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Originally Posted by Bonka
Are mortgages going into default? From what I know client confidence is causing a run on the bank the mortgage assets are unrelated.
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From the jist of the quick reading I did...people were withdrawling alot of money from their HCG savings account and some big institutional investor wanted a 2 bill LOC, which is at 10% interest or something, as a guarantee....
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The loan facility, combined with Home Trust’s current available liquidity, would give Home Trust access to more than $3.5 billion in total funding, more than twice the amount of outstanding high interest saving account balances, the company said.
As part of the agreement, Home Trust would be required to pay a non-refundable commitment fee of $100 million and make an initial draw of $1 billion. The interest rate on outstanding balances would be 10 per cent, and the standby fee on undrawn funds would be 2.5 per cent, Home Capital added.
Gloyn said this translates to an effective interest rate of 22.5 per cent on the first $1 billion, declining to 15 per cent if fully utilized.
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http://business.financialpost.com/ne...posits-decline
As a result of the lack of confidence and big hit, this stock took a dump.
Should HCG go under, big banks would buy their mortgages, I guess? It'd be interesting to see how many are good mortgages the banks would want to buy and not, since HCG canned some mortgage brokers recently for fraud.
A collapse of the market. I doubt it. HCG only owns about 4.5% of the mortgage market, to put things in perspective. The bigger banks have a more stringent screening policy...I hope.