It’s a lucrative segment for brokers – and one that more will turn to, experts say
“Everybody wants to get into the alternative side,” says Shawn Allen, broker and owner of Matrix Mortgage Global, which specializes in alternative financing.
And that may be for good reason. Last year alone, Allen was able to more than double the amount of loans he funded, mostly in the alternative space.
“In 2014, we did 263 total transactions, and in 2015, we did 557,” he says.
And there will certainly be a plethora of clients to be shared among brokers. According to Ron Butler
Butler Mortgage, players should expect more regulations going forward, which will push more clients into the alternative space.
He points to CMHC’s recent move to require a 10% down payment for mortgages over $500,000 that it insures as an indication that the tide of regulations in the prime lending space is far from ebbing.
“That was a very tiny change, but that may be phase one,” he says. “Let’s face it: They changed it once; they could change it again.”
Regulation will lead to more opportunity for brokers, who have the complete arsenal of lending options at their disposal. But is that something brokers should bank on? Butler thinks so.
“[There will be] more opportunity for alternative deals,” he says. However, he adds, it’s important to keep in mind that for consumers, finding themselves pushed into the alternative segment by tighter lending guidelines isn’t exactly a welcome change.
“If we have any respect for consumers, we have to ask why people with great credit and great businesses have to pay higher interest rates,” Butler says. “I think it’s important that brokers who are, in some cases, very happy to talk about these options realize that at the end of the day, the consumer rules us. Openly wishing that people have to pay higher rates and have to use us is not being very nice to our audience. If we spent more time thinking about what is good for the consumer and not what is good for us, we would be much better brokers.”
Still, if alternative mortgages are the only option for clients, brokers will likely happily help them achieve the dream of homeownership without thinking twice.