Know your B products

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Kam Brar
Verico Select Mortgage Corp., Victoria, B.C.
 
How does a broker’s approach with an alt-B client differ from a broker dealing with prime clients? 
The fundamentals are all the same, provide exceptional service and fulfill the needs and wants of the client with the right products.  Where things differ is ensuring that with alt-B clients you get their whole story. In other words, you need to fully understand what has led them to their current circumstances, and most importantly you need to ensure that the short-term plan you are providing them with will ultimately benefit them in the long run.  Furthermore, they also need to understand that in order for things to be successful they will have to adhere to the plan.

What are some of the problems brokers face when dealing with B clients?
Not getting all of the information both about the client and the deal overall upfront.  With B deals there is always a greater likelihood of surprises -- surprises which can often derail the deal quite easily.  For example, there are sometimes judgments on title that the client may not be fully aware of or sometimes reluctant to tell you about, but by doing a simple and quick title search these can be found out quite quickly.   Another common problem is the rates that B deals come with, a lot of brokers simply have a hard time selling their clients on these rates. 

What tips can you offer brokers to get clients looking for B lending through the process?
Be creative, think outside the box, in fact, get rid of the box altogether. Be candid and don’t sugarcoat things. Trying to make them feel good isn’t going to help, being honest and direct with them, however, will. Also, make sure there is an exit door at the end.  Very few clients can continually stay in B and  private mortgages due to the costs, these products are short-term solutions -- make sure that’s the case with all of your clients. Lastly, don’t be ashamed of the rates. Rates are based on risk and, at the current time, those are the ones your clients qualify for.
 
What are some of the problems consumers experience with B products
Less flexibility.  A lot of the B products don’t have the same early repayment or lump sum repayment of options of their A cousins.  Sometimes there is a lock-in period during which they cannot be paid out at all unless the property is sold.  Other products don’t even allow you to refinance and switch to another lender during a prescribed time period.  B products can also come with a set of fees that clients may not often experience with A products.  These can vary from lender to lender so it’s best to know your B lenders’ products inside out thereby avoiding any grief for you and your clients. 

What are some of the problems brokers experience when accessing B products?
They don’t realize that polices and products differ greatly from B lender to B lender.  Unlike the A side, which is fairly uniform, the same cannot be said of the B side.  These lenders all have their own particular nuances on the B side as far as LTVs, types of properties, beacons, credit history, etc.  What one may accept is not guaranteed to be accepted by another.  Lender fees can also present a problem.  Sometimes brokers who are inexperienced on the B side, are quite shocked by what some lenders charge. Once again, this can vary from B lender to B lender. There is no set policy out there.

What are some of the issues for B clients?
Rates. It’s more a sticker shock thing. Most consumers have prime rates in their heads and who can blame them? This is what everyone talks about.  So the sooner a broker can “recalibrate” the rate expectations the better. Fees are another one. Most consumers are not aware that there are fees associated with B lending.  Again, a successful broker is one who deals with this upfront.  Springing these on clients at the last minute is not the way to go -- it’s a recipe for disaster.
 
I’m a B client, should I be upset or worried that I don’t qualify for a better product or are B products satisfactory enough?
 I don’t believe you should. Conversely, I’m not saying you should be jumping for joy either.  You should look at your present situation as a temporary one. If the B product is the best you can get at this time and it bridges an immediate issue or challenge or solves one presently in your life than it’s OK.  Ultimately your goal should be to cross back over the A side. 
 
Chad Mooney
Mortgage Brokers.com

How does a broker’s approach with an alt-B client differ from a broker dealing with prime clients?
I don’t know that the approach is any different to the client themselves. Typically, you have to treat all the clients the same. The approach to the lenders is different and obviously who you can go to. The subprime and the B market is starting to open up a little bit, it wasn’t like it was a couple of years ago. I don’t think the approach to the client is any different whether they’re A, B or C. You basically look at the client, you paint the picture, and you find the best possible mortgage solution for them.

What are some of the problems brokers face when dealing with B clients?
Every situation is unique. We deal with some pretty tough-to-do situations with people. We’ve been doing this long enough where we know exactly which lenders accept what. I’m finding that nowadays even B clients who have been with the B lenders, have loan to value so high because of the mortgages they got into five years ago. Although they’ve always made their payments, it’s tough to find them a lender at this point, there’s just nobody doing it. Their credit’s not good enough to get into a CMHC-insured mortgage. There’s this hole now and a lot of people are having trouble renewing. 

What tips can you offer brokers to get clients looking for B lending through the process?
With B clients, I think the biggest thing now is get the full story. Get all the information upfront before you present it to the lender. Because everybody has a story as to why they got there, some stories are believable some stories aren’t. If you can paint the picture for the lender and tell them the full story as to what the situation is, sometimes they’ll make an exception based on the story you can tell them. Because the client is in B doesn’t necessarily mean they’re bad people, there’s a story to go with it.

What are some of the problems consumers experience with B products?
If they qualify then there’s no problems in essence. If they’re a qualified B client, then they’re qualified. So is there any challenge? Not necessarily. The only downside is going to be interest rates are going to be a little higher than what we can get for our A clients. Outside of that, if they qualify, there’s no challenges that I foresee anyway.

What are some of the issues for B clients?
Not necessarily, like anything, you pay your mortgage every month and you’ll never have an issue. If you abide by your contract and make your monthly payments you shouldn’t encounter any problems.

I’m a B client, should I be upset or worried that I don’t qualify for a better product or are B products satisfactory enough?
Obviously products aren’t as good as they are for your A clients, however, generally, we try to let our clients know two things: if I see a pattern in their credit bureaus we want to kind of coach them as to why they’re there. Usually we put them into a shorter term, whether it be a one-year two-year or three-year,, we kind of stay way from the five-year terms. And give them kind of an approach as to this B-mortgage is basically a stepping stone to get you into the A. Looking at your history and looking down the road here’s what you need to do, over the term, to get you out of this B lending and back into the A lending side.
  • Glenn Pinsent on 2010-10-28 1:18:16 AM

    Good article.Very well done.Pretty much exactly as it is on the street.

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