Easing Mortgage Woes

Easing Mortgage Woes | Spruce Grove Stony Plain Parkland County Real Estate | Barry TwynamDo you have a mortgage on your Spruce Grove, Stony Plain, Parkland County or Edmonton area home coming up for renewal?  Do you expect the process to be just another rubber-stamping, or could there be problems?  A piece of legislation that came into effect on June 21, 2012 could cause you some grief if you have ever had any issue in your credit history. 

The mortgage debt crisis in the US of a couple years ago had people on this side of the border calling for tight controls on lending to prevent a similar calamity in Canada.  The Office of the Superintendent of Financial Institutions (OSFI) responded with several initiatives, such as decreasing the length of mortgage amortization to a maximum of 25 years from the previous 35 years, and limiting borrowing on a home equity line of credit to 65% of the home’s value from the previous 80%, among other things.  (See my blog articles:  “Changes to Mortgage Rules”  and “HELOC Rules Changing”)

A guideline from the OSFI that went into effect on June 21, 2012 (Guideline B-20 – Residential Mortgage Underwriting Practices and Procedures) is apparently being interpreted by some lenders to mean that a heavier hand is needed in assessing applications for mortgages and their renewals.  This means that people who were delinquent on bills in the past but who have now brought payments up to date and are now prepared to enter into a home purchase with an acceptable down payment, good income and so on are being denied a mortgage or a renewal of their mortgage.

Reading through the guideline and its accompanying information would suggest that there is a very broad base for interpreting it, making the scenario of sweeping mortgage denials possible.  But the guideline itself, as policy for Federally-Regulated Financial Institutions (FRFIs) to formulate their own rules and regulations around their money lending practices, contains cautionary wording that would seem to prevent such refusals, urging FRFIs to be reasonable in their procedures:

“Background and Credit History of Borrower

FRFIs should ensure that they make a reasonable enquiry into the background, credit history, and borrowing behaviour of a prospective residential mortgage loan borrower as a means to establish an assessment of the borrower’s reliability to repay a mortgage loan.

For example, a credit bureau score, offered by the major credit bureaus, is an indicator often used to support credit granting. However, a credit score should not be solely relied upon to assess borrower qualification, as such an indicator measures past behaviour and does not immediately incorporate changes in a borrower’s financial condition or demonstrated willingness to service their debt obligations in a timely manner.

Fortunately, there are many lenders who recognize that their job is to do what they can to help their clients!  Fran Jenkins, Mortgage Specialist with ATB Financial in Spruce Grove, comments:

“First, I do not see any drastic tightening of credit lending at this time.  I have been aware in the past 3 years of such lenders as MCAP and Resmor Trust requesting full payment of mortgage funds at time of renewal.  These companies tend to operate differently than Chartered Banks and ATB Financial.

“Low credit scores do not automatically cause an application to be declined.  That is why there are individuals such as myself, with experience in lending, that can explain the reasons for the credit scores and do a full financial analysis to support an application.  Otherwise, if system generated, very few applications would be approved…

“I agree with the statement that slow payments is cause for concern on a lending application however there are many reasons why a client may have these slow payments.  Yes, keeping one’s payments up to date is important however not always possible.  This is what your Mortgage Specialist must understand.

“Today is no different than 20 years ago in the lending environment. You will be granted a Mortgage and/or Mortgage Renewal going thru the same process…..what is imperative is having the right Mortgage Lender supporting you as a client and going above and beyond expectations to make sure you are being presented in the correct manner.”

Fran Jenkins goes on to point out that it is true fewer high-risk applications are being approved these days, but even in boom times these borrowers should not have been approved.  High risk clients are those with bad credit who have neglected making payments for extended periods of time or who have even refused to pay back debts. 

Bottom line?  Chances are, if you have been conscientious about maintaining a good credit history and have a decent record of taking care of your debt load, the odd slip won’t be held against you.  And the trick is to shop around for a lender who will work with you to find the right mortgage for you.

Thanks to Fran Jenkins of ATB Financial for taking the time to provide her wisdom on this complicated topic!  You can contact her here:

FRAN JENKINS, B. Comm

Mortgage Specialist, ATB Financial

Cell  780 722 2266 |  Fax  1 888 722 8291

Toll Free 1 855 375 5022

EMAIL: FJenkins@ATB.com

Comments or questions about this article?  Call or text me at 780-910-9669, email me at barry@barryt.ca, or contact me here.

 

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Barry Twynam, Century 21 Leading
#1 14 McLeod Avenue, Spruce Grove, Alberta, T7X 3X3
Tel: 780-910-9669 Cell: 780-910-9669 Fax: 780-962-9699
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