Major Mortgage Lender's Meltdown has Serious Implications for Homebuyers in Mississauga

The housing market is a hot topic in Mississauga right now, and when a big player in the market shows signs of going under, anyone looking to purchase a home should be on the alert.

A company that provides mortgage-lending services to Toronto residents saw its stock crash on the TSX last week.

Home Capital Group Inc is a holding company and operates through its principal subsidiary, Home Trust Company. For the past few months, Home Capital has been under fire from the Ontario Securities Commission (OSC) for allegedly falsifying mortgage applications.

In a news release, Home Capital said that they intended to cooperate with OSC staff, and had suspended some brokers and brokerages as a result.

On Wednesday, however, Home Capital faced a deposit withdrawal of $472 million, and on Thursday they subsequently faced a withdrawal of $290 million. Though they've secured a commitment for a $2 billion credit line for support, Home Capital may be on a downward spiral that mostly comes back to trust issues for shareholders, stemming from the OSC's allegation that Home Capital falsified mortgage applications.

The fact remains that people are pulling their deposits, and this may be an indicator of the housing bubble bursting, according to CityNews.

For those that haven't entered the housing market and were planning to, if Home Capital ceases to exist, that means there will be one less option in the housing market for taking out a mortgage, making it more difficult for potential buyers to invest in a home.

Home Capital is popular for offering subprime mortgages - mortgages that are easier to obtain for anyone who doesn't qualify for a mortgage from a larger bank. Subprime mortgages have been a major driver in the housing market, which means that housing affordability is at stake yet again for anyone in Toronto or the GTA.

According to CityNews, though this isn't a problem for people using larger banks (RBC, TD, Scotia, and BMO, to name a few), it is a problem for people looking to take out subprime mortgages or use a non-bank mortgage lender. Home Capital's stock has crashed by 64 percent after OSC's accusations, and their running out of money may be an early warning sign of the housing market crashing, or worse, a recession, since the housing market in Toronto is supported by subprime loans.

As housing prices continue to skyrocket in Mississauga, potential homebuyers need all the help they can get from mortgages and loans, especially if they plan to invest in a home anytime soon.

How badly Home Capital's crash will affect residents remains to be seen.

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