Dominion Lending Centres

Dominion Lending Centres

October 09, 2008 08:30 ET

Dominion Lending Centres: The Current Market Crisis and What It Means to Canadians Seeking Mortgages

Dominion Lending Centres Provide Solid Answers to Critical Mortgage Questions

COQUITLAM, BRITISH COLUMBIA--(Marketwire - Oct. 9, 2008) - The current market crisis has Canadians scrambling to find answers as to how the market volatility will affect their homes and investments. For most Canadians, their home is the largest investment they own, and current market conditions have homeowners and future homeowners wondering how, if at all, this market will affect them.

"There is widespread confusion amongst Canadians as to how the U.S. mortgage and real-estate crisis will affect Canadians," says Gary Mauris, President, Dominion Lending Centres Canada. "We are pleased to offer the public peace of mind in knowing the Canadian Mortgage industry is still strong, and there is no need to panic. We are still seeing a competitive landscape where banks, trust companies and credit unions are still hungry for Canadian mortgages."

Unlike the United States, the Canadian mortgage industry has remained relatively stable with the only measureable change being seen with the subprime lenders. "We have seen over 20 subprime lenders either close shop or reinvent themselves as prime lenders," says Mauris. "The total subprime market represents only 5-6% of the outstanding mortgages in Canada compared to 20-25% in the U.S." The massive withdrawal was immediately linked to the U.S., as lenders who previously securitized and sold their loans to the public markets simply saw the buyers of their portfolios evaporate overnight.

How Canadian Mortgage Industry Standards Differ from the U.S.

Canadian mortgages are funded, underwritten and enforced in a totally different manner than that of the U.S. Investor mortgages were among the first products to default in the U.S., where they account for approximately 9% of all outstanding mortgages. In Canada however, they account for only 2-3%.

The Canadian funding model also differs from that of the U.S. with the majority of mortgages being held on a balance sheet with only 34% having been securitized. Mortgage backed securities were not placed in off-balance sheet structures that were over-leveraged like the U.S. This was the critical failure point where over-leveraging occurred after the mortgages were originated. Further, the majority of securitized totals have been done through CMHC, a Crown Corporation with explicit government backing. Through these tighter requirements we are unlikely to see the same problems we are seeing in the U.S.

The Appraisal standards in Canada are generally higher than that of the U.S. with Canadian appraisers more likely to low-ball estimates of property value than over-estimate.

Mortgage Options for Canadians

Canadians are now seeing Canadian lenders tightening credit guidelines and charging higher rates for variable products making it a good time for homeowners to lock into fixed rate terms. For consumers who are looking to manage their risk and have a long-term fixed payment, locking in will provide peace of mind to homeowners during the volatile markets.

For those individuals that currently have a variable rate mortgage with a prime minus discount, such as prime minus 50, the discount off bank prime remains the same which means the rate and payments have actually decreased, making the recent drop very attractive to the average Canadian currently in a variable rate product.

Dominion Lending Centres is one of Canada's largest mortgage brokerage firms with over 1,200 licensed mortgage professionals in over 170 locations across Canada. Dominion Lending Centres originated over $7 billion dollars of mortgages in 2008, offering the best possible rates, terms and conditions to Canadian mortgage needs.

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