Not a full month into the latest B-20 regime, one thing has become clear: The mortgage industry’s fears about having difficulty qualifying clients weren’t unfounded.
Some B lenders, in particular, are having a tough time finding mortgages for borrowers because they’re qualifying at the contract rate plus 2%, which puts the lending rate a hair below 7%. As a result, agents, brokers and lenders are realizing the value of brokerages that have deeper pools of resources.
Wasah Malik just joined King Lending Capital as a district partner, and says the new mortgage rules factored into his decision to move on from his previous brokerage.
King Lending Capital deals with A and B banks, as well as private lenders, but differs from a lot of brokerages in that it has substantial private in-house funds. According to Malik, King Lending has about $60mln to lend out for residential and commercial first and second mortgages. Under the new lending rules, easy access to cash is imperative.
“Because of B-20, it’s going to get extremely difficult to qualify folks for mortgages, and we’re already seeing that within the industry three weeks into 2018,” said Malik. “I found it was hard to qualify my clients before joining King Lending Capital.”
Malik added brokerages with more resources for agents, brokers and lenders could emerge as big winners in 2018.
“Most agents are looking to be with better brokerages—the reason being that you have more staff and resources, whereas if your brokerage is not that strong, you’re pretty much stuck on your own to figure things out,” said Malik. “All the brokerages are nervous about mortgages not getting approved, so we’re looking for solutions.”
King Lending has reach. Established over a decade ago, it has branches all over the Greater Toronto Area, and its considerable volume has curried favour with banks, many of which offer King Lending premium rates.
For example, right now the brokerage is offering a five-year fixed rate mortgage at 2.99%, but can go lower if it wants.
Even superbrokerages could start becoming commonplace. Last week, three brokerages—Paragon Mortgage Inc., Premiere Mortgage Centre, and Compass Mortgage Group—announced that they’d officially come together as Tango Financial, a move that’s largely a reflection of narrowing profit margins in a changing industry.
“Margins are narrowing,” Don MacVicar, president of Premiere Mortgage Centre told Mortgagebrokernews.ca at the time. “It’s harder and harder to run a brokerage than ever before, and when you can share your operation and investment with others, you’ll be able to do more things. Agents expect higher splits every year and most agents can walk away if you’re not providing value every day; they can go work for someone else, so provide value so nobody leaves. That costs money.”
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