“The two insurers are independent businesses that are allowed to make their own approval decisions; one very odd decision cost me $818,000 mortgage yesterday, the client was so mad they did not even give me a chance to switch lenders and insurers, they felt insulted that the insurer had rejected the property,” Ron Butler
Butler Mortgage wrote on MortgageBrokerNews.ca. “Yes, insurer decisions cost us money -- I get it -- but these are the companies that are on the risk if a mortgage goes sideways; they must be allowed to make their own underwriting decisions.”
The comment stemmed from an article about the increased tightening among mortgage default insurers – causing even approved deals to fall apart at the last minute.
And the insurers are especially conservative with self-employed clients, who also have to deal with stricter underwriting from lenders.
“The insurers aren’t listening to the lenders,” Morris Briglio of Verico
The Mortgage Advantage told MortgageBrokerNews.ca. “I had a case where two lenders approved the deal but the insurers wouldn’t … it is increasingly difficult for self-employed buyers.
Briglio told MBN Monday he has noticed this sort of pushback from the mortgage default insurers since 2011, but that they have become stricter recently. He believes the B-20 rules are partly to blame.
“CMHC and the private insurers are the ones dictating policies to lenders which shouldn’t be the case because the lenders know how to [underwrite],” he said. “We might as well send applications straight to the insurers; it’s no longer the lenders who have the power.”
It may be frustrating but it’s a reality brokers must face every day, according to players dealing with tightened underwriting from mortgage default insurers.