“Strategic defaults are not plaguing the Alberta market. We are in a downturn in this province, and there is downward price pressures in the market, particularly in higher end homes, however there is not a wholesale strategic default problem in Alberta at this time,” Dale Koeller, senior underwriter with Calvert Home Mortgage Investment Corporation wrote in the comments section of MortgageBrokerNews.ca.
“Mortgage arrears in Alberta are up over last year, and last year (were) at record lows,” Koeller continued. “Alberta mortgage arrears were 0.28% at date of last report in October, compared to Canada's 0.27%.”
Koeller’s comment was in response to a CBC report claiming the federal government is keeping an eye on the practice of strategic default rates in Alberta.
The practice, which was prevalent in the 1980s when mortgage rates hit astronomical levels, involved clients sending their keys back to their lenders in a bid to walk away from their unaffordable properties.
“We're slowly starting to see it in Grande Prairie and Fort Mac. People saying that we can't make a go of it and mail the keys to the bank,” Real Estate Investment Network senior analyst Don Campbell told CBC News. “In the big cities, not so much because the average sale prices haven't really dropped much, we haven't seen the pain yet. But Calgary is getting pretty tight.”
However, Koeller argues the fear of increased strategic default rates is overblown.
According to CREA’s most recent stats, prices in Alberta fell by 2.7% year-over-year to an average of $381,757 in January of this year.
The unemployment rate in oil country hit 7.4% in January - an increase of 2.8% year-over-year.
It’s no secret many Alberta housing markets have been hard-hit in the wake of falling oil prices, but claims that defaults are out of control are overblown, according to one local lender.