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15 Nov



Posted by: Tracy Luciani Price

While we pride ourselves with having a ‘squeaky-clean’ financial image and a more conservative approach to life than our American neighbours, it seems that we have been on the same slippery ‘subprime’ mortgage slope after all, albeit on a much smaller scale.

Between 2005 and 2008 a dozen or more subprime(B) lenders, the most prominent being Xceed Mortgage, GMAC and Wells Fargo(all lenders from the U.S.A. who came here) took an aggressive approach to mortgage lending, up to 100% of sale price, plus(in some cases) legal costs, charging fees and higher than normal interest rates.

Today these lenders have disappeared because of the ‘credit crunch’, and these mortgages are now coming due. All the borrowers’ have/are/will be told that their mortgages will not be renewed and will need to scramble to find a new lender. The task will not be easy, as most were either self employed, had poor/bad credit at the time, or both. Experts believe that the vast majority will not find a new lender, and will default on their mortgages, causing a flood of power of sale properties. Some will have improved credit, and will qualify. But because loan to value ratios were so high back then, and lending guidelines have tightened up since then, many will not have sufficient equity to be able to qualify for a new (replacement) mortgage.

It is estimated that there are approximately 30,000 such ‘orphan’ mortgages coming due this year and next, which represents about 5% of the total mortgage market. If you are one of these unfortunate people, call us as soon as possible to review your situation with you, especially if you want to remain in your present home. We will see what we can do for you, and as a last resort we may be able to arrange a ‘Rent to Own’ solution, that is, have an investor purchase the property from you and rent it back to you. We will credit ‘coach’ you, and will assist you in improving your credit to qualify to repurchase your house in the future. This way, you will not default on your mortgage, damaging your credit beyond repair.