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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.