MERIX Financial is temporarily halting stated income lending – and for one broker, it suggests more monolines will do the same.
“This came along with no warning,” says Jake Abramowicz, an agent with Mortgage Edge and owner of Mortgagejake. “From my standpoint, I believe we’ll see the smaller monolines follow suit.”
MERIX also increased the minimum beacon score for refinances/ETOs on condos in the GTA and greater Vancouver area to 720.
For Abramowicz, it may start a trend that will have detrimental effects to the industry.
“I’m scared,” he says. “When are we going to see some proactive lending? All we’ve seen so far are tightening and reactive lending. I’m tired of hearing from lenders what they can’t do.”
Stressing that this is only a temporary move in response to "fluctuation market conditions", MERIX’s policy change comes months after the company’s recent purchase by Culpeper Capital Partners.
The policy changes issued from MERIX are:
- For Purchases and Refinances, the BFS (ALT-A) stated Income program has been eliminated until further notice. Merix will continue to permit BFS on a Fully Qualified basis;
- For Refinances/ETO’s specifically for condominiums in the GTA and GVA, the minimum beacon score must be 720;
- For Purchases and Refinances, the option of 80% rental offset is no longer applicable. Moving forward, Merix will use the DSR Calculation method as per CMHC Guidelines;
- For Purchases, the premium for Pre-Approvals is changing to 20 bps from 10 bps (maximum 90 day rate hold).
In contrast to MERIX’s recent move, Street Capital
effectively deepened the utility of its own stated income mortgage in February, eliminating rate surcharge, giving stated products all the features and flexibility of its regular mortgages, and adding commission income as an employment type.
“Street Capital is still funding stated income deals,” says Abramowicz, “albeit shakily; but they are still doing it.”
Despite the recent move by MERIX, Abramowicz believes that client and Realtor education will ensure that deals can still be made.
“Your article on Home Capital looking to double its portfolio (see mbn May 27
) – they’ll be able to do that easily,” he says. “And really, if a client has to take a mortgage at 3.89 per cent instead of 2.89 per cent, that isn’t the end of the world. It just means self-employed people will have to pay a little more. We need to educate the client that they must show their ‘real’ income when applying, and for realtors to tell the client that this is what they can expect.
“We can’t keep promising everything – especially these days,” says Abramowicz.