UPDATED: At least one monoline appears to have cancelled pre-approvals written before the CMHC announcement last week, said one broker, raising concerns that other lenders will follow suit.
“They basically cancelled all of the pre-approvals; I had nine of them and they were cancelled with no explanation,” one broker, speaking on condition of anonymity, told MortgageBrokerNews.ca. “On Monday they basically cancelled every pre-approval I had with them.”
MortgageBrokerNews.ca is now reaching out to that specific lender for comment.
While the broker isn’t entirely sure why the pre-approvals were cancelled, he has now had the underwriter and his broker of record confirm that the CMHC's move to cap goverment guarantees for mortgage securities was the driving force behind the decision.
Also of note, the lender has now come back with a compromise that would see the five-year terms reduced to four and the previous rate protected. That would still leave one client stuck "between a rock and a hard place," said the broker.
Last week, CMHC announced it would limit each lender in its mortgage-backed securities program to $350 million in guarantees for August given it was quickly approaching the fund’s ceiling.
Any cancellation of pre-existing preapprovals could hamper broker efforts to capitalize on the rush of fence-sitting clients now eager to cash in on those promise notes.
Cancellations are also likely to test broker loyalty.
“If they break their word, do you want to send them business again?” said the source. “They went from the top of my list to the bottom. Why would I send them another deal when I got screwed over?”
Another broker, Deepak Bansal of Dominion Lending Centres Mortgage Village, told MortgageBrokerNews.ca that he has struggled with underwriting on some deals this week, although not on preapprovals.
“They have been stricter this week,” said Bansal. “I have had one declined and on the other two, the underwriters were a lot stricter than they had previously been.”
He pointed to apparent contradictions between what the underwriters said and the lending guidelines..
“It’s been corrected now,” said Bansal, “but I had to get our business development manager involved to send them their guidelines to get it rectified.”
Other brokers are concerned some lender may want to hold off on writing new business until rates go up.