RE:RE:RE:RE:RE:RE:RE:RE:Ouch, housing bears got the timing wrong...I think these exist in around 10% of the portfolio, at least in equitable group if memory serves me correctly. These loans are usually at higher interest rates and are junior to the Home Cap or Equitable group loans. In reality, if you look at new buyers accross canada, even the big banks, these loans are more prevalent than most think.
Often they are hidden, i.e. mom and dad lend their kids 20% down to avoid the mortgage insurance or you have a personal LOC and make your downpayment through that. These also have existed for years and years. So I don't think their existance is the catalyst to a financial crisis. You have the right catalyst, ie something that drives people to sell like high unemployment or a credit crisis that blocks renewals from happening and floods the market with houses. Or all the chinese speculators sell their houses at the same time to flood the market.
In reality, between the longs and the shorts, there is some kind of balanced reality. But I don't think Home Capital's current price reflects that balance right now.