The new $100K ceiling...

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It’s now the unspoken rule of A lenders, including monolines, charge brokers: BFS clients declaring income north of $100K are quite simply persona non-grata.  

“I think it started to change about a year ago and now I venture to say that 90 per cent of brokers understand that regardless of what lenders say on paper, once the client breaks the $100,000 mark, they will be turned down for Triple-A rates ,” says Darin Bauer, an agent with Mortgage Intelligence. “That’s regardless of their down payment and credit history and whether their business is incorporated and the income makes sense.

“I wish the lenders would just come clean and put that in their guidelines rather than have us waste time.”

The palpable frustration is more and more common among brokers specializing in Alt-A deals but also the increasing number now turning to the alternative space as the stream of A deals slows.

They point to a growing gap between the declared underwriting guidelines for BFS deals and those actually in use by various lenders. The discrepancy comes at the cost of broker efficiencies but also the time loss for clients and mortgage professionals.

Bauer points to a recent example where a client with a down payment of 50 per cent and stellar credit was turned down more than once by lenders with established and much-touted BFS programs.

The scenario is more commonplace given the tighter underwriting guidelines banks are now operating under, still brokers remain concerned that their advertising is out of step with their practices.

That isn’t likely to change anytime soon, says one industry veteran  suggesting alternative lenders will ultimately benefit for the stricter unwritten policies of A players.

  • kac on 2013-07-03 10:54:39 AM

    problem is the Alternate lenders in most cases don't want to go above 65% ltv and a premium on rate and fees unless there is a cookie cutter deal on a property that is in a suburban sub division.

  • Greg K on 2013-07-03 2:11:56 PM

    With the number of unwritten restrictions lenders are placing on their programs, especially specific to NIQ / Stated Income deals - clients are being forcible pushed by their own banks to Alt A lenders. It is time the consumers recognize that their banks are no longer willing to help them and educate our clients about the cost of doig business with Alt A / Private lenders. Although Alt A's are not as pricy, they do cap out at 65% where private's will go to 80%. Fee based lending is becoming the new norm and we as brokers need to embrace this to allow our clients (ex-Bank Clients) the choice as to how they wish to do business in the future.

  • Malcolm on 2013-07-03 2:36:31 PM

    Please - why is it that brokers and some consumers feel that it is appropriate to have stated income lending practices? If you really and truly earn the income that you are claiming you can prove that you earn it. No matter what your line 150 might say, there are things such as financial statements and tax returns that clearly indicate your true earnings – before all of the varied tax write offs. If those documents do not show the income, then guess what? You do NOT make that money. Period. If you don’t want to prove your income, then you can’t borrow the money. It is called reality and life.

    Stated income programs were simply a way to allow people to live the high life without having the burden of proving that they could afford it. Brokers are upset about the A lenders not doing stated income because it was an easy way for them to get a deal done and make a bag load of money doing it. Well stated income programs got a lot of lenders around the world in trouble, they are gone so deal with it.

    Brokers get all pissy with lenders because they tighten up their lending, but guess what Mr. Broker? YOU are not the one taking the risk – the lender is. There is a VERY old saying in the world of lending… the guy with the money gets to make the rules about who he lends it too. You might not like it, but that is life and it has been that way for longer than brokers have existed. It amazes me how brokers come on this site and complain about lenders and lending guidelines, all in an effort to sustain their commission. It is not up to the lenders to change their policies to suit your needs, it is up to you to change the way you do business to suit them. The sooner you realize that, the better off you will be.

  • Robert Stanfield, INVIS on 2013-07-03 3:42:32 PM

    I have to agree with "Malcolm", if you can't prove the income, then it isn't there. Or, it is there and you are hiding income and not paying taxes.
    I fully support the lenders requiring T-1 Generals to assess appropriate income for self employed clients. I have told numerous clients of mine, one way or another you have to pay the piper. Don't report your income, pay the higher rate, lender premium and lower ltv, OR, pay your taxes and qualify for a mortgage from a "AAA" lender.

    As the old saying goes, "you can't have your cake and eat to".

    Any business owner properly running his business and it is a profitable business, can provide proof of income. After 2 years in business if you can't provide proof of income, you aren't going to be around 2 years from now, so why should the lender give you a mortgage?

