For clients, it’s the one menacing clause in OSFI’s rejection of re-qualification at renewal. But for brokers, says one industry veteran, it’s may be an opportunity to grow their business.
“First, I don’t believe it will be an issue for most (mortgagees) in that the banks will likely take the path of least resistance because they won’t want to incur the human resources costs associated with re-qualifying clients when they don’t perceive there to be any current threat,” Phil McDowell, an associate with Mortgage Alliance - Mortgages Are Marvellous. “But, it has to be said that wherever there is uncertainty in the consumer’s mind, people will seek out advice, and that will benefit brokers.”
The analysis comes within hours of the federal regulator’s move to clarify its position on forcing lenders to re-qualify borrowers at renewal. In a terse paragraph it rejects any plans to mandate that kind of review, but one sentence – calling on banks to periodically review a client’s current credit situation – is raising concern among clients and their brokers.
“FRFIs (federally-regulated financial institutions), however, will be expected to refresh the borrowers’ credit metrics periodically (not necessarily at renewal) so that FRFIs can effectively evaluate their credit risk,” OSFI’s assistant superintendent of regulation, Mark Zelmer, writes Wednesday in his letter to those FRFIs.
Ostensibly that leaves the door open for banks and other mortgage lenders to start performing credit checks on existing clients and using that information to decide whether or not to renew a mortgage.
McDowell doubts banks will implement that kind of double-check for clients with clean payment histories.
Still, the spectre of such scrutiny may ultimately accrue to the benefit of brokers if it encourages more clients to reach out to them ahead of renewal as a way of developing a Plan B should their current lender decline renewal.
“Again, I don’t think lenders want to take on the extra expense to do those checks,” said McDowell, “But brokers will be there to help clients.”