Mortgage Company of Canada Inc. has temporarily halted redemptions for its residential lending fund as homeowners struggle to make their monthly loan payments amid the country’s housing downturn.
For more than a decade, the alternative mortgage lender has provided loans to homeowners in the Toronto region, which is one of Canada’s priciest real estate markets and an area where mortgage delinquencies have been rising faster than in the rest of the country.
Last year “proved to be a difficult year,” Raj Babber, chief executive of the lender, said in a notice to investors dated May 14 that was viewed by The Globe and Mail.
Mortgage Company of Canada is a mortgage investment corporation, or MIC, that pools investor funds to provide loans to borrowers.
Mr. Babber said the Toronto region’s real estate market “remained profoundly challenging throughout the year,” with sales tepid and home prices below their 2022 peak.
The rise in mortgage delinquencies means lenders are increasingly selling properties to recoup missed payments using what is known as a power of sale.
Disputes over the process have, in turn, led to a backlog within the Ontario court system, according to Mr. Babber, which has extended the time it takes lenders to get repaid.
Ontario city leads surge in Canada’s mortgage delinquencies
Conditions have not improved this year with unemployment climbing and the U.S. trade dispute and Middle East war sapping consumer and investor confidence in the housing market.
“Losses continue to be realized on portions of the portfolio at a faster rate than anticipated,” Mr. Babber said.
Because of what it called adverse conditions, Mortgage Company said it has decided to temporarily halt redemptions and monthly distributions, and it will not allow investors to invest more.
“Effective immediately, investors will not be able to redeem their investment or purchase shares,” the notice said.
The MIC is the latest private lending fund to curtail redemptions. Many private debt funds and real estate funds limited investors’ ability to withdraw their money as performance in the sector continued to deteriorate in 2025 because of higher borrowing costs and increasing requests from clients to cash out.
Mortgage Company said that after its June 15 distribution, it will suspend income distributions.
The notice said that “thereafter, cash will be distributed to investors on a pro-rata basis through mandatory monthly redemptions of up to 8 per cent annually of each investor’s holdings.”
The notice did not provide detail on the timing of “thereafter” or the length of the suspension. Mortgage Company did not return a request for comment by deadline.
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The notice said the company would use income that would normally have been distributed to strengthen its balance sheet.
“We understand these measures are significant, however we believe they reflect a disciplined approach to managing current conditions and protecting investor capital,” Mr. Babber said.
The minimum investment in Mortgage Company is $25,000, according to its website.
Borrowers generally go to a MIC or private lender after they fail to qualify for a loan from any of the chartered banks, which have lower interest rates than the alternative lenders.
Because MICs lend to borrowers who typically have a spottier credit history, their portfolios have a higher share of delinquencies, which is when a borrower misses a payment by at least 90 days.
Mortgage investment entities had a delinquency rate of 1.96 per cent in the third quarter of 2025, according to federal housing agency Canada Mortgage and Housing Corp. In comparison, chartered banks had a delinquency rate of 0.24 per cent in the same period.
CMHC said that, overall, mortgage investment entities have a higher exposure to Toronto, which may partially explain their worsening delinquency rate.
Mortgage Company did not disclose its delinquency rate in the investor notice or on its website.