The financing delay headache

In the midst of the industry’s hectic activity over the past 12 months, even the slightest delay or complication in the process of securing a mortgage for clients can feel like time wasted for brokers.

In Quebec, though, mortgage professionals face an issue that’s long been a source of immense frustration for the province’s brokers: the lengthy process to secure financing on an offer with little prospect of waiving conditions or securing an extension.

It’s an aspect of the Quebec market that homebuyers in the rest of Canada don’t face; mandatory financing deadlines (avoidable only by proof of unconditional funding or by bank waiving) are viewed as a means of protecting the homebuyer and decreasing the risk associated with the process of purchasing a home. However, one Quebec-based broker told Mortgage Broker News that the regulation had significantly gummed up the market at a time when demand for housing in the province was higher than ever.

“It affects the Quebec market uniquely,” said Ryan La Haye (pictured), a broker with Planiprêt Mortgage Agency. “In Ontario or British Columbia, as soon as a client is approved [for a mortgage], even if there are two or three financing conditions left, they can waive them. Here in Quebec, you can’t do that.

“What that creates is a huge issue in terms of who’s going to get the fastest mortgage approval, as well as a lot of problems: notably on appraisal side delays, but also on how clients approach a purchase.”

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That overreliance on the mortgage approval process, La Haye said, meant that an onus was placed on lenders to approve mortgages swiftly – something that simply hasn’t been happening in Quebec. At the height of the market’s frenzy, approvals were sometimes delayed by 12-15 business days, or even longer if an appraisal was required.

“In the past, you might have been able to get an approval in, say, 10 days total,” said La Haye, “but some of them are now taking over a month. This is a problem, because there are 60-70 offers on a property at once. If your offer’s accepted, but you don’t have financing within 10 days, you need to ask for an extension.”

That can cause massive complications because while clients are waiting for their mortgage to be approved, bids may be continuing on the property – often at a higher price than was agreed for the original sale.

“If the seller doesn’t give you that extension for your financing delays, the guy behind you is going to offer more, and then the same thing will happen all over again to him if he doesn’t get approved fast enough,” La Haye said. “You end up working deals over and over again in many cases.”

The onerous process can often lead to increased stress for brokers and clients alike – particularly given the generally narrower field of lending options afforded to brokers in Quebec.

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La Haye said that while Quebec had traditionally managed to avoid the skyrocketing house prices witnessed in other parts of Canada such as Ontario and British Columbia, recent market activity indicated that that may be changing – with increased demand not helped by the difficult process of securing a mortgage.

The change was particularly stark, he said, in Montreal, traditionally a more affordable option than other large cities that has recently seen prices rise significantly.

“Montreal has always been unique in that for a very cosmopolitan city in North America, it’s relatively less expensive than Toronto, Vancouver, and even other cities in the U.S. – but we’re now starting to see property prices kick up measurably,” he said.

“The fact that property was cheaper here even though it’s still a major city – that’s sort of disappearing. We’re seeing that no longer being the case.”