GE Money Exits Canada

The global credit crisis has claimed another victim in the Canadian mortgage industry as General Electric Co. winds up its mortgage operations here.

After three years in the business, GE Money Canada said it will stop taking new mortgage applications on Thursday. It's the latest in a string of alternative lenders that have decided to scale back operations or close shop amid the credit crunch.

Lenders who relied on bundling and selling loans to fund new mortgages have run into trouble as the securitization market went dry.

GE exited its U.S. subprime lending business in July, 2007, and has been scaling back its mortgage operations around the world.

Other foreign-based lenders that have recently departed the Canadian mortgage lending market include HSBC Financial Corp. Ltd. and Accredited Home Lenders.

Joe Malek, AMP
www.joemalek.com

New measures designed to head off a U.S.style sub-prime mortgage crisis.

Concerns that cracks were beginning to appear in the foundations of Canada's housing market were behind the government's surprise decision to crack down on loose mortgage conditions ushered in less than two years earlier.

Starting Oct. 15, Canadians will no longer be able to purchase a home with a government-backed mortgage with a 40-year amortization and no down payment.

Instead, mortgages will be limited to 35 years and the government will only insure 95 per cent of the value of the home, meaning buyers will need to come up with at least a five per cent down payment.

Borrowers must also demonstrate that debt servicing costs are no more than 45 per cent of gross income and have a good credit rating.