High-ratio borrowing opportunities for B and so-called “C” clients have essentially disappeared with news Toronto Dominion will fold its non-prime lending arm, a broker “shocked” by the decision said Tuesday.
TD Financing Services Home Inc. will stop accepting new applications from March 31, according to a bank statement issued this week.
The move now leaves a hole in the lending landscape that other B lenders aren’t likely to fill, charge brokers.
“It’s going to get tougher,” said Michael Marini, a mortgage agent with Dominion Lending Centres Funds, who frequently directed clients to the company. “TDFS had a whole different product line from Equity Trust and Home Trust.
“It was a niche area in the market and no one else is doing the line of value on B or C credit.”
The company offered up to 90 per cent loan to value for clients with credit scores below 500. Comparable offers from leading alternative players top out at 85 per cent, but more commonly run between 75 and 80 per cent.
Those ceilings could drop even further.
As A-market lenders tighten their requirements, those in the B and C markets could also become stricter while still getting the majority of business simply because clients have fewer options, Marini said.
Going the private lending route means high-interest but likely the loss of higher LTVs as well.
Marini, who does both A and B deals, was surprised at the decision to collapse the company because it had only been operating for a few years under TD’s umbrella.
“It was a shock to me that they did this,” he said, “I don’t think arrears were too high, but they did have some really risky deals on their plate.”
TD spokesperson Mohammed Nakhooda said the decision was made after a regular review of the company’s risk management policies.
“Ultimately it was decided it was not a core part of our focus building a franchise business,” he told MortgageBrokerNews.ca. “To remain competitive would have required us to increase our risk profile; something we concluded was not within our risk appetite.”
Non-prime mortgages made up only 0.2 per cent of TD’s overall mortgage business.
Nakhooda confirmed the bank’s commitment to working with brokers and said the company would honour all existing commitments and would continue to support current non-prime customers.
“We will be in touch with customers about renewals as their mortgages approach maturity,” he said.