Banks are paring back loans to below prime borrowers amid signs that housing prices are starting to fall. The Canadian Real Estate Association said April 16 that prices in Canada dropped 1.7% in March from the previous month, led by a 3.1% decline in Vancouver. Finance Minister Jim Flaherty said he’s “encouraged” by signs of a housing correction in Vancouver, preferring the market to “correct itself” without government intervention.
Toronto-Dominion Bank, the country’s second-largest lender, stopped originating non-prime residential mortgages as of March 31, spokesman Mohammed Nakhooda said. …
“This decision was based on a number of factors, including a regular review of our secured lending risk management strategies,” Nakhooda said. “To remain competitive in the business in the current environment would require us to increase our risk profile, something we concluded was no longer in our risk appetite.”
Canadian Imperial Bank of Commerce, the country’s fifth- largest bank, said in March it was considering the sale of its FirstLine Mortgages broker. …
Increased risk management has led some banks to reject loans, Reid said.
“Two years ago, they wouldn’t have turned that deal down,” said Reid, 52.
An influx of non-prime lending will benefit Home Capital, Chairman and Chief Executive Officer Gerald Soloway said. The company is expected to earn $1.50 a share before one-time items in the first quarter, up from $1.24 a share a year earlier, according to the average estimate of six analysts surveyed by Bloomberg News.
“We have had a very good first quarter,” said Soloway, who has been CEO for 25 years. “There’s not going to be any surprises, up or down.”
“There is an opportunity for the company to increase its market share without lowering its standards for credit quality,” said Bryan Brown, an analyst at Macquarie Capital Markets in Toronto. He rates Home Capital shares neutral.
“I don’t think there is any sign anywhere from people on the ground in Canada that foresees the bubble,” said Soloway. Economists predicting a collapse in Canada “have been wrong for years; my prediction is that they’re going to be permanently wrong.”
– from ‘Canada’s big banks flee nonprime market amid signs of housing downturn’, Bloomberg via FP, 20 Apr 2012
There never was sub-prime lending, but now we’re stopping it.
Worthy of a Cold-War memorandum.
Also, Home Capital will get BBQ’ed.