A-lenders are already observing the strictest letter of the law on BFS applications, argue brokers largely dependent on those deals and now forced to shift as much as half of them to alternative lenders.
“It used to be that they would cut us some slack with some BFS deals, and that is no longer the case,” Kuljit Singh, a broker with Mortgage Alliance AKAL Mortgage said Tuesday. “What we’re seeing is that everything must absolutely fall within the guidelines even though the deals are insured and conventional.”
The GTA broker, for whom BFS deals make up about 80 per cent of his business, has suffered a similar sized shift to the number of business-for-self deals he now must send to Home Trust and other institutional alternative lenders.
There, too, his clients are going conventional, although not accessing the rates they’d have received in the prime space with insured loans.
As early as last year, brokers began to see the retreat of A-lenders from BFS. That migration has been sped up by OSFI guidelines updated late last month and focused on holding lenders and their boards more accountable for underwriting decisions.
The result has already been the erosion of underwriting flexibility. Singh is just the latest broker to make that observation.
Analysts don’t expect that to change before or after the formal deadline for federal regulators to adopt the new OSFI guidelines.