detroitbootybass
Active Member
There are plenty of new subprime lenders in Canada; I even posted about one a couple of months ago (using neat language like 'near-prime').
Subprime isn't gone... people just don't want to acknowledge it.
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Baby, we got a bubble!?
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There are plenty of new subprime lenders in Canada; I even posted about one a couple of months ago (using neat language like 'near-prime').
Subprime isn't gone... people just don't want to acknowledge it.
Riverdale Rink Rat
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What was the name? I'm not saying that there are no sub-prime or Alt A lenders, but I know that ABCP cut the lifeline for a half dozen that went out of biz, including some big names (the one BMO funded, ResCap (GE), etc.)
Still, I don't believe that owner-occupied houses are getting first mortgages from subprime lenders. Cottages, sure. But not central Toronto homes.
interested
Senior Member
^^^
A propos article in Financial Post.
http://business.financialpost.com/2012/06/14/housing-bubble-fears-a-boon-for-alternative-lenders/
Housing bubble fears a boon for alternative lenders
Barbara Shecter Jun 14, 2012 – 12:52 PM ET | Last Updated: Jun 14, 2012 7:58 PM ET
Steve Murray/National Post photo illustration
Steve Murray/National Post photo illustration
Pressure on Canada's big banks from Ottawa and the Bank of Canada to tighten mortgage lending standards is benefiting the country's alternative lenders.
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Pressure on Canada’s big banks from Ottawa and the Bank of Canada to tighten mortgage lending practices is benefiting the country’s alternative lenders.
One of those, Equitable Trust, has even been able to realize its goal of coast-to-coast mortgage lending. On Thursday, Equitable ventured into Nova Scotia with plans to provide single-family residential mortgages.
“They are filling the void left by the Big Six banks,” said Shubha Khan, an analyst at National Bank Financial. He said the country’s largest lenders have “reduced lending to self-employed borrowers and lending through the mortgage broker channel due to reduced availability of mortgage insurance from CMHC and increased regulatory scrutiny from OSFI, among other things.”
Related
Canada’s housing market still outshines rest of world: Scotia
OSFI relents on tougher HELOC rule
Ottawa has taken a number of steps this year to slow what it believes is an overheated housing market. In April, the federal government made the Canada Mortgage and Housing Corp., a key component of Canada’s mortgage market, subject to direct regulatory oversight by the Office of the Superintendent of Financial Institutions.
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OSFI itself proposed major changes to the way banks handle mortgages and other real estate debt to reduce the fallout of what some fear is a looming housing bubble. Following consultation with the industry, OSFI softened some of those proposals.
On Thursday, the Bank of Canada warned that the country’s heavily indebted households are at risk of “shocks” from the growing economic crisis in Europe.
In its semi-annual review, Canada’s central bank said the two biggest domestic risks are the housing market and high household debt loads.
Alternative lenders such as Equitable and Home Capital Group are poised to continue to benefit as the banks tighten underwriting rules at the behest of policy-makers and regulators, said Stephen Boland, an analyst at GMP Securities.
Tightening of income and credit screening at the big banks will mean more business for the alternative lenders, he said.
A propos article in Financial Post.
http://business.financialpost.com/2012/06/14/housing-bubble-fears-a-boon-for-alternative-lenders/
Housing bubble fears a boon for alternative lenders
Barbara Shecter Jun 14, 2012 – 12:52 PM ET | Last Updated: Jun 14, 2012 7:58 PM ET
Steve Murray/National Post photo illustration
Steve Murray/National Post photo illustration
Pressure on Canada's big banks from Ottawa and the Bank of Canada to tighten mortgage lending standards is benefiting the country's alternative lenders.
Comments
inShare22
Pressure on Canada’s big banks from Ottawa and the Bank of Canada to tighten mortgage lending practices is benefiting the country’s alternative lenders.
One of those, Equitable Trust, has even been able to realize its goal of coast-to-coast mortgage lending. On Thursday, Equitable ventured into Nova Scotia with plans to provide single-family residential mortgages.
“They are filling the void left by the Big Six banks,” said Shubha Khan, an analyst at National Bank Financial. He said the country’s largest lenders have “reduced lending to self-employed borrowers and lending through the mortgage broker channel due to reduced availability of mortgage insurance from CMHC and increased regulatory scrutiny from OSFI, among other things.”
