Mortgage Rates & Mortgage Broker News in Canada

Kyprianou Now With Grey Horse

Nick Kyprianou, former President of Home Trust, has turned up as a white knight on a grey horse.  Grey Horse Corporation that is.

The company has hired Kyprianou to head up its new mortgage lending business.

Grey Horse says its subsidiary, Equity Transfer & Trust Company (ETT), is applying to become a new deposit-taking lender and will distribute its mortgages through mortgage brokers.

Most in the industry know Nick for building his former baby, Home Trust, from a small regional player into a successful national lender. Nick worked there for 17 years, having left just eight weeks ago.

In a statement, Nick said, "I am delighted to be joining Grey Horse at this juncture in its evolution and am committed to this strategic initiative. Having watched Grey Horse's progress over the years, I am impressed with its management team and growth prospects, and confidently invest my own personal capital in the Corporation's future."

Nick has reportedly invested $1 million of his own money in Grey Horse, via a private placement.

The firm’s main business at the moment is that of a transfer agent.  It’s making good money doing it. The company has been profitable 19 quarters straight. 

Regarding it’s target mortgage customer, Grey Horse says: “ETT plans to focus on alternative residential mortgages, a segment which represents 10% of the total mortgage market and is underserved by major financial institutions yet provides a tremendous opportunity for top and bottom line growth. Alternative residential mortgages are loans to borrowers who do not conform to major banks' standards of creditworthiness. Such mortgages are typically granted to self-employed business people, immigrants and borrowers with imperfect credit histories, and are often more profitable than insured mortgages.”

Grey Horse stock (Ticker: GHC on the TSX) popped 15.7% on this news yesterday, to $6.19.

Concentra’s Vision Mortgage Returns

Concentra Financial has re-launched its subprime “Vision Mortgage.”

Prior to Tuesday, it was off the market since December 2008.

“Our decision to temporarily suspend the program was in response to the economic conditions at the time and risk management practices needed to reduce credit risks,” said Jane Kulbida, AVP Residential Mortgages at Concentra.

“Market conditions have since improved and appear to be stabilized. Concentra is emerging from the economic crisis in a very strong position and we are, therefore, able to expand our credit risk tolerances to once again include this important program.”

Here are some of the Vision Mortgage’s lending guidelines…

• Maximum LTV:  75% (Purchases) and 65% (Refinances). A sliding scale applies.
• Terms:  1-5 year closed. No variables.
• Amortization:  25 years maximum
• Income:  Must be verified. No stated income.
• Minimum Beacon:  540 (Concentra also uses their own “internal” scoring model)
• Debt Ratios:  45% maximum TDS
• Derogatories:  Ex-bankrupts allowed with 1-year discharge and re-established credit. No outstanding consumer proposals.
• Property:  No apartment condos, rentals, recreational, or acreage allowed.
• Fee:  1% (This is the same standard fee Concentra charged in the past)
• Lending Area:  All provinces except Quebec

In terms of a target market, Kulbida says, “I think this product will serve many clients. Particularly those that have satisfactorily explained credit issues and need assistance getting their financial affairs back in order.”

“We allow a Total Debt Service ratio up to 45% and the interest rates are reasonable.  This is a true sub-prime product, not an Alt. A product.”

RBC Drops 3- to 5-year Rates

The nation’s biggest mortgage lender lowered its trend-setting 5-year posted and 5-year “Special Offer” rates yesterday.

RBC’s 5-year posted rate is now 5.39%, down 0.10%.  That’s 0.14% above the 5.25% all-time low set last April.

RBC’s 5-year “special offer” rate is now 4.09%.  Expect at least 3.99% in branch, assuming you’re not afraid to ask for it. (This is a discretionary rate that may not be available at all branches.)

5-year fixed rates in the broker-channel will likely keep pace. They’ve been in the mid- to upper-3% range for a while now.

