Note investing in Canada

[Ben French]

Is anyone here familiar with note investing in Canada, specifically buying non performing notes (ideally in large metro areas)?

Where can Canadians buy notes? There doesn’t seem to be a DebtX or Paperstac equivalent here.

When buying non-performing notes, how much are they usually discounted? Does this vary between force of sale provinces like Ontario and judicial foreclosure provinces like Quebec and BC?

Thanks for your insight.

Ben

[Chad U.]

Originally posted by @Ben French:

Originally posted by @Chad U.:

Originally posted by @Ben French:

Is anyone here familiar with note investing in Canada, specifically buying non performing notes (ideally in large metro areas)?

Where can Canadians buy notes? There doesn’t seem to be a DebtX or Paperstac equivalent here.

When buying non-performing notes, how much are they usually discounted? Does this vary between force of sale provinces like Ontario and judicial foreclosure provinces like Quebec and BC?

Thanks for your insight.

Ben

There is no.market for this in Canada as far as I'm aware of, particularly since the default rate is so low (<0.5%). Most of the big banks who originate 80%+ of all loans, typical hold these on their books.  However this may all change once forbearance periods are over and people begin defaulting enmasse.    

You may be able to purchase from B lenders such as Mortgage Investment Corporations.  In any event, with such a stable market (up til this point) lenders are better off holding the loan and foreclosing as they would recoup most if not all their capital, so no need to sell at a discount.  But this could change if the default rate spikes and there is a major downturn in the market.  

 Thank you for response. The reasons you stated, plus the fact that mortgages are full recourse in Canada, seem to point to the fact that note investing is not a thing in Canada.

I guess I’ll have to buy in the US in that case. I’ve been browsing Paperstac quite a bit lately, but I’ve noticed that most of the properties against which the notes are secured are decrepit shacks located in very rural areas.
I’m fully aware that the kind of borrower who defaults on their mortgage won’t usually be living in an ornate mansion, but do you know of any way to buy notes for properties located in major cities, or at least somewhere where home values won’t tank 50% when the local chicken slaughterhouse or glue factory closes? Somewhere nice like Boca Raton perhaps? Do you have to approach banks and brokers for this?

Actually, contrary to many people's beliefs, most mortgages in the US are recourse as well apart from few states, and/or how the mortgage is written.  If you foreclose on a borrower, and don't recoup the full amount owed on the note and mortgage (plus arrears, legal fees, etc), then you can file a deficiency judgement for the remainder.  

Yes it is possible to find distressed mortgages in higher end areas, though the volume may not be as plentiful as it once was.  Also the discounts are much smaller than if buying on a decrepit shack in the middle of nowhere.  This business is all about relationships when buying/selling notes, and having a track record to demonstrate you have the experience churning these and the systems in place to buy them.  

I'm happy to discuss offline further if you want to connect.