News / industry
Brokers react
to FirstLine BFS cut Brokers who pooh-poohed concerns that stated-income lending was headed the way of the dodo bird are eating their words, with FirstLine sending its own segment of that business into extinction, effective Feb. 1. “Hello everyone, FirstLine will no longer accept new applications for stated income programs effective end of today also max loan amount is $1 million,” reads a recent email penned by one of the lender’s BDMs and sent to brokers, “if you have any deals you need to send please do so by the end of today, FYI Brand-to-Brand is NOT affected.” Many other FirstLine programs are: New Immigrant programs, non-Immigrant programs, equity programs (flex), Access low-doc programs, CMHC self-employed simplified program, Genworth Alt-A program, Canada Guaranty low-doc programs, Canada Guaranty Lifestyle Advantage and self-employed program. It’s an extensive list and will likely affect brokers both professionally and personally, considering many themselves rely on BFS lending programs. The FirstLine move comes on the heels of the release of documents suggesting the Office of the Superintendent of Financial Institutions is increasingly worried about BFS underwriting practices at the country’s big banks. Mortgages often granted to the self-employed and recent immigrants “have some similarities to non-prime loans
22 | mortgagebrokernews.ca
in the U.S. retail lending market,” and banks and other lenders are becoming “increasingly liberal” with mortgages and home-equity credit lines that don’t require individuals to prove income, according to a 152-page OSFI document obtained by Bloomberg News.
Sharon
It’s likely OSFI has already brought that increased scrutiny to bear in auditing the country’s banks, said James Robinson, an agent with The Mortgage Centre Mortgage Watch Inc., pointing to recent pull backs in BFS programs at other lenders.
“It’s a sign that the government is auditing the banks and asking them to come up with something to reduce the risk on this line of business,” he told MortgageBrokerNews.ca “It appears that FirstLine has said that it is out. It may be slow and gradual, but I think we’re seeing a return to the 1980s when there was a greater distinction between A and B lending.”
Christina Horvath
The sad part of this is that much of Canada’s economic growth depends upon small business and new immigrants. We need these participants in our economy yet our government and bureaucracy are not in this case rewarding these parts of our economy.
Paul Mangion
It’s funny that FirstLine is the first to do so. I understand why brokers supported them in the past as they did quite a bit to promote the broker channel but I don’t understand why brokers continue to support them now.
I would like to know the stats on default ratios on these stated income people, I bet that they are low. One thing that has always bothered me is that people who work for self-employed people can qualify based on T4’d income but the employer can’t qualify.
Paul in Ottawa
If income is provable there should be no issue. If the applicants are honest about what they earn and what expenses are actually incurred there should be no issue. Too often the privilege to use “stated income” is to short the rest of us on the use of our tax paid services like hospitals, schools, roads and still get a mortgage. At the same time we don’t want to overstate income either, that shorts the lenders and in the long run we pay too. Show me the money in line 150 and maybe we have a deal. Just like a T4 applicant.
Collingwood Mortgage Broker
With secured jobs being lost and the increase of small business in all communities it is amazing that they are targeting this sector again. The BFS rules for obtaining a mortgage are a lot higher than the average person. The way the government is going with their changes no one will be able to purchase a home. Why don’t they start targeting the credit card companies for a change who can give credit to whomever they choose without qualifying them at all? I think if they bothered to look at the defaults in mortgages you will see that the majority of them are from the employed person who is “guaranteed” an income.