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Canada's conservative side.

Article Excerpt
The rising floodwaters from the subprime mortgage and credit crunch in the United States are trickling into Canada, where lending practices are so hedged with legislation and regulation that it is bound to stay a trickle. More important, residential mortgages are nearly fully insured against loss by the Canadian government, and demand and prices in key housing markets keep going up.

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The people, culture, customs and institutions in Canada and the United States are more alike than they are different--except for their financial systems. The scale and very nature of nontraditional and subprime mortgage lending in the United States, for example, would never be countenanced in Canada. Neither is there much pressing need for them, because the five chartered banks handle an estimated 80 percent of conventional mortgage loans. Another estimated 20 percent are in the subprime mortgage market, and about 5 percent are in the alternative lending category--for people who don't qualify for a first or second residential mortgage loan from a bank or credit union and who turn to the Yellow Pages to find mortgage brokers and lenders that are ready to step into the financial breach. [??] Subprime mortgages surfaced on the fringes of the mainstream mortgage loan industry, but only since 2002. The mortgage section of the Yellow Pages telephone directory says it all: "no documentation programs, poor credit or no credit, no qualifying, 100 percent financing, self-employed, bank refusals, past bankrupts." [??] Why, then, are subprime and nontraditional lending growing in the United States and remaining on the margins of the residential mortgage market in Canada? [??] "There is more due diligence [in Canada], and we don't have adjustable-rate mortgages [ARMs], although some of our lenders issue what are known as alternative lending products. What is happening in Canada [the subprime spillover] has more to do with the credit market," explained Jim Murphy, president of the 10,000-member, Toronto-based Canadian Institute of Mortgage Brokers and Lenders (CIMBL), in an interview with Mortgage Banking.

CIMBL represents mortgage lenders, brokers, insurers and other industry stakeholders--and is the largest organization of its kind in Canada.

Mortgages are regulated by the federal Bank Act. Mortgage brokers and real estate agents in eight of the 10 provinces, who account...