Higher demand for mortgages from private lenders the past couple of years has driven CMI Financial Group past the $1-billion mark in mortgage assets under management, according to CEO Bryan Jaskolka.

Having emerged from the the ups and downs of the COVID pandemic and higher interest-rate environment to become a larger player in the private mortgage sector, Jaskolka told RENX Homes crossing the $1 billion mark is a “major milestone” and “one that we hope to continue to grow upon."

Private lending is an alternative financing method generally intended for people who struggle to qualify for mortgages from the major banks. Though offering comparatively shorter terms and higher rates (thus more risk and rarely being a first choice of lender), private mortgages can help “disadvantaged borrowers, or people who are shut out, or the under-banked individuals” Jaskolka said.

According to data from the Canada Mortgage and Housing Corporation, these mortgage investment entities have nearly doubled their share of loans originated and loan value originated from Q1 2020 to Q1 2024 – from the seven to eight per cent of the market to the 13 to 14 per cent range.

Jaskolka agreed private mortgages are a fast-growing market segment, indicating the shifting winds in the mortgage industry and the economy as a whole.

The forces that grew CMI

Founded in 2005 by Jaskolka, who at that time was a 22-year-old living in his parents’ home, CMI has developed into a private mortgage firm of over 120 staff members that has funded almost $3 billion in mortgages. The Toronto-based company operates nationwide and originates, underwrites, funds and services private mortgages across four segments.

With shorter mortgage terms at typically 12 months, compared to the three- to five-year periods more typical of banks, CMI has helped unlock the equity trapped in housing, the CEO said.

The company can work with clients who need housing financing quickly, Jaskolka explained, including new Canadians, those without the strongest credit scores, self-employed and gig workers, and people who reside outside major cities.

CMI can reply in 24 to 48 hours, he said, unlike large banks that can take significantly longer to approve a mortgage application. Plus, a private mortgage firm has more flexibility, such as offering second mortgages which major banks rarely offer.

The first wave of changes that have driven demand for private mortgages arose from a combination of the 2008 recession (which resulted in tighter lending regulations) and mortgage stress tests introduced in 2016, Jaskolka explained. As some borrowers were unable to meet these qualifications in the banking sector, they looked to private mortgages instead.

Then the one-two punch of the COVID pandemic and spiked interest rates to control inflation have been a second batch of factors behind CMI’s growth in the last three years, according to Jaskolka. Elevated interest rates and high housing costs have priced some buyers and owners out of traditional mortgages, opening another window of opportunity for private lenders.

“Anytime we see dislocation or disruption in the market – whether it’s COVID or the interest rates shock – what happens is we have new borrowers who previously may not have been looking for a mortgage.”

In one example, he said business owners who saw their enterprises shuttered during the pandemic reached out to CMI for financing to invest in their businesses using the equity in their homes.

As for CMI, Jaskolka sees the company as having “a lot of runway”, helped by the Canadian economy that “chugs along.”

What to expect from lowering interest rates

After an extended period of rising interest rates , the Bank of Canada commenced a tapering in the summer with three consecutive decreases of 25 basis points to 4.25 per cent as of August.

Jaskolka said it has been challenging time for the industry, homeowners, borrowers and aspiring buyers, making it difficult for people to enter the housing market. But he is hopeful the country has passed the peak of the interest rate cycle, a trend that is ultimately supportive of the mortgage industry.

Mortgage renewal prices will go down and reduce payment shocks as a result, he predicts. Combined with the interest rate falling, housing affordability could be improved, Jaskolka continued.

“There’s definitely some underlying stress points in certain segments of the market, but I think that we’re seeing stable real estate markets in general, with liquidity out there for people who need to sell.”