Industry rejects subprime report

by |

A senior mortgage industry player called a newspaper article on subprime mortgages in Canada a "witch hunt," saying the report overstated the degree to which subprime lenders impacted rising home foreclosures.

"Everyone knows unemployment is up, everyone knows we're in a recession, everyone knows that real estate has dropped - by definition you're going to get higher defaults when any of those things happen," said Ivan Wahl, president and CEO of Xceed Mortgage, a company mentioned in the recent Globe and Mail article on subprime mortgages.

"The point they should have made is that compared to the US subprime mess, defaults on mortgages in Canada are still absolutely miniscule and to me, that's more newsworthy than the scare tactics they used here," he said, adding that the reporters should have shown the percentage of loans that went into foreclosure from some of the mentioned lenders.

For example, he said Xceed has a 3% default rate on mortgages and only about half that number fall into foreclosure.

Following an investigative story about subprime mortgages in Canada published in December, the Globe and Mail printed a report on what they called a "burgeoning" subprime mortgage problem marked by house foreclosures.  The most recent article stated that more than half the foreclosures in British Columbia and Alberta last year started with loans from subprime lenders and partially attributed the subprime trend to "aggressive" US mortgage lenders coming to Canada a few years ago.

"My reaction is that [the story] was kind of a witch hunt and not very even-handed," Wahl said.

Peter O'Neill, vice president and chief operating officer at Bridgewater Bank, said the article didn't have much of an impact on him.

"I think the article was trying to be inflammatory in one way in that it was describing the scale of 85,000 subprime mortgages in Canada," said O'Neill, referring to a CIBC World Markets report in 2006 quoted by the Globe. "When I look at the broad landscape, I know 85,000 sounds like a big number, but it's not that big a number."

What do you think? We want to hear from brokers, so please add your comments below.