Terence Corcoran: Home Capital Group Didn’T Just Fall From The Edge Of A Cliff — It Was Pushed

Financial Post ~ May 2nd, 2017

By now most Canadians have likely seen the Home Capital Group Inc. stock graph, a Rocky Mountain plunge that began April 19 at $22 before hitting bottom a few days later at $6, wiping more than $1 billion off the value of one of Canada’s most successful non-bank mortgage lending enterprises.

In the inevitable media aftermath, Home Capital has morphed from an alleged local corporate scandal into a potential trip wire for a major meltdown in the Canadian mortgage market. In one case, the circumstances surrounding Home Capital’s fall were said to be similar to the 2008 collapse of Wall Street’s Lehman Brothers, which triggered the U.S. sub-prime lending crisis and the Great Recession.

That outrageous claim might seem plausible to anyone who has not followed the factual background to the Home Capital meltdown — a mob that appears to include most of the media. Home Capital is not Lehman and there is no mortgage-lending crisis in Canada (at least not yet). Nor is there even any real scandal at the company which — until April 20 — had $28-billion or so in assets and a solid profit outlook.

So who’s really killing Home Capital? The answer, Dr. Watson, is to be found in knowing who alone was standing on the edge of the cliff when the company began its unexpected plunge in value: The Ontario Securities Commission.

On April 19, OSC staff released a “statement of allegations” against the company and its three top executives. According to the OSC, Home Capital — including the highly respected Gerald Soloway — allegedly failed to adequately disclose certain “material” developments in its mortgage lending operations. They had also issued “materially misleading” information and “falsely certified” an annual report.

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