International speculators play Vancouver’s real estate market through subprime mortgage lenders avoiding foreign buyer tax

By Amy Chen

International speculators are gambling on Vancouver’s real estate market without having to pay the 15% foreign buyer tax by investing in subprime mortgage lenders, who in turn offer high-interest mortgages to Canadians to buy homes.

Wealthy investors from China have poured millions of dollars into Gentai Capital Corporation, who claim to control a $215 million dollar mortgage portfolio through Genesis Mortgage Investment Corporation, the Richmond-based lender’s disclosure documents show[1]

Gentai Capital Corporation promises an 8.24% annualized return on investment, and Genesis MIC offers loans with an average interest rate of 10% to customers who don’t qualify for traditional mortgages[2]

Mortgage broker Hongyu Tina Mu, who is listed as the founder and president of Gentai[3], also runs another mortgage company called Acer Mortgage Lending Corp out of the same registered address[4]

“MICs provide mortgages to borrowers who, due to their credit history and credit risk profile, would typically not qualify for a loan with a regulated financial institution,” Canada Mortgage and Housing Corporation explains. “Such borrowers, who fall outside the underwriting rules and guidelines followed by regulated lenders, may include self-employed individuals whose incomes are more difficult to verify, real estate investors and recent immigrants”

“Available evidence suggests that these lenders account for the majority of unregulated lenders and, in terms of value, the bulk of subprime lending in Canada,” according to CMHC.

CMHC observed a rapid growth in this unregulated industry, and found that the majority of MICs were located in British Columbia.

Housing advocacy groups called on BC’s newly minted NDP government to crackdown on foreign-funded MICs.

“Mortgage investment corporations are a double whammy for British Columbians,” Affordable Housing Canada said in a statement. “They are exacerbating the unaffordability crisis and setting us up for a repeat of 2008 subprime crisis.”

“It’s time for the new BC government to take action to shutdown this loophole by making all buyers who receive money from foreign-funded MICs pay the 15% foreign buyer tax,” AHC added.

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