Nascent national subprime mortgage bond market at risk, observers warn
The current struggles of Home Capital Group Inc. are stifling the prospects of a national subprime mortgage bond market as at least two deals are on hold in Canada.
According to observers (who requested not to be identified), investors in the bond sales are holding off and waiting to see how the alternative lender’s crisis will resolve itself. One of the deals is marketed by the Royal Bank of Canada and backed by loans from Home Capital and Equitable Group Inc., while the other one would be backed by loans from MCAP Corp., Bloomberg reported.
Officials with Home Capital, Equitable, and MCAP declined to comment on the matter, but Ridgewood Capital Asset Management money manager Mark Carpani noted that this hesitation about bond sales isn’t unique to these three companies.
“At the moment, investors are a little bit gun-shy,” Carpani said.
In the wake of allegations that Home Capital has failed to properly disclose an internal probe into fraudulent mortgage applications, alternative lenders are now facing tighter scrutiny from regulators.
This month alone, Home Capital had to draw out a $2 billion line of credit to counteract a flight of customer deposits and a dramatic plunge in its shares since the end of March.
Related stories:
Home Capital in the media
BMO bundling uninsured mortgages into bonds
According to observers (who requested not to be identified), investors in the bond sales are holding off and waiting to see how the alternative lender’s crisis will resolve itself. One of the deals is marketed by the Royal Bank of Canada and backed by loans from Home Capital and Equitable Group Inc., while the other one would be backed by loans from MCAP Corp., Bloomberg reported.
Officials with Home Capital, Equitable, and MCAP declined to comment on the matter, but Ridgewood Capital Asset Management money manager Mark Carpani noted that this hesitation about bond sales isn’t unique to these three companies.
“At the moment, investors are a little bit gun-shy,” Carpani said.
In the wake of allegations that Home Capital has failed to properly disclose an internal probe into fraudulent mortgage applications, alternative lenders are now facing tighter scrutiny from regulators.
This month alone, Home Capital had to draw out a $2 billion line of credit to counteract a flight of customer deposits and a dramatic plunge in its shares since the end of March.
Related stories:
Home Capital in the media
BMO bundling uninsured mortgages into bonds
