Canada’s Sub-Prime Nightmare is just beginning
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 subprime 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.
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