CMP 10.11 Private Lending Guide

THE NEW BORROWER How the private lending landscape has changed MORTGAGEBROKERNEWS.CA SPECIAL GUIDE

MICs IN THE SPOTLIGHT Why more investors are turning to mortgage lending

PRIVATE LENDING The go-to guide for private lending options across Canada

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PRIVATE LENDING GUIDE

CONTENTS

02

CONNECT WITH US Got a story or suggestion, or just want to find out some more information? twitter.com/CMPmagazine plus.google.com/+MortgagebrokernewsCa facebook.com/MortgageBrokerNewsCA

CROSS-CANADA DIRECTORY 08 Map

Find out which private lenders are operating in your province

10 Company listings

Get more details about Canada’s private lenders, including rates, terms, fees and more

SPECIAL REPORT

THE RISE OF PRIVATE LENDING

The tightening of mortgage guidelines for A lenders means today’s private borrower looks much different than in the past

05 SPECIAL REPORT

THE POWER PLAY IN PRIVATE LENDING

Once a largely ignored funding option, mortgage investment corporations have come into their own in recent years

MORTGAGEBROKERNEWS.CA CHECK IT OUT ONLINE www.mortgagebrokernews.ca

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SPECIAL REPORT

PRIVATE LENDING GUIDE

The rise of private lending As underwriting guidelines continue to tighten, private lenders are increasing their presence in the Canadian mortgage industry

FORGET THE references to David and Goliath when comparing the private lending space to the big banks: Since their humble beginnings a few decades ago, private lenders have become a force to be reckoned with in the mortgage channel.

“Private lenders play a huge role in the mortgage world,” says Anson Martin of Verico Fair Mortgage Solutions. “As A lending policy gets tighter and tighter, more room opens up for both B and private lenders.”

The CMHC has played a large part in fuelling the growth of the private lending space, says Michael Graves of W.A. Robinson Asset Management.

“Due to increased regulation and

president of VWR Capital in Langley, BC, market trends and the uniqueness of the lending space are dovetailing nicely for private lenders.

“I think we’re offering products that are very important to the Canadian consumer,” agrees Jim Dunbar, officer/director of Affirm Financial. “I think it is a very unique kind of market. Private lenders have the flexibility to get creative.”

Flexible solutions Flexibility and being nimble are just a few of the strengths that many private lenders can offer.

Michael Anger, investment account manager and marketing manager at Para-

“As A lending policy gets tighter and tighter, more room opens up for both B and private lenders” Anson Martin, Verico Fair Mortgage Solutions tightening by CMHC, resulting in dramatic changes to underwriting procedures for the banks, the alternative mortgage lending market has … picked up comparable steam,” Graves says.

According to Dimitri Kosturos, vice

mount Equity Financial Corporation, says the limitations placed on the A channel have opened the door for private lenders to grow their business by helping homebuyers who would otherwise have been left out in the cold.

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SPECIAL REPORT

PRIVATE LENDING GUIDE “The restrictions placed upon the A channel are squeezing many otherwise good borrowers out,” Anger says. “A ‘non-deal’ in one matrix lender’s opinion can be a slam dunk deal to another.”

Finding solutions for clients is a top priority for private lenders, who are doing more than just making deals work – sometimes even bringing clients back from the precipice of bankruptcy.

“With the housing market in Vancouver, it is not uncommon to see purchases going into multiple offers, subject-free with quick closing dates,” she continues. “Private lenders can act quickly to fund a file without the mountain of paperwork traditional lending would require.”

Another trend Pedersen is seeing in Vancouver’s heated market is clients who decide to purchase before selling their

“Private lenders can act quickly to fund a file without the mountain of paperwork traditional lending would require” Tiffany Pedersen, Capital West Mortgage “We’re getting very creative in trying to reach those customers about our services,” Dunbar says. “We’re reaching a different audience than I think many are reaching today – we are speaking with clients who have been in insolvency; we’ve been talking with people who have been in bankruptcy.”

“Brokers have adapted their best practices to fit a broader range of client needs,” agrees Tiffany Pedersen, assistant vice president at Capital West Mortgage. “Self-employed borrowers, paired with the average price of a metro Vancouver home, demand alternative mortgage products. Brokers can offer solutions that, in many cases, are not offered by their banks.

existing property.

