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The entry to the Home Capital Group's headquarters is seen at an office tower in the financial district of Toronto on May 1, 2017.Chris Helgren/Reuters

Five years ago, Home Capital Group Inc. HCG-T was on the ropes. Financier Stephen Smith was one of several investors offering to rescue the Canadian mortgage lender.

Home Capital’s board opted instead to accept a lifeline from Warren Buffett’s Berkshire Hathaway Inc BRK-B-N. In an interview at the time, the Oracle of Omaha said he took a 19.9-per-cent stake because he believed Home Capital could consistently make money serving clients who can’t get loans from banks, because there will always be “a lot of people don’t fit the cookie-cutter approach to borrowing that are perfectly decent credits.”

Eighteen months later, Berkshire sold its Home Capital holding, after earning a 70-per-cent return. The exit helped clear the way for a $1.7-billion takeover bid on Monday from Smith Financial Corp., Mr. Smith’s family holding company. In bidding for a business he has long coveted, Mr. Smith showed he agreed with Mr. Buffett’s take on Canada’s mortgage market and with one of his favourite sayings, “Be greedy when others are fearful.”

At first glance, Smith Financial is paying up, offering $44 a share for Home Capital, a 63-per-cent premium to where the stock closed last week. In contrast, Berkshire Hathaway bought in five years ago for $9.55 a share.

Mr. Smith’s timing is questionable, however, as the takeover comes when Canada’s housing market faces headwinds not seen in a generation, with mortgage rates soaring, home prices softening after a three-decade run and a recession looming.

Contrarian timing and a willingness to pay for perceived quality are hallmarks of how Mr. Smith built a multibillion-dollar financial empire.

No one need warn the 71-year-old of the dangers that come with investing in housing. Mr. Smith filed for personal bankruptcy in 1984 when soaring interest rates torpedoed his first solo venture, a real estate development company. He talks openly about dealing with depression, and the lessons he learned.

His subsequent investments – First National Financial Corp., Equitable Bank and Fairstone Bank of Canada all cater to the same clients that Home Capital serves: customers who, for one reason or another, don’t deal with the big banks. They include recent immigrants, seasonal workers and small business owners who typically pay back loans, but don’t fit a cookie-cutter approach to credit by banks and other mainstream lenders. In recent years, institutional investors such as the Ontario Teachers’ Pension Plan and New York-based Centerbridge Partners began backing Mr. Smith’s ventures.

A deft touch with data underlies all of Smith Financial’s holdings. Mr. Smith was into fintech before there was fintech, backing development of risk management software and working with insurers to create a secondary market for Canadian residential mortgages. While he said Monday he wants to buy Home Capital in part because of the strength of the management team, Mr. Smith will upgrade the business’ systems if he takes over.

In bidding for Home Capital, Mr. Smith told The Globe and Mail he is looking past current economic problems to big-picture trends – the country’s chronic housing shortage, government plans to welcome 500,000 new immigrants each year and strong employment, which means people will have the cash to pay their mortgages.

Smith Financial plans to acquire Home Capital at a time when its valuation – its price-to-earnings ratio and price-to-book value – are relatively low compared with historic levels, according to a report Monday from analyst Phil Hardie at Bank of Nova Scotia. The federal government will need to approve the takeover and Mr. Hardie said Mr. Smith “is likely to be viewed by regulators as a highly sophisticated buyer given his experience in the mortgage finance sector.”

Outside work, Mr. Smith blows off steam on marathon bike rides and back-country ski runs. He’s one of those people who likes to go the distance when they work out, or invest. Berkshire Hathaway’s Mr. Buffett made a decent return from owning a stake in Home Capital for 18 months. By being greedy in the mortgage market when most of us are fearful, Mr. Smith plans to make far larger profits over a generation.

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