Brokering mortgages in smaller cities and towns isn't for the faint of heart, and in addition to existing challenges, B-20 has made it onerous
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Brokering mortgages in smaller cities and towns isn’t for the faint of heart, and in addition to existing challenges, B-20 has made it onerous.
Properties are worth less outside major urban cities like Vancouver, Toronto and Montreal, so increased volume is necessary to turn similar profits as those made in the aforesaid cities. Karen Matthey, a mortgage agent and co-owner of The Mortgage Professionals in Kingston, says her brokerage’s agents work on numerous mortgages at the same time, but that the bigger challenge to brokering in smaller regions, including their rural outposts, is infrastructure.
“One of the issues in a smaller market, at least our smaller market, is we have a lot of rural-based properties, like well and septic,” she said. “It makes it challenging to do those mortgages because the appetite from lenders isn’t great. They’re not comfortable with those properties. They’re more comfortable in larger urban centres.”
Well and septic properties present a host of problems. For one, water must be tested by inspectors before a deal can close, but that process can take a while, as can bringing in an appraiser. If a client waives financing but the inspection fails, the client could be left in a bind.
“The problem is the moment we make that offer, the ball gets rolling,” said Matthey. “The client could even get sued in some situations because the seller is depending on that sale for their own purchase to go ahead, and if they haven’t sold their home by the time they have to close, it could be an issue.”
Matthey added that it isn’t a common scenario, “but the potential of it is frightening enough, and the results are frightening enough, that we’re always conscious of it. In some cases, the realtor is good enough to know they need to get these things ahead of time, so they’ll get the sellers to check these things before, and it reduces risk.”
Another challenge to brokering in smaller markets is getting B deals done. In tandem with the 200 basis point stress test, Matthey says it has affected mortgages across the board, and added that some people have to qualify as high as 8%.
That doesn’t mean deals are impossible to get done, though.
“Part of it is marketing to our existing client data base and educating them about what these [B-20] changes mean to them,” she said. “For a lot of us, it’s relearning lender guidelines.”
Centum One Financial Group central underwrites mortgages for agents across the country, including in very small markets like Rocky Harbour, Newfoundland and Northern Ontario, and is routinely frustrated by small lender pools and fewer appraisers. Moreover, less demand reduces the likelihood of obtaining top value for a property.
But according to Centum One mortgage broker and Vice President Greg Soucie, qualifying first-time buyers, many of whom are financially responsible, in smaller markets, has been arduous because of B-20.
“I think it’s unfair, frankly, for smaller markets where property values haven’t gone crazy, and where things have been relatively stable,” said Soucie. “The impact B-20 has had on first-time buyers in small markets is a real problem. We have a two-speed market with Toronto and Vancouver, and then the rest of the country, but they’re stuck with the same regulation.”
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Properties are worth less outside major urban cities like Vancouver, Toronto and Montreal, so increased volume is necessary to turn similar profits as those made in the aforesaid cities. Karen Matthey, a mortgage agent and co-owner of The Mortgage Professionals in Kingston, says her brokerage’s agents work on numerous mortgages at the same time, but that the bigger challenge to brokering in smaller regions, including their rural outposts, is infrastructure.
“One of the issues in a smaller market, at least our smaller market, is we have a lot of rural-based properties, like well and septic,” she said. “It makes it challenging to do those mortgages because the appetite from lenders isn’t great. They’re not comfortable with those properties. They’re more comfortable in larger urban centres.”
Well and septic properties present a host of problems. For one, water must be tested by inspectors before a deal can close, but that process can take a while, as can bringing in an appraiser. If a client waives financing but the inspection fails, the client could be left in a bind.
“The problem is the moment we make that offer, the ball gets rolling,” said Matthey. “The client could even get sued in some situations because the seller is depending on that sale for their own purchase to go ahead, and if they haven’t sold their home by the time they have to close, it could be an issue.”
Matthey added that it isn’t a common scenario, “but the potential of it is frightening enough, and the results are frightening enough, that we’re always conscious of it. In some cases, the realtor is good enough to know they need to get these things ahead of time, so they’ll get the sellers to check these things before, and it reduces risk.”
Another challenge to brokering in smaller markets is getting B deals done. In tandem with the 200 basis point stress test, Matthey says it has affected mortgages across the board, and added that some people have to qualify as high as 8%.
That doesn’t mean deals are impossible to get done, though.
“Part of it is marketing to our existing client data base and educating them about what these [B-20] changes mean to them,” she said. “For a lot of us, it’s relearning lender guidelines.”
Centum One Financial Group central underwrites mortgages for agents across the country, including in very small markets like Rocky Harbour, Newfoundland and Northern Ontario, and is routinely frustrated by small lender pools and fewer appraisers. Moreover, less demand reduces the likelihood of obtaining top value for a property.
But according to Centum One mortgage broker and Vice President Greg Soucie, qualifying first-time buyers, many of whom are financially responsible, in smaller markets, has been arduous because of B-20.
“I think it’s unfair, frankly, for smaller markets where property values haven’t gone crazy, and where things have been relatively stable,” said Soucie. “The impact B-20 has had on first-time buyers in small markets is a real problem. We have a two-speed market with Toronto and Vancouver, and then the rest of the country, but they’re stuck with the same regulation.”
Related stories:
Brokers share tips about growing business
Toronto's housing market right now eerily mirrors its cold climate
