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.
March 17, 2009, 7am PDT | Michael Dudley
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"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."

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Published on Saturday, March 14, 2009 in The Globe and Mail
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