Shadow lenders gaining ground but is it a bad thing?

Shadow lenders gaining ground but is it a bad thing?

Shadow lenders gaining ground but is it a bad thing? While the low interest rates will be good news for many homebuyers for those that are not able to obtain a mortgage through traditional lenders the ‘shadow’ banking sector is an increasingly popular choice. Last year the Bank of Canada warned that unregulated lenders are a risk due to the lack of regulation and the high rates of interest they charge, sometimes as high as 20 per cent. However not everyone agrees that the non-bank lenders pose a problem; Jim Murphy, chief executive officer of the Canadian Association of Accredited Mortgage Professionals told Bloomberg that they play an important role in the market and that some of the lenders are very good at what they do. Meanwhile CIBC economist Benjamin Tal says that with home loan from the shadow lenders growing by 25 per cent a year there may need to be more involvement from the regulators to mitigate the risk. Read the full story.
8 Comments
  • John D. 2015-01-22 8:09:25 AM
    I agree, these lenders are very neccessary these days. BUT...some are predatory lenders and the government does have to regulate them. They charge ridiculous fees for every little thing. I don't think any 1 person should be allowed to lend on a mortgage just for the hell of it. Too many brokers use these individual people/private lenders. All 'shadow' private lenders should have to be regulated. Ask them to hold a check for 1 day, $250 fee. No company should be allowed to charge what some of these lenders charge but again we need their basic services. With lenders tightening up, companies not paying fair wages; many people cannot get by and keep their credit clean.
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  • Daryl French 2015-01-22 11:40:38 AM
    Careful what you wish for, more regulation in this area usually leads to higher costs and less flexibility. It's our job as mortgage brokers to help our clients make fully informed decisions in regards to their mortgage options. Most people go to the alternate market because it's easier and faster, so if we add more regulations we may loose some of these advantages flexibility. If there are bad lenders we need to stay away from them and focus our business on the good ones, of which there are a lot these days.
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  • Toronto Broker 2015-01-22 1:31:50 PM
    If you are a mortgage broker or agent placing your client with one of these lenders the responsibility is yours to investigate the lender on behalf of your client and find out what they will charge for service fees, as an example. Or dig around with other broker to see what their experience with the lender was. Most of the mortgage companies have standard charge terms which specifically list the fees they will charge and if they don't and are not forthcoming then select a lender that does.
    However if your client complains about the lender YOU selected, don't blame the lender - blame yourself.
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