5 things you won't forget about 2009
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15/12/2009 8:00:00 AM
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2009 was, undeniably, a year of ups and downs. While talks of a recession segued to talks of a housing bubble, everyone had their eyes fixed on Bank of Canada governor Mark Carney to see what he would do next. But it was also a year that saw a lot of industry-specific events that could very well change the way brokers do business in 2010.
1. The 'R' word and the new lending landscape
Hands down the recession was the newsmaker of the year. Its effects were felt throughout the industry and, not surprisingly, the other events on this list are all directly linked to it. Although the blows of the financial crisis are easing and brighter forecasts are in place for 2010, it has marked a clear shift in how brokers, lenders and insurers do business.
"We were still in the thick of the subprime crisis fallout for most of this year," says Dylan Gallagher, broker/owner of Bridge Capital in Calgary.
"Lenders are still grappling with how to lend in a marketplace like this, so as brokers, we have lots of stories of when we thought we had a deal and then there was an underwriting change or a policy change just based on what was happening in the market - that's what stands out most in my mind."
Brokers noticed more stringent lender and insurer guidelines, even for traditional 'A' clients, making it harder to keep on top of what deals would fit where. Alt-A clients, particularly self-employed borrowers, were even more scrutinized and subprime borrowers with mortgages up for renewal saw their options disintegrated (see subprime sidebar for more details). Many lenders also made it more difficult to purchase an investment property due to adjusted rental income offset guidelines which, in some cases, dropped from 70 to 80 per cent to 50 per cent.
"The policies and procedures of the different lenders have completely changed, so it's not that easy to get a mortgage anymore - and it makes our job a lot harder," says Elana Rendell, a broker with Mortgage Architects in Burnaby, B.C.
Lisa Manwaring, a broker/partner at Meridian Southwest Mortgage in Delta, B.C. agrees, saying it was tougher and more time-consuming for brokers to get deals done this year.
"I found in the summer it got a little bit easier with lenders, but I would honestly say in the last month we're getting back to some of that tough stuff again and they want a lot," says Manwaring. "In some instances I agree with that, but if a guy has been with the federal government for 20 years, for example, and he's given me a job letter and a pay stub, I don't understand why we're being asked for tax documents and things like that."
As tough as the residential mortgage lending situation has been, commercial lending took an even bigger hit, largely because of a lack of investor interest in commercial mortgage-backed securities. There was a 50 per cent decline in transactions in the first half of 2009 and commercial real estate values are estimated to have dropped as much as 20 per cent throughout the recession, according to a November report released by PricewaterhouseCoopers.
Next up: Mark Carney and his low rate drama
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