Home Capital has responded to a claim that it sold non-performing loans to a third party in a bid to improve its balance sheet.
, in the normal course of its business, from time to time sells loans to third parties, when loans require work-outs or restructurings,” Home Capital said in a release Wednesday. “All loans sold to third parties are accounted for, with any losses reflected in write-offs for the related period.
“Loans sold to all third parties since 2013 totaled less than $125 million, and was approximately $12 million in 2015 and $nil in 2016 on a current on-balance sheet total loans portfolio of $18.1 billion.”
Home’s response comes on the heels of a report by the investment website Seeking Alpha that alleges the lender has been transferring loans to a company called Re-Charge Corporation, which is allegedly partially controlled by one of Home Capital’s board members.
“We hypothesize that the only logical reason a growth-starved lender would transfer loans off balance sheet is to hide non-performing loans,” the author of the Seeking Alpha’s report wrote.
The author, The Friendly Bear, provided insight into the research method and how he came to the conclusion alleged in the article.
“Our supporting research in this report includes on the ground insight. Through on the ground field work and our internet sleuthing, we began to suspect ties between Re-Charge and HCG that we were able to prove through our retrieval of public filings,” the Friendly Bear wrote. “For background, our research involved sending investigators to Canada to dig up public documents that can only be retrieved physically from Canadian government offices.”
In response, Home Capital said it has not sold any loans to Re-Charge Corporation since last year.
calculates provisions for credit losses in accordance with applicable accounting requirements and incorporates any losses from loans sold to third parties into the historical data used to calculate the collective allowance,” the lender said. “Home Trust
has not sold any loans requiring work-outs or restructurings to any third party, including Re-Charge Corporation, since September 2015.”