“Alternative lending gives brokers and their clients relief from the often stringent requirements of traditional lending institutions,” says Dimitri Kosturos, Vice President, VWR Capital Corp. “Alternative lenders give clients another option to complete a purchase or reduce their monthly debt obligation.”
The market share for alt lenders has hit record levels, with alt-A lenders now underwriting 2.2 per cent of all Canadian mortgages, according to CIBC World Markets.
While the rules have opened up a large market for alternative lenders, it still demands more effort from brokers to ensure that those mortgages are approved.
“It is important for the broker to take an active role in coaching clients and follow up with the clients on a regular basis,” Kosturos told MBN
. “The broker has to know how to come up with a game plan and the client has to understand what that means for his or her situation.”
According to the CIBC report – which was based on Statistics Canada data and released to the Financial Post
– the value of loans underwritten by alternative lenders grew by a staggering 25 per cent over the past 12 months. The overall mortgage market grew by a mere four per cent over the same period. Much of this growth is due to an increase in subprime lending.
One lender to jump into this lucrative space was B2B Bank, which made the move in April of last year, offering two new alternative lending programs designed for clients who do not fit into traditional income profiles.
“Our extended range of mortgage loan programs builds on our commitment to mortgage brokers,” said François Desjardins, president and CEO of B2B Bank, “and will support them in building their business by giving them access to solutions that provide an even better fit with the diverse mortgage needs of their clients.”
As more lenders move into the alternative space thanks to the current stringent lending rules, lenders are looking to brokers to up their game to ensure those clients with bruised credit are securing mortgages.