Is this the start of the end? Home Trust Meltdown
I’ve been following the story of Home Trust and Home Capital meltdown over the past week and while it’s cause for concern for buyers, it’s ripple effects will be felt for sellers as well but to what extent is yet to be seen. If you don’t know who home trust is, let me give you a run down:
Home Trust is the largest alternative financing option available in Canada for individuals and companies who aren’t able to get financing on their property purchases or refinances via the traditional banks. They offer uninsured mortgages to buyers who don’t have stellar credit history or are self employed. I’ve personally used Home Trust for mortgages in the past along with other lenders such as Equitable Trust (now Equatable Bank) as sometimes banks don’t want to work with buyers like myself who work on commission. These lenders are also how investors who are purchasing multiple properties are able to purchase and eventually sell properties as they usually come with short terms (higher rates and one year terms on most mortgages).
Following are some articles that you should definitely read in order to get a better understanding of the issue at hand
Home Capital Shares Plunge After Lender Seeks 2 Billion Line of Credit
What exactly is Home Capital and why is it so important to the mortgage industry?
Why is this important to you?
While the exposure of Home Trust in the Canadian Real Estate Market is of a minion (2% with 20 billion portfolio versus $1.3 Trillion of the big banks) there will be a credit crunch for investors
If you’re working on your property purchase and have a commitment from Home Trust or another other Trust… Reach out to them and find out if you’re commitment is still valid and can be fulfilled.
If you have an investment property on the market for sale, ensure to review the details of this article with the buyer and his agent to make sure they are able to close the purchase.
What I’ve seen so far in the market
Last week was interesting because we had announcements coming relating to real estate specifically Toronto which created a vacuum of buyers which were evident to me via my search stats and inquiries. We saw a noticeable decrease in number of inquiries (our stats doubled!) which showed that buyers were hesitant in moving forward.
The budget was just announced yesterday and we are new seeing the reactions. While overall the budget is a balance one, it will be interesting to see what actually passes. I will write another article outlining my thoughts on the budget for your review
What do you think the impact will be of Home Trust and the budget that was just announced? Do share your thoughts with me in the comment section below.