CEO spells out careful approach in a lending environment marked by risk and plenty of volatility
Canada’s current housing market is moribund, according to a leading community lending chief executive officer. And that means credit unions are navigating a difficult balancing act: maintaining volumes without taking on undue risk in a market where prices are still falling.
Fausto Gaudio, president and chief executive officer of the Toronto-headquartered IC Savings, described the current market as one where activity was barely getting off the ground. “It’s very, very soft,” he told Canadian Mortgage Professional. “Softer than it was last year – and last year was also a very soft year in terms of trades and prices declining as well.”
That marks one of the biggest obstacles facing credit unions and other lenders. Maintaining asset size is no easy feat, but loosening credit standards to bring more business in isn’t always the best idea either as values continue to slide.
“Top of mind is that there just isn’t enough volume,” Gaudio said. “It’s very, very difficult… to maintain asset size, because unless we expand our risk tolerance and do mortgages at a higher loan-to-value at a time when prices are declining. That’s a real challenge, especially for small boutique lenders.”
Gaudio said IC Savings has opted to hold its position rather than chase volume, steering clear of high-LTV lending. “We do very few mortgages at the 80% loan-to-value,” he said. “And so we don’t seem to have a lot of the problems that the big banks have in terms of defaults and powers of sale today.”
But there’s also opportunity in the market, not least in serving borrowers who fall outside standard bank approval criteria. Tighter lending standards among Canada’s banking giants mean borrowers often don’t qualify in the current market not because of recklessness, but rather circumstance.
When dealing with those customers, understanding the story – and the “why” of how their current situation developed – is crucial, according to Gaudio.
“With somebody that might have had a difficulty – having gone through a health problem, a period of unemployment, a marital breakup – we’re much more attentive to those human stories and try to resolve their problems,” he said.
“When a borrower is coming out of a life experience and a setback, we’re much more willing to try to resolve their issue – but at the same time, they need to have some equity to offset that risk.”
Reverse mortgages: Will their popularity grow in the credit union space?
Gaudio said IC Savings has developed a new term reverse mortgage, a fixed-period alternative to the traditional lifetime arrangement, aimed at homeowners who want to access equity but have a clear exit plan within a few years.
The product, he said, is for “someone that wants to live in their house another three or possibly five years, but then they have a plan – to move back to Northern Ontario or the East Coast where they had family or grandkids – but they don’t want to commit to a reverse mortgage for life.”
2027 outlook for wider market remains unclear
Gaudio sees the current housing market sluggishness as a product of rampant unaffordability rather than the geopolitical headwinds hovering over the Canadian economy.
Trade turmoil and rising oil prices, he said, have less impact of the housing market than the fact that prices have skyrocketed over the past decade, and remain elevated in many regions despite the years-long cooldown.
It remains unclear whether the broader market will normalize quickly enough to ease volume pressure on boutique lenders heading into 2027, but with borrower stress likely to continue rising, he emphasized the importance of brokers and agents telling their customer’s story in as much detail as possible to boost their chances of getting a deal through.
“I believe the brokers that deal with us know us as that type of lender,” he said.
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