Strange things are happening in the mortgage world the past few weeks. It’s as if all the government and media’s efforts to slow down the real estate industry are finally taking effect. Couple this with the typical annual Spring Real Estate Market, and everything is taking a lot longer than usual.
The Home Capital crisis (Home Trust Company) has had a ripple effect on the whole mortgage industry it seems. Here is what we are seeing:
• Banks and other A lenders are really tightening up their underwriting, and more files are being declined than ever before. And when it comes to satisfying their document conditions, there is zero tolerance for “outside of the box” responses. It’s very important home buyers and those homeowners refinancing take this very seriously.
• Alternative lenders such as Equitable Bank, Lendwise NPX, XCEED etc. are underwriting more like A lenders, or A- lenders, rather than true B lenders. And also their interest rates have risen at least 0.5% across the board in the past couple of weeks.
• Alternative lenders are besieged by a flood of new applications, and are loathe to take on new broker partners or promise short closings. It’s best to give yourself at least six weeks from the date of submission.
• Private lenders are also acting tough – cutting back their comfort level loan to value ratios and increasing their interest rates too.
• Whereas private lenders typically offer closings in two to three weeks, we are seeing five to six weeks being the norm these days. In fact we are seeing a number of declines just because of the closing date!
• HomeTrust Company (HTC) themselves are still top of mind – they have cancelled a number of transactions they had previously committed too. Often when the client’s lawyer had already been instructed!
• And they are repricing their deals too – even after they have issued a commitment. We have one buyer whose purchase is closing June 01, who has watched HTC increase their interest rate twice in the past two weeks – with a take it or leave it attitude.
FURTHER FOOD FOR THOUGHT ON THE REAL ESTATE MARKET
• We are hearing reports of home purchases not closing because the buyers could not arrange mortgage financing. (Yet in many cases, they bought with no condition of finance, and they may lose their deposits and a whole lot more)
• And then there are home values. In February there was a dearth of listings and buyers were in a frenzy to pay whatever it took to win a multi-offer property. Values rose at an unsustainable pace in early 2017, right into March.
• Now though, the number of listings has balanced out with the number of buyers, and in most parts of the city, buying conditions are a bit more favorable. That said, there are still pockets of resistance where it is incredibly difficult to buy something at a decent price.
• Condos and townhouses remain very strong – as they are starter homes and the basic entry point into the market. At the bottom of the buyers’ pyramid, there seems no shortage of demand.
It’s the high end luxury homes which are currently feeling the pinch. Not so many showings, longer listing periods, and buyers not willing to pay over asking price is more the norm than the exception.
So tread cautiously out there. As always, surround yourself with subject matter experts in real estate, mortgages and real estate law. Ask them the tough questions; make sure they completely understand your objectives and limitations, and don’t try to take short cuts in this market. If you do, you might be very disappointed in the result.
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If the bank doesn’t want to speak with you… if alternate lenders are not interested… if all seems hopeless but selling your home isn’t an option… a private mortgage may be your only hope