The Story Untold

The subprime lender universe has shrunk considerably since August 13, 2007, when Canada's ABCP market went into a tailspin. 

Today, just a handful of mainstream lenders remain for people who can't qualify for an insured mortgage.  These lenders could pare back their offerings even further in the next few months or so.

It will probably be interesting to watch what happens after August.  That's because August is the one-year anniversary of the ABCP debacle.  Starting in August, a number of non-bank lenders will have to renew their one-year agreements with the investors who purchase their mortgages.  Some industry experts think investors will be far less inclined to renew at favourable terms time around, or renew at all.

What can borrowers expect?

• It is reasonable to assume that "quick close specials" will become rarer by August because funding will dry up for some of the non-bank lenders promoting them.
• Xceed, Accredited, GMAC, and others are now out of the uninsured mortgage business.  That's reduced choices and put credit-challenged homeowners' backs to the wall, especially those that need to renew their mortgage.  Here's one story about a family who had to sell their house recently because they couldn't get anyone to renew their mortgage--and they didn't even miss a payment.
• Private lenders and MICs are becoming more popular by the month.  If you're credit is bad, and the bigger non-bank lenders can't help you, they may be your best hope.
• According to sources, CMHC will reportedly no longer back lenders in the mortgage bond program if those lenders don't enforce more stringent borrowing guidelines, like 32%/42% GDS/TDS ratios.  As a result, flexible lenders may have to tighten their lending criteria.   "A" clients who are "on the bubble" may be forced to consider higher cost "B" lenders.
• We'd be surprised to see this, but one respected source has told us that support for 40-year amortizations and 100% financing could evaporate in the not-so-distant future, thanks to pressures on insurers and the government.

Despite the above, don't lose hope if you're credit-challenged--especially if you have a down payment of 15% or more.  Consult a mortgage planner for all the available options that might apply to your situation.  Find a mortgage planner that specializes in private lending if need be.