Time to lower minimun volume requirements?

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Stricter mortgage rules threatening to cool down the housing market are fueling broker hopes lenders will soon lower their minimum volume requirements to compensate for a drop-off in business.

“The question in a lot of brokers’ minds these days is will lenders lower their threshold for qualifying status?” said Paul Mangion, a broker with the Mortgage Centre in Mississauga. “I am personally curious to see how lenders will handle the drop in volume brought about by the new mortgage rules set by the government.

“Business for B lenders is still up, but a lot of A lenders are down because of the pressure brought on by the new regulations.”

Lender financials for the period after mortgage rules and new underwriting guidelines came into effect  won’t be out for several months, but many brokers are now suggesting both broker channel banks and mono-lines will lower their qualifying requirement to recover lost volume.

“That will definitely be good news for the community,” Mangion told MortgageBrokerNews.ca.
Still, it’s simply too early to tell if lenders will move in that direction, said another broker.

“It’s hard to say because there are some divisions within the lender community,” said James Robinson, mortgage agent for The Mortgage Centre in Toronto. “Depending on how they approach funded deals, some lenders have stricter funding ratios and some don’t.”

Lower qualifying requirements have always been on brokers’ wish list, but more so now as indicators suggest a market slowdown lies ahead, according to Kent Brewer, with Mortgage Alliance Front Gate Mortgages in Fredericton, NB.

“If the lenders gave brokerages a little more slack in terms of meeting minimum volume requirements to maintain status, it would really help those in small markets,” he said.

Brewer also argued that such an action would also help brokers maintain a wider choice of lenders to offer their clients. With the current climate, he said, some brokers resort to bringing their deals to a smaller number of lenders in order to maintain minimum volumes.

That may in fact be the other option open to lenders, argue some mortgage professionals, suggesting they’ll sweeten their pots for those brokers who bring a higher percentage of their deals to them, cutting out lending competitors to do it.
 

  • Long time banker on 2012-07-26 9:28:25 AM

    Are the broker going to take a reduction in compensation for these lower levels. As the brokers compensation rose so did the funding expectations. There is a direct link between them both. At above 1.1 percent of principle in compensation if the brokers wanted a twenty percent reduction in qualifying tiers would they work for twenty percent less. These programs tie volume to compensation and discounts.
    Would they return to individual volume targets and not allow pooling of business? You have companies where a target for volume is say ten million approximately 40 deals based on a lenders average mtg amount and you have regions of agents pooling under a regional managers name.
    I think a more logical scenario will be that lenders will look at costs with the highest being after underwriting is broker compensation and say how do we get his in line with our need to cover operating costs and still make a profit?

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