“Private lenders can offer inter-alia financing with an interest reserve option to allow clients to carry two properties while waiting for the sale to complete,” she says.

“Private lenders also have the ability to finance multimillion-dollar properties, considering stated income and income coming from overseas.”

Prime lending’s decline While the alternative lending space is now a force to be reckoned with, it wasn’t that long ago that A lenders ruled like the dinosaurs before the meteor strike.

“There was a time when A lending was

at the peak of the mortgage market space,” Anger says. “CMHC guidelines for approving high-ratio mortgages had so many flexible, insurable products available. Over the past 10 years, those flexible guidelines became less and less due to government restrictions placed upon the A lenders and the high-ratio mortgage insurance providers.”

The best part is, alternative mortgage loans are now a fraction of the cost they were 10 years ago, Anger says.

“In fact, they’re even cheaper than they were just three to five years ago,” he says.

“This means the debt load of having an alternative mortgage is more affordable to the borrower, and the default ratios for the lenders have been drastically reduced.”

However, while B and private lending are on the rise, A lenders won’t be going away any time soon, since eventually placing clients with a prime lender to further reduce costs remains the goal for most brokers.

“That creates a challenging business model when a client is forced to use a certain lender out of necessity, and would gladly switch as soon as they are able,” Martin says.

“For my clients, part of the game plan is creating an exit strategy, to get them back to an A lender down the road. So I don’t think A lenders are all that concerned since they know clients want to move back to them once they are able to either get things back on track or adjust their profile to conform with A lender guidelines.”

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The power play in private lending Mortgage investment corporations are quickly becoming the institutional lender of choice in the private space, but that doesn’t mean private lenders are about to disappear

THE A LENDING space has traditionally been tight – but now the B space is beginning to tighten up as well, creating new opportunities for private lenders.

“Even B lender policies are tightening up, which creates even more space for private lenders to step in and finance deals that otherwise would be lost,” says Anson Martin of Verico Fair Mortgage Solutions.

And increasingly, mortgage investment corporations are the ones stepping up to the plate.

“Due to the growing opportunities in this lending space, I’ve seen more and more MICs start up, and I believe it will continue this way,” Martin says. “My view on them has always been mixed: They are a good fit for certain straightforward deals, but there will come a time when interacting with an actual private lender, who makes their own decision with their money, is key to obtaining an approval.”

MICs’ thorough underwriting and commitment to the client – both things that individuals acting as lenders struggle to achieve – certainly have helped them make inroads with brokers. MICs came onto the mainstream lending scene in force just a few years ago, having previously been relegated to the ‘shadow banking’ sector since they first appeared back in the early 1970s. But when tougher rules governing MICs were introduced in 2013, any concerns about potential vulnerabilities in how MICs operate were quickly allayed – a move that

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SPECIAL REPORT

PRIVATE LENDING GUIDE was embraced within the MIC community.

“That is a positive for the industry, raising the bar to become a MIC,” says Dave Koeller, vice president and senior underwriter for Calvert Home Mortgage Investment Corporation. “Back then it was a lot easier to form a MIC. But then again, it was a lot easier to form a brokerage too.”

“There are so many MICs doing so many different things out there – and there’s no overlap” Chris Couprie, Secure Capital MIC

Q&A

The role of MICs Tiffany Pedersen Assistant VP of business development CAPITAL WEST MORTGAGE

What role do mortgage investment corporations play for brokers?

Alternative lenders such as mortgage investment corporations provide a competitive advantage in today’s marketplace. With the tightening of mortgage lending guidelines from federal regulators, MICs have become the go-to lender for many brokers for their alternative lending needs. MICs can typically provide financing solutions for self-employed individuals who are tax-efficient, or bridge financing for borrowers who own multiple properties, waiting for one to sell.

Traditional financing has become stringent, leaving a gap in products to fit client’s needs at standard rates. MICs typically are established and regulated, and therefore a reliable source of funds for brokers. Many brokers have been able to capitalize on using MICs and alternative lenders in situations to provide solutions that don’t fit within the bank ‘box.’

What kinds of options do MICs provide?

