Canada's "Dirty Secret": Subprime Loans

Its political and financial leaders have long insisted that Canada was insulated from an American-style subprime mortgage crisis. However, a Globe & Mail study reveals that western Canada is facing an "alarming" rate of foreclosures.

"Since the subprime mortgage meltdown in the United States, Canadian leaders have assured the public that a similar tidal wave of foreclosures can't hit here. [But a] Globe and Mail investigation into more than 10,000 foreclosure proceedings has uncovered a burgeoning subprime mortgage problem...Data obtained from both the governments of British Columbia and Alberta, as well as from two private companies that specialize in tracking foreclosure proceedings, show that lenders are foreclosing on the homes of overextended borrowers at an alarming pace. Even more startling is that more than half the foreclosures in 2008 were initiated by a mish-mash of subprime lenders who targeted riskier borrowers with tarnished credit histories. The numbers tell a story of thousands of homeowners who borrowed more than they could afford from lenders who lent too readily.

Inventories of unsold homes are building in Canadian cities – and the ripple effect hits everyone, depressing the value of houses owned by people who haven't overextended themselves.

The spread of subprime mortgages to Canada is one of the country's most poorly researched and misunderstood economic afflictions. Government agencies don't publish numbers on the scope of high-risk lending. Banks and other mortgage lenders do not disclose details about such loans."

Full Story: Canada's dirty subprime secret

Comments

Comments

Is Subprime Really Below Average?

What does the average citizen on this planet have to do or have to experience a bit of stability?

Many risked nearly everything to 'own' a home and now subprime lodging (tent cities) are replacing subprime loaning.

Are banks lending to people who did not have the income, credit history or savings to justify borrowing even in a good economy? Or are many subprimers canaries in the coal mine - financially stable enough in good time or even average times but just not enough so to weather the worst economy in decades? Sure the banks have been enjoying absurd revenues compared with other industries or historically for their own industry AND there is something else this may all be pointing to as well.

What (in addition to lack of regulation of 'free' markets) is providing the opportunity for subprime risk taking? Perhaps this is all an indication that most everyone, the average person, not only wants stability but needs it at some point in their lives. Perhaps we need political and economic systems that can insure that basic human need for most people. Perhaps the old way of doing business, whether that be the lords and surfs of yesteryear or the occasional infusion of 'discovered' contents or temporary income garnered from post war economies are no longer viable means of providing the opportunity for that basic human need for stability.

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