Executive on the conversations coming to the fore in the current market
The alternative and private lending spaces are witnessing continued growth in 2023 – and the ability of brokers to offer as detailed and comprehensive advice as possible about those sectors has never been more important, according to a top brokerage relationship manager.
Harj Sohi (pictured top), of Canadian Mortgages Inc. (CMI), told Canadian Mortgage Professional that a key focus for the lender in the year to date had been clear communication with brokers about suitability, and the situations when private lending solutions are most appropriate for borrowers.
That’s especially the case, he added, with an increasing number of brokers turning their attention to the space for the first time.
“Some of the most common conversations that we’re having right now are in-depth, solution-oriented structuring of private mortgages,” he said. “Private mortgages are intended to be a solution, a stepping-stone in that borrower’s homeownership journey, and they’re not meant to be permanent or long-term.
“Ultimately, the reality is that qualifying has tightened a lot in the A and B spaces of the market, and privates are becoming a more viable and common solution. So more often than not with the conversations that we’re having today, it’s speaking to brokers who haven’t used privates as often.”
That involves showing brokers how to structure a deal and focus on the exit strategy, he said, with the intent of putting the client in a better situation at the end of the term than they are at the beginning.
It’s also a case of guiding brokers on how to explain the various benefits, he said, such as quick closings, flexible terms and less documentation. “All of those things go a long way when somebody’s trying to close on their property and they don’t have any other options,” he explained. “So we’re here to help, and we’re here to put more people in homes.”
Victor Tran from RATESDOTCA noted that preapprovals were continuing at a noteworthy clip in the current market, although inventory shortages are presenting their fair share of challenges for prospective buyers.https://t.co/i74yBxreHb#mortgagenews #mortgageindustry— Canadian Mortgage Professional Magazine (@CMPmagazine) July 21, 2023
Rate vs. solution: which should brokers be focusing on?
The rising-rate environment of the year to date has pushed many borrowers away from the A side, and even the B side, meaning that a higher number than ever are now contemplating private mortgage options.
For Sohi, emphasizing the solution rather than the rate is top of mind in the current conversation, with brokers having the opportunity to come to the fore and help steer their client through a challenging and complex environment.
“I’m constantly encouraging brokers and instilling the confidence in them to take the extra time, create a financial roadmap over the next two to five years and highlight how they’re going to go from their private mortgage solution to a more traditional lending solution like an A or B over the course of those years,” he said.
“It has to be something that’s sustainable and it has to be something that the borrower is comfortable with because ultimately the real heard work is getting them out and making sure that over the course of the term, they’re doing those things like paying off their debt, improving their credit, maybe working on finding other employment or whatever the case may be. We’re just trying to make sure that everything is mapped out for the client and that way, there are no surprises.”
Also essential for brokers when dealing with lenders in the private space is providing as much information as possible up front, Sohi said, making it a more straightforward process to plan an exit for the client and tailor-make the solution.
What’s in store for the rest of 2023 in private lending?
For the remainder of the year, the growth of private and alternative lending can only be expected to continue, he said, with CMI remaining laser-focused on its service- and education-driven approach against that backdrop.
“In the first half of the year, CMI has been able to scale application volume while also managing the quality of originations at the same time, so that’s amazing – and also good for the borrowers because that means their needs are being met,” he said.
“We pride ourselves on accomplishing this through our collaborative approach with the brokers. We always encourage them to reach out to myself and other BRMs on the team for advice. If you want to run a deal by us or discuss possible solutions, just have that conversation with us. We’re more than happy to do that.”
Ultimately, the fact that more Canadians are having their eyes open to the private space is a fact that will stand it in good stead moving forward, according to Sohi.
“Alternative mortgages are a solution where conventional mortgages can’t service the borrower, and the hope is that as fewer people qualify for conventional mortgages, more people will see alternative mortgages as a solution to an immediate problem,” he said, “to help the client, not to punish them.”