In the news … (on affordability)

General Tim Hill, MBA 29 Sep

Advice from a leading financial writer could drive more clients to market

One of Canada’s most respected housing critics is now advising Canadians intent on purchasing in hot markets to do so with less than 20% down. What do brokers think about the suggestion?

Rob Carrick, a personal finance columnist for the Globe and Mail, is making a case for people intent on buying in hot markets to take the high ratio hit rather than defer until enough money can be saved for the full 20% down payment. 

“A popular and sensible bit of financial advice is that you should ideally wait to buy a house until you have a down payment of at least 20% and thus are excused from buying mortgage default insurance,” Carrick recently wrote in a recent column entitled It’s time for many Canadians to abandon the 20% down-payment rule. “But if it takes a few years to save that much, you may find that soaring prices more than offset the savings on mortgage insurance.”

While Carrick does argue “the conventional wisdom about 20% down payments is right on the money,” he also acknowledges it may not apply in hot markets such as Toronto and Vancouver, where home prices have been on skyward trajectories.

“Either jump in now or resolve to wait and save indefinitely for sanity to return,” Carrick writes of those who are set on purchasing in hot markets.

Carrick is one of the most influential voices in personal finance through his regular contributions, despite the fact that he is neither a mortgage broker nor an economist.

And this specific advice is nothing new, with many Canadians already choosing high ratio loans in favour of deferring purchases until 20% is saved.

Still, it’s the sort of advice that could entice even more buyers to jump off the fence.

But at least one industry player argues that advice is incomplete.

“What I preach is that with the current low rate environment, clients should be utilizing prepayment privileges and (paying more than the minimum mortgage payment),” Geoff Lee, a broker with Dominion Lending Centres GLM Mortgage Group, told “That way, when rates go up, psychologically they’re ready to handle that increased mortgage cost.”

For his part, Tim Hill, a broker with Dominion Lending Centres Primex Mortgages, advises clients to focus solely on affordability.

“(Carrick’s) approach is very speculative,” Hill said. “I advise clients to approach a mortgage in terms of affordability and to make sure they can handle the increased costs if prices go up; I tell them to focus on affordability more than rates and price increases.”

To read Carrick’s column in its entirety, click here.


by Justin da Rosa | 29 Sep 2015

Mortgages for the Self-Employed

General Tim Hill, MBA 28 Sep

Brokers are beating the drum for BFS clients

Spreading the word about what brokers can do for clients hasn’t been easy – but there are ways to inform and educate, and in the process, build a book of clients.

“With all the new government regulations that have come out over the last few years, it has affected the self-employed the most,” says Bryan Guertin, principal broker for Mortgage Intelligence Oakville. “CMHC no longer insures stated-income mortgages and the other two insurance companies that still do have really tightened up with the qualifications. Many self-employed are finding out that their bank can no longer help them.”

His recent article in the Hamilton Spectator explains the many ways that brokers work with self-employed Canadians, such as freelancers, contractors and small business owners.

“The timing of this article is perfect,” Guertin told MBN. “We have to make these potential clients aware that there are other mortgage lenders out there that qualify them in a different way to make the numbers work.”

And although BFS clients sometimes end up paying a higher rate, there are ways to keep the numbers down; but it isn’t easy.

“Depending on the equity in their homes, some self-employed deals can be done at best rates,” says Guertin. “I have been a mortgage broker for over 40 years, placing BFS mortgages has always been easy, but we now find them tougher to place.”

The business-for-self client base is simply too large for brokers to ignore, and one that is tailor-made for brokers to engage, says Tom Hickey, VP Operations (Adjudication) for B2B Bank.

“The BFS segment in Canada is growing and represents about 18% of the workforce,” Hickey told MBN. “We see an opportunity to adapt to the changes in the workforce Canada is experiencing.”

And Guertin has seen first-hand his own BFS client base increase.

“In the past, approximately 40% of our transactions were BFS,” he says. “Now we are at 60%.”


by Donald Horne | 28 Sep 2015

Watch out for “cash back” mortgages!

General Tim Hill, MBA 10 Sep

Bank tries to win other lenders’ business

It may be a clever marketing ploy, but brokers are poking holes in one big bank’s mortgage promotion that offers free mortgage switching from existing lenders – and an enticing cashback offer.

“If a client is wanting to switch before renewal time, then it’s likely the current lender will impose a prepayment penalty based on the greater of three months interest or an Interest Rate Differential calculation,” Bill MacDonald, an agent with Invis, told

In many cases, that IRD penalty can amount to thousands.

CIBC is currently advertising a campaign that allows clients to switch their existing mortgage for free.

