Underwriting a private deal
Mar 27 2018
The private mortgage market in Canada has been consistently growing over the last 10 years. Reasons for the growth include stricter regulations for institutional lenders and increase in the amount of capital available to private mortgage lenders as a result of underperforming bonds and other traditional fixed-income investments, which has motivated the investment community to seek out higher return products. Another factor is increased regulation of how private mortgage lenders raise capital (except for BC) which has consolidated smaller operators who are challenged to meet regulatory requirements.
Substantiating how much the industry has grown is a challenge, but, as an example, in 2010 there were approximately four private mortgage lenders based in the Western Provinces who had a portfolio of loans exceeding $100 million and today there are over 12.
As mortgage professionals, there is a real opportunity to embrace private lending in order to service more clients and in turn grow your business. Part of embracing this market is educating yourself on its nuances. In this article, I will discuss how private mortgage lenders make underwriting decisions.