MICs do provide one-stop shopping for brokers, saving them a lot of time and energy when looking for a loan, says Gay Andrews, executive vice president and COO of Caplink Financial Corporation and Camrock Capital.

“It allows a broker to know where they can take a deal easily without having to shop it all over the place,” she says. “A MIC offers constancy of market area, [LVRs], terms and rates. In addition, more than your typical private investor, professional MIC managers are skilled a structuring mortgage financings and, as such, can and do assist mortgage brokers with putting together comped mortgage financings.”

Something that has occurred organically is how each MIC has grown and thrived in its own particular niche, and how the network of MICs works together through an informal referral service.

“There are so many MICs doing so many different things out there – and there’s no overlap,” says Chris Couprie, CEO of Secure Capital MIC. “That’s why we can all get together in a room and work together – and we all have referrals for each other. Everyone is doing what they are comfortable with; there is a lid for every pot.”

Capital West Mortgage’s Alternative Mortgage Centre is an example of a group that has combined efforts to provide a unique service to brokers. The group has combined one of BC’s largest credit unions with one of BC’s most reputable mortgage investment corporations with over 20 years of experience.

The combination of the two nontraditional lenders gives brokers a ‘one-stop shop’ to address their clients’ needs. This is just one example of the many nontraditional lenders that have grown and entered the market as there is growing demand in the nontraditional space.

What are the benefits of choosing an alternative lender?

All lenders serve a purpose in the broker space and play a role in providing the consumer with choice. Not one lender out there offers a solution for every type of borrowing situation. Alternative lenders tend to have more flexibility, as they are set up for short-term solutions. [Things like] open terms, multiple draws and interest-only payments usually are limited when paired with A rates. Alternative lenders are not bound to the same rules as A lending, which means they do not concentrate on GDS/TDS or collecting mountains of paperwork.

What are MICs looking for when it comes to borrowers?

At the Capital West Mortgage Alternative Mortgage Centre, we look at the ability to repay, the track record of the borrower’s payment history, consider all income and funds coming into the client’s possession, and of course, the marketability of the property.

With that said, many alternative lenders are not lending past 75% LTV, as there are risks associated with high-ratio lending that most B lenders are simply not set up for or interested in.

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SHOULD YOU START A MIC? Private lending companies and MICs fill an important gap in the Canadian mortgage market. However, says Tribecca Finance Corp.’s Rajan Kaushal, “some MICs opening do not have the level of experience needed to run a long-term, successful mortgage lending business. If investors lose money, it will negatively impact the reputation of the mortgage broker and private lending industry.” Here are five things to consider before starting your own MIC: 1. Accountability It is extremely important that you provide clear information to investors about the products you are offering and the associated risk(s), including geographical lending areas, type and rank of mortgages, loan-to-value ratios, underwriting criteria, and the range of interest rates and fees charged to your borrowers. Be clear with your investors about the expectation of returns. Make sure your investors are suited to the risk tolerance of your business model.

2. Experience Generally, you should have at least 10 years of lending experience under your belt before you consider raising investor funds. Until you have been through some fluctuations with the economy

and/or real estate market, you do not know how your mortgage portfolio will truly perform over time. This experience is needed to mitigate the portfolio’s risk and will assist in determining the right lending criteria. Have a great team – make sure you have enough experienced individuals to manage all areas of the business, including third-party appraisers, lawyers, etc.

3. Learning curve Raising investor money can be more difficult than brokers think. It is essential that the funds are raised at an appropriate cost, or the expected dividends to be paid to the investors must be in line to provide the MIC enough of a spread to cover all the operating costs. One of the worst things a MIC can do is alter their

lending criteria to generate higher returns when under pressure to perform.

4. Price of admission It is imperative that the principal(s) of the MIC have a sufficient amount of their own capital invested. This will provide stability and give confidence to investors when raising funds. In essence, this is not a ‘no money down’ venture for brokers.

5. Compliance Understand all the compliance and regulatory requirements. You are accountable to the governing bodies and investors. If you fail to operate within the guidelines, there are severe consequences.

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SPECIAL REPORT

PRIVATE LENDING GUIDE

CROSS-CANADA DIRECTORY Discover the private lending options available in your province

Yukon Kokanee Mortgage Alberta Bayfield Mortgage Professionals

Manitoba

Canadian Mortgage Inc.

