Subprime mortgage mess on the horizon: Financial Post

Subprime mortgage mess on the horizon: Financial Post

Canada could be facing a mortgage nightmare in the next few years with an estimated 30,000 subprime loans - now dubbed "orphan loans" - coming up for renewal in the next few years, according to a report in the Financial Post.

So concerned about the situation at hand, the industry recently approached the federal government with a request for a bailout - specifically to participate in a $1-billion fund to help finance the coming flood of orphan mortgages. Several alternative mortgage lenders began lobbying the government in the spring 2009 on the same issue but still have not gotten a response.

"This thing is a wave and it's just starting," Eric Putnam, formerly with a subprime lender, now managing director of Debt Coach Canada, told the Post. "Investors are no longer willing to continue on and these mortgages were not insured by the CMHC so the borrowers are not going to be able to move to another lender in today's environment."

Subprime loans have dried up in the wake of the financial crisis. There were at least a dozen sub prime lenders here in Canada and was forecast as the fastest growing sector of the entire mortgage market, Benjamin Tal, senior economist at CIBC World Markets, told the Post - who pegged it at being about five per cent of the total market.

The general term subprime refers to high interest loans made to people who are unable to get a better deal at any one of the big banks.

  • anne perala 2010-04-14 5:35:20 AM
    Give me a break, - but no bailout, please!!!
    There is such a thing as SELLING your property if you cannot renew or refinance your mortgage that is up for renewal, folks. Anyone heard of realtors and the housing market being short of houses...?
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  • David R Young, AMP 2010-04-14 5:45:50 AM
    I think there is ample time for most of the home owners to establish credit enough to qualify for a A or alt A mortgage. If the reason was because of bad credit at the time of application then it is time they wake up and fix their credit issues.

    If they are self employed they need to start declaring more income so they can get a proper mortgage with a market rate, need to wonder if they ever looked at the interest rate difference, maybe paying their fair share of tax is worth it.

    The last option is they can sell the home and be prepared to deal with short falls.
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  • karim lalji - Intracap Financial Inc 2010-04-14 6:00:17 AM
    We are sub prime lenders and have no losses and do not expect any losses. The simple formula? Don't lend your money up to 95% ltv and expect anyone to pay you back. There are numerous brokers who will lend money out at high ltvs and at time of renewal its the home owner that suffers.
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