Home Capital's Swoon Has Investors Mulling Contagion Odds

After the alternative-mortgage lender set up a C$2 billion ($1.5 billion) credit line to offset a run on deposits, Mawer Investment Management Ltd.'s Jim Hall is recalculating the odds of a contagion widening across one of the world's strongest financial systems.

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Mawer, which oversees more than C$40 billion in assets, sold about 2.8 million shares, or a 4.3 percent stake, in Home Capital in the past week, joining another Calgary-based money manager, QV Investors Inc., in exiting its investment amid the imbroglio consuming the Toronto-based lender.

Home Capital has been struggling since April 19, when Ontario's securities regulator accused management of misleading investors over how the firm handled a review of mortgage brokers who falsified documents about borrowers' income. Home Capital shares plunged 65 percent the following day, and the lender has since disclosed an accelerating pace of declines of its high-interest savings balances -- deposits used to help fund its mortgage business.