I would consider myself a Mortgage Broker who appreciates the reasons behind the Government’s decision to apply the most recent regulatory changes by way of the “stress test”, that took effect this past January. I see the benefit in stimulating a Borrower’s financial situation in the event the rate environment is higher, compared to when the mortgage was originally taken, and the need to stabilize the real estate prices in some of Canada’s hottest markets. That being said, I would also agree with many of the arguments against the magnitude to which the Government applied this agenda. Canadian Lenders are seeing the lowest level of mortgage default in more than 10 years, not to mention the impact a slower real estate market will have on the Canadian workforce.
I thought I would start this piece with my opinion of the regulatory environment to help address any perceived bias. Coming from the Banking world, I am more sensitive to the notion that Mortgage Brokers will present mortgage options to their Clients, based on the relationship the Broker would have with the Financial Institution. That couldn’t be further from the truth! Speaking for myself, a majority of the mortgages I’ve arranged for my Clients have been completed with my client’s preferred Bank. It’s ironic that as a Mortgage Broker, some of my strongest lending partnerships are held with two of Canada’s Big Five Banks. I don’t know a Mortgage Broker who doesn’t objectively present the top three Mortgage Lenders based off their client’s suitability and preference.
What has motivated me to author this blog is to highlight my position that although I can understand both sides of the debate with the government’s regulatory changes, it is also my belief that not every home buyer has the luxury of waiting for the best time to purchase. Adding to that, for those who must evaluate their purchase decision with leasing for another year – there can actually be a cost-benefit in purchasing with a mortgage from an Alternaitve Lender. The new mortgage guidelines have also impacted the traditional Alternative Lending institutions and that has given rise to Alternative “Private” Lenders. Banks and institutional lenders still account for a majority of my mortgages funded; but having access to these lenders, gives a mortgage broker the ability to support a Borrower that might not have the option of waiting until they can qualify under the current B20 Guidelines. With my clients who request this support, I structure it as a “short-term” strategy; as the length of term is normally 12 to 24 months, depending on the borrower’s situation and how soon the reasons that required alternative lending would be addressed.
Before I started as a mortgage broker, I had assumed that any lending from a non-traditional source (ex. private lending), would only be necessary for individuals who have mismanaged their credit. After supporting mortgage clients as a broker for the past 10 years, I understand that these types of lending solutions can be a great assistance with self-employed borrowers who don’t qualify based on the income they have declared, for borrowers who may not have active credit (which can negatively impact an individual’s credit score) and for those who don’t have the options with traditional mortgage lending.
In closing, it’s my opinion that having a Mortgage Professional who can navigate these various lending options and educate Home Buyers, will make the decision “to buy” or “to wait” an informed one.