While economists are waiting to measure the impact of Ottawa’s new mortgage rules on home sales, the fallout on alternative mortgage lenders has already been considerable. 

Sherry Cooper, chief economist for Dominion Lending Centres, said the uncertainty surrounding the federal government’s latest efforts to tame Canada’s hottest housing markets has resulted in “a spate” of alternative lenders suspending their mortgage activities.

While Cooper did not name any firms, she told BNN in an interview that some lenders have decided “until further notice, until the dust clears, we are no longer making loans, we are not making renewals.”

Cooper added that, “What has happened, is that the rules of the game have changed and there are some specific situations that are unclear. For example, what about all those people who have put down deposits on a condo project that is now under construction and won’t be delivered for a year or two? Will these people be subject to the stress tests on a five-year fixed rate?”

Toronto-based mortgage lender Merix has suspended its investment property programs for rentals, and said that refinancing programs must close before Nov. 15. Ottawa’s new mortgage eligibility rules are set to take effect on Nov. 30.  

True North Mortgage chief executive Dan Eisner told BNN in an email that many of the company’s funding sources have “either announced substantial changes or have reached out to us to tell us substantial changes are coming.”

Eisner added that the mortgage broker expects real estate transactions to fall about 40 per cent over the next few months, in a similar way that Vancouver was affected after a new tax on foreign homebuyers was implemented in August.

One non-bank mortgage lender, Street Capital Group, released a statement on Thursday that highlights how the industry is bracing for the full impact of Ottawa’s housing changes.

“While the company expects that in the near term there may be a negative impact on new prime mortgage originations generally in the market, the company believes it is strategically well placed for future growth and profitability given its planned transition to a Schedule I bank,” Street Capital said in a statement.

Based on Wednesday’s closing prices, alternative lender First National has plummeted almost 20 per cent over the last three days. Genworth MI Canada’s stock has tumbled almost 12 per cent over two days, while Equitable Group has dropped 9 per cent over the same period. 

At Ontario’s largest credit union Meridian, it’s ‘business as usual” right now, according to President and CEO Bill Maurin. He told BNN in an interview they are still “assessing the impact” of Ottawa’s new lending rules.

“We don’t have any major concerns around the impact going forward on our business, but there will be impacts from a fee and cost of funding perspective for sure,” Maurin said.  

The federal government’s housing moves have also spurred investors to look for signs of a U.S.-style mortgage disaster in Canada, said Michael Scanlon, portfolio manager at Manulife Asset Management, in an interview with BNN.

“I’m hearing a lot of the same buzz words that we heard in the U.S. in terms of the distressed ability to pay mortgages that have been taken on in the last couple of years,” Scanlon said.

He said investors are “overreacting” and jumping to conclusions that the Canadian market is similar to the U.S.

“It’s the same situation where these companies are getting hit disproportionately, [compared to] what the actual result might be,” Scanlon said.

“A lot of short term traders see potential for blood in the water and they jump all over these things. And sometimes it just doesn’t come to fruition.”

On Monday, Finance Minister Bill Morneau unveiled a number of new housing measures including more robust stress tests on mortgages, and the closing of a loophole that allows homeowners to avoid paying capital gains tax on the sale of a principal residence.