Bayfield Mortgage Professionals

Caplink Financial Corporation

Canadian Mortgage Inc.

Kokanee Mortgage

Kokanee Mortgage

Secure Capital MIC

Secure Capital MIC

VWR Capital Corp.

VWR Capital Corp.

British Columbia Bayfield Mortgage Professionals Canadian Mortgage Inc. Caplink Financial Corporation First Swiss Mortgage Corp.

Saskatchewan

Kokanee Mortgage

Caplink Financial Corporation

VWR Capital Corp.

Kokanee Mortgage VWR Capital Corp.

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PRIVATE LENDERS PAGE | COMPANY

PAGE | COMPANY

10 | Atlantic Signature Mortgage & Loan

13 | First Source Mortgage Corp.

10 | Bayfield Mortgage Professionals

14 | First Swiss Mortgage Corp.

11 | Canadian Mortgage Inc.

14 | Kokanee Mortgage

12 | Caplink Financial Corporation

15 | Magenta Capital Corporation

12 | Corwin Mortgage Capital

16 | Secure Capital MIC

13 | CYR Funding

16 | VWR Capital Corp.

Newfoundland & Labrador Atlantic Signature Mortgage & Loan Ontario

Secure Capital MIC

Canadian Mortgage Inc.

Prince Edward Island

Corwin Mortgage Capital

Atlantic Signature Mortgage & Loan

CYR Funding First Source Mortgage Corp.

First Swiss Mortgage Corp.

Canadian Mortgage Inc.

Quebec Secure Capital MIC

Magenta Capital Corporation Secure Capital MIC VWR Capital Corp.

Nova Scotia

New Brunswick Atlantic Signature Mortgage & Loan Canadian Mortgage Inc.

Atlantic Signature Mortgage & Loan Canadian Mortgage Inc. Bayfield Secure Capital MIC

Secure Capital MIC

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SPECIAL REPORT

PRIVATE LENDING GUIDE ATLANTIC SIGNATURE MORTGAGE & LOAN INC. Niche/focus: Residential, income-producing multi-units, renovation and construction, small commercial, mixed-use, land Lending markets Urban and rural community centres in Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland

Maximum LTV: 80% residential in urban core; 65% commercial; 50% land Minimum Beacon: None

Products: First and second mortgages Terms: Typically 1 year Customer type: Consumers, small businesses, developers, experienced builders Property type: Single-family, multiples, large homes, mixed-use, condos, land

Rate type: Fixed Maximum amortization: Typically interest-only Feeds: 4% lender fee

Purpose: Common-sense, solution-based lending for bridge financing purposes

Preferred loan amount: $25,000 to $2 million

BAYFIELD MORTGAGE PROFESSIONALS LTD.

We

Niche/focus: Common-sense, equity-based lending on residential and commercial properties on exception. Being an equity-based lender, we are Lending markets not limited to a specific market type, GDS/TDS BC, Alberta, fund a broad spectrum of limits property typesof income. Readvanceable product or proof Manitoba and loan situations. now available on an exception basis

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Submit your applications through Filogix, Products: First, secondfax and occasional third 1-888-226-8834 residential & commercial or by email mortgages documents@caplink.ca

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Maximum LTV: 75% Minimum Beacon: N/A Terms: 1–2 years Rate type: Fixed/open Maximum amortization: 40 years Fees: All fees are fair and negotiable Preferred loan amount: Under $1 million

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Caplink now offering FIRST mortgages up to 85% in major urban centres.

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Or give usGay a call to Andrews ext 236 discuss yourgay@caplink.ca deal 1-888-429-0114 Residential Helen Neufeld ext. 215 Helen@caplink.ca Commercial Gay Andrews ext 236 gay@caplink.ca

We fund a broad spectrum of property types and loan situations.

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CANADIAN MORTGAGES INC.

