S&P: Home Capital on watch

S&P said it placed the BBB- long-term and A-3 short-term issuer credit ratings on Home Capital Group Inc. on CreditWatch with negative implications.

The agency also said it placed on negative watch the BBB long-term and A-2 short-term issuer credit ratings on Home Trust Co., along with its BBB senior unsecured debt ratings.

The CreditWatch placement reflects a view that a series of recent events has increased the near-term downside to the operational challenges the company is facing, S&P said.

The company recently disclosed that the Ontario Securities Commission sent enforcement notices to Home Capital and several of its officers and directors. The company also disclosed that it has information about a proposed class action lawsuit filed against it, the agency explained.

These events have increased the near-term downside to the operational challenges the company already is facing, S&P said.

Both events pertain to the bank's disclosures in 2014 and 2015 concerning mortgages with falsified income information, which subsequently led to the suspension of about 45 individual mortgage brokers during the period from September 2014 to March 2015, the agency said.

While Home Capital has stated it believes that its disclosures met requirements, S&P said it believes that the commission's action and the lawsuit increases the risk of reputational damage to the company.

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