More…

Yields Are All Over The Map

The bond market (which influences fixed mortgage rates) has had wild spikes and drops in the last 9 months.

Since May, bonds have made more back-to-back directional changes than they have in years.

Consecutive up and down swings usually suggest trader indecision.  This time is no different.  The bond market doesn’t know where it wants to go and the economic picture has been too murky for yields to break out of their 9-month trading range. 

That’s made mortgage holders pretty happy. Prime rate has stayed put and long-term fixed rates are only 1/4% (roughly) above their all-time lows. Normally, rates would have risen more, but spread compression last spring and summer offset a lot of upward pressure.

Looking ahead…

In the short term:

• Thanks to a 30 basis point drop in 5-year bond yields since January 1, longer-term fixed mortgage rates may drop marginally from here.
• Yields had a big bounce off of support today.  It will take a good heaping of economic doom and gloom for them to drop much lower.

Long-term:

• Not much has changed since last Friday’s round of interest rate predictions.
• The U.S. FOMC said today that the economy is slowly strengthening. On the other hand, they’re still forecasting rates to be at “exceptionally low levels” for “an extended period.”
• Canada’s rate market will take most of its cues from the Americans. Nevertheless, the Bank of Canada has said it will operate independent of the Fed if inflation reappears faster than expected. This would not be unprecedented. “After each of the last two major North American slowdowns, the Bank of Canada hiked rates ahead of the Fed,” said CIBC economist, Avery Shenfeld.

Why Pay A Higher Rate

Why would someone ever want to pay a higher mortgage rate than he or she had to?

Some people trade a low rate for cash back.

Most cash-back mortgages are pricey, but there are a couple of lenders out there that do it somewhat economically.  FirstLine might be the most popular example.

FirstLine lets you pay a reasonable rate premium and get cash back on closing. And, if the amount of cash back is under 2% (roughly), there’s often no clawback if you terminate the mortgage early. Most cash-back mortgages have clawback provisions. (A clawback is where a lender asks you to return a pro-rata portion of the cash-back they gave you, if you break the mortgage early.)

People use cash back for a variety of things. Two interesting ones are:

• Making additional RRSP contributions to generate a tax refund
• Getting cash back on a rental-property mortgage and using it to make a prepayment on a non-deductible home mortgage

This last part is more of an observation than anything else. We don’t advocate specific tax strategies so consult a licensed financial advisor or tax practitioner before employing anything similar to the above.

Trends in Broker Compensation

MCAP is the latest lender to revamp its broker compensation policy.

Last week it announced a brand new set of bonuses for brokers, based partly on:

• 1st-year arrears (i.e.  how many of the broker’s deals were 90-days in arrears in the first year.)
• Funding ratios (i.e.  the % of a broker’s approved deals that close).

Both are fantastic ideas.  After all, rewarding good funding ratios and low arrears encourages efficiency and deal quality.  (It’s good that MCAP didn’t further penalize low funding ratios. Positive reinforcement is better than negative, and sometimes cancellations are unavoidable when it’s in the client’s best interests.)

Another change MCAP announced is that it will pay volume bonus (VB) not on firm-wide production, but on the production of the individual agent.  This isn’t a new concept (some other lenders do it too), but it’s not the most common model either.

Paying VB on individual performance seems to make sense—at least at first glance.  From a lender’s perspective, why pay a broker full volume bonus if they only do a few deals a year?

On the other hand, one could argue that lenders who link VB to individual production disincentivize new or smaller brokers.  Reason being:  Several competing lenders still pay full VB to new/small brokers based on the overall volume at that broker’s firm.

Whatever the case, it’s getting tougher and tougher for small brokers to deal with multiple lenders, and still get paid well.  To the extent this affects broker impartiality, it’s a legitimate concern.

An exception to that statement applies to brokers who work under “super-agents.”  Super-agents submit applications and aggregate volume from multiple sub-agents.  The super-agents thereby earn maximum compensation from lenders and then share that wealth with their sub-agents.

