TORONTO, Oct. 6, 2016 /CNW/ – Street Capital Group Inc. (“Street Capital” or the “Company“) (TSX: SCB), today provided a business update following the announcement of new mortgage insurance rules by the federal government’s Department of Finance.
On October 3rd, 2016 the Department of Finance announced changes to the mortgage insurance rules that will affect rentals, refinances and mortgages where the property value is in excess of $1.0 million, as well as the requirement to apply a qualifying mortgage rate stress test to all insured mortgages. The most significant impact is with respect to mortgage refinancing and the new qualifying rate stress test requirements.
Street Capital is currently reviewing the impact of these changes with respect to its current and future business plans. The Company’s current view is that these changes will be most impactful for those lending institutions that solely rely on the availability of mortgage insurance in order to access funding for the mortgages they originate. This is not the case for Street Capital, which has other sources of funding available.
In addition, as previously disclosed, Street Capital is in the final stages of its application to the Minister of Finance to obtain a Schedule I bank licence. The Company does not expect that any of the most recent changes to the mortgage insurance rules will negatively impact its progress toward becoming a Schedule I bank and remains confident that it will receive a Schedule I bank licence by the end of 2016. The bank platform would allow Street Capital to access additional sources of balance sheet liquidity, which when combined with its current operations, would strategically position the Company well in order to support its prime mortgage business as well as take advantage of the growing near-prime segment.
The Company will carefully monitor the market during the roll-out of the changes and provide updates as to the impact on its future business when appropriate. While the Company expects that in the near-term there may be a negative impact on new prime mortgage originations generally in the market, the Company believes it is strategically well placed for future growth and profitability given its planned transition to a Schedule I bank.
About Street Capital Group Inc. (www.streetcapitalgroup.ca)
The Company (TSX: SCB) is a financial services company operating in residential mortgage lending through its wholly owned subsidiary Street Capital Financial Corporation (www.streetcapital.ca), one of the largest non-bank mortgage lenders in Canada. Founded in 1979 and a public company for more than a quarter century, the Company’s goal is to create shareholder value by building a substantial, diversified financial services organization. Street Capital Financial Corporation sources its mortgages primarily through a network of independent, high quality mortgage brokers across Canada with whom it has built relationships. Street Capital Financial Corporation offers a broad lineup of high ratio and conventional mortgages, to prime borrowers, and sells the mortgages it underwrites to top-tier financial institutions. Business revenues are almost entirely from the gain on sale of mortgages.
This release contains certain forward-looking statements that are based on management’s exercise of business judgment as well as assumptions made by, and information currently available to, management. When used in this document, the words “may”, “will”, “anticipate”, “believe”, “estimate”, “expect”, “intend”, and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as outlined in the Company’s Annual Information Form and other filings made with securities regulators, which are available on SEDAR (www.sedar.com). These factors include, without limitation: timing and results of banking application process, expansion opportunities, technological changes, regulatory changes (including mortgage insurance rules), and changes to the business and economic environment, including, but not limited to, Canadian housing market conditions and activity, interest rates, mortgage backed securities markets, and employment conditions that may impact the Company, its mortgage origination volumes, investments and capital expenditures, and competitive factors that may impact revenue and operating costs. Any of these factors, amongst others, could cause actual results to vary materially from current results or from the Company’s currently anticipated future results and financial condition. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.
SOURCE Street Capital Group Inc.