Brokers believe all this “shadow” mortgage lending talk amounts to little more than fearmongering.
“The good that private (lenders) do is vastly underrated and misunderstood; they are not helping Canadians get into homes that they cannot afford,” Dustan Woodhouse
, a B.C.-based broker with Dominion Lending Centres
told MortgageBrokerNews.ca. “Privates help clients; stay in a home for an extra year or two, buy a knock down house and renovate then refi, buy raw land, complete challenging builds, buy ‘unique’ properties, allow many clients to make significant profits themselves.
“I could go on.”
Talk of “shadow” lenders – a scary name for private lenders – has ramped up in the wake of a CBC article that drew attention to an increase in the number of private deals.
"The risk arises if the unintended consequence of regulation is to push out the risk profile of the less regulated sector, and to encourage it to grow quickly at the same time," Finn Poschmann, vice-president of policy analysis at the CD Howe Institute was quoted saying in the article
. "In dollar terms, it is not a huge part of the economy (but) my concern is that we pay attention, because small problems sometimes get unexpectedly large, and quickly so."
The underlying thesis of the CBC article seems to be that house prices – which have risen 36 per cent over the past six years – are forcing clients to turn to the private sector for financing.
CIBC Senior Economist Benjamin Tal told the CBC that “shadow” lending market makes up 4-5 per cent of the market.
"This is something that is growing very fast, because many borrowers are not having access to banks because the banks are highly regulated," he said.