Lender stock prices plunge as investors pull money out of monoline lending channels.
In the early 1900’s miners, when they would descend into a mine. Would bring with them a small caged bird such as a Canary. The technology did not exist back then to tell them if dangerous gases such as carbon monoxide were present in the tunnels. So they used these tiny little birds as an instrument. The gases would kill the canary before killing the miners, this would give them warning to leave the tunnels and exit to safety. Today we apply this term to anything that has a sensitivity to adverse conditions.
lenders in Canada. One of the biggest hit was First National Financial Corp (TSE:FN) with a Market Cap of over $1.5 Billion it saw its stock price plummet from a high of $32.23 on Monday to a low of $23.27 by Friday midday. The stock closed on Friday at $25.31; Is this our canary in the mine?
Unfortunately, this is happening behind the scenes quietly and no one seems to be talking about it. People are more concerned about what is happening with Kim Kardashian and Donald Trump.
So you say Terry who cares it’s just one lender. WRONG!!! This new policy change by the federal government, Has impacted all the monoline lenders in Canada they have all lost 13%-26% of the stock prices. I’m talking about First National because it is currently one of the biggest and if they fail they will bring down a part of the market with them! What very few people know is that Mono Line lenders serve a very important roll in the Canadian Mortgage market. They provide the market with competition, they are the ones that drive prices on mortgages low, if it was up to the banks we would all have 5 year fixed rates at 4.64% and we would have to give our first born child.
The banking industry also relies heavily on these monolines. When a bank can not place mortgage funds by themselves they use Mono lines to place the business for them. All big banks in one way or another need these monolines, as we are talking about First National lets look at its anatomy a little bit closer. The main Investor behind First National is TD Bank they provide mortgage funds to them so that they can place business that otherwise, they would not be able to. FN also plays another important roll in the Market as they are the ones that do all Underwriting for TD Bank. Oh, you did not know that did you. When you go and apply for a mortgage at TD bank the underwriting is done at First National.
Paradigm is also a monoline lender. The main investors behind them are National Bank of Canada and RBCDS ( Royal Bank of Canada Dominion Securities). Paradigm has recently also signed a contract with Manulife Bank to provide them with all the underwriting for the residential mortgages.
The list goes on and on. The bottom line is that monoline lenders are an integral part of the fabric of our Real estate and mortgage market. If they fail the market will fail.
Please make your voice heard and sign this petition if you have not already done so. Together we have a voice against greedy Banksters.
As always I welcome your comments and your thoughts. I can be reached at 514-680-4674