One of the prevailing themes on this blog has been documenting the growth of the alternative mortgage market. There are various reasons for this growth. Traditionally, the strict lending practices of the big banks have been a contributing factor. In addition, federal regulators have the tendency to, well, over-regulate, which has borrowers look elsewhere.

Today’s mortgage landscape

One of the places people have looked is a lender such as Home Capital. It’s an alternative in the sense that its lending practices aren’t generally as restrictive as the big banks, yet it still qualifies as a lender under federal regulations, which means it’s subject to those federal regulations.

Canadian alternative mortgage lenders

Well, Home Capital has run into various financial difficulties this year. As a result — and quite predictably — borrowers are now looking for other alternatives, such as mortgage investment corporations (MICs), which don’t fall under federal regulation and don’t engage in some of the restrictive practices of the big banks.

Growth in alternative lending

According to some estimates, about a quarter of Canada’s borrowers are looking for alternative investors at any given time. The alternative lending market is estimated to be worth upwards of $400 billion, out of a total residential mortgage market of almost $1.5 trillion.

There are a couple of ways to look at this growth in alternative private mortgage lenders. Traditionalists will argue that it means less regulation, and more risk. However, the growth in this market might suggest something else. It might suggest that there is a market for less restrictive lending practices, and that alternative lenders are meeting that market, and it simply keeps growing.

ASCEND MIC is a mortgage investment corporation, with offices in Toronto and Richmond Hill, that specializes in various aspects of mortgage investing, lending, administration and more.

Behdad Hosseini

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