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Sun American Mortgage - Reverse Mortgage Lender

Sun American Mortgage is a lender, seller and servicer of the government insured Reverse Mortgage. Over twenty years ago, we closed the first ...

Risks in uninsured Canadian mortgages on rise, may stem from reforms

Measures by the federal government last year to tighten qualification rules have improved the credit quality of the insured mortgage sector, the central bank said. Those measures though may be pushing more higher-risk borrowers into the uninsured space, the Bank of Canada said.

“Some potential borrowers have likely chosen to purchase less expensive homes, some have chosen to delay their purchases, and others may have increased their down payments and taken out low-ratio mortgages,” it said.

The Bank of Canada also commented on the situation at Home Capital Group, saying the “first steps” of a market-based solution have emerged, adding that the market expects the situation is largely isolated to the troubled lender.

There are growing worries about uninsured mortgages, which are increasing as a share of total mortgages. Not only is the uninsured sector growing, but the Bank of Canada is seeing some riskier mortgages within that area.

Worries include the growing use of home equity lines of credit that have been growing at rates above income growth since early 2016. The quality of credit has improved significantly for high-ratio mortgages (those with down payments of less than 20%), amid a decline in share of highly indebted borrowers.