Education for Mortgage Brokers

Magenta Answers Broker Questions About B20

The new B20 guidelines are set to come into effect on January 1, 2018.  It is essential for Mortgage Brokers to understand lenders and their niches, and what impact these changes will have.  Accordingly, we have compiled Brokers’ most commonly-asked questions to help you understand Magenta’s lending posture.

Will borrowers have to re-qualify at renewal?
Magenta has always been a short-term lender and will continue to offer short-term loans.  We have always re-qualified mortgages based on payment history and current lending posture, with the goal to move borrowers back to the federally regulated space.

How will it affect your income-verification process?
Magenta has always had a rigorous income-verification process; however, our underwriters are encouraged to apply judgement to each file, and are well versed in identifying and verifying alternative sources of income.

Will Magenta be affected by the restrictions on co-lending and bundled mortgage products?
Although Magenta has previously participated in bundled products, we have always offered our standalone second mortgage product.  We anticipate our second mortgages becoming more popular in 2018.

Will the loan-to-value limits be affected?
Magenta continually evaluates and reviews its LTV posture, and we do not foresee any changes at this time.

Will Magenta still be able to cap their fees?
Yes, this is a key feature of our product offering.

Will the minimum qualification rate (stress test) affect Magenta’s rates?
Although federally regulated financial institutions will be required to qualify clients at the greater of their contract rate plus 2%, or the Bank of Canada posted 5-year rate, this is not the case for Magenta.  We will continue to lend to our clients at our contract rate.  In most cases, this will be equal to, or less than, the qualifying FRFI’s rates.  Our servicing ratios have already taken this rate into consideration.

At Magenta, our goal is to support our Broker Partners during these changes, as well as, help as many people as possible to achieve their home ownership goals.

To find out more about B20, call us at (613) 230-5014.

Register for Magenta’s back-end portal to access useful tools and forms today!

For more information, please visit Magentacapital.ca.

Top 4 Tips for Mortgage Brokers to Effectively Package Deals

You create solutions for your clients by addressing their unique circumstances. The process of packaging the deal is ultimately communicating your client’s story and the proposed solution to the lender.

By remembering these four tips, you will be able to package deals effectively:

Tip #1: Understand your client to provide strong lender notes.  

• Hear their story: ask open-ended questions and probe for explanations
• Identify the challenges of their situation
• Document the complete picture, providing strong lender notes

 

Tip #2: Know your lenders and the niches in which they operate.

• Know your lenders’ niches, lending areas, and special programs
• Match your client’s profile/circumstances with the right lender
• Be up front about what the client’s challenges are and what documents you can or cannot provide
• Contact your BDM to discuss the detail

 

Tip #3: Be clear on how the solution will help your client.

• Know the benefits of the deal and how they meet your borrower’s goals
• Focus on what’s important to the borrower e.g. payment over rate
• Communicate with the underwriter for any questions regarding the commitment
• Let your underwriter and BDM know if there are objections you can’t overcome in the event adjustments can be made

 

Tip #4: Formulate and communicate your exit strategy.

• Explain to the borrower why they didn’t qualify with an A lender and why you selected the chosen lender
• Plan for the end of the term
• Suggest actions the borrower can take to help themselves in the future
• Be specific and measurable in your action plan for the borrower: “You need to pay $X on your credit card and $X on your loan each month.  That will bring your balances to $X in 12 months and improve your credit score by the end of the term.”

 

With strong communication and planning, you can implement solutions that create better tomorrows for your clients.

Register for Magenta’s back-end portal to access useful tools and forms today!

About Magenta Capital Corporation

Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.

For more information, visit www.magentacapital.ca.

Getting to ‘File Complete’: Using a Checklist to Complete the Package

A good old-fashioned checklist is one of the most useful tools to help complete a file.

Checklists are easy to create, easy to use, can be implemented at any stage of a file, and are one of the simplest ways to make sure you get to ‘File Complete’ with the fewest hiccups.

Checklists for Borrowers

Introducing a checklist system can happen right from the initial interview with the borrowers, and before the file has been submitted.  After taking an application, you will have an idea of which documents will be required right away.  You could create different types of checklists for different types of files. You might also create one checklist and simply highlight the things you need from your clients on each different file.

For example, you may have one checklist for traditional income, and one checklist for Business for Self (BFS) files.  You might also have one checklist for purchase files, and one checklist for refinance files.

You can expect overlapping requirements – every borrower will be required to present a valid photo ID, for instance.  For the most part, however, you can customize a system that works best for you and for your clientele.

Checklists for Brokers

It’s a good idea to place a checklist noting all required documents into the hands of the borrowers. It’s an even better idea to keep a copy of that same checklist for yourself!

The necessary items may arrive in one big package, or the borrowers may bring things in as they find them, etc.  If you have a copy of the checklist, you can tick items off as they come in.  Consider adding a column to keep track of whether you’ve sent the documents to the lender, and whether they’ve been approved.

Depending on your file load at any given time, you may want to have a system to keep track of which stage your files are sitting.

It’s standard to keep a ‘Closings Calendar’, for files that have been instructed and have firm closing dates. What’s less common is to keep a checklist in each file to let you know at a glance at which stage a file is in the process.  You can have a checklist that has columns like: ‘Pre-Submission’; ‘Submitted’; ‘Approved’; ‘Declined’; ‘Complete’; ‘Instructed’; ‘Closed’.

Utilizing a checklist system helps ensure that you get the paperwork needed to complete your file. It’s also a good reminder that it’s time to follow up with a lender or law office!

About Magenta Capital Corporation

Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.

For more information, email us at brokers@magentainvestment.ca or visit www.magentacapital.ca.

