With stricter mortgage guidelines suppressing volumes and competition squeezing margins, mortgage brokers are increasingly on the lookout for new business generators.
Have you ever seen a cool new idea and wondered how on earth it took so long to come up with it?
One such idea, at least in this author’s mind, is matching private lenders with non-prime borrowers online. And a start-up called Strategic Matches is now doing just that.
It works like this:
For one thing, the fixed-variable spread (i.e., difference between fixed and variable rates) needs to widen. With today’s typical 5-year fixed at 2.84% and discounted variables at 2.45%, that spread is currently ~39 basis points.
As a rough rule of thumb, when the fixed-variable spread hits 100 basis points, demand for variables noticeably increases. Spreads are currently a ways off from that point, but we may inch closer this summer.
Alt-A borrowers are people who “just miss the traditional credit requirements of their bank,” says Pino Decina, EVP of Residential Mortgage Lending at Home Trust.
One example he provides is a self-employed client who is waiting to receive his/her current year’s Notice of Assessment, or finalizing Business Financials. That person may not meet the two- or three-year documentation requirements of his or her bank.
Consumers and brokers have a new mortgage lender to choose from. CMLS Financial launches today in Ontario, and Monday in Alberta and B.C.
CMLS is a broker-only lender that should get a warm industry welcome, given the recent departures of FirstLine and ING from our channel. But we have to admit, when we heard last year that CMLS was entering the market, one thing came to mind, “Another non-bank lender with the same old insured products.”
It turns out that CMLS brings some legitimate advantages to market. Here are some of them:
The company revamped its stated income mortgage 11 days ago by:
- Eliminating its stated income rate surcharge
- Adding commission income as an employment type
- And giving its stated products all the features and flexibility of its regular mortgages.
Interest rates are the #1 mortgage differentiator for the average consumer. To offer the lowest possible rates, lenders are often forced to delete features and flexibility.
These no frills (or low frills) mortgages, as they’re called, are often stripped down products. But last week, RMG Mortgages, a division of MCAP, launched a slightly new spin on the low-frills concept. It’s called the Low Rate Basic Mortgage and it’s got full prepayment privileges and a 90-day rate hold, plus a materially better rate.
But there are a few trade-offs.
Canada’s most candid business personality has a strong view about what’s wrong with mortgages. It’s so strong that he decided to start his own mortgage company.
On Friday, I spoke with CBC commentator, multi-millionaire, Dragon and Shark, Kevin O’Leary. I asked him what makes his new “O’Leary Mortgages” so unique. He outlined a two-pronged strategy: to add transparency to the mortgage process and to help Canadians pay down their biggest debt faster.
Kevin has been scoping out the mortgage business for almost two years. He was kind enough to share his mortgage philosophy and business plan with CMT in his first interview about O’Leary Mortgages.
There are a slew of rate comparison sites out there, but they all present a similar challenge for consumers. People are forced to call a broker or lender to know if they qualify for the rates being advertised.
Kanetix.ca believes it has a better approach. On Monday it launched a revamped version of its rate comparison site that helps consumers get firm quotes with minimal human interaction.
“A lot of websites give you a teaser rate and make you contact the broker for details,” says Yousry Bissada, President and CEO of Kanetix Ltd. “At Kanetix you get an actual pre-approved rate online.”
To do that, Kanetix takes a mini-application and Equifax checks the person’s credit – all online – to confirm qualifications. (It’s a “soft” credit check that doesn’t adversely impact your score.)