Street says the new products, referred to as its “Street Options Program,” are geared to people who can’t get approved through “traditional sources.”
That includes folks who typically can’t be insured (e.g., those with sub-600 credit scores) and self-employed borrowers who can’t prove income by traditional means.
More specifically, this means Street will now offer options for borrowers with:
- Beacon scores as low as 540
- Loan-to-values up to 80%
- Higher-than-normal debt service ratios
- Self-employed income of less than two years
- No NOAs or other traditional documentation to prove self-employed income (Street still makes income reasonability assessments and may request alternative income validation, such as bank statements and/or a statutory declaration)
- A discharged bankruptcy (with no waiting period to apply)
- A need for a second mortgage behind a first mortgage (Street will allow another lender’s second mortgage behind its first mortgage, with a total LTV up to 90-95%, depending on the application)
The common requirement of all Street Options mortgages is an owner occupied, highly marketable property. Rentals are not permitted.
In terms of funding, “Street Capital plans to sell the mortgages it originates through its Street Options Program to institutional investors, as it does with the mortgages generated by its prime lending business,” according to a Globe & Mail story. These products will all be uninsured.
President Paul Grewal tells CMT, “The intent with the Street Options Program is to leverage existing broker relationships to win some of the volume (going to other alternative lenders).”
Indeed, Street has built a loyal broker following and it has plenty of relationships to tap. It’s now the 5th largest lender in the broker channel by market share.
Street Capital was last in the alternative lending business prior to February 2008 (See: Street Capital Suspends Subprime). At that time, Canada’s liquidity crisis knocked Street and a host of other lenders out of the non-prime business.
The Street Options Program is only available in Ontario for now, but it will roll out to brokers across the country by next quarter or sooner. Underwriting is headed up by Chris Laing, formerly Manager of Residential Underwriting at Equitable Trust.
The one drawback we can see with this program is its non-set pricing. There are no rate sheets, says Grewal. Brokers need to call Street and go over a deal to get a rate quote. Many brokers prefer at least a rudimentary pricing matrix to guide their (and their client’s) expectations, even if those matrices include pricing ranges.
That said, this is something that can be tweaked later if enough brokers complain. All-in-all, it’s terrific to have another lender in the non-prime space. It’s also a big positive for the industry that more investors out there are willing to buy non-prime uninsured mortgages. Four years ago, in the midst of the subprime crisis, that was virtually unheard of.
Rob McLister, CMT