Demand for private mortgages swells as new rules bite – so will this market be the next one in regulators' sights?
“To regulate private mortgages, the government would first need to arrive at a definition of ‘private mortgage.’ It may originate with a MIC, syndicated fund lender or individual/corporation with their own guidelines and funds to lend. They would then have to include small provincial and national finance companies.
How often do you hear that CitiFinancial will lend at a 19.99% rate for a second mortgage when another lender may do the same deal at an 8.95% rate with the same or less obtrusive criteria? Bottom line: Private mortgages will be targeted; however, regulation will prove extremely difficult on a national basis.”
“Over the last three years, private lending has more than tripled in the Canadian mortgage space. Private lending will gain even more market share in the wake of the new B-20 regulations. It’s only a matter of time before the government steps in; it is highly unlikely that private lending will be allowed to continue to operate as it does today.
Regulating the private market would allow regulators and the government to maintain better controls and further cool down the market, control current debt levels, and most importantly, track how much private money is currently in the Canadian mortgage market.”
“In the immediate future, I can’t see the private channel being targeted, but it is definitely something that could happen down the road. With the recent OSFI changes, I expect private lending to become more popular, which may result in greater scrutiny on the private channel.
With more people moving to private lending, riskier borrowing will increase, which could result in increased regulation. Also, if the new stress test doesn’t cool the Vancouver and GTA housing markets as it was intended to do, the government could look into other avenues to achieve this goal, which could involve the private channel.”
