Three weeks into the year and the private channel is reporting a surge in business, but it might not last.
Ameera Ameerullah, CEO of Canada Mortgage and Financial Group, a private lender, believes it’s only a matter of time before the government regulates the channel. The industry is witnessing hyper regulation, and with the latest B-20 update in effect for only three weeks ago, Ameerullah thinks a crackdown on unlicensed lenders is inevitable.
“We’ve been seeing the changes with FSCO right now shifting over to OSFI, in terms of regulating private, syndicated mortgages,” she told Mortgagebrokernews.ca. “I think the government will regulate it because there are a lot of private lenders out there who claim to be private lenders, but who are not properly licensed to administer mortgages. That’s one of the reasons they’ll try to regulate the industry.
“Just like we ensure investors are suitable to invest in mortgages, they’re trying to ensure there’s similar suitability for borrowers. They’re going to come out with some sort of guideline for a ratio you have to go by and not just look at equity lending.”
Under the new lending rules, CMFG has experienced a boost in business, and that includes more “quality clients” than Ameerullah was used to seeing before this year.
She defines them as people with good credit scores and repayment histories, as well as good incomes, but who don’t fit traditional lending guidelines. But despite the increased business, Ameerullah remains torn about the new calibre of customer she’s started seeing in her channel, because she doesn’t believe they belong there.
She noted the government’s rationale for implementing B-20 was to cool down the housing market, decrease borrowing habits and reduce debt, but she doesn’t think forcing people into the private sphere is necessary.
“What’s been happening is people are still buying, and yes, the market has cooled down, but clients are now forced to take higher rate borrowing mortgages, which doesn’t make sense, and it doesn’t reduce their debt or cost of borrowing,” she said. “I think that private should be an option when you really have no other options and you need a quick fix, but it doesn’t make sense to push quality people into private loans.”
Ultimately, Ameerullah believes acting in the customer’s best interest trumps all, and even though more borrowers will be stuck in the private channel for longer than they’d like, she still tries to get them out as quickly as possible.
“Even being a private lender, as a mortgage broker I always try to place the client into a traditional mortgage, or B type of mortgage, rather than a private one, so I wouldn’t say that I enjoy seeing more clients who used to fit bank lending guidelines,” said Ameerullah. “That does not make me feel good, but in terms of a boost to business, it will be a good year for our investors.”
How will private channel fare in 2018?
With B20 around the corner, industry wary of coming year