Subprime a US-only Problem

Bob Ord, CEO of Mortgage Architects, reaffirms in this Toronto Sun article that Canada should be immune from the subprime fiasco hammering our neighbours to the south.

For one thing, Canadian lenders are “paid for the deficiency on sale, and can pursue wage garnishees.”  50% of Canadian mortgage defaults therefore end up “curing” themselves.

That’s not to mention the fact that Canadian mortgage delinquencies are currently about 3%, versus 14% in the U.S. (according to the story).

  1. Melanie,
    I appreciate the blog. The full text of the Mortgage Architects report is here. It “borrows” very heavily from Benny Tal’s report and the Xceed report. Bob Ord (former chief bottle washer at Mortgage Intelligence) does offer some added value with his comments about the regulatory environment and the loss severity comaprison.
    There is a danger when comparing Canadian and U.S. “subprime” markets. In the U.S., subprime means subprime only and not Alt-A or Jumbos. While in Canada
    the media and analysts tend to lump the two together into a Canadian subprime or “non-traditional” category.
    In 2006 U.S. subprime purchase originations were about 600 billion and Alt-A was about 400 billion more. The total stock of subprime morgages in the U.S. is about 1.4 trillion (13.7% of the the total 1-4 unit family mortgages in 06q4). In Canada, the whole stock of “non-traditional” mortgages is only about 15 to 17 billion C$. That is less than 2.5% of total residential mortgages outstanding. That is to say that all these reports are correct to say that the Canadian and U.S. situations are completely different and that there is
    little immediate risk to Canadian lenders or to the economy in general.

  2. Hi James,
    Outstanding information! Thanks so much for your comments.
    In previous posts I too have tried to stress the other differences between our subprime market and that in the U.S.
    In this latest post, my goal was primarily to note Canada’s regulatory differences (as articulated by Bob), which you mentioned as well.
    Your delineation of what “subprime” comprises in each country is indeed a key point.
    Anyways, thanks again. We welcome your insights any time!

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