A Family Affair At Home Capital Group: Did Re-Charge Just Open Pandora’s Box?
The Friendly Bear, 29 September 2016
We published a report on August 23rd exposing a peculiar relationship between Home Capital Group (OTCPK:HMCBF) (HCG.TO) and a previously undisclosed mortgage company called Re-Charge. In response to our report, Home Capital Group put out a press release making a series of claims that downplayed the significance of Re-Charge. Some of the main claims in the press release were as follows:
That “in the normal course of its business, HCG from time to time sells loans to third parties, when loans require work-outs or restructuring.” That “loans sold to all third parties since 2013 totaled less than $125 million” in the context of a “current on-balance sheet total loans portfolio of $18.1 billion.” That “Home Trust has not sold any loans requiring work-out or restructuring to any third party, including Re-Charge Corporation, since September 2015.”
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Are Short Sellers Right About Home Capital Group Inc.?
Nelson Smith, 25 August 2016
Tuesday was not a good day for Home Capital Group Inc. (TSX:HCG) shares. An anonymous author identifying as “The Friendly Bear” wrote a scathing piece about the company on the investing website “Seeking Alpha.” The article investigated the company’s relationship with a mortgage brokerage called Re-Charge Corp.
Essentially, the dirt goes something like this.
Home Capital sold mortgages to Re-Charge in the autumn of 2015 on at least 14 different occasions. Many of these mortgages were on real estate in Brampton, Ontario, which insiders view as a place where mortgage fraud is common. Thus, the author of the article hinted that the reason why many of these loans were sold is because borrowers were either behind or in default.
Additionally, one of the principals of Re-Charge Corp is William J. Walker, a lawyer who was named to Home Capital’s board of directors in November 2015. This relationship between Walker and Re-Charge was never disclosed to shareholders. In fact, the relationship with Re-Charge was never disclosed.
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Home Capital stock in turmoil after anonymous short seller’s post
TAMSIN MCMAHON, 24 August 2016
Shares of Home Capital Group Inc. were on a roller coaster this week after a popular investor website accused the company of hiding losses by selling bad mortgages to a firm run by one of its board members.
A report posted by someone identifying as a Home Capital short seller called “The Friendly Bear” on the website Seeking Alpha on Tuesday highlighted more than a dozen mortgages that Home Capital transferred last year to a mortgage brokerage called Re-Charge Corp, based in Ancaster, Ont. One of Re-Charge’s directors is William J. Walker, a partner in the Hamilton office of law firm Gowling WLG. Home Capital appointed Mr. Walker to its board as an independent director last November.
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