Home Capital stock closed today at $5.99, down 65% on the day and 84% from last May.
There’s now speculation in the media that OSFI, the banking regulator, will wind the company down or force a sale. It’s important to note that’s pure speculation until proven otherwise. No one can count it out just yet.
Apart from its banking licence, the company does have things going for it that could attract potential partners, namely:
It originates highly profitable non-prime mortgages as well as anyone in this country
It’s had a record spring (so we hear) with respect to non-prime volumes
The default metrics of its mortgages, even those in the fraud pile, outperform industry averages
Home Capital’s remaining staff, at least the ones we know, are good honest people
Personnel who were connected to the reported fraud will be long gone
It has long-standing institutional ties (e.g., RBC and other reputable names have referred a significant amount of non-prime business to Home. Institutions have continued funding its loans, even after the fraud was uncovered).
Non-prime is its core business and non-prime borrowers are often just happy to get a mortgage at all, regardless of who it’s from (albeit depositors don’t have the same degree of understanding).