The Alternative Mortgage Market

Here’s some interesting tidbits taken from CAAMP’s Alternative Lending Conference last week in Toronto.

  • Canada will have $800 billion of mortgages outstanding this year.
  • Subprime loan volume will more than double in Canada within 5 years, to almost $70 billion.
  • Canada’s subprime markets consists mostly of high-ratio uninsured mortgages.  In other words, most subprime borrowers put down less than 20% and don’t qualify for mortgage default insurance (from CMHC, Genworth, etc.).
  • When will U.S. subprime woes end?  Ivan Wahl, Chairman of Xceed Mortgage, says we’re “only 1/4 of the way through (interest rate) resetting in the U.S.”  That means a lot more defaults are on their way.
  • subprime2 Several Canadian lenders have halted their subprime mortgages thanks to a deteriorated commercial paper market (commercial paper is how many non-bank lenders finance their mortgages).  When the commercial paper market does bounce back, expect subprime interest rates to remain significantly higher for several quarters at least.
  • In the future look for more mortgages geared towards self-employed borrowers who’ve been on the job less than 2 years.  Two years is the standard tenure lenders look for on “business for self” applications.
  • 300,000 Canadian rent despite qualifying for a mortgage.
  1. Melanie,
    Thanks for the update. I will be attending the Ottawa CAAMP Alternative Lending Conference on Oct 22.
    So far prime loans seem to be unaffected by the ABCP / higher spreads storm. But the major banks have raised a lot of cash in the past month or so by issuing new debt. Also National (all maturities) and Scotia (18 month) have temporarily boosted posted rates on non-redeemable GICs. They could be raising cash for future storms.

  2. Hi Paul, One of these days we’ll have to meet up. If you’ll be at CAAMP’s December conference in Toronto do let me know.
    At any rate, the only side effect so far in the prime market has been with variable rate mortgages. Lots of lenders have raised (reduced their discounts) on prime variable rate mortgages lately–thanks to tightening BA spreads. Scotiabank was the latest, uping some of their variables 1/4 point today. We’ll keep a close eye on what happens next…
    Have a great weekend,

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