MoneyConnect Winding Down

Moneyconnect MoneyConnect has officially closed up shop.  On Friday, the non-prime lender announced the closure of its credit office and the departure of its President/CEO, Moe Forget.

MoneyConnect first ran into difficulties in December and the company released this statement today:  “The international liquidity crisis has seriously impacted our ability to access capital markets based funding. After several months of attempting to secure alternate forms of financing, we regret to advise that we have been unsuccessful in this regard.”

Service for existing customers will not be affected according to the company.

  1. Rob, a few thoughts.
    Yes, Moneyconnect is an insignificant little company, in the tiny 3-4% Canadian subprime [oops non-traditional] mortgage market, but the trend to move away from uninsured non-traditional loans funded through securitization [ABCP, uninsured term-notes] has become clear. This necessity has resulted in a growing number of casualties in the non-traditional mortgage space.
    More lenders are switching [trying to switch] to insured mortgage products that can be sold into the NHA-MBS and Canada Mortgage Bond programs. However, there is much more competition in the insured mortgage space and lenders must first become approved by mortgage insurers (CMHC,Genworth, AIG, PMI) to offer insured products. Traditionally mortgage insurance is mandatory for borrowers with LTV ratios over 80% (if the lender is federally regulated), however lenders even buy insurance for mortgages with lower LTV ratios so that they can be securitized. Although NHA-MBS funding has exploded (up 40% y/y), there is a limit to what it can absorb.
    Home Trust and Equitable Trust (the largest non-traditional lenders) already sell mortgages into the NHA program, and since they are deposit taking institutions, they are not scrambling to dramatically change their product line-up or find completely new sources of funding in a very competitive market. In fact, they are benefiting from decreasing competition in the non-traditional mortgage market.
    Jim

  2. Hi Jim,
    Excellent post. You’re absolutely right about the trends you mention. Virtually the only securitization vehicle working in the market today is the canadian mortgage bond sponsored by CMHC. Without it, multiple lenders would potentially be out of business. We’ll be doing a piece that touches on this in the next week or so.
    Rob

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