What’s the difference between alternative and private lenders in Canada?

Alternative and private mortgage lenders are often lumped together in Canada’s policy debates, but a new position paper from the Canadian Alternative Mortgage Lenders Association (CAMLA) draws a sharper line between the two and warned of rising risks if regulators do not do the same.

CAMLA, which represent non‑bank institutional lenders, said the distinction is not academic. It framed alternative lenders as regulated pools of capital operating under defined frameworks, and private lenders as mostly individuals making case‑by‑case loans with far fewer structural safeguards.

“Alternative lenders are regulated mortgage lending institutions that serve creditworthy borrowers who may not meet traditional bank criteria,” the paper said.

These lenders, including mortgage investment corporations (MICs), limited partnerships and mutual fund trusts, “operate within defined capital pools and deploy risk‑managed strategies with transparent pricing and reporting,” it said.

By contrast, “private lenders are often individual or informal investors who lend their personal capital on a case‑by‑case basis,” the paper said.

This segment “lacks consistent underwriting standards, formal risk governance, and regulatory oversight,” a gap CAMLA argued increased the risk of fraud, misaligned incentives and market volatility.

Risk, oversight and consumer outcomes

On risk, CAMLA said alternative mortgage lenders adhere to “compliance frameworks, transparent disclosure and strict regulatory oversight.” Private lending, it said, carried “significantly higher borrower risk – particularly in vulnerable populations seeking short‑term solutions.”

CAMLA also highlighted basic protections that many private lenders do not consistently provide: privacy policies, cyber security, complaint handling and access to ombuds services.

Alternative lenders, it said, are subject to boards, auditors, bank and syndicate partners, real estate and securities regulators and FINTRAC – a web of oversight that “all benefits the consumer.”

Provincial watchdogs such as the Financial Services Regulatory Authority of Ontario (FSRA) ramps up supervision of private mortgages and MIC‑related brokerages, citing potential conflicts and investor‑protection risks. Meanwhile, there has been surge in non‑bank mortgage volumes and demand for private credit across real estate.

Call for clearer rules – and clearer language

CAMLA’s paper urge regulators to adopt “clear, public‑facing definitions” distinguishing alternative mortgage lenders from private lenders, expand public education on the extra risks of borrowing from private lenders, and pursue “tailored regulation that supports responsible alternative lending while curbing high‑risk private activity.”

“As Canada’s trusted voice for alternative mortgage lending, CAMLA invites regulators and stakeholders to align with our vision: advancing alternative lending as a trusted pillar of the Canadian financial system,” the paper said. 

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