Super-agents are a growing trend in the business, and they may someday become the only way for most new/small brokers to earn top dollar.

The question then becomes, what have lenders gained by encouraging the creation of these super-agents?  That’s another debate for some other time…

Abode Mortgage Will Be Back

That’s according to a BrokerNews.ca report, and it could be as soon as a few weeks.

Abode’s CEO, David Nelson, says paying outstanding finders fees “was very important” when negotiating with the new purchaser.

He says the company is not far from a formal announcement (which will likely reveal the new purchaser).

If the deal goes through as planned, the new Abode will reportedly have even more product choices than before.

More…

Rate Hike Predictions Pushed Back Slightly

Financial markets can be a total random walk in the short-term (some would say, even in the long-term). 

When the market’s not trending, economic indicators can vary considerably from expectations on a month-to-month basis.

In November, for example, employment data was robust and the high rollers were placing bets on 3rd quarter rate hikes.  Some expected a move as early as spring.

Then we get December’s limp jobs and CPI numbers and the conversation shifts to rates staying flat until the 4th quarter. 

People are finding it tough to make heads or tails of rates at this point. 

For those wanting an “expert” opinion, here’s what they’re saying now:  

    Mortgage rates will be "low, well into the usually strong spring home-selling season." (i.e.,  at least another six months.) -- BMO economist, Sal Guatieri -- Winnipeg Free Press

    The BoC will lift its target lending rate 2% by early 2011. -- Scotia Capital economist, Derek Holt – Bloomberg

    Reuters poll of 20 noted economists. The median forecast is for a 1/2% hike in Q3 of this year, and another 1/2% by year end. -- Financial Post

    Bloomberg’s most recent economist survey forecasts rates rising 2% by first quarter 2011. -– Bloomberg

    “The dangers to keeping essentially a zero rate policy are rising. We'll be looking for the start of a tone change in (the next) statement or Canada, in our opinion, runs the risk of being the bartender who offers one too many shots to a drunken patron." -- Scotia Capital economists Derek Holt and Karen Cordes -- Kelowna.com

    There is no "significant risk of a double dip” recession. -- TD economist, Craig Alexander -- Winnipeg Free Press

    2% economic growth may be the “new normal” after 2011 says Bank of Canada head, Mark Carney (story). If he’s right, it suggests moderate interest rates over the long-term.

    By the way, don’t expect any more rate hints from the Bank of Canada for a while.  Carney says he doesn't feel “compelled” to give more “guidance” at this point.

    “On average, the first rate hike following a recession takes place one quarter before the output gap closes…If this strategy is replicated this time around…then the very earliest the bank will move is the second quarter of 2011.” -– Economist David Rosenberg –- Financial Post

    “If the bank were to raise interest rates to cool the housing market now – when inflation is expected to remain below target for the next year and a half – we would, in essence, be dousing the entire Canadian economy with cold water just as it emerges from recession.” -- Bank of Canada adviser, David Wolf -– Globe & Mail

Wolf isn’t alone in that thought. Several economists warn that premature rate hikes would damage our fragile recovery.  That ups the odds that variable mortgage rates won’t rise before at least June 30 (the end of the BoC’s conditional rate commitment).

If you throw all of these opinions into a pot and simmer for 20 minutes, it boils down to the first rate hike taking place in the third, or possibly fourth, quarter.  As always, take that with multiple grains of salt because the next round of economic data could change the course for rates…yet again.

Haiti - Update

Thank you to all the brokers who generously supported the Haitian relief initiative by giving to the Red Cross.  The minimum donation was $100 with some donating far more.

We ended up getting pledges from dozens of folks, including many readers not in the industry.

Thank you all once again.  Red Cross aid continues to flow into Haiti and each of your donations will have a vital impact.

