A lenders' loss is B lenders' gain

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The mortgage gods were smiling on Equitable Trust in the first quarter, with single-family originations climbing 35 per cent – helped along, say brokers, by finicky A lenders.

“I can’t tell you how pleased we are with single-family growth rate,” Andrew Moor, the alternative lender’s president, told analysts during a conference call this week. “Single family’s well-document growth rate last year continued unabated in Q1.”

During those three months, ”production amounted to $327 million, up $111 million from the same period in 2011." At the same time Equitable’s commercial book grew by $120 million, compared to the $183 million- rise a year ago.

Moor is attributing the single-family  increase to the success of his underwriting and sales teams, also credited for “record renewal rates.”

Still, brokers argue that increasingly skittish A-lenders, pressured by CMHC, OSFI and the federal government to tamp down on risk, have significantly helped institutional alternative lenders to grow their appeal.

They point to the recent loss of many BFS options across the broker channel, a withdrawal kick started by Firstline’s retreat.

“It’s a sign that the government is auditing the banks and asking them to come up with something to reduce the risk on this line of business,” James Robinson, an agent with The Mortgage Centre Mortgage Watch Inc., told MortgageBrokerNews.ca “It appears that FirstLine has said that it is out. It may be slow and gradual, but I think we’re seeing a return to the 1980s when there was a greater distinction between A and B lending.”

It’s likely that development has now accrued to the benefit of the few lenders still prepared to lend stated-income and rental clients. The appetite for conventional mortgages among small lenders is also expected to take a hit now that their access to CMHC portfolio insurance has effectively been denied.

That may be another gift from the gods for Equitable and competitors Home Trust and Equity Financial Trust.

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