Related
Canada’s housing market still outshines rest of world: Scotia
OSFI relents on tougher HELOC rule
Ottawa has taken a number of steps this year to slow what it believes is an overheated housing market. In April, the federal government made the Canada Mortgage and Housing Corp., a key component of Canada’s mortgage market, subject to direct regulatory oversight by the Office of the Superintendent of Financial Institutions.
Advertisement
OSFI itself proposed major changes to the way banks handle mortgages and other real estate debt to reduce the fallout of what some fear is a looming housing bubble. Following consultation with the industry, OSFI softened some of those proposals.
On Thursday, the Bank of Canada warned that the country’s heavily indebted households are at risk of “shocks” from the growing economic crisis in Europe.
In its semi-annual review, Canada’s central bank said the two biggest domestic risks are the housing market and high household debt loads.
Alternative lenders such as Equitable and Home Capital Group are poised to continue to benefit as the banks tighten underwriting rules at the behest of policy-makers and regulators, said Stephen Boland, an analyst at GMP Securities.
Tightening of income and credit screening at the big banks will mean more business for the alternative lenders, he said.
marsh
Active Member
Debt growth slows, but income growth slows even more
ORA MORISON and JEREMY TOROBIN
TORONTO and OTTAWA — The Globe and Mail
Published Friday, Jun. 15 2012, 6:44 PM EDT
Last updated Friday, Jun. 15 2012, 6:51 PM EDT
Canadians are piling on debt at a slower pace, but with incomes barely growing and the threat from Europe increasing, many of Canada’s most vulnerable households may be running out of time to get their finances in shape.
The latest figures from Statistics Canada on household balance sheets, released Friday, show the debt-to-disposable income ratio rose in the first quarter to a record 152 per cent, from 150.6 per cent in the last three months of 2011. Debt growth slowed, but incomes increased at an even slower pace, a familiar trend the Bank of Canada this week said will probably continue.
The report underscores rising concerns over personal debt in the current uncertain environment, amid fears that developments in the fragile euro zone could further shake markets and economies. Interest rates are at emergency-low levels for now, but are expected to begin gradually rising by late this year or early next.
According to an analysis by policy makers at the central bank, the proportion of households deemed most vulnerable to changing financial conditions may be small, at just over 6 per cent, but it is higher than the average of the past decade. And in a semi-annual assessment of the financial system, released Thursday, the bank warned that as the global backdrop threatens to deteriorate, those who are most indebted are “especially vulnerable” to shocks such as job losses or falling home prices even as the overall pace of debt growth slows.
“If the economy here were to pull back, too, all these households that have gotten way deeper into debt, purchasing homes at over-inflated prices, will sooner or later experience real trouble,” said Louis Gagnon, a finance professor at the Queen’s University School of Business. “From that point, who knows how the situation will unfold, but it won’t be good news.”
Rising real-estate values have pushed the net worth of Canadians to a record level, contributing to a sense of calm among some observers who argue most borrowers are in far better shape than the debt-to-income numbers suggest. But those rising home values have also fuelled a buying binge, funded through home-equity lines of credit.
While some measures show a relatively balanced real estate market, namely the number of sales compared to number of listings, or the average length of time a home is on the market, others – such as the price-to-rent ratio – show home prices may be overvalued by as much as 10 per cent.
Royal Bank of Canada economist David Onyett-Jeffries has made calculations to determine how seriously a drop in home values could affect Canadians, and says while a 10-per-cent decline would have “a sizable impact on net worth, it wouldn’t actually wipe it out.”
The likelihood of such a sharp drop appears low for now.
In May, according to figures Friday from the Canadian Real Estate Association, home re-sales across the country fell for the first time in four months, and average prices softened slightly. That suggests the market is in a gradual cooling that analysts say will help Canada avoid a shock that guts household finances and puts the most heavily indebted under water.
Most Canadians will have no problem continuing to service their mortgages and other debts, as long as they don’t lose their jobs and interest rates don’t jump up overnight, according to Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada.
“Interest rates, while they are going to rise, they’re not going to jump so rapidly that some of the people can’t handle a small increase,” Mr. Schwartz said.
