ING Shelves its “Low Doc” Mortgage

ING-DirectING Direct is cancelling its “Express Income Qualifier” (EIQ) mortgage.

It’s the latest bank to pull back on conventional non-income qualified mortgages. This is a trend that became more pronounced earlier this year as word broke that regulators were becoming increasingly concerned with these products.

Martin Beaudry, Vice President—Lending, told us ING made this change because:

  • It aims to comply with FSB guidelines, which stress the importance of provable income in mortgage underwriting.
    • This was a “primary consideration”, Martin said, as the bank sees these global standards becoming the norm everywhere, including Europe where ING Direct Canada’s Dutch parent, ING Group, is located.
  • It was getting a “disproportionate amount of applications” for this product.
    • That’s due to ING being one of only a few prime mortgage lenders left servicing this market.
    • Underwriting EIQ deals was becoming increasingly time-intensive
    • EIQ deals stressed broker relationships when ING was occasionally required to ask for supporting income documentation.
  • Non-income qualifying mortgages are more capital-intensive and ING was unable to bulk insure all these files to keep funding costs down.

Martin-Beaudry-INGMartin confirmed that ING was very happy with the performance of its EIQ portfolio. He said EIQ clients were “high quality” customers and that defaults were absolutely not a problem.

ING’s EIQ mortgage was a product that allowed no income confirmation if the borrower met certain credit standards and the loan-to-value was 65% maximum.

ING will continue to offer insured stated income mortgages through Genworth and Canada Guaranty.

Looking forward, “low-doc” mortgages may become more sparse in the banking world, Martin said, at least for a few years.

Rob McLister, CMT

  1. Hi Rob, great post as usual.
    As more and more prime mortgage lenders exit the “low doc” lending space, what overall effect do you believe this will have on mortgage volumes?
    In other words, do you think that the borrowers who fit this criteria will move on to “B” lenders to attain financing, or will some / many / most of them exit the home buying market entirely?
    I realize that the “low doc” market segment is relatively tiny, but I’m curious to know if the current trend will have a palpable effect on overall housing demand, or whether the onus will simply be shifted from prime to sub-prime.

  2. Thanks App.
    Other things equal, this trend (in and of itself) would probably have a small negative effect on overall volumes, as borrowers defer financing until they qualify for better terms/pricing, or until they qualify period.
    You’re right that non-income qualified (NIQ) mortgages are a relatively small slice of the market and some borrowers will simply shift to non-prime lenders.
    By itself, the shrinking NIQ market could have an effect at the margin when it comes to home prices–but not a huge effect. However, if you add it to other speedbrakes (policy tightening) being applied to housing, its impact could be magnified.

  3. That is an ignorant statement. A lot of the people getting denied probably earn a lot more than you do and create the jobs that benefit you, directly or indirectly.

  4. @ John FYI: The ING NIQ products were 35-50% down with impeccable credit they are much lower risk than an employee with 5% down.
    Regarding the change, the elephant in the room no one wants to talk about is that all lenders are reassessing the risk of the underlying asset. They all know the real estate prices will fall shortly and what was once a minimal risk investment is now… well riskier.
    Private lenders and Home Trust will be pleased.

  5. I suspect eventually with increased demand on B lenders inquiries and their limited resources would put them at a leisure point of them deciding to cherry pick too.

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