 

 

What to Expect During the Mortgage Renewal Process

The maturity date of your mortgage is fast approaching. The maturity of your mortgage gives you an opportunity to review your financial situation and make some decisions based on your financial goals and current situation.

If you discussed an exit strategy with your mortgage broker, you may be preparing to refinance with a new lender at a lower rate. If it suits your needs to renew your current mortgage, here are a few things to keep in mind both before and during the process:

Here are some tips to prepare for your renewal:

1. Ensure your account is current: If your mortgage account has fallen behind, make arrangements to bring it back into good standing. Work with your lender to find a solution that suits everyone.  Small changes, such as moving your monthly payment to a new day, can make a difference.

2. Keep your home insurance in good standing: If your insurer has changed since you originally obtained your mortgage, make sure you let your lender know!

3. Keep the home in a good state of repair with no deferred maintenance: Don’t put off those home maintenance projects, big or small. Touch up the paint. Mow the lawn. Make sure the roof, furnace, and electrical wiring are in good repair.

What to expect at renewal:

1. Renewal Options: Your renewal options will be sent to you in advance of the maturity date. Review the options you have been offered. You may wish to discuss your options with your bank or mortgage broker.

2. ‘Business-for-Self’ Income: If you are ‘business for self’ or have ownership in a business, you may be asked to provide confirmation that HST and Source Deductions are being remitted to Revenue Canada.

3. Second Mortgages: If you have a second mortgage you may be asked to provide a current first mortgage statement. Most lenders will either send these out annually, or provide a way for you to access the information on their website or via online banking.

4. Income Verification: You may be asked for updated income verification. Gather or print your two most recent pay stubs, just in case you need them.

5. Appraisals: You may be asked for a new home appraisal. Appraisals always make note of any instances of deferred maintenance that are noted during the inspection. This is why keeping on top of projects around your home is so important.

Following these tips can ensure your mortgage renewal goes as smoothly as possible.

Register for Magenta’s back-end portal to access useful tools and forms today!

About Magenta Capital Corporation

Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.

For more information, visit www.magentacapital.ca.

 

Packaging Your Deal: Top 5 Things to Include in Your Submission

Crafting a mortgage file for submission is an art, but did you know that your submission notes can be one of the most important parts of your deal?

Thorough broker notes can lead to speedier approvals and a smoother underwriting process.

Here are the top 5 things you should always be including in your submission notes:

1. Your Contact Details: Be consistent about putting your best contact telephone number and your business email address in your notes, especially if the submission agent is not the same agent who will be looking after the deal. This will allow underwriters to reach you quickly and easily if they have any questions while reviewing the file.

2. The Basics: Is the deal a purchase or a refinance? Is it a rush? Are your clients looking to pay out specific debts or do renovations? Will the property be owner occupied or rented? Providing a brief outline of the file in your notes can help a deal take shape quickly for your underwriter.

3. Rates and Promotions: Are you looking for a special rate or a lender-specific program or promotion? Request it in your broker notes!

4. Potential Issues: Have you spotted something you think may cause a hiccup in your deal? Is it something that may need an explanation? Be sure to include the details in your notes. Broker notes provide an ideal forum to explain and mitigate any issues that may affect a deal.

5. Documentation: Do you have all your paperwork ready to submit?  Sending required documentation up front is a best-practice strategy, but if you give your underwriter a list of what you’re able to send, they’ll know to expect it, and it will be added to the file with little to no delay.

Thorough broker notes show the underwriter that you have a good grasp of both the deal and what your clients are looking for, and they can make the underwriting process quicker and more efficient for everyone.

About Magenta Capital Corporation

Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.

For more information, visit www.magentacapital.ca.

 

Importance of the Exit Strategy: Formulating a Plan for Refinancing

The day-to-day life at a mortgage brokerage can be fast paced at the best of times. Once a last-minute purchase or urgent refinance is added to that mix, the pace can threaten to become hectic.

Oftentimes, it is tempting in these situations to close that last-minute mortgage without fully mapping out the next step. However, in the long run, flying by the seat of your pants is doing yourself a disservice.

Having a clear exit strategy can be a huge advantage for brokers, clients, and lenders alike.

Brokers

The clearest benefit in formulating an exit strategy is garnering repeat business. Once the initial scramble is over, having a step-by-step plan for borrowers to follow will likely result in getting their file again when their initial mortgage is up for renewal.

Whether their challenge is bruised credit, thin credit, unusual income, or otherwise, a personalized plan to address the issue is ideal for connecting with clients. It also builds trust in the broker-client relationship, ensuring that they will return again and again.

Mentioning that an exit strategy has been discussed with clients shows potential lenders that the application process has been thorough. This may lead to less questions during underwriting, resulting in a faster turnaround time for everyone.

Borrowers

An attractive interest rate is something most borrowers are seeking. If a short-term mortgage with a higher interest rate is called for, showing the borrowers how to move smoothly from that mortgage to one with a lower interest rate will result in real and obvious benefits for them in the future.

Discovering credit problems, especially at the last minute, can be both frightening and frustrating for clients. A plan outlining how to resolve the issues standing between borrowers and the best possible rate can lead to a smoother mortgage process both now and in the future.

Lenders

Knowing that a broker has discussed an exit strategy with a borrower can make the underwriting process more efficient. Including this information in notes can mean that less questions arise, and it may even give the underwriter more confidence in the file. Thorough notes with details of an exit strategy may lead to less back and forth, reducing that stressful waiting period between submission and file complete.

Writing the exit strategy down and providing a copy to the client while keeping a copy on file is key. Checking in periodically to see if progress is being made is helpful in creating a win/win situation for everyone involved.

 

Register for Magenta’s back-end portal to access useful tools and forms today!

About Magenta Capital Corporation

Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.

For more information, visit www.magentacapital.ca.