For those who wish to participate, it is not too late. More…

Street Capital Launches 1-year Variable

Street Capital has rolled out the first nationally available 1-year adjustable rate mortgage.

Paul Grewal, President of Street Capital, says the product is well-suited to those who expect that “discounts on ARM’s will increase.” It gives people “the flexibility to choose a shorter ARM term,” he adds.

Therefore, if you think variable rates will be prime – 0.50% next year, for example, this 1-year variable lets you switch mortgages in 12 months without penalty--instead of waiting 3-5 years.

Street Capital also lets customers convert to a 3-, 4- or 5-year fixed rate at any time, with no fee, and at discounted broker rates.

From a strategic standpoint, it’s a great move by Street.  The 1-year term has a clear value proposition in the current market.  More importantly, it gets customers in the door—many of which will renew with Street in a year, or lock into a long-term fixed rate.

Here are some of the key guidelines:

• LTV: Up to 95% on purchases and 90% on refinances
• Rate Hold:  60 days
• Amortizations:  16-35 years
• Compounded:  Semi-annually
• Loan Amounts:  $50,000 to $1,500,000
• Qualifying Rate:  3-year discounted rate or contract rate
• Minimum Beacon Score:  600
• Early Termination Penalty:  3 months of interest
• Lump-sum Pre-payments:  20% annually
• Payment Increase Option:  20% annually

Rate premiums apply on conventional mortgages between 75%-80% LTV, rentals, stated income deals, and discharged bankrupts.

In conjunction with today’s announcement, Street Capital also announced a new 3-year variable.

Dig Into Trade Publications

For those new to the business, one of the best ways to get up to speed is to comb through past trade publications.

You’ll find hundreds of helpful articles on mortgage planning, lender policies, broker profiles, marketing ideas, and more.

Here’s a list of Canada’s biggest mortgage industry publications in electronic format (if we missed any, drop us a line and we’ll add them).

• CAAMP Mortgage Journal
• Canadian Mortgage Professional
• The BC Mortgage Broker
• BrokerBiz
• AMBA Matters Magazine

If you’re sitting around wondering how to improve your practice, flip through some back issues.  One good idea might boost your volume 10-15% a year, or more!

Bank of Canada Leaves Rates As Is

The Bank of Canada’s rate announcements have sounded pretty similar for the last 8 months:  no change, no change, no change…

Well, today they met again, and guess what? No change.

The Bank left Canada’s key lending rate at a record low 0.25%.  That’s been the rate since April 21 of last year.

In today’s report it said:

• “Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010.”
• “The global economic recovery is under way.”
• The economy should return “to full capacity” with inflation returning “to the 2% target in the third quarter of 2011.”
• “The Bank projects that the economy will grow by 2.9% in 2010 and 3.5% in 2011.” (an increase versus its prior forecast)

The next BoC meeting is March 2.

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In Other News…

• Canada’s leading indicators posted their biggest gain in 27 years in December—up 1.5% month-over-month. Economists had expected a rise of just 1.0%. It tied February 1983 for the largest gain in over 50 years. More from StatsCan…
• Government bond yields are flat and today’s news should have little effect on mortgage rates in the short-term.

Bird In The Hand, or Two…?

BrokerNews had a good story last month on trailer fees.

Trailer fees are compensation paid to brokers on an annual basis. They are an alternative to the lump-sum finders fees that lenders normally pay brokers at closing.

The story cites some common benefits of trailer fees, namely:

• Brokers who use trailer fee lenders don’t have to fight lenders’ client retention programs to keep the client.
• Trailers discourage churning (moving a client to a new lender for no reason but to generate a new commission)

The problems with trailer fees (as cited by brokers) are:

• Potential conflict of interest (The claim is that trailers encourage brokers to not shop around for clients at renewal.)
• Concern about whether trailer fees follow agents when they switch firms
• Difficulty splitting trailer fees with sub-agents

One key point the story doesn’t talk about is renewal rates.

