TDFS departure spells big loss for brokers

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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.

  • Zoltan M. Padar on 2012-03-08 8:39:31 AM

    Given most of the comments are trashing TDFS I wonder where is the professionalism in this industry.

  • Vipul Jasani, Mortgage Associate, Calgary on 2012-03-08 10:44:08 AM

    This will reduce financing options for "B" & "C" Market segment. I would like to see more financing options to service wide variety of consumers.

  • Mike on 2012-03-08 4:25:26 PM

    I think the majority of you are not seeing the trend happening here. The BOC along with mortgage insurers and schedule A lenders have a great fear of a decline in the real estate market. The fear is that there will be a loss in equity as a result of a decline in RE pricing. This is becoming a self fulfilling profecy. Lenders like TDFS leaving the market reduce competition but also reduce the need for privates and alternative lenders to risk their money with high ltv's. Do you all really think that private lenders will continue to offer 90% ltv's on deals when no one else in the market is? Even HT stopped offering 90%. I agree with Lisa, this isn't good for anyone ad lending guidelines are already getting tougher. This is simple one more adjustment that will lead to others making it tougher to put deals together, even in the private lender market. If your a private lender looking to do 90% with low fees like TDFS was then I would love to hear from you otherwise what are you all even talking about?

  • MPM on 2012-03-08 4:44:49 PM

    I think the majority of you are not seeing the trend that's happening here. The BOC along with mortgage insurers and schedule A lenders have a great fear of a decline in the real estate market. The fear is that there will be a loss in equity as a result of a decline in RE pricing. This is becoming a self fulfilling profecy. Lenders like TDFS leaving the market reduce competition but also reduce the need for privates and alternative lenders to risk their money with high ltv's. Do you all really think that private lenders will continue to offer 90% ltv's on deals when no one else in the market is? Even HT stopped offering 90%. TDFS is not leaving the market because they are losing money. They have a growing concern that in the future RE market they will lose money. I agree with Lisa, this isn't good for anyone and lending guidelines are already getting tougher. This is simple one more adjustment that will lead to others making it tougher to put deals together, even in the private lender market. If your a private lender looking to do 90% with low fees like TDFS was then I would love to hear from you otherwise what are you all even talking about? You all should read the news and be better than our banks to give brokers a better name for being more educated. Zoltan also has it right, there is a real lack of professionalism and knowledge being shown here.

  • Omer Quenneville on 2012-03-08 5:37:54 PM

    The professionalism is in the fact that no one used TD anyway, they were no good, how more profesional can one be than to know better?

  • David on 2012-03-08 10:32:54 PM

    Zoltan, it is NOT lacking in professionalism to critique a business
    that was flawed from the beginning, run by people lacking the necessary tools to underwrite & administer at best a "challenging" B/C mortgage portfolio,and clearly the TDFS business plan lacked the long term support of the bank's senior management/board of directors .

    If your corporate abilities, training & systems are setup for A lending, do A lending & stick to it. It you have the right people,training, flexibility & systems to do B or C business, stick to that. Just because a lender is large & an adequate A lender does not mean they have the people/systems/mindset it takes to be a good B or C lender, nor should they "dabble" in B/C lending. Their shear size causes unnecessary "turbulence" in the market as they enter & exit the sector. Clearly closing/winding down TDFS is adequate evidence of that.

    Zoltan, what will be a true evaluation of professionalism is how TDFS's borrowers will be treated by a) TDFS itself & b) the brokers that placed the deals with TDFS, as the mortgages mature. Will the mortgages be sold, renewed, or will we have more "orphan borrowers"?

  • MPM on 2012-03-08 11:18:52 PM

    I think the majority of you are not seeing the trend that's happening here. The BOC along with mortgage insurers and schedule A lenders have a great fear of a decline in the real estate market. The fear is that there will be a loss in equity as a result of a decline in RE pricing. This is becoming a self fulfilling profecy. Lenders like TDFS leaving the market reduce competition but also reduce the need for privates and alternative lenders to risk their money with high ltv's. Do you all really think that private lenders will continue to offer 90% ltv's on deals when no one else in the market is? Even HT stopped offering 90%. TDFS is not leaving the market because they are losing money. They have a growing concern that in the future RE market they will lose money. I agree with Lisa, this isn't good for anyone and lending guidelines are already getting tougher. This is simple one more adjustment that will lead to others making it tougher to put deals together, even in the private lender market. If your a private lender looking to do 90% with low fees like TDFS was then I would love to hear from you otherwise what are you all even talking about? You all should read the news and become better educated about the market that you all deal in. Zoltan also has it right, there is a real lack of professionalism and knowledge being shown here.

  • Jim A on 2012-03-09 12:46:37 AM

    This is truly a shock in one way but in another it is not. But then again it is not. TDCT and the other major banks are trying ways to ensure they keep their current customers with them. From offering better rates to their branches to taking away clients from brokers when the client is about to be renewed. I think as a mortgage broker then we must try to focus on the lenders that deal with the mortgage broker community exclusivity. This way when the big banks see that we have a lot to offer to them compared to their so called mortgage specialists they will be more keen on ensuring we are taken care of by respecting our business and ensure our clients we refer to them are ours and not theirs.

  • Chris on 2012-03-09 6:00:52 AM

    Sorry to say, they were ridiculous to deal with in Winnipeg. Always approved, then when appraisal came in always declined. Had stopped using them anyway for that reason.