A spike in unemployment, though, could have a bigger impact, and also seems like the more likely trigger of a shock to the household sector, given the shaky global backdrop and the effect it could soon start having on companies’ willingness to retain existing staff, let alone boost hiring.
ORA MORISON and JEREMY TOROBIN
TORONTO and OTTAWA — The Globe and Mail
Published Friday, Jun. 15 2012, 6:44 PM EDT
Last updated Friday, Jun. 15 2012, 6:51 PM EDT
Canadians are piling on debt at a slower pace, but with incomes barely growing and the threat from Europe increasing, many of Canada’s most vulnerable households may be running out of time to get their finances in shape.
The latest figures from Statistics Canada on household balance sheets, released Friday, show the debt-to-disposable income ratio rose in the first quarter to a record 152 per cent, from 150.6 per cent in the last three months of 2011. Debt growth slowed, but incomes increased at an even slower pace, a familiar trend the Bank of Canada this week said will probably continue.
The report underscores rising concerns over personal debt in the current uncertain environment, amid fears that developments in the fragile euro zone could further shake markets and economies. Interest rates are at emergency-low levels for now, but are expected to begin gradually rising by late this year or early next.
According to an analysis by policy makers at the central bank, the proportion of households deemed most vulnerable to changing financial conditions may be small, at just over 6 per cent, but it is higher than the average of the past decade. And in a semi-annual assessment of the financial system, released Thursday, the bank warned that as the global backdrop threatens to deteriorate, those who are most indebted are “especially vulnerable” to shocks such as job losses or falling home prices even as the overall pace of debt growth slows.
“If the economy here were to pull back, too, all these households that have gotten way deeper into debt, purchasing homes at over-inflated prices, will sooner or later experience real trouble,” said Louis Gagnon, a finance professor at the Queen’s University School of Business. “From that point, who knows how the situation will unfold, but it won’t be good news.”
Rising real-estate values have pushed the net worth of Canadians to a record level, contributing to a sense of calm among some observers who argue most borrowers are in far better shape than the debt-to-income numbers suggest. But those rising home values have also fuelled a buying binge, funded through home-equity lines of credit.
While some measures show a relatively balanced real estate market, namely the number of sales compared to number of listings, or the average length of time a home is on the market, others – such as the price-to-rent ratio – show home prices may be overvalued by as much as 10 per cent.
Royal Bank of Canada economist David Onyett-Jeffries has made calculations to determine how seriously a drop in home values could affect Canadians, and says while a 10-per-cent decline would have “a sizable impact on net worth, it wouldn’t actually wipe it out.”
The likelihood of such a sharp drop appears low for now.
In May, according to figures Friday from the Canadian Real Estate Association, home re-sales across the country fell for the first time in four months, and average prices softened slightly. That suggests the market is in a gradual cooling that analysts say will help Canada avoid a shock that guts household finances and puts the most heavily indebted under water.
Most Canadians will have no problem continuing to service their mortgages and other debts, as long as they don’t lose their jobs and interest rates don’t jump up overnight, according to Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada.
“Interest rates, while they are going to rise, they’re not going to jump so rapidly that some of the people can’t handle a small increase,” Mr. Schwartz said.
A spike in unemployment, though, could have a bigger impact, and also seems like the more likely trigger of a shock to the household sector, given the shaky global backdrop and the effect it could soon start having on companies’ willingness to retain existing staff, let alone boost hiring.
Riverdale Rink Rat
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- Back to East York... Alas!
Good article. It goes to show that CMHC and the banks really are tightening credit in the housing market.
One needs to keep in mind the difference between 'alternative' and 'sub-prime', though. To call Equitable or Home Capital or even the Canadian mortgage brokerage channel 'sub-prime' is doing a disservice to their credit standards. In fact, a self-employed consultant probably has to jump through more hoops with Equitable than they did with the big 5!
interested
Senior Member
^^^
Agree RRR.
That said, there have been innuendo's on the forum of 5% back on some mortgages, effectively making them Zero down.
I do not know if this is true in fact and if it is, how frequent an occurrence it is.
Agree RRR.
That said, there have been innuendo's on the forum of 5% back on some mortgages, effectively making them Zero down.
