Last year was challenging for Xceed Mortgage, but Chairman/CEO, Ivan Wahl, has a “renewed sense of optimism” for 2010.
First the bad news…
- Net income last quarter was 1/2 of what it was a year ago—thanks to “a reduced net gain on the sale of mortgages and sharply lower securitization income.”
- Xceed’s loss for the year was $3.3 million vs. a $12 million loss the prior year
- Revenue for fiscal 2009 sank from $22.3 million to $9.4 million.
- Wahl says: “An increasing number of Canadians still are unable to renew their mortgages if their overall credit condition has not improved sufficiently for them to qualify for an insured mortgage.” Many of them will be stranded come renewal time.
Interestingly, despite losing money in 2009 (see earnings), Xceed underwrote 46.3% more mortgages. One might expect that more mortgages = more profit. Not last quarter. (Although Xceed did trim its deficit for the year.)
Xceed said that 2009 left it with “lower-spread margins than previously enjoyed.” An industry-wide liquidity shortage and warlike competition in the insured mortgage market (the only market Xceed now plays in) didn’t help.
The good news…
Xceed Mortgage plans to become Xceed Bank, as we wrote back in August. Wahl said that bank status will give Xceed “a new and important avenue for accessing stable capital at a reasonable cost” and will “significantly increase our underwriting capacity.” It will also give Xceed a way to get back into more profitable non-prime lending.
Wahl says, “We believe that the application process is making progress, but the timing of any approval is entirely up to OSFI.”
Other interesting notes from Xceed 2009 MD&A.
Page 5: While Xceed is “winding down its uninsured portfolio … the Company successfully renewed $34.7 million of uninsured mortgages within the securitization trust.”
Page 5: If approved for bank status, “the Company also believes, operating within the OSFI guidelines, that it will be able to provide financing options to some of its customers that have good payment records but with few reasonable alternate financing alternatives.”
Page 15 and 17: “The Company has
assigned responsibility for the servicing of its mortgages to the largest Canadian third-party servicer of mortgages.”
“The Company has entered into a sub-servicing agreement with MCAP Service Corporation as the sub-servicing agent
of its mortgage portfolio.”
I wish GMAC would make some similar announcement regarding its insured (and even uninsured) mortgages. I am a GMAC customer with an insured (Genworth) 5-year fixed mortgage with a 25-year amortization. Because of rumours I heard, I made an inquiry by email last September. GMAC replied that it was true that they were “no longer renewing” their mortgages in Canada.
My end of my term is not until mid-2011. Would it not make sense for GMAC to pass off its unwanted Canadian mortgages, or at least its insured ones, to a new buyer? With things perking up in the housing world, I expect one could be found. Aren’t insured mortgages a virtually risk-free investment?
In any case, knowing GMAC, I don’t expect them to tell me anything official until the 11th hour, and I hope to have made new arrangements by then.