B-20 formally came into full-effect this week, but some mortgage brokers report they have learned to live with the stricter underwriting guidelines from OSFI months ago and have even put a positive spin on it.
“You could say it makes brokers sexy again,” said Brad Compton, an Invis broker focused on the Toronto. “The guidelines cover banks that are federally regulated but we have access to many more lenders that are not under OSFI.”
Earlier this year, OSFI said it would compel federally regulated lenders to implement a series of lending changes by their fiscal year end (October 31 for most banks). Among those changes were: reduction of HELOC loan-to-value from 80 per cent to 65 per cent; the elimination of 100 per cent financing, aka 5-per-cent cash-back mortgages; and the requirement that variable rate mortgages and mortgages with fewer than 5 years, must now be qualified using the mortgage qualifying rate or contract rate.
“A few weeks from now, when more borrowers get turned down by the banks, brokers will probably see more business,” said Compton.
Many federally regulated banks and some monolines began implementing the changes well before the October 31 deadline, other lenders like ING Direct have until the end of 2012 given fiscal years that end December 31.
“It’s getting harder for some borrowers to get a loan,” said Bernie Klacer, broker for RMA in London, Ont. “The new rules affect maybe 10 per cent of my clients but I can still get them loans from other lenders.”
The situation has led many brokers to take some of their deals to credit unions, which traditionally haven’t traditionally been a mortgage professionals first stop.
“Business has slowed down a bit, but I think that could be attributed to market forces and the mortgage rule changes,” said Lee Welbanks, broker for Verico Welbanks Mortgage Group, in Toronto. “What has happened is that I have been re-acquainted with my credit union partners.”
He said previously credit unions were not very popular among many brokers because clients preferred to borrow from the better-known banks. Credit unions also typically require borrowers to appear personally at the lender’s office and become a member of the credit union before getting a loan.
However, Welbanks said, credit unions are now ideal for borrowers seeking an 80 per cent LTV on a HELOC, require a 5-per-cent cash-back mortgage or need to qualify for a one- to four-year term mortgage at the posted rate.