RE:Why Home Capital still has big problems?https://business.financialpost.com/personal-finance/mortgages-real-estate/mortgage-fraud-not-a-widespread-problem-in-industry-says-head-of-cmhc
Please ask him why the insurers continue to provide insurance to HCG.
His statement "HCG has enabled excessive demand in the market by lending money to unqualified buyers to purchase homes, resulting in pushing otherwise qualified buyers out of the housing market and increasing home prices. That problem is very much still alive today"
does not stand scrutiny according to the facts. Why are mortgage default rates so low? Why are HCG\s default rates below industry average? Why are insurance companies continuing to offer insurance?
These are valid questions. Either the HCG mortgages are fraudulent or they are not. If they are as fraudlent as Cohodes is contending, wouldn't the insurers catch wind of this as well? Wouldn't they subject HCG's mortgages to additional scrutinty? And if there was additional fraud, would they not say something? or just stop taking their mortgages altogher????
I am yet to find a short seller or someone in the Cohodes camp who can adequately answer the above questions. The usual answer is trust me, we know, the mortgages are bad, everyone knows it, but they don't provide any statistical proof that are in any measured numbers that support their claims. I am willing to listen. But Cohodes himself has yet to connect these dots in his articles. Because in essence, if the HCG mortgages are all as fraudlent as he claims, then the amount of collusion that is taking place has to extend beyond a few brokers but it wil be throughout HCG, and also at the auditors and at CMHC and Genworth mortgage insurers.
My gut tells me that there is no statistical evidence that there is more fraud at HCG than at any of the other banks. The new mortgage rules the federal government brought in has significantly improved the income verifcation processes at all instiutions. Cohodes thesis implies there needs to be too much collusion to be believable and that amongst too many firms/accountants etc that there are enough internal controls to stop this.
Cohodes also has a shifting thesis- one day its the Canadian market is overheating and due for a collapse and that HCG is full of fraud. But he has been saying this for sometime now and i don't understand why the bad debts have yet to show up in the financial statements. Can any shorter any this question as well?