Sector is playing an important role in current market, says executive
The influential role played by alternative lending solutions is increasingly apparent in the mortgage market with a shift towards the private space continuing to gather pace, according to a prominent industry executive.
James Grantis (pictured), director of investments at Hosper Mortgage, told Canadian Mortgage Professional that with access to funding at institutional and bank lenders remaining out of reach for many borrowers, private lenders are filling an important gap in the current market.
“In terms of the market right now, we’re definitely still seeing an increased need for private solutions as interest rates remain elevated,” he said. “Two years ago, I would have said a lot of brokers are going to need to try private that would have never tried private companies before.
“A lot of brokers that typically dealt with bank clients probably saw an increase in their loans done with private solutions and MICs [mortgage investment corporations]. I think that trend is continuing.”
Brokers’ perceptions of private lenders continues to evolve
As the prevalence of private lenders in the market grows, Grantis said their ability to offer advantages that more mainstream entities usually can’t – for instance, fewer qualifying requirements and rapid turnaround time – were becoming increasingly clear for brokers and agents.
“The longer we’re seeing that [need for private solutions], I think the more comfort brokers are getting directing their clients to someone like Hosper,” he said, “because not only now are they getting familiar with how private mortgages close and what the requirements are – of course, there are much fewer requirements than submitting a bank deal.
“They’re also probably appreciating the convenience of a private solution. But now that it’s been over a year since rates were rapidly increased, and since the need for privates became more apparent to some brokers, they’ve also now experienced the first deal cycle or life cycle of those clients.”
Jelena Pejic, head of licensing and risk assessment at FSRA, stresses the urgency for Ontario mortgage agents and brokers to complete the mandatory private mortgage course and exam by March 31. https://t.co/19oEuKtMOR#mortgageindustry #mortgagebroker #financialregulation
— Canadian Mortgage Professional Magazine (@CMPmagazine) March 14, 2024
That’s important because it’s given those brokers a strong indication of which lenders have not only closed the deal on time but also honoured the commitment they offered initially, he added, meaning well-organized lenders that communicate clearly and transparently have a good opportunity to strengthen their reputation in the eyes of the broker community.
“Brokers are getting the second-level education of, ‘Who has hidden fees on the backend? Who doesn’t? Who gives grace periods and extensions, and who doesn’t?’ and learning that side – which is just as important in the private space as a seamless and quick closing,” he said.
What should brokers keep in mind about private lending offerings?
Top of mind for Hosper is emphasizing that the right mortgage solution in the private space goes beyond simply the price at closing, rate and fee, according to Grantis. “There’s a lot of things that can go into it that can differentiate private – especially for a broker who’s familiar and mostly deals with a bank,” he said.
While bank renewal processes are usually similar, it’s a much wider spectrum on the private side – and Grantis emphasized that for a broker, a decision should also be based on what’s best for them, their reputation and their client.
Where near-institutional-grade pricing is offered by lenders on the private side, he said brokers should also keep in mind whether backend penalties or hidden fees are a prospect down the line.
“[If] a borrower finds out a year later or nine months later that they’re going to be paying a six-month penalty, and the broker didn’t give them a heads up on that… not only is that a difficult situation, but think about any referrals that are coming from that borrower,” he said. “Product knowledge is about a lot more than just rate and fee.
“[It’s also] open and closed terms, it’s about extensions, about grace period or time to close. It’s about the customer service that your borrower will experience when dealing with that lender. It’s about hidden fees. I think because rate and fees fit into a grid really easily, that becomes the main topic when you think about product knowledge, and I just think that falls short.”
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