Cory McLean, a broker/owner at Verico Axis Mortgage, told BrokerNews that clients these days “don't feel a loyalty to a lender” as “they are becoming more educated.”

“That diminishes the value of a trailer fee,” McLean says.

That seems to make sense.  Clients tend to want two things more than any others: the best overall deal and a mortgage advisor they can trust. Most of today’s generation is putting less and less stock in the lender itself. As long as the lender appears reputable and has the best offer, people are usually happy.

Back to renewal stats.  One brokerage executive told us recently that less than 50% of mortgages make it to renewal. (Of course, for the clients that do make it to renewal, 90% stay with their current lender according to CMHC.)

So the combined odds are pretty good that a homeowner will either break their mortgage before renewal or switch lenders at renewal.  When that happens, a broker’s trailer fees often go out the window.

So the question is:  Does the broker take the bird in the hand (up-front finders fee) or two in the bush (smaller up front FF + trailers)?  Many still prefer a bird in the hand due to the multiple factors that can derail trailer fees. There is also a present value argument to be made for taking more compensation up front.

More important than any of this, is that we owe it to our clients to shop objectively for them on renewal.  Incentives from the existing lender shouldn’t guide our advice to consumers unless those incentives directly benefit the consumer.  That’s what people expect from us, and what we must deliver.

Xceed Lost $3.3 Million in 2009; Originations Up 46%

Last year was challenging for Xceed Mortgage, but Chairman/CEO, Ivan Wahl, has a “renewed sense of optimism” for 2010.

First the bad news…

• Net income last quarter was 1/2 of what it was a year ago—thanks to “a reduced net gain on the sale of mortgages and sharply lower securitization income.”
• Xceed’s loss for the year was $3.3 million vs. a $12 million loss the prior year
• Revenue for fiscal 2009 sank from $22.3 million to $9.4 million.
• Wahl says: “An increasing number of Canadians still are unable to renew their mortgages if their overall credit condition has not improved sufficiently for them to qualify for an insured mortgage.” Many of them will be stranded come renewal time.

Interestingly, despite losing money in 2009 (see earnings), Xceed underwrote 46.3% more mortgages. One might expect that more mortgages = more profit. Not last quarter. (Although Xceed did trim its deficit for the year.)

Xceed said that 2009 left it with “lower-spread margins than previously enjoyed.”  An industry-wide liquidity shortage and warlike competition in the insured mortgage market (the only market Xceed now plays in) didn’t help.

The good news…

Xceed Mortgage plans to become Xceed Bank, as we wrote back in August. Wahl said that bank status will give Xceed “a new and important avenue for accessing stable capital at a reasonable cost” and will “significantly increase our underwriting capacity.” It will also give Xceed a way to get back into more profitable non-prime lending.

Wahl says, “We believe that the application process is making progress, but the timing of any approval is entirely up to OSFI.”

Canada Prepared For Rising Rates: CAAMP

Claims that Canadians are taking out risky variable-rate mortgages and borrowing more than they can afford “are not based on actual data” and “are misinformed.” That’s according to CAAMP, who issued this study of 40,000 mortgages from 2009:  Revisiting The Canadian Mortgage Market…

Despite rising home prices, first-time mortgagors took out “far less” than they could afford last year, says CAAMP.

"The vast majority of Canadian mortgage borrowers are not taking on undue risks. They have factored rising interest rates in to their mortgage decisions," stated Jim Murphy, president and CEO of CAAMP.

CAAMP ran simulations to estimate what would happen if the Bank of Canada hiked rates 3% over two years (and fixed rates rose 1.25%).

It found that income gains should offset much or all of the increases in mortgage payments that most Canadian’s would experience.

"The bottom line from the simulations is that even though mortgage payments will probably rise for most borrowers, the increase in their incomes will more than offset the higher payments," said CAAMP chief economist Will Dunning. “All in all, the degree of risk from rising mortgage rates appears to be small and manageable,” he writes.

