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CBC paints brokers with same brush as ‘shadow’ lenders

A cross-Canada radio segment on mortgages appears to offer misleading and potentially damaging information about non-bank lenders and brokers.

“Housing prices have increased … so people need to borrow more; you can’t borrow from the banks so you turn to this non-bank sector and it is an expensive option,” CBC business commentator Armine Yalnizyan said on Friday’s Metro Morning segment entitled Shadow Banking. “Bank mortgages, which average about three per cent for a five year fixed term compared to non-banks which can vary between seven and 15 whopping per cent.”

The story may be misleading and, perhaps, detrimental to potential mortgage borrowers who may discount the services a broker could provide.

“This story highlights the continued misconceptions about mortgage brokers and non-bank lenders that still persist,” James Laird, president of CanWise Financial told MortgageBrokerNews.ca. “If a business journalist still thinks that brokers and monolines only exist to service the alternative space, then we as an industry have to educate consumers on all of our offerings including the prime business that the majority of our industry focuses on.”

“Shadow” lending has come under scrutiny in the mainstream media as many borrowers have had to turn to private options because they don’t fit the profile required for more traditional mortgages.

Referencing a Reuters story, Yalnizyan appears to lump all non-bank mortgage options – including monoline products – together.

“(Shadow banking) is where you turn to when the bank or the credit union turns you down because of a faulty credit rating or … you already borrowed too much, according to your income or maybe your income stream isn’t that steady,” she said. “So that could be the ‘bank of mom and dad,’ it could be an individual; but increasingly they’re investors and, in fact, branch plants of the banks and mortgage brokers.”

And, in a call with MortgageBrokerNews.ca, Yalnizyan admitted she was unfamiliar with monolines and the fact they are regulated and CMHC insured.

She also clarified what she wanted the piece to focus on.

“The concerns that policymakers have is that there is a growing segment of risky loans out there,” Yalnizyan told MortgageBrokerNews.ca. “In the effort to contain risk in the regulated sector, we have pushed a lot of risk into the unregulated sector and we’ve actually magnified the profile of that risk.”

Resource By : http://www.mortgagebrokernews.ca/news/cbc-paints-brokers-with-same-brush-as-shadow-lenders-193595.aspx

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