CMHC tar­get­ing shadow lenders

National Post (Latest Edition) - - FINANCIAL POST - Ka­tia Dmitrieva Sandrine Rastello and

TORONTO• Canada’ s hous­ing agency is seek­ing more data on home loans from shadow lenders, amid con­cern ris­ing lev­els of debt aren’ t be­ing ad­e­quately tracked and may in­crease the risk of fi­nan­cial in­sta­bil­ity.

Canada Mort­gage & Hous­ing Corp. will seek data from par­tic­i­pants in the se­cu­ri­ti­za­tion pro­gram on their unin­sured con­ven­tional mort­gage lend­ing, said Evan Sid­dall, chief ex­ec­u­tive of­fi­cer at the agency. CMHC needs to “know what risk we are ex­posed to,” so will use the re­ported in­for­ma­tion to de­cide if changes are needed to their rules, he said.

“We are con­cerned about in­creas­ing lev­els of riskier mort­gage ac­tiv­ity by non-fed­er­ally-reg­u­lated fi­nan­cial in­sti­tu­tions,” Sid­dall said in the text of a speech he gave in Mon­treal on Tues­day.

“We have a re­spon­si­bil­ity to iso­late sound, sol­vent in­sti­tu­tions from the con­ta­gion that can erupt when a lender fails.”

Var­i­ous lev­els of gov­ern­ment re­cently in­tro­duced re­stric­tions on mort­gage lend­ing to get a han­dle on what seemed like out of con­trol in­creases in home prices. That’s push­ing buy­ers who no longer qual­ify for in­sured home loans to take out mort­gages with in­sti­tu­tions that aren’t tracked by fed­eral reg­u­la­tors.

CM H Ci sr a is in gt he alarm af­ter Home Cap­i­tal Group Inc.’ s near- col­lapse this year called into ques­tion the sta­bil­ity of the coun­try’s hous­ing mar­ket.

In­sured mort­gages in the two most ex­pen­sive hous­ing mar­kets are drop­ping, Sid­dall said. In Toronto, in­sured loans com­prised 16 per cent of the mar­ket last year, com­pared to 27 per cent in 2010 and in Van­cou­ver, those fig­ures are 12 per cent and 20 per cent.

In ad­di­tion, in­di­ca­tors of risk are ris­ing for low- ra­tio mort­gages — those where the buyer has staked at least 20 per cent of the pur­chase price up front, Sid­dall said.

Some 27 per cent of bor­row­ers who took out low-ra­tio mort­gage in 2016 had a loan- to- in­come ra­tio higher than 450 per cent, up from 19 per cent in 2014, CMHC said.

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