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Mortgage Broker News | 19 May 2017, 07:40 AM Agree 0
Analysts say that the Home Capital situation bears similarities with that of a U.S.-based subprime lender prior to the 2008 crisis
  • Jim D | 19 May 2017, 10:31 AM Agree 0
    I don't agree with these "observers" who are comparing Home Capital with the US Sub Prime Crisis.

    The Sub Prime Crisis arose from mortgages that were structured to fail. Mortgages were granted with 18 month "teaser" rates to unqualified borrowers. To compound the matter, the sub prime paper was hidden in a bundle with good debt and rated as AAA to al the institutions. When the teaser rates expired, and defaults skyrocketed, the whole scam was exposed.

    My experience with Home Capital is that they are very conservative with appraised values particularly in equity takeout and refinance situations.

    What is their default rate? Losses from default??
    I think this crisis of confidence stems from regulators discovering some sloppy underwriting practices.
    Not an actual massive default A La Us Sub Prime.
    The fact that other banks are willing to buy their book of business shows the underlying strength of their portfolio.
    Jim D
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