How did a single LOC product become firm’s marquee product?
This article was produced in partnership with Royal Canadian Mortgage Investment Corporation.
Desmond Devoy, of Canadian Mortgage Professional, sat down with Rick Petrie, senior vice president mortgages, for Royal Canadian Mortgage Investment Corporation, to discuss its wildly popular residential line of credit product.
When it comes to financing solutions for borrowers, Royal Canadian Mortgage Investment Corporation likes to call itself the path of least resistance.
The company’s senior vice president of mortgages, Rick Petrie, describes it as a “common-sense lender.”
Royal Canadian’s principals have more than 80 years of credit experience, which means that with that level of expertise, “there are no surprises for the client when they go to close the deal. And there’s certainly no surprises for the client when they get to discharge. We’re transparent.”
The boutique firm’s marquee product is its RoyalFLEX line of credit (LOC) which is aimed at residential customers, for a minimum amount of $20,000 for a one-year term with automatic renewal. It covers detached and semi-detached homes, as well as condos and townhomes. Rental properties are also included in the mix (the LOC is only open to Ontario residents and requires no minimum Beacon score or income).
It can be used for first and second mortgages and “it’s very easy to apply for, it’s easy to utilize. It’s a friendly product. It’s our niche product,” said Petrie of the three-year-old LOC. “It’s taken over our entire portfolio.”
Lines of credit do remain popular with Canadians.
According to Statistics Canada, Canadians owed an average of $227,885 in lines of credit as of March 2023. That rose to $228,848 by July of 2023 (and had been up to $229,756 in June 2023.)
One of the chief attractions of RoyalFLEX is its ease of use.
“It’s easy for the client to draw down money,” said Petrie. “It’s easy for the client to pay back money. They pay interest on the principal that they utilize. It’s completely flexible. It’s a friendly product.”
The importance of broker relationships
Royal Canadian places a premium on having good relationships with mortgage brokers and agents, in part by respecting the role they play.
“We don’t own the client – we simply lend them money,” he said. The company gives the borrower and their agent or broker freedom to sort out any exit strategies. “That’s what makes us attractive to brokers and agents,” Petrie added.
But what makes this line of credit unique?
A borrower may have a line of credit at their bank, because they qualify on paper. But the majority of Royal Canadian’s clients do not quality on paper. However, that does not mean that they do not have the resources to pay, through, for example, equity in their property, but not on paper.
Helping Canadians out of bad debt
“Those clients have become really attractive to us,” said Petrie. A little blemish on their credit history, for example, may look bad on paper, but Royal Canadian looks at the borrower’s ability to pay the LOC off.
“We also repair their credit history with the line of credit,” he pointed out. “We ensure all of the derogatory debt is paid.” This allows the broker or agent to help their client to a more traditional lender in the near future.
As more Canadians take on debt, Royal Canadian is also doing its part to clean up credit histories and deal with bad debt.
According to the CBC, Canadian households are more in debt than any other G7 country, and the amount they owe is now more than the value of the country’s economy. TransUnion reports that consumer debt is now at $2.3 trillion in the first quarter of this year, up 5.6% from last year.
“I see every single file that comes from credit bureaus,” said Petrie. Even if a borrower owes only $90 in arrears to a big box store, that can still come across as “derogatory” and the banks will not touch that borrower. “We do repair,” he said, but stressed that “we ensure they pay.”
Royal Canadian’s team includes in-house lawyers who make it a point to talk with brokers and agents.
“A lot of other lawyers will not do that,” said Petrie. “That really sets us apart, that we have transparency, through the team, right to our lawyers. They’re a big part of our team.”
To find out more about Royal Canadian’s RoyalFLEX program, click here.
