www.primewest.ca

1
www.primewest.ca
2
Demystifying Subprime

• What is a Subprime Mortgage?
• Granted to anyone who does not qualify for a
  mortgage with a conventional lender
• New to the job
• Recent graduate
• Credit problems
• Immigration status

3
Why did the U.S. Subprime Industry Collapse?
Other
Fed
9
5
Greedy Lenders
51
Poor Bond Rating
25
Mgrs
10
4
Canada vs U.S.
United States Canada
Industry Size 2.7 Trillion 50-60 Billion
Current Default Rate 20 Below 0.5
of Total Mortgage Industry 35 10
Average Loan to Value Above 90 78.3
Business Cycle Declining Improving
of 2006 Liar Loan or no doc Loans in 2006 47 N/A
of Interest Only or ARMs (Adjustable Rate Mortgages) 66 N/A
Bankruptcies per 1000 People 7.7 2.7
Capital Market Performance TSX/DJIA YTD (SEP30) 10.2 11.3
Prime Rate 7.50 6.25
5
Industry Size

• US 2.7 Trillion or 8,940 per person
• CDN 60 Billion or 1,818 per person

6
Current Default Rates
0.50
20
7
Loan to Value
Based on a 200,000 Mortgage

• U.S Debt to Equity 9.01
• CDN Debt to Equity 3.61

8
Liars and ARMs

• U.S Almost half of all subprime mortgages
  in 2006 had either no down payment and/or no
  income confirmation.
• 66 of all subprime mortgages since 2006 were
  Adjustable Rate Mortgages, (ARMs).
• CDN N/A

9
In Closing

• Analysts predict Canada will have
• Industry growth of 200 in the next 10 years
• Above average ROE
• Stable interest rates
• Strong real estate trends

10
25 year Comparison
Source Saskatoon Real Estate Board
11
www.primewest.ca