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Post B20-how to keep the gears turning

I last wrote about B20 in December 2012, when I suggested that OFSI’s B20 regulation wasn’t really all that bad.  At Optimum Mortgage, we’ve had a year to work through the requirements of B20 and while it has been a significant change for all of us; it really hasn’t been all that bad.

What should you expect from your lender, post B20?

During my visits to broker offices this past year, I’ve heard a lot of comments about the challenges you’ve faced when dealing with lenders–'A' lenders in particular. Hopefully, you recognize the difference between a lender who simply wants too much detail and a lender who asks for the appropriate amount of information to ensure the deal makes sense. To us at Optimum, the deals that make sense are deals that will improve the client’s financial situation; whether it is upgrading their home, buying a smaller home, or consolidating debt to reduce monthly payments.  All lenders require more documentation to verify that there is a reasonable chance of repayment and to ensure your client is not misrepresenting their financial situation.

So yes, deals are harder to get done.  Is it bad?  No, I don’t think so.  We all have a responsibility to act in the client’s best interest and this additional information serves to ensure that the client’s best interests are being met.

What can you do to manage these changes?

Because of tightened lending rules, it has become increasingly more important for brokers to consider clients who do not match the “A” profile. However, packaging an alternative lending deal differs greatly from a typical “A” mortgage. Here are some tips to ensure your entry into the alternative lending market is painless:

Know your client

To ensure that you are working in your client’s best interest, make sure you really know who your client is. Often, delivering on what a client wants is not nearly as important as getting them what they need. As a professional, you can guide the initial interview so that you both arrive at the same conclusions together. Providing your lender with as much up front detail as possible will help to ensure that your deal’s lifecycle is seamless - meaning more approvals and less wasted time.

Know your lender

As professionals, it is important to know how lenders differ from one another and what area each lender specializes in. Any alternative lender can easily compete on rates and fees; but as many of you know, closing an alternative lending deal shouldn’t only be about the rate. Other factors to consider when choosing a lending partner include: whether or not they have reasonable conditions, a common sense approach, affordable pre-payment options, mortgage portability/blend and extend options, and most importantly, service and flexibility.

Look for an alternative lender that will work with you to find a mortgage solution that meets your client’s personal needs. Your alternative lending deal should also provide your client with stepping stones to help them get back into the “A” market. Ultimately, the alternative mortgage solution that your lender provides should be as unique as the client you serve.

Lean on your business development manager (BDM) and underwriter.

Your BDM and underwriter see alternative lending deals every day. They are your best resource for packaging, rate determination, and any other questions you have. It’s important to develop a strong relationship with your lending team and become well versed in their products and policies. This will allow you to identify the solutions that are best suited for your client.

We’re all aware of the fact that close/efficiency ratios are becoming more and more important in the broker/lender relationship. Therefore, by combining your knowledge and experience with that of your BDM and/or underwriter, you can achieve those close/efficiency ratios – meaning more income for you.

Use your deal’s notes

Your deal’s notes serve as important building blocks for your lender. Alternative lending deals can be won or lost because of the notes section, so notes should be used to tell your client’s whole story. As a general rule, telling it as it is is always the best approach. Just remember that your notes will help you and your client avoid a CRISIS:

  • Credit–identify any credit issues and how they are being resolved.
  • Risk-recognize the weaknesses and mitigate them.
  • Income–note how long your client has been employed in his or her current position.
  • Security–inform your lender of any security issues related to the property.
  • Identify–provide your contact information so the lender can easily reach you.
  • Story–answer why the borrower is coming to you, what their unique circumstances are, what strategy you are using to get them into the 'A' market, and how long your exit strategy will take.


Guide Your Client

Because of online resources, the mortgage consumer is more educated on the mortgage industry than they have ever been in the past. They are aware of the 'A' rates that are out there. However, they often don’t understand why these lower rates aren’t accessible to them and what industry terms, such as LTV, stated income, and TDSR mean. As a broker, become their trusted advisor by explaining to them why they don’t currently fit in the 'A' market, but then provide them with a game plan that will get them back on track to qualify for the lower rates at the earliest opportunity.

As a result of regulatory changes, more and more brokers are now entering the alternative market. By guiding your client, working with your lender, and packaging deals properly, you can put yourself ahead of that curve. Manage your clients’ expectations and keep them, and your lender, aware of every single step in the process. By taking these steps, customer loyalty will increase and along with it: increased referrals, more repeat business, significantly improved close/efficiency ratios, and probably most important of all-reduced stress. Your experience will be smoother, hassle-free, and faster.

Lester Shore
Vice President, Optimum Mortgage