Where others say no, it is the job of alternative lenders to find a way to say yes. Within reason.
“We look at the ability to repay, the track record of the borrower’s payment history, consider all income and funds coming into the client’s possession, and, of course, the marketability of the property,” says Tiffany Pedersen, assistant vice president, business development, Capital West Mortgage. “With that said, many alternative lenders are not lending past 75% LTV, as there are risks associated with lending high-ratio that most “B” lenders are simply not set up for or interested in.”
Alternative lenders and mortgage investment corporations have been able to step in and provide financing solutions for individuals that have been turned away from big banks – especially self-employed individuals – and that has sometimes been a godsend for brokers.
“Traditional financing has become stringent with many rule changes, leaving a gap in products to fit clients’ needs at standard rates,” says Pedersen. “Many brokers have been able to capitalize on using MICs and alternative lenders in situations to provide solutions that don’t fit within the bank ‘box.’”
MICs especially have become the “go to” lender for brokers faced with non-conforming clients. Capital West Mortgage’s Alternative Mortgage Centre is one example of a group that has combined one of B.C.’s largest credit unions with an MIC to provide a “one-stop shop” for brokers.
MICs have come a long way in just a couple of years. It was only 2013 when the Deputy Governor for the Bank of Canada had to reassure Canadians that these lenders weren’t a cause for concern.
“Part of the shadow banking recommendations are looking at ways to address the vulnerabilities these corporations might pose … At this point in time we don't see a large vulnerability but we are monitoring those corporations quite closely,” Lawrence Schembri of the BoC told MBN
in a 2013 story.
And in those intervening years, MICs have blossomed.
“Not one lender out there offers a solution for every type of borrowing situation,” says Pedersen. “(But) alternative lenders tend to have more flexibility as they are set up for short-term solutions.”