Magenta Capital Corporation

Selecting the Right Mortgage Investment Corporation 

Early on in your journey into alternative investment options, you likely came across the term Mortgage Investment Corporation (MIC). MICs have entered the spotlight in recent years as a key piece in both the wealth accumulation and the wealth preservation strategies of a variety of investors. This surge in popularity can be credited to the many advantages this investment format has to offer, such as reduced risk through diversification, as well as strong and reliable rates of return. 

Choosing which MIC is right for you is not as simple as who has the highest Return on Investment (ROI).  

Here are five factors to consider when deciding to invest in a MIC:  

1. Liquidity 

Read the subscription agreement closely to see how quickly you can withdraw your investment.  No one wants to be in a situation where they need access to capital but are stuck in a long waiting period to withdraw an investment- and some MICs will only allow redemptions once per year.  

2. Consistency 

Ask for information on the actual ROI vs. target ROI of the past 5-10 years.  This will give you a sense of how accurate the MIC is at estimating ROI and indicate if the MIC can consistently meet or exceed target ROIs. While macroeconomic factors such as the Bank of Canada rate directly affect MIC ROIs, it’s still vital to look for trends in the data to determine the growth trajectory of a MIC.  

3. Risk 

Learn which housing markets you are investing in and what types of mortgages your money is financing.  The specific housing markets and types of mortgages that compose a MIC’s portfolio, whether urban or rural, first mortgage loans or second mortgage loans, are important factors that go into how a MIC determines interest rates and subsequently the potential pitfalls associated with an investment.  You should find a MIC whose acceptable level of risk matches your own.   

4. Reward 

Ask when and how dividends are distributed, especially if you plan to reinvest the dividend in the MIC, as the investment is compounded based on a predetermined schedule. Not all MICs issue dividends on the same schedule, some issue monthly, some quarterly, and others annually.  

5. Communication

Prudent investors keep tabs on their investments, and prudent MICs know that the best questions are the ones shareholders shouldn’t have to ask. Check to see not only that the MIC reports with clarity and regularity, but that they can handle ad hoc requests for information. You never know when you’ll need to be able to access relevant details related to your investment at a moment’s notice. Your prospective MIC should have an investor relations manager ready to answer questions, provide additional information, or help you understand the product.  

Investing with Magenta 

Since 1994, our goal at Magenta has been to empower our investors to build for their tomorrows and achieve peace of mind. Magenta has delivered strong returns and reliable income to our investors while safeguarding capital by applying a risk-mitigated portfolio strategy. The portfolio is constructed of residential, primarily first mortgages located exclusively in carefully selected Ontario markets. 

Investing with Magenta offers: 

• Flexibility 
• Liquidity 
• Regular income 

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
Established in 1994, Magenta Capital Corporation (MCC) is one of Canada’s oldest and largest Mortgage Investment Corporation (MIC) managers.  MCC sources, underwrites and manages a portfolio of primarily residential first mortgages, secured by properties located in Eastern and Southwestern Ontario, two of the strongest, most recession resistant real estate markets in the country. MCC has a long track record of generating superior returns for the shareholders of Magenta Group MICs.  MCC exercises oversight responsibility for the Magenta Group MICs in its capacity as General Partner of three limited partnerships, each of which is wholly owned by one of the MICs.

For more information, please visit Magentacapital.ca.

3 Tips for Planning an Exit Strategy

For your clients who need a quick-fix mortgage, putting together an exit strategy is a must!

Here are three tips for planning an exit strategy that will help you transition your borrowers:

1. Begin Right Away: Successful exit strategies depend on getting started right away. The best practice is to formulate a plan while the ink is still drying on the quick-fix mortgage. This is especially true if bruised or thin credit necessitated the short-term, higher rate mortgage, as credit takes time to build and repair.

2. Diagnose the Problem: In order to find a solution, it’s important to know where your borrowers are struggling. The culprit is usually bruised or thin credit, but in this age of entrepreneurs, proving income may also be an issue. No matter the problem, there are almost always ways to address it and fix it.

3. Follow Up: Set milestones for your borrowers and check in on them regularly to make sure things are progressing according to the plan you set up.

If everything is coming along nicely, you can begin building the file for their transitional refinance nice and early and have it ready to go when the quick-fix mortgage renews!

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

 

About Magenta Capital Corporation
Established in 1994, Magenta Capital Corporation (MCC) is one of Canada’s oldest and largest Mortgage Investment Corporation (MIC) managers.  MCC sources, underwrites and manages a portfolio of primarily residential first mortgages, secured by properties located in Eastern and Southwestern Ontario, two of the strongest, most recession resistant real estate markets in the country. MCC has a long track record of generating superior returns for the shareholders of Magenta Group MICs.  MCC exercises oversight responsibility for the Magenta Group MICs in its capacity as General Partner of three limited partnerships, each of which is wholly owned by one of the MICs.

For more information, call us at 888-267-1744 or  visit Magentacapital.ca.

Getting to ‘File Complete’: Using Checklists to Complete the Package

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

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 can either create different types of checklists for different types of files, or you can 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.

There will be overlapping requirements – every borrower will be required to present 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

While it’s a good idea to place a checklist noting all required documents into the hands of the borrowers, it’s also a good 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.  You can also add 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 fairly standard to keep a ‘Closings Calendar’, for any files that have been instructed and have firm closing dates, but it’s not as common 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 is a great way to ensure that you get the paperwork needed to complete your file, and a great way to remind yourself and your team if it’s time to follow up with a lender or law office!

About Magenta Capital Corporation
Established in 1994, Magenta Capital Corporation (MCC) is one of Canada’s oldest and largest Mortgage Investment Corporation (MIC) managers.  MCC sources, underwrites and manages a portfolio of primarily residential first mortgages, secured by properties located in Eastern and Southwestern Ontario, two of the strongest, most recession resistant real estate markets in the country. MCC has a long track record of generating superior returns for the shareholders of Magenta Group MICs.  MCC exercises oversight responsibility for the Magenta Group MICs in its capacity as General Partner of three limited partnerships, each of which is wholly owned by one of the MICs.

For more information, call us at 888-267-1744 or  visit Magentacapital.ca.

 

The Mortgage Renewal Process: 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
Established in 1994, Magenta Capital Corporation (MCC) is one of Canada’s oldest and largest Mortgage Investment Corporation (MIC) managers.  MCC sources, underwrites and manages a portfolio of primarily residential first mortgages, secured by properties located in Eastern and Southwestern Ontario, two of the strongest, most recession resistant real estate markets in the country. MCC has a long track record of generating superior returns for the shareholders of Magenta Group MICs.  MCC exercises oversight responsibility for the Magenta Group MICs in its capacity as General Partner of three limited partnerships, each of which is wholly owned by one of the MICs.

For more information, call us at 888-267-1744 or  visit Magentacapital.ca.