“A-lenders used to have business-for-self equity programs but they are non-existent now,” says Christine Xu of Mortgage Architects
. “It’s pretty much only alternative lenders doing insurance for self-employed people who want investment properties
Recent employment numbers show that some 6,600 jobs were added to the Canadian workforce in July – but of that number, the vast majority were self-employed.
As these BFS clients do not have a salaried work history to qualify for mortgages in the prime space, it has allowed brokers and alt lenders to flourish in what remains a hot housing market.
According to the CIBC report – which was based on Statistics Canada data and released to the Financial Post
– the value of loans underwritten by alternative lenders grew by a staggering 25 per cent over the past 12 months. The overall mortgage market grew by a mere four per cent over the same period. Much of this growth is due to an increase in subprime lending.
“Alternative lending gives brokers and their clients relief from the often stringent requirements of traditional lending institutions,” says Dimitri Kosturos, VP of VWR Capital Corp. “Alternative lenders give clients another option to complete a purchase or reduce their monthly debt obligation.”
During uncertain economic times, BFS deals are tantamount to manna from heaven for hungry alternative lenders.