Brokers, it seems, can keep clutching their beloved cashbacks, with a number of a provincially regulated lenders opted to keep that offering even as their federal counterparts are being forced to give it up.
Last month it appeared as though cash-back mortgages were about to go the way of the Dodo bird when OFSI ordered federally regulated banks to drop the product from their offering by the end of fiscal 2012/13.
“With respect to the borrower’s down payment for both insured and uninsured mortgages, writes the regulator in its June 2012 guidelines update, “incentive and rebate payments (i.e., “cash back”) should not be considered part of the down payment.”
However, RMG Mortgage, now owned by MCAP, told MortgageBrokerNews.ca Monday that it would continue to offer borrowers their 3-per cent cash-back program.
“RMG is one of the few banks that offer borrowers to get up to a 3% cash back on loans and use this a down payment on property they wish to purchase,” said Collin Bruce, broker for Dominion Lending in Edmonton.
This is a “welcome development” said Bruce, as it enables brokers to offer a wider range of borrowing options to offer their clients.
Another broker confirmed that other provincial lenders continue to offer cash backs.
“Only one lender to this point has cancelled the program,” said Len Lane, broker/owner of Verico Brokers For Life, based in Edmonton. Of the ones that remain, client must meet all “the 5C’s of credit in order to qualify,”
Lane said OFSI clearly wanted to get rid of cashbacks as the regulator’s report singled out the product as “not favourable for down payment.”
They nonetheless suit many broker clients.
“Cashback has its place in some of the markets that I deal in where rents are high and even at the posted rate in a lot of cases the borrower may be paying less for a mortgage than rent,” Lane said.
The broker pointed out that Fort McMurray, where renting a house could cost anywhere from $3,000 to $5,000 a month and the average selling price of a home is $750,000, is a prime example.
They do have their place in the broker's arsenal, said another Edmonton broker, arguing the move to crack down on cashbacks may have been an “over kill” on the part of regulators.
“Regulators probably overstepped on this a bit,” said Gord McCallum, broker/president for First Foundation Residential Mortgages. “Cashback requirements are already pretty tough in the first place, so very few qualify for it.
"My default position is that the more choices on the table, the better for the customer.”