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The Big Story: The self-employed market

An expanding market for brokers still has obstacles to overcome. They see the business-for-self market as a key growth area for an industry looking to grow originations in a slowing market. The statistics back them up with more than 22 per cent of Canadians now self-employed. These borrowers face challenges, say brokers, as lenders mitigate their risk, but policies applied across the board don’t take into account individual differences say brokers. On today’s Big Story, we spoke Sabeena Bubber of VERICO Integre Mortgage Partners, Blair Anderson of Anderson Associates and Reed Harris of VERICO Manifest Mortgage Corp. Find out on today’s The Big Story, on TV, your home for industry news, opinion and analysis.

Video transcript below:

John Tenpenny, Mortgage Broker News TV
John Tenpenny:
 Hi, I’m John Tenpenny, Editor of CMP magazine and welcome to the Big Story on Mortgage Broker News TV.

An expanding market for brokers still has obstacles to overcome.  They see the business for self market as a key growth area in an industry looking to grow originations.  The statistics back them up as more than 22% of Canadians are now self employed.  These borrowers face challenges say brokers, as lenders look to mitigate their risks, but policies applied across the board don’t always take into account individual differences.

Blair Anderson, Broker, Owner, Anderson Associates, Mortgage Brokers
Blair Anderson:
 Well there is definitely obstacles for self employed individuals, banks hold to a higher standard with respect to credit scores, the cost of the insurance under the insurance programs is upto 138% more expensive for them, the time on the job by the time they have been learning their business has to be minimum of two years and the eligibility requirements range from you know, not allowing any past bankruptcies, they are not allowed gifted down payments, properties must be owner occupied,  they have to have a higher net worth, better credit and documentation is always more onerous for self employed.  So is this fair, is this higher standard fair, well the banks deem them higher risk loans, if they are not getting the proof of income so they are mitigating the risk by holding them to higher standards, but it’s tough to have this policy applied across the board to everyone because everyone’s situation is different.

John Tenpenny:  Some products for this group of borrowers have disappeared, but changes may be in the offing.

Sabeena Bubber, Managing Broker, VERICO Integre Mortgage Partners
Sabeena Bubber:
 I think it’s definitely hard for self employed applicants these days to get financing, a lot of my self employed clients have really struggled over the last couple of years where they didn’t issues getting financing in the past and now the products and services that they used to getting are no longer available for them.  I think that it's not over for them, I think that the Federal regulators are going to come in and make some further changes to the market similar to what they did with changing amortization for lenders, refinances for borrowers, I think that's going to change for the self employed borrower as well, they are going to face some challenges going forward..

John Tenpenny:  Some say sources of income for self employers must be taken into account.

Reed Harris, Broker, Owner, VERICO Manifest Mortgage Corp.
Reed Harris:
 I say it’s not fair to penalise the professionals and people with professional corporations, for paying as little taxes they are able to, I often get clients who have very little income but very high earnings and we have a lot of difficulty proving income for them.

Often as well the, what we find is that the lenders or insurance company will give us an opinion what the income of this should have, which isn’t necessarily reflected what is actually going on, so I don't think it’s fair.