Credit unions are hoping FirstLine’s loss will be their gain, with Ontario’s largest player actively reaching out to brokers seeking a new home for BFS clients.
“This really is an opportunity for brokers to take a look at other lenders,” Robert Leaker, VP of emerging markets for Meridian Credit Union, told MortgageBrokerNews.ca. “And quite frankly we are that other lender, with the products, the services and the common-sense lending guidelines to accommodate that business.”
That message is increasingly getting through to Ontario brokers, who helped Meridian add $450 million to its mortgage book in 2011. The credit union expects to better that by 10 per cent to 15 per cent this year.
If Leaker gets his way some of that growth will come directly from self-employed borrower deals brokers would otherwise have taken to FirstLine, Merix or Street – all of which made major adjustments to their programs in the last two weeks.
Meridian’s self-employed terms are increasingly hard to come by: no automatic interest rate premium for clients with beacon scores above 600 and there’s no mortgage insurance requirement.
“We don’t do high ratio,” Chris Fontana, manager of Meridian's broker Unit, “and we may or may not bulk insure a loan ourselves, but the member doesn’t pay it.”
While FirstLine has axed BFS lending altogether, Merix and, on a case by case basis, Street will do those deals only if the client is willing to take out default insurance on what is nonetheless a conventional loan.
That may rub both clients and brokers the wrong way as they parse through the dwindling number of options still open to them.
Those choices will likely get further eroded following the CMHC’s warning earlier this month, the Crown corp. telling lenders that they will face increasingly limited access to bulk insurance for their conventional loans as the CMHC’s $600 billion fund comes within 10 per cent of its government-set ceiling.
Non-deposit taking institutions are most likely to be affected because they rely on that insurance to facilitate the securitization and sale of those mortgages – a way of taking them off their books and freeing up cash for more lending.
Meridian, with more than 263,000 members -- or, more importantly, depositors -- isn’t in the same boat.