Lending markets Ontario, British Columbia, Alberta (primary, secondary and tertiary markets), Manitoba, the Maritimes (primary and secondary markets)

Niche/focus: • Residential owner-occupied • Rental • Renovation • Commercial (retail, multi-family, office, medical, light industrial) • Prime building lots in urban cities

Maximum LTV: • Up to 85% in major centres of British Columbia and Ontario • 80% elsewhere • 75% rural

Products: First, second and – third mortgages (residential only)

Terms: 1-year standard, shorter or longer on exception

Customer type: • Salaried • Self-employed • Corporations • Good credit • Bad credit

Rate type: Fixed

Property type: • Single-family • Multiples • Stores • Apartments • Multi-income commercial • Prime building lots

Preferred loan amount: $25,000 to $1 million

Minimum Beacon: None

Maximum amortization: Typically interestonly Fees: Case-by-case basis, minimum $1,000

Purpose: Bridge loans and/or debt consolidation, renovation

ons

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SPECIAL REPORT

PRIVATE LENDING GUIDE CAPLINK FINANCIAL CORPORATION Niche/focus: Residential, commercial and industrial Lending markets Alberta, British Columbia and Saskatchewan

Minimum Beacon: N/A Terms: 1–5 years

Products: First and second mortgages Rate type: Fixed Customer type: All Property type: Single-family, multi-family, industrial, commercial

Maximum amortization: 30 years, or interestonly Fees: First mortgages, 2%; second mortgages, 3%

Purpose: Purchases and refinances Preferred loan amount: $25,000 and up Maximum LTV: 85% (Alberta only)

CORWIN MORTGAGE CAPITAL INC. Niche/focus: Equity mortgage lending, land, retail, industrial, residential Lending markets Primarily Ontario, major urban centres

Minimum Beacon: N/A Terms: One to two years, typically 2% lender fee

Products: First, second and third mortgages Rate type: Fixed Property type: Single-family, multiples, large homes, stores, apartments, condos Purpose: Bridge lender

Maximum amortization: Interest-only Preferred loan amount: $200,000 to $5 million

Maximum LTV: 75%

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CYR FUNDING INC.

Lending markets Primarily Ontario, with sources all across Canada, as well as the US

Niche/focus: Income-producing, construction, land, retail, industrial, residential, commercial and industrial, as well as special-purpose properties such as churches, gas stations, hotels/motels, retirement homes, nursing homes, banquet halls, self-storage, student residences, marijuana facilities, etc.

Products: First, second and third mortgages

Maximum LTV: 85% Minimum Beacon: Not required Terms: 1–2 years on construction; 5, 10 or 15 years on conventional; fees negotiable Rate type: Fixed or floating

Customer type: All types

Maximum amortization: 30 years, but typically interest-only

Property type: Single-family, multiples, large homes, stores, apartments, condos, commercial, industrial

Fees: Quoted individually

Purpose: Purchase/refinance/construction/land servicing

Preferred loan amount: $80,000 to $120 million

FIRST SOURCE MORTGAGE CORP. Niche/focus: Income-producing, construction, land, retail, industrial, residential Lending markets Ontario, primary and tertiary markets

Products: Typically first mortgages Customer type: Experienced builders/investors

Minimum Beacon: 600 Terms: 1–2 years Rate type: Fixed Max amortization: Typically interest-only

Property type: Land, industrial, retail, residential, gas stations, etc.

Fees: 2%

Purpose: Bridge lender

Preferred loan amount: $1.5 million to $12 million

Maximum LTV: 65%

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SPECIAL REPORT

PRIVATE LENDING GUIDE FIRST SWISS MORTGAGE CORP.

Lending markets Ontario and British Columbia

Niche/focus: Residential

Minimum Beacon: No minimum

Products: Second mortgages

Terms: Typically 1 year

Customer type: Homeowners

Rate type: Fixed

Property type: Single-family detached, multi-unit, townhouses, condos and rentals

Maximum amortization: Interest-only or amortized for maximum of 35 years

Purpose: Purchase Assist®, debt consolidation, equity take-out

Fees: Self-insured lending fee applies and is capitalized

Maximum LTV: 95%

Preferred loan amount: $10,000 to $500,000

KOKANEE MORTGAGE

Lending markets British Columbia, Alberta, Saskatchewan, Manitoba, Yukon

Niche/focus: Smaller towns and rural lending

Minimum Beacon: No minimum

Products: First and second mortgages

Terms: 1–2 years

Customer type: Non-bank-qualified

Rate type: Fixed

Property type: Single-family, multi-family, rural acreage and small commercial

Maximum amortization: 25 years Fees: 1% to 3%

Purpose: Short-term financing solutions (1–2 years) Preferred loan amount: $50,000 to $750,000 Maximum LTV: 70%

Small town Equity Lending specialist

Flexible. Creative. Solutions.