A key finding in the report was that 86% of Canadian home buyers took out fixed rates in 2009.  Here’s a breakdown of the terms they selected:

• 5% chose 1- to 2-year terms
• 20% chose 3-year terms
• 5% chose 4-year terms
• 70% chose 5- to 10-year terms

Other notable findings from the study:

• 5%:  Number of Canadian households who purchase a home each year.
• 50-60%:  Number of those who are first-time homebuyers.
• 0.03%:  Percentage of first-time home buyers (compared to all home owners) that are “pushing the envelope” by getting mortgages they may not be able to afford.
  
  CAAMP estimates these “at-risk” borrowers amount to 4,000 households out of 13,250,000 in Canada.
  
• 10%:  Annual growth rate of mortgage debt in the last five years.

”This growth rate was far in excess of growth of incomes and therefore mortgage debt has become a growing burden for Canadian households,” CAAMP said.

CAAMP attributed this growth to rising home prices and increased home ownership. 70% of households now own homes, versus 63.6% in 1996.

• 5.425 million:  Number of Canadian mortgage holders.
• 22.3%:  Average GDS ratio of a home buyer in 2009
  
  32% is the traditional GDS maximum. This stat is a pleasant surprise. According to CAAMP’s findings, most Canadians appear to be underbuying, not overbuying--as some critics charge.
  
• 32.8%:  Average TDS ratio of a home buyer in 2009
  
  Similar to GDS above, this is well below the standard. 40-42% is the typical TDS maximum.
  
• 0.44%:  Current percentage of mortgage holders in arrears.
  
  CAAMP says arrears averaged 0.50% in the 1990s. Mortgage arrears are highly correlated with Canada’s employment rate. Reduced hours/pay and separations/divorce are secondary factors. CAAMP says it “appear(s) most likely that the arrears rate is close to peaking.”

Dunning closed the report by writing: “Virtually every Canadian who is in a position to buy a home and qualify for a mortgage is well-educated and capable of assessing what is in their best interests, of looking forward, and of anticipating threats to their financial well-being.”

Let’s keep it that way by advising homeowners to remain conservative.

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Sidebar:  More details on the study above:

• Data was collected from a CAAMP survey of its corporate members
• Sample size was 40,000 mortgages totalling $10 billion
• This represents about one-sixth of total mortgage activity for home purchases in Canada.
• The mortgages were all funded in 2009
• The data included purchases only. No renewals or refinances.
• The vast majority of mortgages in the dataset are high-ratio and insured.

MCAP Update

MCAP is one of Canada’s biggest non-bank lenders, and it recently made a welcome improvement to its early termination policy.

Prior to this year, a firm sale was required to break an MCAP mortgage in the first 36 months. This was meant to prevent losses that occur when a borrower breaks his/her mortgage early.

It wasn’t too popular, however, because it kept people from refinancing elsewhere for three years. (It was the main reason we didn’t send them much business ourselves.)

Now that this “sales-only” clause is history (as of January 26, 2010), MCAP’s products and prompt turnaround times will return to center stage.  As a result, its business should increase.

We’ve always been curious, though, why MCAP’s fees and standard penalties were not enough to make MCAP whole if a client breaks early. So we asked this question to Ron Swift, President of MCAP Service Corporation.

“The answer depends on a couple of key factors…” Ron said. “The total cost of acquisition (broker compensation, hedging, underwriting, etc.), time of pay out (near the beginning of the term or near the end of the term) and the lender's method of funding the mortgage (balance sheet versus securitization).”

“For certain, the closer a mortgage is paid out from when it was funded, the more likely the lender will not be made whole with the penalties.”

In order to eliminate its sales-only clause, MCAP said it may need to claw back part of the broker’s commission if the client breaks the mortgage before three years and goes elsewhere. The reason: Longer-term MCAP’s mortgages are sold to investors on the basis that they will not be paid out in the first 3 years, barring a sale.