I do not know if this is true in fact and if it is, how frequent an occurrence it is.
Eug
Senior Member
This house went for $926000, which is $227000 over the $699000 list price.
http://www.theglobeandmail.com/life...r-upper-at-227000-over-asking/article4258381/
It was probably listed a bit low, but still, the real estate agent likely gave his/her clients really bad advice given that:
“We were all totally shocked when it sold firm for $926,000,†says Lyle Hamilton of Royal LePage Real Estate Services Ltd.
The house at 180 Pearson Ave. sits in Roncesvalles Village - one of the most frenzied real estate pockets in Toronto. Six bidders submitted offers that night.
“This one was way out in front - it was a pretty obvious winner,†says Mr. Hamilton, who added that there was no second round of bidding. “The sellers were elated.â€
http://www.theglobeandmail.com/life...r-upper-at-227000-over-asking/article4258381/
It was probably listed a bit low, but still, the real estate agent likely gave his/her clients really bad advice given that:
“We were all totally shocked when it sold firm for $926,000,†says Lyle Hamilton of Royal LePage Real Estate Services Ltd.
The house at 180 Pearson Ave. sits in Roncesvalles Village - one of the most frenzied real estate pockets in Toronto. Six bidders submitted offers that night.
“This one was way out in front - it was a pretty obvious winner,†says Mr. Hamilton, who added that there was no second round of bidding. “The sellers were elated.â€
cdr108
Senior Member
Eug
Senior Member
Mr. Hamilton seems to say so.
“This one was way out in front - it was a pretty obvious winner,” says Mr. Hamilton, who added that there was no second round of bidding.
“This one was way out in front - it was a pretty obvious winner,” says Mr. Hamilton, who added that there was no second round of bidding.
ISYM
New Member
Someone really ought to call out the Globe and some of these REALTORS for reporting and hyping this kind of nonsense. This is ridiculous that the Globe should hype such tripe almost 2 months after the fact. They’ve truly become a ‘rag.’
It’s a 5 bedroom, 5 bath semi divided into an income producing 5 units with double garage and taxes of $4,800 thereabouts.
21 days prior, another semi (virtually the same style), a 4+1 bedroom, 3 bath SFD, neat, presentable and early 2000’s at best was also listed close to $900k and sold for well above #180’s price. Includes a double garage with taxes just shy of $3900.
30 days prior to #180's sale another semi (similar exterior style) down the street, SFD 5 bedrooms, 2 bath, also neat, presentable and early 2000’s at best was listed for close to $900k and sold for just $5k shy of the above 4+1 bdrm. Again a double garage with taxes just under $4300.
I'm absolutely shocked that the REALTOR is shocked. Stunned actually as to why he could even be mildly surprised considering that a tiny 3 bedroom 1 bath detached with a spitoon for a yard and zero parking, $3500 in taxes sold for just shy of $650k while last year a 3 bedroom, 2 bath with a single garage sold above $800k. In fact of the 10 properties sold within the last year on the street this one should have set the street’s record.
If this house had feelings it would be highly insulted by a list price at even its selling price.
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interested
Senior Member
^^^
thank you for the insight ISYM.
I am curious about one thing though. While it seems from the article that 1 bid was clearly way above everything else, given what you have said, I would conclude this is evidence that the market has peaked and is in fact slowing. Only 1 individual was way out in front and yet you seem to be suggesting if I read you correctly that the price paid was "appropriate" or possibly even low.
Am I interpreting your comments correctly and arriving at "the right conclusion" based on your post above.
thank you for the insight ISYM.
I am curious about one thing though. While it seems from the article that 1 bid was clearly way above everything else, given what you have said, I would conclude this is evidence that the market has peaked and is in fact slowing. Only 1 individual was way out in front and yet you seem to be suggesting if I read you correctly that the price paid was "appropriate" or possibly even low.
Am I interpreting your comments correctly and arriving at "the right conclusion" based on your post above.
Eug
Senior Member
You left out the part where this one is a fixer-upper. Despite having six bidders, the one that won was "way out in front". Obviously, 5 of the 6 bidders didn't share your sentiment.
