Real estate lawyer says the worst of the private lending cycle may be over for mortgage brokers
Canada’s private lending market is approaching a turning point – and the difficult conditions that have defined recent years may be the very thing that sets it up for a more stable future, according to a real estate lawyer who’s worked through its transformation.
Daniele Grechi (pictured top), partner and founder of Grechi Carter Real Estate Lawyers, told Canadian Mortgage Professional the worst of the current cycle may be behind it as the mortgage industry prepares to usher in a new year in 2027.
“My general thoughts are we’re close to the bottom. Hopefully things are going to move up from here,” he said. The sector will be in a better space for withstanding the turbulence of recent times, according to Grechi: “It’s really forced people to have tighter processes. I think tough times make for better actions and people have had to tighten their processes, really look at their underwriting.”
The sector has faced the same challenges as the wider industry amid a slower purchase market, climbing interest rates, economic uncertainty, and rising mortgage strain in certain pockets.
But the progress made in private lending over the past decade and a half shouldn’t be understated, Grechi said, with the sector increasingly moving into the mainstream and pivoting away from its status as an option of last resort.
“In the first six or seven years, it was such a different space,” he said. “It was a lot of syndicate lending, a lot less structure, a lot of random different groups, small lenders – and the returns were just absurd for the risk levels that were available.”
Annual property value increases of around 20% in the early days made the space an easy – and lucrative – one to operate in, attracting a surge of capital and a wide range of participants.
How COVID changed the game
A turning point arrived during the COVID-19 pandemic, when institutional investors flooded into the private lending market in significant numbers. Grechi said the process, rigour and competitive pressure that those companies brought have redefined the space entirely.
“What we’ve seen is the flock of institutional money through the MICs [mortgage investment corporations] and they very much have professionalized the space,” he said. “What we now refer to as private is kind of institutional, very regulated, very professional, extremely competitive. I think that’s the biggest change I’ve seen since we started in the business.”
That progress isn’t to say that the sector is an entirely safe bet. In its latest residential mortgage industry report, Canada Mortgage and Housing Corporation (CMHC) highlighted that what it labels mortgage investment entities (MIEs) are showing the strongest signs of stress among lenders, mainly because they’re more exposed to higher-risk borrowers than other institutions.
Risk among MIEs/MICs is especially concentrated in the Greater Toronto and Hamilton Area (GTHA), CMHC said, with the share of MIE balances in arrears for 90 days or more jumping from 3% in 2023’s third quarter to 11.1% by the first quarter of 2026 in that region.
But that segment represents “only a small part” of the market, the national housing agency added, with certain MICs likely at greater exposure than others in the current climate.
Executives within the space have highlighted the likelihood of further consolidation as smaller MICs with riskier exposures continue to struggle in a turbulent market.
“Increased regulation is making it more difficult for smaller players to compete,” Brad Rembold, chief executive officer of All Island Equity MIC, told CMP in May. “This isn’t necessarily a bad thing – just a reality of the regulatory world we live in.”
What brokers are focusing on in their private lending conversations
Conversations with mortgage brokers, Grechi said, typically revolve around familiar priorities: speed, turnaround, and the ability to handle complex files. But tougher conditions have also impacted how brokers approach lender selection, reflecting a market where matching the right private lender to the right file is now a key skill for brokers.
“Not every lender is doing every deal anymore, so you’ve got to go to different lenders for different needs,” Grechi said. “You’ve got to know your sweet spots for whatever it is that your clients need.”
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