned Home Capital a lot sooner about being in violation of the rules?

To be clear, the OSC is not primarily concerned with the murky mortgage originations as such. Instead, the results of Home's internal investigation and the steps taken because of it had already caused material changes in current and future outlooks for Home's business, yet it did not disclose those publicly in the February-July period in question. In effect, the OSC allegations are that Home deliberately buried critical information it should have revealed. All the conduct in the OSC case dates from the Feb-July 2015 period.

May 23, 2017
12:01 pm
Typhoon
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NorthernRaven said
To be clear, the OSC is not primarily concerned with the murky mortgage originations as such. Instead, the results of Home's internal investigation and the steps taken because of it had already caused material changes in current and future outlooks for Home's business, yet it did not disclose those publicly in the February-July period in question. In effect, the OSC allegations are that Home deliberately buried critical information it should have revealed. All the conduct in the OSC case dates from the Feb-July 2015 period.  

Well, given how this whole situation has played out since the OSC got involved, maybe the way such situations are dealt with needs to be rethought.

As a previous poster pointed out, there were ex OSC members on Home Capital's Board who, presumably, informed the rest of the Board what was required in the way of reporting to the General Public. So, either those folks deliberately misinformed the Board (unlikely) or the "rules" are not as clear as they ought to be. Because, upon reading the article, it doesn't sound as though Home Capital was trying to keep what was happening a secret from the powers that be. So we have to assume there was some sort of miscommunication about what was expected.

It seems to me that when so many "body's" are aware of what's happening, at least one of them should have raised the alarm about informing the General Public, prior to getting to the stage of feeling a need to "CYA". And if that's not a requirement, then it ought to be.

Those who oversee regulatory body's such as the OSC, should take a good long look at the role of ALL the "players" in this mess, and consider changing the rules governing how each should react when they become aware of such situations. Because it isn't just Home Capital that may be at fault here.

Even though I believe Home Capital will recover from this debacle in some form or another, the "system" still needs to be revamped to prevent a similar situation occurring with some other company. A timely warning to Home Capital that they weren't "following the rules" could have saved everyone a lot of headaches.

May 23, 2017
2:38 pm
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Todays Liquidity and Deposits update from HCG

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

The Company also reports that is has today received an additional draw of $250 million on its credit facility in preparation for the repayment of deposit notes which is scheduled for Wednesday, May 24, 2017. The undrawn portion of the credit facility stands at $350 million, as of today.

May 23, 2017
4:02 pm
Typhoon
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Well that's no surprise because, if I remember rightly, those deposit notes coming due were a good chunk of the reason for the line of credit in the first place.

Anyway, regardless, for those of us who are under the $100,000 limit in each of our accounts, it's all a moot point. Because we're covered whether Home Capital survives or not.

I have a TFSA, an RSP and also a Savings Account , and within the TFSA and RSP I have both Home Bank and Home Trust GIC's. So that's $200,000 worth of coverage on the TFSA, $200,000 on the RSP, and $100,000 on the Savings Account (when I calculated my coverage in a previous post I forgot to allow for having GIC's in both financial entities - Home Trust & Home Bank).

My spouse has his own Oaken accounts, with his own similar coverage. So between us we have more than enough insurance to cover any possible losses should the company go under. But I still don't think it will because, apart from anything else, it's not in either the Government's or the other Financial Institutions best interest to let Home Capital fail.

It was a profitable company that had a run on the bank, due to an undeserved lack of confidence stoked by short sellers trying to make a fast buck. But now that the dust is beginning to settle, folks will begin to slowly gravitate back. I sure have; I've purchased several GIC's since all this trouble began. The most recent this morning. Oaken has the best rate available right now and, as it's fully insured, I'd be a fool not to take advantage of it. Anyone would.sf-smile

May 23, 2017
5:37 pm
Loonie
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Today's chart indicates that deposits have stabilized. There has not been any substantial change in a week. Deposits may now start to creep up, since a lot of people find the new rates attractive, there is exceptional CDIC coverage due to the two member institutions, and they have done a lot of advertising. They have also added new board members in the last week. But we shall see.

