Multifamily Mortgage Lending: A Comparison of the U.S. and Canada

Authors: Cynthia Holmes and Michael LaCour-Little

Start Page: 151
End Page: 170
Volume: 10
Issue Number: 1
Year: 2007
Publication: International Real Estate Review

Abstract:

We combine loan data from distinct sources to compare and contrast multifamily mortgage lending in Canada and the U.S. After a general comparison of the multifamily housing markets in the two countries, we focus on loan pricing and non-price contract terms in the two environments. We find longer loan terms in the U.S. compared to Canada and attribute this to the greater liquidity available from a more established secondary mortgage market. We also find that while nominal rates are higher in Canada, mortgage spreads are actually lower, a result likely due to contract features that raise the cost of default for borrowers and restrict prepayments". In terms of loan performance, we found greater prepayment risk in U.S. mortgages and greater default risk in Canadian mortgages, although findings regarding default are limited by small sample size.
 

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