The campaign – which is being pushed online and in print advertisement, including A-frame boards outside branches – tells potential clients that, for a limited time, they can switch their mortgage to CIBC for free, and get up to 5% cash back.

A disclaimer also states that the “free” switch doesn’t include existing lender fees.

But it’s the cashback mortgage that brokers may view as the bigger problem.

“The advertising doesn’t completely reveal that consumers will pay a much higher rate for a “cash back” product … I can arrange a 5 year mortgage today at most lenders at 2.69% but if my client insists on a “cash back” of 5%, then the rate will likely be 6.1%,” MacDonald said. “That, obviously, makes a huge difference in the monthly mortgage payment. Some clients may want or need the ” cash back ” but it’s extremely important they understand the product and whether it’s  definitely worth the higher cost.”

Regulators have long advised against cashback mortgages, with OSFI recommending urging default insurers not to underwrite these loans.

For their part, brokers are wary of cashback options because, as MacDonald explains, they often cost clients a hefty sum in interest.

CIBC announced last week that it had funded $165 billion in mortgages during Q2 — a $7.7 million spike over the previous quarter.

See below for an example of the ad.

Calls to a CIBC rep were not returned.

by Justin da Rosa | 08 Sep 2015

In the News … (rate specials)

General Tim Hill, MBA 10 Sep

Lenders using specials to win business from each other

Lenders are duking it out over business and offering special promotional rates to their rival’s clients – much to the chagrin of one leading broker.
“The big issue I have right now is the live-deal specials that lenders offer; a lender will publish a new special rate that is only for new business if that client has an existing deal in progress with another lender,” Tim Hill of Dominion Lending Centres Primex Mortgages told “It’s a bid to get clients away from other lenders and they all do it but they also hate losing clients.”
The biggest frustration comes when two lenders offer the same live-deal special, but the existing lender won’t match the competitor’s promotion for that particular client, according to Hill.
The scenario creates a conflict of interest for the broker because he wants to get his client the best rate, but he has to cancel the deal with the existing lender.
“Say I have a client with lender A at 2.69% and lender B announces a 2.59% live-deal special,” Hill said. “Lender A comes out with its own 2.59% special but that client won’t qualify because he is already considered an existing client.” obtained an email sent by one leading lender to brokers announcing this type of deal. The conditions for the 2.59% five-year fixed rate were as follows:

  • New business and live deals only
  • Maximum buy down to P-0.85% | 2.49% | 2.14% allowed
  • You must indicate in notes – 5 Year Fixed Promo or
  • 3 Year Fixed Promo or 5 Year ARM P-0.65%
  • 120 Day Rate Hold

And while Hill, who is based in Vancouver, has been struggling with an increase in these types of promotions, it appears the trend may be specific to hotter housing markets.
“I have not head of this sort of deal; the only thing I’ve had trouble with are quick-close deals,” Steven Klassen of Verico One Link told “In Manitoba I haven’t seen lenders do anything like this.”


by Justin da Rosa | 03 Sep 2015

In the News … (last-minute issues)

General Tim Hill, MBA 9 Sep

Broker: Lender staffing issues leading to last-minute deal issues

Lenders are understaffed and dealing with record volume, according to one former underwriter, which explains the increase in last minute audits and the resulting problems with files.

“There is often another level of review after the underwriter signs off on a deal before it gets funded; the underwriters sometimes miss something and it’s a function of underwriters being overwhelmed,” Tim Hill of Dominion Lending Centres Primex Mortgages told “Volumes for lenders are also as high as they’ve ever been, and a lot of documents are being looked at very late in the process.”

Those last minute reviews are done by an auditor that oversees underwriters’ work according to Hill, who worked as an underwriter for Street Capital for over three years before moving to the broker side of the business.

An increasing number of brokers are reporting issues late in the mortgage origination process with last minute audits.

For his part, Robert Clancy of Verico Safebridge Financial argues these last minute audits are being exacerbated by lenders who all interpret mortgage regulations differently.

“A lot of the time there is an issue with conditions being added on by lenders at the end of deal; all of a sudden lenders call and ask for more documents,” Clancy told “It seems to be the monolines grappling with the regulation changes; everyone seems to be interpreting them differently.”

One specific example Clancy encountered was when a lender requested – at the last minute –that a number of debts to be paid down.

“They requested this days before closing, and even though we showed them their calculations were wrong they still forced us to deal with it.”

Luckily Clancy was able to work with the client and eventually got the deal funded. But not all brokers have the same luck at the last minute.

by Justin da Rosa | 02 Sep 2015