RE:RE:RE:RE:RE:RE:RE:RE:Tater's back! Worthless puts and total loss on premium paid!For the six-millionth time, HCG's liquidity crisis was only fully solved in Jun/Jul. When you are in a liquidity crisis, it is natural that you would not refinance the existing mortgages and use the liquidity to either pay off the ST obligations or hold them on BS to satisfy capital requirements.
Given the lag time from origination to closing, it is normal to see Q3 origination to be down after the worst liquidity crisis.
Try to know the basic facts. Tater78 wrote: I wonder why HCG didn't just refinance the 1.35bio in mortages that went out the door in Q3. Page 20, MD&A.
HCG has to stress test as well. Try to know the basic facts.
jojotrader wrote: Funny Guy,
70%-80%(if not more) Of those mortgages that are "rolling off" are going to be refinanced.
Of course you would like to think that all of them will goto a BIG bank where they have to be tested at interest rate + 2%.
Which means they only need to orginate 400M-600M. Which seems reasonably achievable.
Will wait for Q4 results. Nicely just 2 short months away.
Tater78 wrote: In rough numbers, they have about 2bio in mortgages rolling off this quarter. That represent about 12.5mio in revenue. If they only replace 400 million of them they are down 10mio in rev for the Q. That’s around 12 cents a share. That will directly hit the bottom line as their non-interest expenses won’t scale down at the same rate. And, that 10mio loss also assumes they are able to shed cash. If those mortgages roll off and they don’t dump the cash, they’ll lose an additional 9mio from holding the cash (the spread between average funding cost and return on cash)
They made money this quarter on their legacy book. As that winds down they need to get back to originating.
As we move into 2018, and B-20 kicks in and home prices take another leg down (imho), we will see how good HCG’s underwriting was over the last 2 years. If it was solid, they can scale down the business and perhaps pay out a special dividend. But, the book value of the shares is the limit of their value without massive origination growth.
MDawg65 wrote: but as long as they remain profitable deals- i..e very low rate of bad debts/foreclosures, they what is the problem. the short thesis was that the company's loan book was all fraudulent, then it became apparent that it wasn't, so then they changed their thesis to that the real estate market was about to crash, which is hasn't ( yet) and isn't going to for at least another six months if not longer, so then the shorts freak out about originations being too low. so if they now become more prudent, in part because they didn't have the money to give out for the majority of the last quarter, then shouldn;t that be viewed as a good thing in the short run- i.e all the deals they made will have been of the better quality as they could fund a limited amount of deals, they would pick the less risky deals. going forward, the company had advised that they will not be funding as many deals as they had hoped, but they are going to try and regain market share but it will take time. So again they are being upfront and managing people's expectations. As long they continue to be profitiable and they hopeful restore the dividend at some level, then this should be a decent company in which to invest, given that the BV at the end of the last Q was 22 to 23 dollars per share, which is significantly higher than $ 16.50, with no accounting for any future earnings potential, even if the rate of profitability will be lower. so again, why the concern about lower originations? the company has admitted as much, so again, I say its the shorts who have made much ado about nothing.