If you want to know the winners and losers in Monday’s surprise mortgage rule announcement, peek at lenders’ stock performance.

Traders collectively decided, at least in the short-term, that the visible future is dimmer for second-tier lenders than for their big bank competitors.

The stock prices for most Big Bank challengers took it on the chin today. Here’s the scorecard for a sampling of them, as of Tuesday’s close:

Most major banks performed decidedly better:

Stock prices are partly emotion-driven so let’s see how things shake out in the next month or so. But the immediate opinion of those with money on the line is that Canada’s Big 6 are less impacted by the coming insurance restrictions.

More fallout from earlier today:

• Investors handed Genworth (Canada’s second largest default insurer) its biggest intraday selloff since August 2009. The company estimated that:
  • Roughly a third of transactionally insured mortgages, mostly for first-time homebuyers, would “have difficulty meeting the [government’s] new required debt service test.
  • About half of its “total portfolio new insurance written would no longer be eligible for mortgage insurance under the new low-ratio mortgage insurance requirements.”
• Multiple monoline lenders (including some of the biggest) announced that they were suspending new refinance, rental and/or business-for-self (BFS) originations. Expect more of that to come, unfortunately. These companies are now left wondering how they’re going to finance mortgages that can no longer be insured (mortgage buyers prefer insured product). They simply cannot lend under that uncertainty.

By Steve Huebl & Rob McLister

Last modified: October 5, 2016