A tiny Canadian mortgage lender suddenly finds itself in the spotlight as its stocks plunge. It is facing a run on deposits and regulators are ready to review the company’s practices.

All of this points to a potential crack in the foundation of Canada’s seemingly unshakable housing market. According to a report by Bloomberg, the cracks started to form when the company allegedly failed to review a number of questionable mortgages brought in by outside brokers. Some 45 brokers falsified income information on borrowers, prompting Home Capital to cut ties with them, leading to a drop in new business. Ultimately, this piqued the interest of the Ontario Securities Commission, which determined that the company misled its investors when it didn’t disclose the fraud for five months.

The company’s stock has plummeted by 75 percent, dropping its value to about $515 million (CN) from a high of about $3.5 billion (CN).  Today, the company doesn’t have a strong deposit base and can’t fund new mortgages. It has hired investment firms to consider a sale with little success.

Everyone is asking about a bubble ready to pop. Markets in Toronto and Vancouver leave everyone waiting with baited breath. As prices in Toronto jumped 33 percent in March from a year earlier, lifting the average price of a detached home to almost C$1.6 million. Vancouver prices surged even higher.

There is some concern North of the Border that the issues could spread to other lenders. There is a competitive market in the alternative mortgage space, which caters to those who can’t get financed by the larger banks. One difference from the U.S. housing crisis of a decade ago, there is little evidence of faulty loans so far.

Right now, it doesn’t seem that Home Capital will be the needle that pops the Canadian housing bubble. It makes up 1 percent of the Canadian mortgage market. Trouble will loom if other lenders see similar deposit runs and retreat from the segment or if it scares off potential clients. Then, Canadian real estate agents will be left to wonder what is next.

The company received a lifeline of sorts on May 9, when it agreed to sell as much as $1.5 billion worth of mortgage renewals to an unidentified buyer as Home Capital looks to shore up its balance sheet and restore investor confidence. According to Jaeme Gloyn, an analyst at National Bank of Canada, the lender also plans to shift its strategy away from funding mortgages from its deposit base.

“Home Capital solved a significant near-term liquidity risk, but acknowledged the current state of the business model is broken.”