Originations climb for Alt A/B lenders

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There’s yet more indication mortgage professionals are turning to the alternative sphere to lift sagging revenue, with brokers originating $34.5 million for newcomer Equity Financial in the third quarter.


“We believe (we are) on track to meet our previously disclosed target of $100 million in outstanding loans within the first twelve months of operations,” said the Alt A/B lender in quarterly financials released late last week. “As at September 30, 2011, on the strength of third quarter originations of $34.5 million, we have outstanding mortgage loans of over $53 million and we have estimated commitments to make future advances on mortgage loans of $15.7 million.”


That growing book represents the increased willingness of mortgage brokers to take on alternative lending deals in markets across the country. That niche has grown as a portion of Canada’s mortgage business over the last year, according to industry data. The movement comes as brokers grapple with a slowing real estate market and mortgage rule changes introduced early this year, effectively making it hard for clients to qualify for both first and second A mortgages.


Last week, leading alterative lender Equitable Trust announced it had seen a 55 per cent uptick in single family originations in the three months ending Sept. 30, compared to the year-ago period. That translates into a funded volume of $379.9 million.

The channel’s other major institutional lender in the alternative sphere also saw its Alt A/B originations bolstered by $941.1 million in the third quarter, even as those for insured mortgage – what Home Trust calls its "Accelerator" line – fell by nearly half to $293.5 million. The drop reflects the company’s deliberate retreat to the B side.


Lenders are hopeful they’ll repeat their performances.


"With respect to production, we expect to continue to expand our conventional mortgage assets in chosen markets and over the coming year,” President and CEO Andrew Moor said. “Included in our fourth quarter outlook is an expectation that conventional single family mortgage originations will remain strong and at levels similar to the fourth quarter of 2010.”


Brokers are increasingly positioning themselves to be the ones driving that business.

“It really is getting highly competitive on the a side,” Michael Marini, a mortgage agent with Dominion Lending Centres Funds in Toronto, told MortgageBrokerNews.ca, “and it’s for that very reason that I’ve grown the B portion of my portfolio substantially over the last while, as well as commercial. I have a referral relationship with banks where they send me their turn-down business and I’m taking those clients to the B side for a short term-loan, one or two years, and then placing them back, usually with the same lender later.”
 

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