CMHC maintains lender statistics on various markets, but as you might expect, the direct, individual private lending space is an amorphous animal and therefore, at best we can make directional assumptions based on what we see happening in the Mortgage Investment Corporation (MIC) space. MIC assets are up nearly 25% this year (whereas the market in general is up about 10%) [Refer to this article]. MIC renewals are also up, so they are retaining more clients than prior years. Renewals are an interesting statistic because most borrowers in the private markets borrow typically for an interim period and refinance within a year or 18 months, with a mainstream institution. What is happening is income qualification is tightening (or becoming more restricted), and home prices are declining, which affects the ability for a private borrower to refinance. As a result, MIC volumes are up, and retention (renewal) is also up. So, you might ask, why have my loan volumes at Home Ownership Solutions declined?
Home Ownership Solutions is a very conservative lender, with over a decade of lending without one penny of capital loss during that time. We take great care to ensure capital preservation and we believe that the best credit decision a lender makes is the first decision to take on a particular client. As a result, our clients are typically able to refinance in any market. Consequently, and by design, our retention rate is low. This year, approximately 50% of our portfolio refinanced with a mainstream lender. We plan on this and we are happy for our clients to find the best, affordable solution for their families. Furthermore, due to the weakening market, we have not taken on many new borrowers. Our strategy in 2020 was effectively to sideline and find the right time to expand the portfolio. We think that time is effectively here. Our 2023 strategy will focus on the best quality borrower and assets, and we will offer them the best rates in the market. This will allow us to get assets to work, in a ‘sleep well at night mode’ when it comes to capital invested.
We thank our lend Link partners for their patience in 2022 and we look forward to expanding your loan portfolio in a responsible way in 2023.
All the anecdotal signs on the street is that this will be an active year for Private Lenders. Just yesterday OSFI put out a request for comments on yet further tightening of lending rules, booth at the Borrower level and at the Bank Portfolio level. Anytime the regulators are active, it's a leading indicator for us. Also, the 'Bank of Mom and Dad' will be more active, with parental collateral blankets to help younger buyers close on recent purchases...