Private lending: What brokers need to know

As Canada’s private lending space continues to evolve, CMP caught up with two of the most prominent companies in the space, Canadian Mortgages Inc. (CMI) and Neighbourhood Holdings, for an update on how brokers should choose a private lender – and what can be done to ensure a smooth, efficient process for brokers and lenders alike.

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​Fergal: [00:00:24] Hello again and thanks for joining us on the latest edition of CMP TV. I'm Fergal McAlinden, CMP's news editor. And today, we're taking a closer look at a sector of the mortgage industry whose influence and reach are perhaps greater now than they've ever been. We're delving into the world of private lending to find out the latest developments in that space and hear from leading figures about some of the main things that brokers and their clients should be keeping in mind about their choice of private lender. Here to talk us through those topics and many more, I'm delighted to be joined by executives from two of the most prominent companies in Canada's private lending space. Travis Allinot is brokerage relationship manager at Canadian Mortgages Inc, and Lisa Stewart is chief revenue officer for Neighborhood Holdings. You're both very welcome to the program. Thanks to you both for joining us today.

Travis: [00:01:08] Thanks for having us. 

Lisa: [00:01:09] Thanks for having us.

Fergal: [00:01:10] Lisa, I wanted to get started with you, if you wouldn't mind. I'd like to, first of all, just talk about some of the main factors that brokers should be considering in their choice of private lender. Is there anything that stands out for you?

Lisa: [00:01:21] Yeah, I mean, a couple of things. What we often say is that a broker should choose a lender that really elevates their brand. So think about a company that reflects your values. You can really, really want to work with someone who is someone you can trust your clients with. Because once the deal is said and done, the borrower really becomes a client of the lender. So you want to make sure that it's the end to end customer experience, that that really matters. So from the beginning, making sure that they can get your deal done quickly. They have consistent underwriting. They have a friendly team that you really like working with, and then you can really trust them with your borrower once the transaction is is funded.

Fergal: [00:02:08] Thanks, Lisa Travis. Is there anything that stands out for you in terms of what brokers should be keeping in mind when they choose their lender?

Travis: [00:02:14] I think the biggest thing that comes to my mind right away is relationship management, like we said, was bang on when it comes to brand and recognition. But relationship management and. Being collaborators with your customers and being a team of CMI is a very large company. We've got many, many departments, but it's all one team and my brokers, I consider part of that team. So it's all a big collaboration and relationship management that's key and that's how you're going to earn trust and and have win wins for everybody.

Fergal: [00:02:58] One thing that I wanted to ask you, Lisa, was that we've seen we often hear that the private lending space has gone through something of a transformation over the past five or ten years, and that it's almost unrecognizable from what it used to be. Do you believe that there are still any misconceptions or educational gaps that might exist among brokers when it comes to private lending?

Lisa: [00:03:19] Yeah, I think a common misconception is that alternative or private lending is really designed for people with poor credit or bruised credit, and that's really not the case anymore. Our space has really expanded, especially in a rising rate environment like we're in today. It's just going to push more and more borrowers into the alternative space as they struggle to qualify with the banks. So we've seen the credit quality of our portfolio really rising as more borrowers are pushed into the alternative space to, you know, to to qualify at the higher rates or also to get a transaction done in relative a relatively short time frame. The market has been quite hot for the past few years, so it seems like every deal is a rush deal today and that can make it kind of tricky to go with a bank. So really there's a number of different borrowers that come to the alternative space for a short term solution or to get a deal done quickly. Maybe they do, Bruce Credit, maybe they're new to Canada, maybe they have some life event that they're transitioning through. But there's a number of different clients who are a good fit for the alternative space. So it's really a good tool for brokers to have in their toolbox. And it's great to work with a lender who can really explain that to you and and help you problem solve to get the deal done for your client.

Fergal: [00:04:53] Travis Do you think that private solutions are suitable for maybe more borrowers than is sometimes envisaged? Or are there any other misconceptions that you think currently exist about the space?

Travis: [00:05:04] I think the biggest misconception is no structure. The private lending firms today are as big as banks like the volume that that some of the private lenders do. $1,000,000,000 a year. So they have the structure of the banks, they have the resources and they have the size. So I think that's a big misconception is private lending. There's still a little bit out there that you're borrowing from an individual, right? That's not the case. Right. And I think one of the big ones is risk management, private lending, or we're really needing to get into the risk management these days because we're not just, okay, you've got to hurt, you've got a pulse, we're lending money. It's not that it's there's many factors in it. And we are risk managers today.

