Private market growing

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Tightened underwriting guidelines over the past few years have increased need for private mortgages and that trend is expected to pick up steam in 2016, according to one industry veteran.

There are all kinds of different levels of regulation; brokers are regulated provincially, monoline lenders are effectively regulated by their insurers; i.e., Genworth or CMHC or whoever their insurer happens to be.

“There is no question that (the unregulated private) part of the market is growing … with the introduction of B20 clients,” Lester Shore, vice president of Optimum Mortgage, told “What might have been an A before, they no longer meet the requirements of the A lender, so they get pushed to the Alt-A side or the private side, which might include a provincially regulated MIC or that might include their lawyer friend who lends them his personal money.”

It isn’t known just how large the unregulated mortgage market is. CIBC economist Benjamin Tal told the Canadian Press in mid-October that it currently accounts for less than 5%. But that it is certainly growing.

"It's a baby, but this baby is growing fast," Tal told CP at the time. "I don't think it's an issue now, but it might be an issue five years from now if we continue this way."

And while much has been made about the potential growth of the market, Shore is quick to point out the difference between unregulated lenders and what the mainstream media has dubbed “shadow” lenders – which some have used as an inaccurate umbrella term for all non-bank lenders.

“MICs have to meet the requirements of the provincial legislation where they are headquartered,” Shore said. “There are certainly private lenders – you and I could pool our resources and go lend some guy for a mortgage – that I would say is the shadow industry that is completely unregulated.

“If you and I are able to convince the poor guy who needs $50,000 to fix all his windows to pay 25% then we convince him to pay 25% and that is certainly the unregulated part of the marketplace.”

CMP got in-depth with Shore about all things concerning the Alt-A space. Keep an eye out for more of that interview in the January issue.
  • Chad on 2015-11-26 9:59:15 AM

    It is not unregulated! There are a ton of regulations. Not as much as banks but to call it in regulated is false.

  • Len Lane on 2015-11-26 10:47:11 AM

    I guess that they don't understand that pooling two guy's money together would constitute a syndicated mortgage and that is even more highly regulated by Security commissions.

  • G on 2015-11-26 11:58:31 AM

    "you and I could pool our resources and go lend some guy for a mortgage – that I would say is the shadow industry that is completely unregulated."


    As one of those "shadow" lenders in Ontario for 27 years, this is far from an "unregulated" market.

    All applications must come through a mortgage broker or solicitor. Last time I looked, both of those intermediaries are strictly regulated. In addition, we require all mortgagors to have independent legal representation regardless of the amount of the mortgage. As well, there is a little something called the Interest Act of Canada ( and provincial courts which can enforce equity in cases of lender abuse, "shadow" or institutional.

    As well, though I can only speak for my company, our mortgages do NOT have the open ended charges and penalties that are rife in some of the largest alt B lender's documents I have seen.

    BTW, the "abuse" I have most often encountered has been from mortgage brokers who charge 10%+ of the mortgage amount for their services. Legal, but really??

  • Kuldip S Panesar Homeland Mortgage Corp. on 2015-11-26 3:11:14 PM

    When the financing through Mortgage Broker then it is fully regulated.

  • Paul D on 2015-11-27 10:25:25 AM

    If you're convincing a guy to pay 25% to fix his windows then you are certainly not dealing with me as a lender. You are either an inexperienced agent dealing with an unscrupulous lender, or you and the lender are dishonest. There are those of us, like G above, who are correctly described as not directly regulated, but we work only through regulated individuals and choose to behave as regulated entities. Sometimes there is more credibility and less 'shadow' on a person who chooses to behave as if he were regulated, than a MIC who is forced to be. With the growth in the Private Lending space it is incumbent on those of us who are forthright to deal with the trustworthy and transparent and shun the shadows, to keep improving the image of our industry.

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