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Grab your coffee, sit back and enjoy this excerpt from Canadian Mortgage Trends on the nostalgic return of non-prime mortgages.
Non-prime Hits Prime Time…
The old days are the new days: “Brokering is going back to what it used to be,” says broker, Fred Testa. “In many ways, brokering in the late 80s and early 90s was the same as it is today. Amortizations were a maximum of 25 years and lenders would only go to 75% (loan to value), not 80%. Everything was being done with a first mortgage to 75% and if people wanted additional funds, they would need a second mortgage to 80% or 85%. We’re going back to the past. A lot of the young brokers haven’t been through those times.”
Coming Trends in subprime: Testa says we’ll see more and more MICs going mainstream. MICs will make a “big time” dent in the market because “they’re not federally regulated.” That makes them more flexible with lending guidelines.
2nds growing in popularity: Testa is seeing “quite a bit more interest” in second mortgages now, even compared with a few years ago. But there’s only “a fraction” of the institutional lenders doing 2nds today, versus pre-credit crisis. MICs will increasingly be motivated to fill in the gap, he says. They’ll do 2nds to 80%, or even 85% LTV.
So are VTBs: Movement is also being seen towards vendor takeback mortgages (VTBs). With institutional lenders tightening credit more people will find it harder to get financing, and motivated sellers will take back mortgages to move their properties.
What do you think of everything old being new again? Leave a comment and share your views.