For over 30 years, Kokanee Mortgage has been providing equity lending in small towns and rural areas in Western Canada. Now lending in British Columbia, Alberta, Saskatchewan, Manitoba and Whitehorse.

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MAGENTA CAPITAL CORPORATION

Lending markets Eastern and Southwestern Ontario, primarily urban settings (full city limits plus 10 kilometres)

Niche/focus: • Owner-occupied properties • Single and multi-unit rental properties • Student rentals • Commercial • Mixed-use • Construction • Raw land

• • • • •

Products: • First and second residential mortgages • Construction • Seasonal properties • Lot and land • Equity lending • Small commercial and mixed-use • ‘No-doc’ and ‘stated income’ products

Maximum LTV: 85%

Customer type: • Experienced builders • Self-employed • Salaried • Bruised credit • New to Canada • Nontraditional income sources • Anything that falls outside of regular bank parameters Property type: • Single-family

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Multi-use residential Large homes Stores Apartments Condos

Purpose: Purchase or refinance; bridge lending available

Minimum Beacon: None Terms: 1–2 years Rate type: Fixed Maximum amortization: 40 years; interestonly available Fees: Generally a 2.5% lender fee for first mortgages; 3% for second mortgages and raw land. We always cap our fees, and fees could change with any rate/product specials we have Preferred loan amount: Residential properties up to $750,000; small commercial to a maximum of $1.5 million. No minimum loan amount, but a minimum fee on our second of $2,000

COMMON SENSE PRIVATE LENDING FOR INDIVIDUALS & BUSINESSES • Prompt • Professional • Customer Focused Short-term lending solutions for Atlantic Canada’s major urban and rural communities.

From $25,000 to $2,000,000.

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SPECIAL REPORT

PRIVATE LENDING GUIDE SECURE CAPITAL MIC Niche/focus: Residential and construction financing Lending markets Across Canada, excluding Saskatchewan, PEI and BC

Products: First and second mortgages, construction financing and bridge loans Customer type: Self-employed, bad credit, bank rejections/turndowns, new immigrants

Minimum Beacon: No minimum for less than 80% LTV; minimum 600 for greater than 80% LTV Terms: 6–12 months (negotiable) Rate type: Fixed

Property type: Single-family, condos

Maximum amortization: Typically interest-only (amortization on request)

Purpose: Purchases, refinances and construction

Fees: 2% to 6%

Maximum LTV: 85%

Preferred loan amount: $15,000 to $500,000 (more on exception)

VWR CAPITAL CORP.

Lending markets British Columbia, Alberta, Saskatchewan, Manitoba and Ontario

Niche/focus: Residential, rentals, multi-family, serviced land and raw land Products: First, second and third mortgages, inter-alia/blanket mortgages, bridge financing, inventory loans Customer type: All types of borrowers: individuals, non-residents, permanent residents, holding companies, operating companies, etc.

Property type: Single-family, condos, townhouses, apartment complexes, residential land Purpose: Low-doc/no-doc mortgage financing

Maximum LTV: 75% Minimum Beacon: None Terms: 1 year Rate type: Fixed Maximum amortization: Up to 35-year amortization; interest-only payments available Fees: $750 lender fee for first mortgages; $500 lender fee for second/third mortgages Preferred loan amount: $25,000 up to $2.2 million

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Speed. Service. Solutions.

Equity

*

85% LTV

*

First

*

Construction

We commit. We close.

It’s that simple.

FSCO #12651

Century 725 BT-Bold

Submit your deal today to: deals@securecapitalmic.com Any questions, please call your BDM, Monalee Catena monalee@securecapitalmic.com • 905-709-8633 x228 • 905-730-5630 (cell)

www.securecapitalmic.com Secure Capital MIC Inc. is a lender serving the Canadian mortgage broker community.

Use Promo code "CMP2015" and close your deal before February 1, 2016 to receive $200.00

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