CmB magazine cmba-achc.ca summer 2017 | 9
rules against individuals, and they certainly
do not publish Notices of Hearings containing
fraud allegations against banks. In this sense,
mortgage brokers and alternative lenders are
much more stringently regulated than the
banks; and yet it is the banks that have recently
come under scrutiny for their high-pressure
sales tactics and other public safety concerns.
AllegAtion: Alternative (shadow)
loans are dangerous
Sam Cooper: "As a result of the tighter federal
lending rules, borrowers trying to buy million-
dollar-plus properties in Vancouver's market
are increasingly taking out dangerous loans
from shadow bankers in a fast-growing and
poorly regulated financial market."
Fact Check: It is not clear how alternative or
private mortgages are dangerous. In addition,
it is the new, tighter underwriting guidelines
imposed by the Department of Finance that have
caused the shi in more borrowers opting for
alternative mortgage financing. By Sam Cooper's
logic, the federal government is "dangerous."
AllegAtion: Alternative (shadow)
lenders have no oversight and are
overly leveraged
Sam Cooper: "Shadow lenders are non-bank
lenders that increase the supply of credit in
Canada's financial system, without facing
the regulatory oversight of banks. Critics say
shadow banking is vulnerable to loose lending
standards, mortgage fraud, money laundering,
and collateral that is overly leveraged (also
called re-hypothecated) – meaning debt
backed by property assets is used over and over
again by related lenders to issue more home
loans, in ever riskier chains of debt."
Fact Check: As stated above, alternative
lenders are subject to market conduct
regulation through licensing regimes, which is
different from bank regulation. ose lenders
who engage in capital-raising are also subject
to what most would consider the heavy hand
of securities regulation – just think of the
case of Home Trust and the OSC. e idea
perpetually floating around in the media
that mortgage brokers and alternative lenders
are poorly regulated is simply unfounded,
and likely comes from reporters not fully
That readers gobble up this
poorly researched tabloid fodder
is confirmed by a simple scan of the
comments below the articles, which
generally decry the mortgage and
real estate sectors, predicting a
swift market collapse.