  • Brian on 2012-03-09 11:16:09 AM

    You mortgage brokers are all the same...Your attitude to clients is "Do we cheat the them and How" You advuse clients on the product or term that will make you the highest commission. You guys know nothing about profitability of the lender..you just care about getting paid. I have worked with many brokers and do not know one I could trust. You really need to think about what is best for your client instead of thinking of yourself first. If I were head of TD bank, I would not even use brokers..and if you check the stats...the highest mortgage arrears at the bank come from broker deals. "FACT"

  • Bob on 2012-03-09 1:24:10 PM

    Brian is correct that most of the arrears banks have are from brokers. But that is from a handfuly of brokers that give the business a bad name. If you have a real B or C deal and not a piece of junk that you get off the bottom of your shoe trying to push it through just to get paid. There is still good options out there such as Home Trust and Equitable for normal B deals. Yes they dont do 90% LTV but what lender in their right mind would for a B deal.

  • David on 2012-03-10 4:46:44 AM

    Are the bank road rep's numbers included with "brokers numbers"... If they are, the higher delinquency rates wouldn't surprise me...if the deals are underwritten to the same standards & the appropriate due diligence, why should there be any difference?

  • Terry on 2012-03-10 6:33:38 AM

    (Brian's comment) In regards to all of the Brokers only thinking of themselves and the commissions they make: Please don't put all of us into the same category, because we are really not made of the same cloth. I for one, a very seasoned Broker, in the finacial business for years and years, am not paid on any volume, as I operate as one Broker under this roof. I have never placed a client into any of those 7 or 10 year so called rate specials, not have I chosen any lender that pays anything more that the minimum commissions. And, it is simply because I care for my clients, as I do my own adult children that I have mortgaged. I believe in quality, not quantity, because I also believe if you do your business on quality alone, it will bring in the quantity of clients from their referrals alone. Helping consumers is my passion and I become almost emotional when they feel everything sits well with them, knowing that I have taught them about credit and finally, closed the deal for them. And, I do sleep well at night because I was raised with a conscience.

  • Bill on 2012-03-10 11:59:32 AM

    Funny to see how little some "professional" mortgage specialists know about the industry and how to leverage the strengths of each lender. The fact that TDFS is no longer originating business hurts many of us in the industry...and to the broker who says he has no need for TDFS, go sell bagels!

    TDFS helped me close a ton of extra business. 90% LTV in Keswick, Hamilton, Oshawa, Barrie, Orilla, North Bay....find that elsewhere for 6%. In the city, no income docs...and I mean nothing...70% LTV and 4.15% - a great program.

    Maybe instead of bashing a company that you knew nothing about, you should be looking to gain knowledge and provide your clients with a truly invaluable service.

    ...and to the goofball who sang...nananana goodbye....sing that for your career as it sounds like you are soon to graduate from grade school...high school is tough, you better focus.

    For those who know the business, this is a sad day...and my thoughts go out to the good people who may be without a job...good luck to you all.

  • Story behind the story on 2012-03-10 1:56:53 PM

    Terry, your post is refreshing, good on you

  • Steve the broker on 2012-03-08 4:51:22 AM

    This is no big loss to me or any of the hundreds of brokers that I know. Who really used them? private mortgage lenders can fill this void...

  • Margaret on 2012-03-08 4:56:16 AM

    I think this is super great news.

  • Jeremy on 2012-03-08 6:35:58 AM

    I have never used TDFS and their departure means very little to me and our industry. That said, I haven't used TD on the A side in years and refuse to until they recognize us brokers as a "partner". TDFS...RIP!

  • andrew on 2012-03-08 6:36:34 AM

    No loss at all. They really didin't want to do business and when they did they would condition to the point it was not worth putting the client into the mortgage

  • Justin on 2012-03-08 6:38:09 AM

    As a private lender I would be more than happy to assist brokers in placing deals when TD calls in these mortgages.

  • Lisa on 2012-03-08 7:22:30 AM

    How can you say this is no loss? Even if you didn't use them, isn't it good to have choice and options available? It seems like whenever a lender pulls from the market, people comment 'no loss, I didn't use them anyway'. Based on comments like that, it's no wonder our industry has trouble growing marketshare.

  • David on 2012-03-08 7:30:55 AM

    A few weeks back someone, in these comments, was dumping on "small" lenders who left the broker network, now we have one of the "big boys" who thought just because they had tons of money, they also knew how to work the B & C market.WRONGO! I am sure some wizard of quantitative analysis explained to a Bay St. "suit", the genius money making methods of "portfolio lending"! What idiot is going 90% LTV with a <500 score & no insurance/self-insurance, unless they are into predatory lending? If you go POS on the deal, taxes, legals, property management, R/E commission & HST on commission eats up most/all of the 10% equity,never mind the interest arrears, even in a level real estate market. It was never a good long term business plan... but they are smart Canadian bankers...right?
    Private money exists because it deals in common sense lending.On every mortgage the same questions are asked. What do I have to lose? What's the return?
    The flip side of this good news story about TDFS, is the bad news that we will now have unlicensed little TD road rats, acting as "brokers" trying to place B&C deals privately.
    If you want to have a real mortgage brokerage industry, here is where we have an opportunity to shut down road reps...just say no to their requests to "co-broker". They leave the business & consumers learn that a mortgage agent or broker is the right person to do mortgage business with.
    Oh,I almost forgot...NaNaNa NaNaNa Hey Hey Goodbye TDFS!

  • Stephane Prevost DLC Alliance on 2012-03-08 4:21:27 AM

    great. this leaves more room for private Mortgages

  • broker on 2012-03-08 4:42:41 AM

    No loss who used them anyway?

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