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Mortgage Investors Demand Risk Premiums

mortgage-risk Investors are demanding higher rates of return on Canadian mortgage-backed securities.  Here’s a great article from MyNext Mortgage’s Boris Kogut that explains the repercussions.

According to Kogut, “The commercial paper market, one of the
primary securitization sources of funding for over $30 billion of non-insured Canadian mortgages, has come to a complete
standstill.”  Interest rates in this mortgage finance market are up over 1/2% in just a few short weeks.  

What does it mean to homeowners?  Well, for one, Canadians who need “alternative” mortgage products can expect to pay higher rates–at least in the short-term.

In addition, the breadth of subprime Canadian mortgage options available to these borrowers may be limited for a while.

Nevertheless, Kogut says, “Canadian mortgage portfolios
continue to exhibit strong credit performance with relatively low levels of arrears and losses.” 

It’s still a totally brighter picture up here than it is south of the border.