Wardle credits the Canadian lending community for spotting the potential danger five years ago.
“Lenders and investors no longer wanted this type of mortgage product as part of their investment portfolio, other than the traditional self-employed programs insured by CMHC, Genworth
, and Canada Guaranty,” Wardle told MortgageBrokerNews.ca.
In a statement, Serageldin portrayed a period of intense pressure as the housing crisis spooked financial markets in 2007 and 2008. In late 2007, Serageldin said he discovered that a portfolio of securities he oversaw was marked much higher than it could have been sold at the time.
Wardle doesn’t see the guilty plea as a signal for the return of subprime offerings here in Canada, but does see it reassuring those who are renewing existing subprime mortgages.
“The only part of the general public that would take notice (of the guilty plea) would be the ones that are trying to qualify for a subprime mortgage and more importantly that are trying to complete a mortgage renewal for a previously issued mortgage of this type,” he says.
Credit Suisse awarded Serageldin a bonus of $7 million in cash and stock in 2007, before it discovered the scheme, according to the Manhattan U.S. Attorney's Office. The bank later took back the bonus.
Under the plea agreement Serageldin agreed to forfeit about $1 million, which represents the after-tax cash portion of his 2007 bonus.
Wardle doesn’t see the U.S. financial meltdown of 2007 affecting the Canadian lending community.
“We just don’t want to go down the same road,” he says. “Our lenders in Canada who are in the subprime market do an excellent job of doing proper due diligence; and with the new underwriting guidelines (B20), lenders are making sure people are capable of making the payments through their due diligence.”