Brokers report different struggles

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Brokers are still struggling with self-employed clients for a number of different reasons.

"The thing I face most is 'reasonability of income' test," Jake abramowicz of Mortgage Edge wrote on MortgageBrokerNews.ca. "It is very irregular and one application may pass, while other one may fail. I find that to be the biggest drawback."

Despite record-low rates, brokers are still reporting difficulties trying to secure financing for one unique type of client.

“Rates are great but the problem is if you’re self-employed they’re not for you. Why is it in today’s marketplace where seven years later after the (American) subprime crisis, the U.S. economy is doing better than ours, their real estate markets are doing well?” John Panagakos of Dominion Lending Centres Home Financial told MortgageBrokerNews.ca. “They’ve forgotten the subprime crisis and we as Canadians still worry about it when it was a U.S. problem to start with.”

Rates across the industry have been low since the Bank of Canada axed its overnight rate to ¾ per cent, with many lenders offering special promotions on various fixed and variable rate products.

According to Panagakos, Canadians are being drawn to the market because of the record low rates but self-employed individuals are encountering the same problems they have all along – lenders are less likely to finance mortgages and higher rates apply when they do.

“We know Canadians have debt but they’re also building wealth at the same time and it frustrates me. Saying you’re self-employed now in Canada is like a dirty word,” Panagakos said. “It’s a shame. I try to deal with a monoline lenders; I’m an advocate for consumers and try to get them the best rate but it’s straight to (the alternative lenders) or MIC lenders.”

Still, not all brokers are reporting an influx of mortgage applications, despite the enticing rate environment.

“No matter what the market is there is going to be a demand from clients who need alternative lending because they either can’t qualify or they choose not to qualify with a mainstream lender,” Jason Scott of TMG The Mortgage Group. “I don’t think people do things necessarily because of rate; let’s put it this way, if you’re buying a house based on interest rate you’re buying a house for the wrong reasons.”
 
  • Jake Abramowicz on 2015-02-25 12:09:34 PM

    The thing I face most is "reasonability of income" test. It is very irregular and one application may pass, while other one may fail. I find that to be the biggest drawback. That being said, why not go to the credit unions? They allow for us to qualify based on GROSS not NET incomes, and give pretty damn good rates and terms.

  • Rick on 2015-02-25 1:57:47 PM

    The Subprime crisis was a symptom and result of a housing bubble. Every global analyst now knows this 8 years later in hind sight. Canadians are worried about a national debt crisis that now dwarfs the US on a household level, NOT a Subprime crisis. The US is doing better because unlike Canada they have a diversified economy and are still for now the world reserve currency. NOT because they offer easier credit to BFS clients. The fact that rates are being reduced only shows the pure desperation of the central bank. As a Canadian its concerning. Prudent investors are rolling up their sleeves at the prospect of deflation and distressed assets.

  • John S. on 2015-02-25 6:56:11 PM

    I agree with Rick. Mr. Pangakos needs to look under the shiny surface of "Canadian wealth". Bidding wars, bleached MLS records, institutional policies and various deceptive techniques in conjunction with cheap credit availability created false real estate values in most of our cities and resulted in unfair competition practice. With deflation only the “wealth” will fade away and the debt is more than guaranteed no matter how many more zeroes one will add to the bottom line today.

  • Cec Aube on 2015-02-26 10:29:07 AM

    I have discussed the possibility of a second mortgage for debt consolodation. My home is worth appx 325,000. I have a line of credit of 230,000.with my home as equity. Our combined guaranted pension including CCP/OASincome is 5,200. Our unsecured loan and credit cards amount to appx 60,000. Would a secured line of credit against the equity where interest payments only would be required or a fixed rate 10yr Mtg be better. We are not concerned in leaving money from sale of home at death. Life insurance is the avenue we took. Your comment will be greatly appreciated

  • Jake Abramowicz on 2015-03-01 2:20:33 PM

    Your best bet is to meet someone in person and/or all a local broker. Your situation sounds interesting and definitely a lot of options on the table.

    Remember you cannot exceed 80% of the value of the home in refinancing, and 65% when getting a new HELOC.

  • Judy on 2015-03-01 3:34:53 PM

    Jake: as a retired broker, I am curious as to the "lot of options on the table."
    Really, with a combined income of $5200??

  • Jake Abramowicz on 2015-03-01 3:36:29 PM

    I read that as $5200 per month not year.

    If per year then it depends if that HELOC they have now is at what balance.

    If at full balance I'd sell ;)

  • Judy on 2015-03-01 3:37:29 PM

    My mistake re above..I read too fast as $5200/year. Apologies to all

  • Jake Abramowicz on 2015-03-01 3:39:13 PM

    Hey, no problem. You're right: I did a double take and thought $5200 per YEAR is quite low.

  • JSydneyH on 2015-03-02 8:08:28 PM

    I spent some time with a big red bank that expressed a desire to become the small business bank of Canada. When asked if that meant, the bank would relax the underwriting requirements for the small business owner, the response from the executive present was ' we have to ensure our lending practices are maintained while attracting the small business owner.'

    The true job creators in our country are the small business owners - always has been, is today and will always be. Big business gets the splashy headlines (see Target's closure) but for every job big companies create, small businesses have added two, three or more without all the fanfare.

    But if we can't find them a home they can call their own, they will look elsewhere.

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