Lending executive on the right way to approach the sector
Strong communication between brokers and lenders has always been a crucial part of ensuring a smooth overall mortgage journey for borrowers – and in the private space, brokers’ willingness to engage with lenders and up their educational focus has been a huge benefit of a quieter market.
That’s according to Ryan MacNeil (pictured), president at Atlantic-based lender Keystone Capital, who told Canadian Mortgage Professional that picking up the phone and calling private lenders for more information about their processes and policies was giving brokers a clear advantage in that sector.
The trend has strengthened, he said, since the end of the COVID-era market boom. “One thing I’ve noticed is with most of the craziness of the pandemic market behind us, brokers have had more availability to meet or just jump on a call,” he said, “which is really critical for us in the private lending space.
“Education is key: reminding them of the products we offer as solutions for their client bases, the flexibility, the short-term aspect, the open loans.”
Taking the right approach in an evolving market
Growth in the private market as a result of tightening credit conditions and affordability challenges in the conventional space means it now represents a larger chunk of many brokers’ business than in years gone by – and expanding their knowledge base and expertise in the sector is the best way for brokers to flourish there, according to MacNeil.
That’s doubly true with the need for alternative solutions expected to remain strong in the years ahead. “The alternative space in general has been growing steadily for 10-plus years, and it continues to increase in importance every year,” he said. “So I’m really glad to see this trend.
“I’m super passionate about educating our broker partners, whether they’re brand-new brokers or they’ve been in the space for 10 years. It’s all about providing solutions and you not only put a smile on the face of the broker, and likely have them become loyal to us – but they’re able to help their client, which is likely going to lead to more loyalty and more leads for the broker themselves.”
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It’s no secret that rates and borrowing costs for private mortgages, which are typically arranged with a much shorter term than a conventional product, are higher than in the banking space. MacNeil, though, said the comparison is “not apples to apples” and that brokers should keep in mind to calculate the dollar cost of the loan instead of the different percentages.
That’s because of the different timescales at play. “When you’re looking at an open loan for six months, it’s really not comparable to a two-, three-, or five-year fixed term. If you’re into new home construction-type loans, compare the options from a private lender with a refinance to an A lender, versus locking in with the credit union for a longer period of time.”
What lending opportunities are present in the Atlantic Canada market?
In the Atlantic region, MacNeil highlighted demand for new home construction as a prominent trend in recent months, with housing starts surging. That’s proven a factor behind Keystone’s decision to launch construction loans across the region, mainly for single-family or smaller multi-unit builds.
He advised brokers to keep that loan type top of mind, particularly with applicants typically demonstrating good borrower profiles. “They may be business-for-self, but they’ve got stellar credit and they may have experience in the trades or doing their own construction with different companies,” he said. “So it tends to be very good from a profile perspective.”
Another active part of the market: real estate investor-type borrowers. Fix-and-flip scenarios have dwindled as prices stabilized over the past year, but the fact that property values have surged since the pandemic is also seeing plenty of buyers turn their attention away from the most prominent urban centres.
Those buyers are seeking higher affordability, purchasing power, and the ability to live in an area with a commutable distance to their place of work such as Elmsdale, Truro and Windsor in Nova Scotia, and Sussex and Hampton in New Brunswick. “We’ve seen awesome opportunities for lending in these communities on purchases,” MacNeil said, “but also for new home construction.
“Part of the reason there is that other alt-lenders, like B lenders, tend to shy away from these areas due to their smaller populations. We’ve got boots on the ground here. The Atlantic’s our home market, and we all have roots here on the Keystone team. So it makes it a little bit easier to fully understand the situation in these smaller markets.”
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