Consultant on the importance of cultivating relationships within the sector
The rise of mortgage investment corporations (MICs) in Canada in recent times has been well documented: the channel was the fastest-growing mortgage segment nationally in 2019, according to Canada Mortgage and Housing Corporation (CMHC), and has continued to surge in the following years.
In 2022’s third quarter, the nation’s top 25 MICs saw their assets under management increase by more than 24%, far outstripping overall national mortgage debt growth of nearly 6%, the national housing agency’s spring residential mortgage industry report showed.
That expansion had slowed noticeably by the opening months of 2023, marking the first time for six quarters that growth did not tick above double digits – but at 7.1%, it continued to outpace the rising national debt load.
Despite spiking interest rates and an uncertain lending environment, the overall risk levels of the sector remained low in the first quarter of last year, CMHC said, although it flagged certain risk indicators including a climbing debt-to-capital ratio.
How brokers can tap into the potential of the MIC space
For mortgage agents and brokers dealing with MICs in the year ahead, cultivating strong relationships and fostering clear communication with those entities should be as central a focus as ever, according to a leading consultant and former broker in the space.
Benjamin Sammut (pictured top) told Canadian Mortgage Professional that working on building those connections could give brokers a vital edge in their interactions with MICs.
“It’s one thing to understand the lending criteria of a MIC, but it’s a very different thing to have a relationship with a MIC,” he said. “And I would say investing in your relationships with MICs is going to be a huge thing this year because MICs are what the bank used to be known for back in the day.
“You could call up your underwriter, you could plead your case, and you could have some common-sense underwriting performed. I think that’s a bit of a lost art. We’ve seen so much regulation since 2017, so much tightening and restriction, that it’s just not really commonplace to do that anymore.”
The worrisome trend of spiking rates and monthly payments was unlikely to spill over into a full-blown mortgage crisis, according to Ratehub CEO James Laird.https://t.co/fmdCMZR36r#mortgageindustry #industrytrends #borrowers #mortgage
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 31, 2024
Strengthening those links within the MIC space, Sammut argued, could help brokers grow their business and eke out deals that might otherwise have been a challenge to get over the line.
“For brokers that are maintaining really close relationships with the MICs, it’s an amazing partnership to have,” he said. “So if you don’t have that yet, I would heavily advise either the broker of record or a team leader to get to know their BDM and underwriter – and the product – inside out.
“And you’ll get deals done that you would never even have imagined were possible, simply because the MICs are so cooperative with brokers. They’re an amazing space in that sense.”
Latest rundown on Canada’s MIC space
Unsurprisingly, Ontario and British Columbia account for the majority of MICs in Canada, according to CMHC, with 45.6% and 40.8% of the market share respectively in 2023’s first quarter.
Ontario saw its share of the MIC market slide from 47.9% to 42.8% between Q3 and Q4 of 2021, but that total has ticked steadily upwards in the ensuing quarters.
Quebec has witnessed a mild but noticeable rise in its share of the MIC market, jumping from 4.1% in 2021’s third quarter to 6.3% in the first quarter of last year, while Alberta’s market share slipped from 7.4% in Q3 2021 to 5.9% in Q1 2023.
Assets under management of Canada’s top 25 MICs totalled over $10.5 billion at last count, up from $8.4 billion in the third quarter of 2021 – with the average lending rate to single-family at a near-two-year high of 9.0%.
Leading MICs’ average loan-to-value (LTV) ratio sat at 58.6% in last year’s Q1, with the debt to capital ratio ticking down from the prior quarter to 24.1% (from 25.7%).
Their foreclosure rate increased in each quarter between Q1 2022 and Q1 2023, from 1.08% to 1.58%, although that remains markedly lower than the 2.21% recorded in 2021’s third quarter. A similar trend was noted in delinquencies of 60 or more days: although they rose from 1.34% (Q2 2022) to 1.95% (Q1 2023), they remained markedly lower than their third-quarter level in 2021 (2.90%).
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