Fergal: [00:06:06] Absolutely. Well, Lisa, we talked a little bit about some of the things that brokers should be keeping in mind whenever they're choosing their private lender or whenever they're choosing options for their clients. In terms of your own company, what are some of the main things that the holdings prioritize is when it comes to servicing brokers, and that's based.

Lisa: [00:06:23] Yeah. So Travis really mentioned this in his the response to the first question, but it really is about building long term relationships. And so one of our key buzzwords around neighborhood is transparency. We like to have transparent underwriting, transparent pricing and really open, collaborative conversations with our brokers. And that really helps us. It helps us develop products that that fit the needs of borrowers today. And it helps us develop those long term relationships with brokers so that we can really find a good groove and have a very efficient process with the brokers that we work with.

Fergal: [00:07:03] Is that something that you would agree with in terms of CMI? Are those conversations with brokers?

Travis: [00:07:08] Transparency is my favorite word, and that was the buzzword. The transparency is key. I mean, I come from. Most of us might come from long banking backgrounds and continuous learning, stuff like that. But transparency is the ultimate right. You have to have that. If you don't have that, you don't have trust. If you don't have the trust and transparency, you're not helping the client. Like, let's face it, private lending truly is a temporary thing. And we're helping a customer get over something or get by something and get back to something. You need the transparency to accomplish those things.

Fergal: [00:07:48] Does that transparency work in terms of we already spoke about what brokers should look for in terms of their private lender, but is there anything that you think brokers could do that would make the process more efficient for their lender?

Travis: [00:08:01] Absolutely. I mean, it's it's a two way street. I mean, we're on the platforms that the banks are on. So a full application and the full story is is paramount. We're not going to be able to help the end user if we don't know the whole story. So but there's no need to hide anything with private lending. Like we're most likely going to do the deal. But so don't hide this. Don't hide that. So transparency on the customer end and on the program is just as important as ours.

Fergal: [00:08:37] Lisa, anything that you think brokers could do that would make the process more efficient or speed things up?

Lisa: [00:08:42] I agree with Travis calling out the call it warts on the file out of the gate is really helpful. Our teams are used to dealing with unique scenarios and doesn't need to be something that's completely down the fairway. Call it out and and ask your underwriters for their help, their opinion, work with your sales teams. Our sales team is really a resource. They're there to help educate you. They're open to answering questions. That's actually what they love about their roles. So just getting those things out in the open, right out of the gate so that you can document and tell the right story and and make the process efficient that way.

Fergal: [00:09:30] Obviously, more and more brokers are now becoming involved with private and alternative solutions. But Travis, for somebody, a broker who might not have worked extensively with private lenders, did would you have any main message to them or anything that you'd like to say to them?

Travis: [00:09:46] Communication and finding out what the product is and the longevity of I mean, we're seeing in this last week, I don't want to use the word crash or anything like that, but we are in a new economic market that a lot of Canadians haven't seen. And when it comes to private lending, it's very important to know that. You're going to be there next year and the year after. And you have. The full spectrum. You have renewables, you have discharge, you have fulfillment, you have the relationship management end of it. So you want to make sure that you're you have the ability to have all those sources with the company.

Lisa: [00:10:37] Yeah, I agree. I think it's really about expanding your toolbox and it just allows you to expand your client base and whether alternative lending is really your bread and butter as a broker or whether you're focused on prime and have the odd one off customer who's going to need that alternative financing it. It just helps to have that that other option to provide to your client.

Fergal: [00:11:06] Okay. Excellent. Well, look, we will leave things there for now. I'd like to thank you both for joining us on today's show. That was a really great insight into what brokers and borrowers need to keep in mind about private lending. So we really appreciate your time, Travis and Lisa, and we'll talk very soon.

Travis: [00:11:22] Great.

Lisa: [00:11:22] Thanks for having us.

Fergal: [00:11:24] That's just about does it for today's show. Thanks for joining us. Our thanks again to CMI neighborhood holdings, make sure, as always, to stay tuned for more great content from the team here at CMP. We'll see you next time.