Ron conceded that clawbacks “are not common practice” in the industry. He says this is only being done to “provide an option for a (prior) customer who is choosing to pay us out of their sale-only mortgage in the first 3 years, versus us saying no to allowing them to pay out the mortgage.”

Two key points about clawbacks:

• They will not apply to new MCAP mortgages.
• Nor will they apply if the client remains with MCAP after breaking a current MCAP mortgage before three years.

All of the above is a net positive for MCAP and its customers going forward.  It seems that, more and more, lenders are re-evaluating their policies to benefit customers (we just saw Home Trust get rid of their IRD penalty on variables, for example).  As the Internet makes homeowners more knowledgeable, the trend towards consumer friendliness will hopefully strengthen.

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About MCAP: MCAP is Canada's largest independent mortgage and equipment financing company, with more than $25 billion in assets under administration. MCAP originates, underwrites, securitizes, and services mortgages and has over 100 institutional investors and over 130,000 borrowers.

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Note: The "sales-only" clause has not been removed from mortgages that funded when it was in place (March 2008 to January 25, 2010).

Haiti

It’s hard not to be awed and moved by the massive devastation in Haiti.  The people down there need help desperately and people need to step up.

If you’re a broker willing to pledge:

• $50 from every mortgage funding over the next 7 days; or,
• At least $100 one time

...please email CMT by January 20. We’ll add your name and web link to this list and run a follow-up story on January 21.

At the end of the 7-day collection period, donations should be made directly to the Canadian Red Cross here.

Q&A With Invis’s Bryan Devries

After a long and successful tenure at mortgage lender, MCAP, Bryan Devries took a big leap over to the broker side of the business.

In November, Bryan was named Executive Vice President, Sales and Operations, at Invis and Mortgage Intelligence. 

We recently caught up with Bryan to chat about lenders, banks, and brokers.

Q&A - Bryan Devries

Racing To Bank Status

Bridgewater Bank sent out a nice email the other day summarizing 2009.  In it was one point that resonated. 

It said:

“Unlike lenders that depend solely on lines of credit or “warehouse lines” supported by third party lenders, Bridgewater Bank has the advantage of being able to raise consumer deposits to fund its mortgage business, delivering us from the vagaries of third party decision making driven by market impacts.”

Many of the non-deposit-taking lenders out there would love to be in that position.

Non-deposit-taking (“non-bank”) lenders were put at a disadvantage last year.  While banks enjoyed overflowing deposits from market-shy investors, most non-bank lenders had to rely heavily on the Canada Mortgage Bond market for mortgage funds.  As a result, non-bank mortgage rates were dependent largely on that market.

Banks, meanwhile, had lots of relatively low-cost cash to lend thanks to deposits and government mortgage buybacks. As a result, they were able to underprice competitors and recapture market share.

Going forward, non-deposit funding sources (CMBs, mortgage backed securities, covered bonds, etc.) might not be enough to keep non-bank lenders competitive.  One monoline executive told us Friday that, “Everyone will be a deposit-taking lender (eventually).”

Similarly, we still recall the prognostication from Scotia Mortgage Services’ President, John Webster, who said in November: “For a lender going forward, you either need a balance sheet, or need to rent one."

Recently, we’ve seen lenders like Xceed and CHIP apply for bank status--so they can get their hands on deposit money.  It seems other lenders may not be far behind.  We hear there are at least 30 new bank and trust applications with OSFI as we speak.

6 Days Left To Vote For CMAs

Only 6 days remain to pick your favourite mortgage broker, brokerage, BDM, website, and underwriter.

The Canadian Mortgage Awards (CMAs) honours the best of the mortgage brokerage industry.

Finalists for the 2010 awards will be announced in February.  The black tie awards ceremony will be held April 23 at the Liberty Grand in Toronto.

Click here to vote by Jan. 14