NPX executive says the sector is strengthening, with a growing number of Canadians now considering options outside the major banks
Canada’s lending sector has seen a big shift over the past decade, with a growing number of borrowers turning their attention to alternative options as the best fit to meet their specific circumstances.
That’s not necessarily a product of changing borrower types – but rather, an evolution in their needs and the type of product that works best for them, according to John Kerr (pictured top), associate director sales at NPX.
“More borrowers are looking to consolidate consumer debt and increase their overall borrowing power for changing life events, whether they’re looking to renovate, or a need to transition to a home that’s a better fit for their family situation,” he told Canadian Mortgage Professional.
The prominence of alternative lenders has surged in Canada’s mortgage market – a trend long noted by the national housing agency – and while the alternative sector may once have been viewed as less-than-ideal compared with the country’s top banking institutions, that perception is rapidly changing.
Kerr said borrowers with good credit tend to like the flexibility offered by lenders like NPX in contrast to some of the big banks.
“We’re still seeing clients that have strong credit profiles who are looking to borrow a little bit more than traditional lending is allowing them to do,” he said. “We’ve seen a shift from our stress-tested products towards our non-stress-tested, contract rate qualified pieces, which is allowing brokers and clients a little bit more flexibility.”
Alt space a key solution for brokers
A telling sign of where the market is heading, and the likely continued growth of alternative lenders, according to Kerr: mortgage brokers have also been turning to the sector in greater numbers over the past several years.
“Another trend that goes hand in hand with that is we are hearing from brokers that more of their clients fall into the alternative and private spaces than they have in the past,” he said. “Even brokers that have traditionally focused on AAA clients are seeing more deals go towards alternative and private.”
That drift may be widening a gap that has become harder for lenders with conventional alternative guidelines to bridge. For Kerr, that’s the “sweet spot” for NPX.
“There’s this growing middle ground between traditional alternative lending and private, and it’s becoming harder to service even with the traditional alternative guidelines that are out there – which is where NPX fits,” he said.
“That’s really our sweet spot: whether we’re using contract rate qualification, extended debt ratios, 40-year amortizations, or all three, we’re having brokers come to us to access those features and bridge that gap between traditional and private lending.”
‘The more context we have, the better we can work with brokers’
Borrowers are also navigating a turbulent mortgage landscape – whether that involves renewing their mortgage at higher rates, attempting to overcome housing affordability challenges, or dealing with an unexpected or unplanned life event.
For brokers dealing with lenders in the alternative space, Kerr said the steps to a successful relationship are simple: communication, communication, and communication.
“Talk to your BDM, lead with the challenges of the deal, and talk about potential issues before they become harder to overcome,” he said. “We can work through it together. That’s important no matter what lending you’re doing, whether that’s AAA or alternative.
“But when you’re calling NPX, there’s a reason you’re calling us. So tell us why. The more context we have, the better we can work with brokers and have that conversation upfront and set those expectations, so in turn they can set those expectations with their client.”
A good relationship also means getting as much information upfront as possible, and having as many documents ready as possible, so brokers can offer quicker answers when underwriters ask questions.
“That’s why partnership matters,” Kerr said. “As you get to know your BDM, you’re building a relationship and partnership with the lender so you’ll know what to expect in terms of documentation and the types of questions you’re going to be asked. Just knowing your partners is huge.”
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