If you're an "A broker" starting to submit B deals, you're not alone: Private lenders are now seeing a significant uptick in the number of neophyte brokers presenting B deals – another indication of the ferocity of this year’s rate wars and the need to make up for a dwindling number of A deals.
“The bank and their mobile specialists have become more active in the A sphere,” Rajan Kaushal, president of The Money Source, told MortgageBrokerNews.ca. “ As a result, we are now seeing an increase in the number of deals being submitted by brokers who haven’t done private lending deals before. They’re expanding their horizons and their revenue streams in light of that increased competition on the A sphere.”
The observations echo those of A specialists themselves who have deliberately stopped referring on Alt A/B deals, opting instead to arrange those deals themselves.
The increasingly tight guidelines of A lenders has also seen the number of turndowns grow, adding another incentive to brokers to head into the alt space.
“I believe the reason we are seeing increased activity in private lending is because the Feds are cracking down on the loose lending practices that have been prevalent in bank lending over the last decade,”said David O’Gorman, broker/owner of MortgageLand Inc. in Markham, Ont. “Banks appear to be declining most deals that are not ‘in the box.’ “
That step-up in activity is reflected in the quarterly financials of institutional alt lenders Home Trust, Equitable Trust and Equity Financial Trust, all of which are now seeing strengthening originations.
Private lenders are also benefiting for the growing awareness of A brokers.
“It’s really a good thing,” he told MortgageBrokerNews.ca. “We have been encouraging brokers to explore the opportunities here and more of them are now doing that. It makes sense given the market.”
Many of those new brokers to the Alt sphere are nonetheless struggling with the increased stewardship requirements of deals submitted to both institutional Alt A/B lenders and private investors, other private lending veterans told MortgageBrokerNews.ca.