Industry wades into latest Home Capital litigation

Industry wades into latest Home Capital litigation

Industry wades into latest Home Capital litigation An earlier version of this story misquoted Home Trust as a private lender

With the news of West Face Capital Inc.’s lawsuit against Home Capital making the rounds, industry professionals don’t think the former has much of a case, with one going so far as to call the litigation buyer’s remorse.

The $70mln suit filed late last week, and which additionally named three former Home Capital executives, alleges West Face took a large short position between 2013 and 2015 that was based on “inaccurate, incomplete and misleading” public disclosures.

“They probably bought at the peak and it did nothing but come down from there,” said Ajay Soni, a senior mortgage broker with Invis, adding that the litigation is likely the result of pressure from investors. “What they’re saying is ‘I wish we could have a refund.’

“But I don’t have all the information, so it’s a tough one to comment on.”

Soni believes Home Trust will bounce back, as it’s already shown signs of recovery from recent troubles stemming from mortgage fraud in 2015, however, he also alluded to it being open season on the company.

“Home trust settled with Ontario Securities (Commission) but weren’t found guilty of anything either, so it seems like another kick of the can,” he said. “I don’t think their stock has even gone down. I think Home Trust is ready to get back to where they were before.”

Soni also said it’s telling that other people who bought Home Trust shares within the same period of time have not launched lawsuits against the company.

Mortgage broker Dustan Woodhouse believes Home Trust’s recent turbulence has been blown out of proportion and will, unfortunately, echo for years to come.

“If nothing else, this puts every other lender on notice to have their ducks in a row because these stories don’t end quickly” he said. “Hometrust fills an important niche with a business model valuable to many Canadian families — helping people get back on their feet before returning to the A-side. Hopefully Hometrust will be able to put this all behind them soon.”

Related stories:
$70M lawsuit filed against Home Capital
Laurentian's flawed mortgages echo Home Capital troubles