Brokers move closer to collateral charges

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New financials from lender B2B further illustrate broker willingness to arrange collateral-charge mortgages, with the niche player reporting a $333m spike in funded volume last fiscal year.

That broker arm of Laurentian Bank saw the value of its mortgage loans for fiscal 2011 shoot up six per cent from the previous year, at the same time it made an aggressive push to sell HELOCs through the broker channel.

That sales pitch worked, although tighter spreads ultimately limited gains in net interest income, with the trust company raking in just over $400,000 more last quarter, compared to the same 2010 period.

Still, the increased originations point to the success of the lender’s home equity lines of credit and represent new business for brokers and not merely a re-routing of clients normally bound for the refi market.
“May was the single best month in HELOC sales ever, representing a combination of new purchases and HELOCs on existing mortgages” Mark Zochowski, VP of business development at B2B, told, pointing to a number of factors driving that growth. Chief among them, he said, is the flexibility of the offering and the collective impact of lender advertising campaigns hawking HELOCs.
“Also a lot of brokers are looking to differentiate themselves,” said B2B Product Manager Mary Hayes. “This HELOC allows them to do that.”
The drive to make up for revenue lost through the conventional refi business may have weakened broker opposition to readvanceable mortgages, with ING the latest lender to indicate it will follow the lead of TD, Laurentian and others focused on collateral mortgages.

While readvanceable mortgages allow clients to re-borrow the principal they’ve paid off on their mortgage, up to 80 per cent of the value of the property, and to avoid upfront legal costs, they also allow the lender to register a collateral charge on the home usually for 100 per cent of the value.

Effectively, the mortgage must be entirely discharged in order for a borrower to transfer it to a new lender at renewal or for refinancing.

Most mono-lines and banks – as well as private lenders – refuse to accept the transfer of collateral mortgages, forcing homeowners to pay additional fees to register a new conventional or collateral mortgage in order to move the loan from the lending institution.
While, HELOCs aren’t for all clients, “they do have a place in the broker arsenal of products,” said Gord McCallum, owner of First Foundation Residential Mortgages in Edmonton. “It’s important that the broker really understand the client needs in order to determine if the HELOC is appropriate.”

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