  • Lance on 2013-07-04 6:19:57 AM

    Malcolm & Robert. While there's certainly a grain of truth to the things you say, the default rate of all mortgages in Canada during the stated-income hayday, was .4%. When subtract those that got divorced, lost their job, personally screwed up etc, that leaves a very tiny % that simply got in over their heads. The tightening is really about forcing ppl to pay taxes, as the Gov needs the money. The risk to banks was not excessive. All that aside, what the brokers are really screaming about is the lack of honesty by the banks. If we were as dishonest as them, they'd kick us to the curb. We simply want them to be forthright is all. Is that too much to ask?

  • John Hamilton on 2013-07-04 9:44:28 AM

    Here at Paramount Equity Solutions, we don't care what the income is to 85% LTV. There are still some of us lenders that will read between the lines.

  • Malcolm on 2013-07-04 10:26:57 AM

    Lance: You do realize that .4% deliquency is nearly DOUBLE the national average of .24%. .4% might not seem like a lot of money, but consider that there is almost 1 trillion in outstanding mortgages in Canada, and that is an awful lot of money in arrears.

    In credit adjudication the point of confirming income is to prove that the borrower can reasonably service the debt over the term of the mortgage.

    As for lenders being "dishonest" and brokers not... show me a broker that has NEVER ommitted ANY information from an application in order to secure financing for their clients.

    Brokers need to be careful how much they push lenders, or we might go back to the days of max LTV 75%, max ratio 32/40, including monthly dependency costs of $250 for one child, $400 for 2 etc. - All with NO EXCEPTIONS.

  • Malcolm on 2013-07-04 10:29:13 AM

    I also forgot to add one other comment. Back in the day, many many years ago, consumers had to qualify for borrowing based on their NET income, not pre tax. Probably because one the tax man takes the money you can't really use it to pay your debt... can you?

  • Marc Poirier on 2013-07-04 11:51:05 AM

    contact us we can get these mortgages done

  • Anil kumar on 2013-07-04 11:57:03 AM

    Small Business loans and Equipment finance within Ontario and Canada wide.

    For more information please contact us or visit our website at:

  • Ottawa Broker on 2013-07-04 6:16:14 PM

    So I guess this forum is now about people pushing their company and asking for business???

    Come on, no need to be begging for business and making a statement like you do something special. There are thousands of MIC's and private lenders out there that will do this business, we don't need any agents on here "plugging" their business.

  • Walid on 2013-07-04 8:58:13 PM

    We have to be fair to small business owners.
    The leave their 9-5 jobs, work probably more than 70 hours a week, face income variation, risk losing everything, struggle with line of credit etc. If they hide a little cash then it's okay. Did I mention they no pension plan.
    PS: kinda reminds me of brokers.

  • Lior, Mortgage Edge on 2013-07-05 9:38:28 AM

    Robert Stanfield:

    If someone has a profitable business and they can adjust their pay to cover basic living expenses while keeping the rest in the business, that is their prerogative. They should not be penalized by lenders for doing so. This is a legitimate tax strategy that's implemented by many individuals including yourself I'm quite sure.

    In the grand scheme of things, I am able to finance BFS with little problems including getting exceptions from the insurers. It's the business income (financials, contracts, receipts,...) that is scrutinized.

  • Robert Stanfield, INVIS on 2013-07-05 11:34:45 AM


    I agree 100%. But I am assuming you are talking about clients that have the paperwork to confirm that the business is viable and that they are able to support their lifestyle.

    I am talking about the abuse of the BFS stated income program by many individuals, including brokers.

    yes, there is a need for this program, but clients should be able to provide substantial documents to the lender.

  • Malcolm on 2013-07-09 10:15:02 AM


    If a person has a business and is writing off expense to save taxes, they still have to have full financials to justify the total earnings of that business. If a business owner "hides" money and does not declare it on any financials, anywhere, then they should not be able to use those funds - Period.

    This whole argument of 'penalizing' small business owners is hollow. They get immense tax write offs – some businesses reporting a loss every year. That fact of the matter is simple. If you do not want to declare the income to the government to avoid paying taxes, then why should that same undeclared income be used to qualify for a mortgage? Intentionally not declaring income is tax evasion, and is against the law. Accordingly those people are subject to penalties, and possible criminal charges – but hey – let’s promote the behavior and give them mortgages anyway.

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