Counsel Corporation’s stock price is up 42% year-to-date, thanks in large part to its mortgage lending subsidiary Street Capital.
Counsel acquired Street in May 2011. From then until year-end 2011, Street Capital made its parent $8.2 million on $2.5 billion in mortgage volume.
Street ended the year as the fifth biggest mortgage lender in the broker channel, by market share. That’s up from 6th place one year prior.
What will be more interesting, however, is watching how Street fares in 2012. Like many lenders, it has been a heavy user of bulk insurance, which helps lenders reduce funding costs and aids with securitization.
But things changed when CMHC cut back on bulk insurance in January. Shortly thereafter, Street had to axe its conventional stated income, equity and rental programs. It must also rely more heavily on private default insurance (which can lead to higher funding costs).
Despite that, Street Capital President Paul Grewal suggests Street is comfortable with its position. “We have a strong foundation with institutional investors and private mortgage insurers,” he says.
That’s good, given that Street has apparently suspended its relationship with CMHC on conventional mortgages. A Counsel Corp. spokesperson tells us: “As with all participants in Street Capital’s industry, Counsel continues to monitor issues surrounding CMHC portfolio insurance.” (CMHC’s loss is the private insurer’s gain, but that’s a separate story for another day.)
The story for now will be Street’s management. Given the headwinds they’re facing, if they can best the company’s 2011 performance, it’ll be an impressive accomplishment indeed.
Rob McLister, CMT
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