Business for self deals are all about relationships

Business for self deals are all about relationships

Business for self deals are all about relationships Industry players are frustrated by the lack of options for self-employed clients but the best way to navigate this area, according to one broker, is to assemble a solid stable of a few lenders willing to go the extra mile.

“The attack on self-employed clients is really bothering me; you have to make a compelling case to the lender to prove they are good candidates,” Jake Abramowicz of Mortgage Edge told “When I have a self-employed client I go to three underwriters who have worked on these types of cases in the past and who are willing to do the work.”

Options for business for self clients – especially those who require a high ratio mortgage – are shrinking. Effective May 30, CMHC will no longer insure self-employed homebuyers who do not have third party income verification.

However, Canada’s other two insurers – Genworth and Canada Guaranty – have stated they will not be making changes to their respective self-employed programs.

“Upon review of the current Business for Self Program we will not be making any amendments to current product guidelines,” a Genworth letter to lenders sent in early May read. “There will be no amendment to the maximum number of Genworth-insured properties per borrower.”

Still, brokers have expressed exasperation at the limitations placed on self-employed clients.

“If you really look at how many people are self-employed in the country they really are the backbone of the economy,” Zoltan Padar told following the CMHC’s recent changes. “That’s a good product and it has been proven over time that the two (private) insurers can be very competitive.

“CMHC cutting their business for self program will be a lesson to businesses – some lenders only work with CMHC but if I’m a lender I would start supporting the other two immediately."

There are options for brokers with these types of clients, however. Especially for those professionals who are willing to build a rapport with certain lenders.

“It’s all about relationships with lenders, underwriters and BDMs,” Abramowicz said. “I have to work with who I have and who I know.”
  • Anthony C. 2014-05-16 12:06:33 PM
    Zoltan clearly identifies the importance of BFS to the economic landscape in Canada. Reliable estimates indicate in excess of 2 million + adults in Canada owning or operating a BFS or generate income in a Contract or Consultant or 100% commission basis.

    Jake hits the nail on the head with emphasizing the importance of personal successes with B.F.S. files has always weighed heavily on a trusting relationship with a few select lenders/ underwriters, in addition to the relationships which they maintain with their Insurer counterparts...furthermore, its about how well one articulates the merits of the deal to their lender and whether we can support the typical conditions of financing associated with alternative lending.

    Now that our choices for B.F.S. are being reduced once again, its time for renewed focus on loyalty with our lenders who support the BFS products and ensure the deals we are submitting for funding are well qualified in advance of submission.
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  • Ron Butler 2014-05-16 12:33:10 PM
    I agree with Jake that there is a required level of expertise, relationships and knowledge necessary today to achieve success placing mortgages for self-employed clients.

    While I understand OFSI's desire to tighten rules and bolster the stability of the Canadian banking system at some point we should all acknowledge the basic unfairness of some of these changes. Small business people use the official rules of the income tax system ( I am not talking about cash businesses here) to minimize their taxable income and grow their businesses and employ millions of Canadians.
    They should not be highly penalized for that effort.

    I see deals every day that would have sailed through any lender 2 years ago at best rate and these folks are now driven to less attractive offers. These are deals that usually have 35% equity or more. Nothing has changed about the clients; the SYSTEM has changed. They all have great credit scores, they have superb mortgage payment records, they have ample proof of self employment, they are not gaming the system, they work to pay less tax based on existing tax law but they don't fit into the new rules "box".

    It's not fair. We should talk to our associations and to our MPs about hard working, honest people be discriminated against unfairly.
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  • Daniel McKay 2014-05-16 1:03:28 PM
    I don't think we would have much luck taking this up with our MPs. I firmly believe that these rule changes have a specific agenda to coerce self employed individuals and business owners to pay more taxes/show more income than they otherwise would.
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