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

Why did the U.S. Subprime Industry Collapse? Greedy Lenders 51% Poor Bond Rating 25% Mgr’s 10% Other 9% 5% Fed

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 DecliningImproving % of 2006 “Liar Loan” or “no doc” Loans in %N/A % of Interest Only or ARMs (Adjustable Rate Mortgages) 66%N/A Bankruptcies per 1000 People Capital Market Performance TSX/DJIA YTD (SEP30) 10.2%11.3% Prime Rate 7.50%6.25%

Industry Size US: $2.7 Trillion or $8,940 per person CDN: $60 Billion or $1,818 per person

Current Default Rates 0.50%20%

Loan to Value U.S: Debt to Equity = 9.0:1 CDN: Debt to Equity = 3.6:1 Based on a $200,000 Mortgage

“Liars” and ARM’s U.S: Almost half of all subprime mortgages in2006 had either no down payment and/or no income confirmation. 66% of all subprime mortgages since 2006 were Adjustable Rate Mortgages, (ARM’s). CDN : N/A

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

25 year Comparison Source: Saskatoon Real Estate Board