With the recent rule changes the government has imposed in the last few years, more and more people cannot get mortgages at a bank. One group, the self-employed was hit particularly hard. This group has not lost its ability to service a loan in the last few years but they have been pushed into the subprime lenders.
The word subprime inevitably conjures up images of the US financial crisis and all sorts of irresponsible behaviours by government, bankers, brokers, insurers and the rest of the financial world. That was a horrible event. I am still furious about it and I am not even an American taxpayer. Just because we use the same word “subprime” it doesn’t really mean the same thing.
This is why I prefer the term alternative lending or non-bank lending as it doesn’t confuse what happened in the States with what is happening in Canada.
Also the financial crisis was not caused by the US subprime loans alone. You had government policies pushing money out of Fannie Mae and Freddie Mac. You had mathematical geniuses creating mortgage derivatives that few understood, but were willing to sell all over the world. You had insurers willing to issue insurance on these products that they do not understand, and rating agencies that willy-nilly stamped them triple A – investment grade. Then you let it fester for about a decade into a large financial dirty bomb.
US subprime was an unemployed person with a mortgage larger than the value of his home. The extra money was used to pay the monthly mortgage payments. The hope was that by the time that extra money runs out, the house would increase in value and the person can refinance again. In Canada, it is the self-employed hiding too much money from the taxman and the Canadian government making sure the banks are not helping them anymore.
And if this is not reassuring enough, the US had subprime loans make up 5% of their lending market for 40 years without any problems. We are currently at 2.2% of the market. When the US went boom, subprime was 33% of the market.
Alternative lending.ca help people with difficult situations get financing and people in good financial situations get better financing through non-bank lenders. We operate out of Vancouver, BC, but can assist people in all of BC and selected locations in Alberta, Manitoba and Saskatchewan.
