B lenders losing appetite for BFS

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Paydays for  BFS deals are fewer and farther between, as lender demands for paperwork in some cases doubles the wait time for brokers and borrowers alike.

“We are still able to get our clients their mortgage,” said Lucy Melino of the Your Mortgage Connection in Vaughan, Ontario. “But what used to take 24 hours, now require three days to as much as a week because of the stricter scrutiny from B lenders.”

Ideally, brokers should be able to refer BFS clients to a B lender at the onset. However, she said, most borrowers prefer their brokers approach an A lender first.

Prior to the mortgage rule changes, BFS borrowers could easily apply for mortgages with A lenders. However, banks and A lenders have adopted stricter qualifying controls following the mortgage rule revamp and lately B lenders appear to have “lost their appetite” for BFS borrowers as well, said Melino.

The constraints have negative repercussions for Melino and business partner Rachele Raia whose brokerage has a sizeable clientele of commissioned and self-employed individuals.

“They make up 30 per cent of our client list,” said Raia, representing the concerns of hundreds of brokers in the same boat. “More document requirements mean more back and forth and longer wait times.”

B lenders are now demanding documents that they didn’t use to ask from BFS borrowers even if they have very good credit ratings and regular incomes, she said.

“Several months ago, a stated income was enough,” Raia said. “Now lenders want to see a person’s stated income, T1, notice of assessment and bank statements.”

  • Jessica on 2012-09-26 6:09:28 AM

    Not all B lenders have changed what they require! Deal with a MIC and likely the same criteria that applied for last five years still applies today. MICs are often much more flexible to deal with and not significantly higher pricing.

  • ayaz on 2012-09-26 6:26:42 AM

    That analysis is not quite true. We are still able to finance business for self clients through A lenders by reviewing the reasonability of income test and certainly we have no issues having these approved through B lenders in a very timely manner. Lets try and stay positive here and especially when we are still able to get deals funded!!!!!!!!!!!!!!!!

  • John W on 2012-09-27 6:13:06 AM

    just did a deal for a BFS client on a rental with $350,000 in declared income with Equitable. No problem, sailed right through!

  • anonymous on 2012-09-27 6:35:15 AM

    i have found in the past year that a great majority of B or mic fund lenders are not even returning calls or responding to submissions as they are all looking for bankable deals which they are able to charge higher rates and fees. There doesn't really seem to be a fit for un traditional financing any longer unless one has a quite good credit score and a loan to value of under 65% in a major city. Smaller communities don't fit any longer.

  • anonymous on 2012-09-27 8:18:35 AM

    $350,000 in declared income? obviously not privy to the debt servicing however $350,000 can service a lot of debt and regardless of BFS or not sounds like a bank deal and not Equitable.

  • whatever on 2012-09-29 5:44:12 AM

    350,000 declared is a pretty broad statement. what was the line 150? what was the ltv, was the rental income declared on the t1 gens....

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