There has been much debate surrounding Canada’s construction market, for a number of reasons. Canada survived the global housing bubble relatively intact. While the United States housing recovery has been very slow, in Canada, the rebound happened very quickly, and the market has for a while now surpassed pre-recession levels.
Canada’s construction boom, both residential and commercial, has been so good that much of the debate is about whether or not it’s actually a bubble, and if steps need to be taken to prevent it from bursting.
The government and the banks
As a result, the Canadian government has instituted various measures, including mortgage provisions, to try to cool down a red-hot sector of the country’s economy. At the same time, the country’s large banks have engaged in cautious lending practices, in part to protect themselves, too, from a potential bubble.
As is often the case in life, the law of unintended consequences often kicks in. In this case, the somewhat restrictive policies of the federal government and the big banks have created a gap into which private mortgage lenders have jumped. The result has been a mix of opportunity, confusion and need for education.
The private mortgages market is not as regulated as that of the banks. This has sometimes created the impression that the private mortgages market is chaotic and risky. However, that is not the case, and mortgage investment corporations (MICs) are an example of that.
The mortgage investment corporation
MICs are mortgage-investing entities essentially created by the Canadian federal government to encourage private investing in mortgages. MICs are not part-time operations selling mortgages out of a T.V. repair shop.
On the contrary, there are various rules and regulations in place for private mortgage lenders to operate as mortgage investment corporations. In addition, MICs have to protect themselves from risky investments, too, which is why they tend not to engage in overly-risky mortgage loans.
The end result is a sector of the Canadian economy that is filling a market need while still protecting the interests of investors seeking high-yield but low-risk alternatives.
ASCEND MIC is a mortgage investment corporation that specializes in offering investors high returns at low risk in Canada’s mortgages market. Please contact us to learn more.