The silver lining to tighter mortgage rules appears to be a spike in Alt A and BFS clients rejected by the banks.
“The phone is ringing off the hook from clients who are being turned down at chartered banks.” Vancouver broker Garth Ellis, with Verico Ellis Mortgage, told reporters earlier this month.
With both CMHC and OSFI guidelines revamped in July, Ellis and others are now seeing the effects of more rigorous underwriting on the part of default insurers but also lenders.
BFS clients have been particularly hard-hit, with brokers across the country experiencing significant growth in that end of their portfolio.
The trend makes good on predictions from across the sector, coming on the heels of Jim Flaherty’s announcement this spring.
Still, brokers are themselves struggling to place some clients as channel lender pull back on their own BFS offerings.
ING Direct is the latest lender to make the move, ending its NIQ "Express Switch" program for Triple-A clients with LTVs capped at 75 per cent. It’s blaming stiffer regulatory requirements on verification as the driver of that decision.
For alternative lenders, it means significant growth in demand for their wares. That growth even predates the formal introduction of tighter mortgage rules, with Home Trust growing it broker market share by nearly 1 percentage point in the second quarter.