Alternative Lenders Say Lumping Them With Private Lenders Misses the Point
The Canadian Association of MortgageLenders and Administrators just dropped a 28-page brief telling OSFI and Finance Canada to stop treating every non-bank mortgage lender like they're the same animal. They aren't.
At stake is how Ottawa regulates the roughly $300 billion slice of the mortgage market that sits outside the Big Six. OSFI's been making noise about systemic risk in the shadow banking sector since late 2024, and the regulator's default move when it gets nervous is to paint with a wide brush. CAMLA's position: that brush is missing the actual lines.
The difference regulators keep blurring
Alternative lenders, the ones CAMLA represents, are already regulated entities. They operate under provincial licensing regimes, report to FINTRAC, follow FCAC disclosure rules, and in many cases carry federal deposit insurance through their warehouse funding arrangements with Schedule I banks. They lend at prime-plus rates to borrowers who don't fit the stress-test box: self-employed income, recent credit events, non-traditional properties. The loans get securitized through NHA MBS or sold into bank balance sheets. These are not kitchen-table operations.
Private lenders are a different species entirely. No provincial oversight beyond basic mortgage brokering rules. No mandatory reporting. Rates starting at 8% and climbing to double digits. Funding comes from high-net-worth individuals, syndicated pools, or private debt funds. The loans stay on private balance sheets. Many private lenders are one-person shops operating out of a single market. When a private lender blows up, the fallout is local and contained.
The CAMLA brief argues that grouping these two categories under a single "non-bank" umbrella for regulatory purposes creates two problems. First, it applies private-lender risk assumptions to alternative lenders who already operate inside the regulatory perimeter. Second, it lets genuinely unregulated private lenders slip through because the rules get designed for the larger, visible players.
What tighter regulation actually looks like
The specifics matter here. OSFI has floated capital requirements, liquidity stress tests, and mandatory securitization disclosures for all non-bank mortgage originators above a certain volume threshold. CAMLA isn't objecting to oversight. They're objecting to being stress-tested like they're a systemic risk when their loan portfolios flow directly into federally regulated bank warehouses that already hold capital against those assets.
The brief points to 2008. Subprime blew up the U.S. system because unregulated originators were writing garbage loans, securitizing them through unregulated vehicles, and handing the risk to institutions that didn't price it correctly. Canada didn't have that blow-up because CMHC-insured lending dominated, the Big Six held most mortgages on balance sheet, and alternative lenders were a rounding error. Today, alternative lenders represent roughly 12% of mortgage originations nationally, bigger than they were, but still operating in a system where the ultimate credit risk sits with entities OSFI already supervises.
Private lenders, by contrast, hold their risk. That makes them less systemically dangerous in the "contagion spreading through the banking system" sense, but more dangerous in the "retail investors losing their shirts" sense. The regulatory gap isn't that private lenders are under-capitalized. It's that no one is watching what they promise investors or how they value the collateral.
CAMLA's ask is straightforward: regulate alternative lenders as regulated lenders, which they already are. Build a separate framework for private lenders focused on disclosure and investor protection, not bank-style capital rules.
The political economy problem is that splitting the category creates more regulatory work. One rulebook is easier than two. But easier for the regulator and correct for the system are not the same thing.
