Two provinces have seen a surge in foreclosure proceedings
 
Foreclosure proceedings in Alberta have more than doubled in two years, according to data provided by the Alberta Justice Department - from 2,510 in 2006-2007 to 5,300 in the first 11 months of 2008-2009.

According to statistics provided by the British Columbia government, the province has seen a similar surge, with nearly 2,100 foreclosures filed between April and December of 2008 - more than the 1,900 that were filed in the entire previous fiscal year.

Despite having just a share of about 7 per cent of the national market, subprime lenders in Alberta accounted for 56 per cent of the foreclosures in 2008. In British Columbia, the tiny subprime market laid claim to 42 per cent of the province's 2008 foreclosures. In comparison, Canada's five largest banks accounted for 33 per cent of the foreclosures in Alberta in 2008, even though the country's chartered banks account for about two-thirds of Canada's total outstanding mortgages. (The remainder of the lenders in the mortgage market are made up of credit unions, trust companies and insurance firms).

The Globe and Mail's analysis shows that several cities have an extremely disproportionate share of subprime lenders who have started foreclosure proceedings, compared with traditional, prime lenders. Edmonton had 330 foreclosures in the calendar year 2008 - 60 per cent of which were initiated by subprime lenders. "Oh, it's here. For sure it's here," said Larry McTaggart, an Edmonton realtor who is often enlisted to sell homes for lenders who have foreclosed on properties. "I don't know where it came from... it's not the Bank of Montreal or the Bank of Nova Scotia or Toronto-Dominion" Mr. McTaggart said. "It's the 'B' lenders." The 90,000-person city of Red Deer only had 36 foreclosures in 2008, but 32 of them were launched by subprime lenders such as Accredited Home Lenders, Wells Fargo and the subprime lending division of HSBC.
(The findings are based on data provided by two private companies, British Columbia's Foreclosurelist.ca and Alberta's Foreclosurescanada.com. Both companies track foreclosure filings from each province's respective court systems and sell them to potential investors. They also advise homeowners who find themselves in default. Both companies acknowledge that their data collection isn't perfect. Some proceedings slip through the cracks, and they don't have access to foreclosures that might have been sealed by the court, but their records are the best available sample.

The most accurate numbers reside in the databases of the Alberta Justice Ministry and B.C. Ministry of the Attorney General, but both departments turned down The Globe's request for the data. They did provide, however, basic statistics on the number of foreclosure applications.)

SUBPRIME DEFINED

The word subprime has created much confusion because many mistakenly believe that it refers to an interest rate that is below the prime rate - which would obviously be a less risky and more affordable mortgage.

That is not what the word means. Rather, subprime refers to the credit-worthiness of the borrower.
There is no standardized definition of the word, but many mortgage experts interviewed agree that subprime mortgages are best described as loans that include at least two of the following characteristics: a borrower with a bad credit history, an interest rate that is significantly higher than prime lending rates and mortgage values that amount to more than 80 per cent of the market value of the house.

In the United States, there was a proliferation of subprime lenders coinciding with the boom in the real estate market. In 2007, when thousands of homeowners started defaulting on their mortgages, dozens of subprime lenders, including one of the largest, New Century Financial, filed for bankruptcy protection, which ultimately sent the economy into a tailspin.

GREG MCARTHUR AND JACQUIE MCNISH
From Saturday's Globe and Mail