May 23, 2017
6:38 pm
Bill
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100s of posts on this site in the last few weeks essentially saying over and over how no-one knows how this is going to end and how there's really nothing to worry about re the Home situation - funny!

May 23, 2017
6:55 pm
User230
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Bill said
100s of posts on this site in the last few weeks essentially saying over and over how no-one knows how this is going to end and how there's really nothing to worry about re the Home situation - funny!  

They are wishful thinkers. To me they mislead investors (which wasn't me). If they are willing to do that. Imaging what else might be happening. That is my worry.

For me I wouldn't touch the company with a 10 foot pole. Oaken or Home Trust. Their headed on a path that might lead to bankruptcy. Just look at their poor management.

They could have gotten good terms on a line of credit. Could of prepared. They knew it was going to drop for a while. They were fighting it. Instead they left it to the very last minute and HOOP bailed them out (with hours before regulators were going to take over). That doesn't sound like a well managed company.

Even if they bring in new people. The business doesn't seem to be built on strong foundations. To me it's closer to failing in the next 5 years than it is to surviving for 10 years.

May 23, 2017
7:28 pm
Loonie
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The fact remains that the business itself has been sound and profitable even under the previous managers.

The managers who did the damage are gone.
They are functioning with an acting CEO at the moment.
With a new CEO, new board members, and a business model which has been sound in the past, I'm not ready to write them off yet. And my money is safely within CDIC limits.
I don't own the stock, and never have.

May 24, 2017
4:24 pm
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Todays Liquidity and Deposits update from HCG

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

Home Trust HISA's continue to bleed cash while "GICS in a cashable position" appear flat (numbers over the last 5 days all in a round-off range). Likely too early yet, to see consumer uptake in Oaken's increased 5-year GIC rates, if there's any interest at all.

May 25, 2017
4:18 pm
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Todays Liquidity and Deposits update from HCG

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

Both Home Trust and Oaken savings accounts continue to bleed cash while the "GICs in a cashable position" show a build.

May 25, 2017
7:49 pm
Loonie
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Today's results area a wash but favourable for the GIC promo. Savings accounts are down about 4 million, and GiCs are up about 4 million - rounding off.
If there were a Smiley for "yawn", I would use it.

May 26, 2017
5:55 am
gicjunkie
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One thing one may want to consider about Oaken is investing in the 5 year monthly payout rate of 3.00%, rather than the only slightly more enticing annual rate of 3.10%. By investing up to $100,000.00 in either or both companies for monthly interest, you would be risking only the current and possibly the next month's interest if the banks failed, and not the 3-11 months interest should the timing of the failure not work out well on an annual interest basis. CDIC has assured me, if one can believe them, that, if the banks fail, the insured deposits would be returned to the customer quite quickly, ie. within a few weeks. Just a thought. I would hate to think these companies would fail based on the information revealed about the "bad brokers" from 2 years ago.

May 26, 2017
6:43 am
frank87
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gicjunkie said
One thing one may want to consider about Oaken is investing in the 5 year monthly payout rate of 3.00%, rather than the only slightly more enticing annual rate of 3.10%. By investing up to $100,000.00 in either or both companies for monthly interest, you would be risking only the current and possibly the next month's interest if the banks failed, and not the 3-11 months interest should the timing of the failure not work out well on an annual interest basis. CDIC has assured me, if one can believe them, that, if the banks fail, the insured deposits would be returned to the customer quite quickly, ie. within a few weeks. Just a thought. I would hate to think these companies would fail based on the information revealed about the "bad brokers" from 2 years ago.  

CDIC indicates that they aim for reimbursement within 3 business days: http://www.cdic.ca/en/about-cd.....tools.aspx

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