ISYM
New Member
Eug,
I chose instead to mention that the others were also outdated as well as provided other pertinent facts to show the disparity. All things are relative. This particular property is attractive to three types of buyers, those who want to live in it without any tenants; those who want to live in it and take advantage of rent from one even two of the units and those who want to continue with it as an investment property.
The first buyer is the least likely buyer as their occupancy is limited to when the leases if any start to expire or have a minimum wait of 3 months if no leases and will have no rent to subsidize a higher price which obviously explains the advantage the second buyer has. The third buyer, the investor, could'nt care less that it’s a fixer-upper.
Interested
My conclusion is partially that with a slightly different take. It’s Monday quarterbacking I know.
That the winning buyer’s bid was several percentage points less than the other sales but ‘way out in front’ of the other bids tells me one of two things: the listing price was so low all it managed to do was attract many buyers well out of their league and who paid little to no attention to the street’s prices. A smart buyer and REALTOR would note that with only 6 bids for a property priced approximately 40% below the street’s prices, at best 3 might be real competitors who are unlikely to jump more than 20% over asking.
This was a miscalculation by seller and REALTOR who probably presumed they would get far more offers and play those hopeful buyers who had no business bidding anyway against those with the appropriate budget. With only 6 bidders it reinforces for me that seasoned investors are doing what seasoned investors do when the market is peaking – they stay home. Secondly, the 750k to million dollar price range has far fewer buyers than 500 to 750k so pricing the property appropriately would have attracted this buyer anyway who undoubtedly would have coughed up more.
There was no second round bidding which means that the other bids were so far removed the seller and REALTOR could not afford to bluff the winning buyer and were probably freaked by the lower bids which would not have happened had it been priced appropriately. That is the downside to playing this list below market price game, if it’s not done properly, the seller loses.
I chose instead to mention that the others were also outdated as well as provided other pertinent facts to show the disparity. All things are relative. This particular property is attractive to three types of buyers, those who want to live in it without any tenants; those who want to live in it and take advantage of rent from one even two of the units and those who want to continue with it as an investment property.
The first buyer is the least likely buyer as their occupancy is limited to when the leases if any start to expire or have a minimum wait of 3 months if no leases and will have no rent to subsidize a higher price which obviously explains the advantage the second buyer has. The third buyer, the investor, could'nt care less that it’s a fixer-upper.
Interested
My conclusion is partially that with a slightly different take. It’s Monday quarterbacking I know.
That the winning buyer’s bid was several percentage points less than the other sales but ‘way out in front’ of the other bids tells me one of two things: the listing price was so low all it managed to do was attract many buyers well out of their league and who paid little to no attention to the street’s prices. A smart buyer and REALTOR would note that with only 6 bids for a property priced approximately 40% below the street’s prices, at best 3 might be real competitors who are unlikely to jump more than 20% over asking.
This was a miscalculation by seller and REALTOR who probably presumed they would get far more offers and play those hopeful buyers who had no business bidding anyway against those with the appropriate budget. With only 6 bidders it reinforces for me that seasoned investors are doing what seasoned investors do when the market is peaking – they stay home. Secondly, the 750k to million dollar price range has far fewer buyers than 500 to 750k so pricing the property appropriately would have attracted this buyer anyway who undoubtedly would have coughed up more.
There was no second round bidding which means that the other bids were so far removed the seller and REALTOR could not afford to bluff the winning buyer and were probably freaked by the lower bids which would not have happened had it been priced appropriately. That is the downside to playing this list below market price game, if it’s not done properly, the seller loses.
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Eug
Senior Member
Meh. To be honest it just sounds a lot like you're trying to justify an inflated bid, when even the seller's agent thinks it's inflated.
interested
Senior Member
In fairness to ISYM Eug, she has a view and provided some comparables to justify her conclusions. I side with you that the bid was likely inflated.
I say this because I don't believe anyone would honestly price expecting to beat by 33% the ask. I could see trying to create a bidding war at 10% below market but the strategy, if that was the realtors or the sellers, to price a full 33% below what they would have wanted / expected in most cases would be a recipe for disaster.
I think the fact that the article states the agent was surprised suggests to me that the bid was "over the top" and perhaps the property was requiring a lot of work?
That said, I believe Roncesvalles in one of the hot neighbourhoods so who knows.