RE:RE:HCG: Insider selling and short seller targetCalgaryrider
Will respond to your post as unlike most on this board you don't seem to have an agenda and your post seems genuine
I will respond to each of your three points.
1- Why does Home report such a low default rate if they lend to people having trouble getting a mortgage?
First, the default rate is audited and part of their FS- Its the biggest issue the auditors look at in their year end audit ,so i would trust the reported number as correct. The reason its so low is Home lends to mainly self employed who cant get mortgages at big banks. These are often new doctors, Painters, Plumbers owning their own business etc anyone without a T5. They require 20% down, on appraised value. These are not low credit individuals, they do not bottom fish. These are often new Canadians, well educated, with their own business who simply do not meet the rules of the banks.
2- Selling their loans??
The loans sold off the balance sheet were all loans that required some work out expertise. The amount was far less than 1/10th percent of their loans outstanding. Under GAAP they are sold at fair market value at the date of sale, and any loss if any is included in the already low reserve rate.
This is not an attempt to shift masses of losses off the balance sheet as may short sellers try to make you believe. it is peanuts, and Home's view is they can do better by selling these loans to experts in collations, and take a very small discount , rather than employ people with that expertise themselves. Most mortgage lenders do the exact same thing. The difference is, most lenders don't have a huge short position who try to make a normal business event sound so bad to hopefully drive the stock down.
4- What about the 1.9 million in fraudulent loans??
You have been reading the propaganda of the shorts again. Why not read the company's own press releases. They fired 45 brokers who placed these loans for Home. They announced that the total mortgages issued by these brokers over the prior two years amounted to about 1 billion. Note this was not the total of mortgages where they falsified the income, this was the TOTAL mortgages issued of all these brokers over 2 years. Later, they did another press release saying in the last FIVE years the TOTAL mortgages issued by these brokers totalled 1.9 billion. You are just quoting from the short sellers propaganda- look at the facts. They have now reviewed all 1.9 billion mortgages. and guess what, about 5.5 to 6% had incorrect incomes on their applications. Home is renewing the other 95% of the 1.9 billion mortgages,. so the so called fraud was on about 100 million or 300 mortgages out of 1.9 billion. the default rate on these mortgages was less than 1/10th of 1%.
What concerns me is that you and many others take their info on Home from the constant twisting of facts by the short crowd. I would trust the audited financial statements far over their statements which are always meant to drive the stock price down.
The stock is sp low given earnings and future earnings that its a steal for one of the big banks to put in a takeover offer at 40- 42 bucks and steal the company at less than 9 times 2017 earnings.