Common sense lending

Part of Rajan Kaushal’s lending philosophy is that serviceability expectations shouldn’t be stringent.

“We look at it in terms of serviceability and the clients being able to service mortgages,” said the president of Tribecca Financial. “We look at all aspects; if borrower is renting out the basement, we look at the basement. There are many different circumstances and if we get a sense that the borrower can service the mortgage, then we’re satisfied instead of being strict like institutions with GDS and TDS ranges.”

Put another way, that malleability, in essence, is trusting borrowers not to skirt on their financial obligations. Moreover, that Tribecca doesn’t make its clients jump through hoops may go a long way towards explaining why it has become so popular in the B-20 era.

“As long as we feel they can service it, that’s what matters,” said Kaushal. “If someone was planning to renovate the home and sell it but their serviceability was tight, we’d deduct payments for the terms. We want to get a sense of what they can service and the real estate’s equity.”

Since the beginning of 2018, Tribecca has seen an increase in the volume, and quality, of the mortgages it originates. Kaushal compares it to the high times before the 2008 financial crisis, save for the fact that the B space has since grown, as has the competition. However, in spite of the crowded space, brokers are realizing that there’s more to be done for their clients in the alternative space than there is with A lenders.

“Alternative lending has always been around because there’s always been a need for it,” said Kaushal. “We have a limited amount of institutions in Canada and they all have certain lending guidelines, so the alternative space has become that much more important. It fills a gap—and has especially in the last couple of years. It’s extremely important for brokers to have relationships with alternative lenders because, even though clients go to brokers for all kinds of reasons, it’s most commonly because they’ve been turned down by an institution and they’re looking for their mortgage broker to provide them options for funding. I think it’s imperative that brokers have relationships with alternative lenders and I only see the alternative space growing.”

Guideline B-20 may have opened a window of opportunity for the alternative space, but it has also created vortex of uncertainty, with many who aren’t already precluded from entering the market simply taking a wait-and-see approach. Kaushal isn’t worried, though, because he steadfastly believes that it won’t be long until normalcy creeps in and people become used to the new normal.