There’s growing indication the new year will usher in the loss of high-ratio mortgages for self-employeds, worries one frustrated broker, suggesting that would limit both the professional and personal ambitions of mortgage professionals.
“We had already seen Scotia move to limit those mortgages to five-year terms, and recently one of the few monolines offering those mortgages told me that they were no longer considering them for the rest of the year and next year only on a case-by-case basis,” Michael Marini, a mortgage agent with Dominion Lending Centres Funds in Toronto, told MortgageBrokerNews.ca. “Even then, the application would have to be with them for a minimum of five days.”
While a handful of lenders are still willing to do those loans at a premium -- usually a minimum of .15 per cent -- even fewer are now prepared to offer self-employeds comparable rates to those salaried borrowers are accessing.
Marini and others are pointing the finger at default insurers suggesting their appetite for high-ratio BFS deals has effectively disappeared, something possibly owing to concerns around exposure to fraud and a possible market correction and economic downturn.
That explains the higher down payment requirements and insurance costs, but even with those buffer, fewer and fewer lenders appear willing or able to offer prime rates to BFS – including mortgage brokers themselves.
Marini is among those concerned that lenders are simply finding it hard to get those loans insured. The reluctance has everything to do with more conservative underwriting by the sole default insurer now serving that niche market, argue some brokers.
The loss of that type of loan would effectively leave BFS clients with little choice but to go conventional. It’s something few have wanted to do in order to capitalize on low interest rates and invest their money into growing their businesses.
Marini’s concerns mirror those of other brokers from across the country who are now seeing the pendulum swing back from the dark days of 2007/8 when broker channel lenders had all but closed their doors to non-income qualifying mortgages. But while banks and mono-lines are increasingly willing to fund those deals at prime rates, they are still demanding default insurer backing.
That’s where brokers are hitting a snag, said broker Vittorio Oliverio with Centum Professional Mortgage Group. He works the entrepreneurial-rich Alberta market where the business-for-self market is viewed as a key growth area for brokers looking to grow originations in a slowing market. The statistics back them up with more than 22 per cent of Canadians now self-employed, among them mortgage brokers.
“The change means that many of us will be challenged to get a mortgage as well,” said Marini, fearful 2012 will see it become nearly impossible for self-employeds to win high-ratio mortgages at the rates of their salaried counterparts.