It’s an important move for the 21-year-old lender, which has limited itself to the BC and Alberta markets for two decades. Fisgard’s mortgage features will be the same across the country, and those features are now more compelling than ever — for a private lender anyway.
The company, officially named Fisgard Capital Corporation & Fisgard Asset Management Corporation, has $210 million of capital under management. And it has totally revamped its products. Here’s what’s new:
- It has eliminated all lender fees
- It doesn’t have administrative fees either, making it a true no-fee lender, which is very rare in the private lending field.
- “We know how difficult it is to explain a private lending rate and terms to clients when all they hear in the news is 2.99% or less,” says Fisgard SVP Hali Noble. “But it’s even more difficult when you have to explain big fees on top of that.”
- It still collects broker fees and pays them to the broker on closing.
- It has eliminated all renewal fees on residential deals
- Once again, this is a relative rarity in the private lending business.
- “For borrowers who pay as agreed, we don’t charge renewal fees,” Noble says. Most private clients are renewing because they have nowhere to go. Their planned exit strategy didn’t happen during the term of the loan. Their credit hasn’t recovered, their employment/income situation has not sufficiently improved and/or their property hasn’t appreciated enough to make them acceptable to insured or Alt-A lenders. We don’t have institutional lenders like Wells Fargo and Accredited anymore, with the appetite for poor credit or high-ratio “B” or subprime lending.”
- “It’s taking longer for people to rebuild credit and brokers need to change the expectations they’re setting for clients. They need private or B clients to understand that they might be with their alternative lender for a while; in Fisgard’s case possibly up to two years.”
- All Fisgard residential mortgages are now fully open
- The company used to charge a 3-month interest penalty for early terminations.
- Its standard mortgages are now interest-only
- Alternatively, it can offer up to 35-year amortizations.
- “We always had a philosophical belief that we wanted borrowers to pay back some principal,” explains Noble. “But brokers came to us and said that it’s easier for me to sell [a higher rate with] an interest-only payment.” (For illustration purposes: A $100,000 mortgage payment at 7% is $575 a month, versus $700 a month with a 25-year amortization.)
- Fisgard’s maximum stated income loan-to-value is now 75%
- That’s versus 65% previously, albeit the company still expects clients to exhibit “a reasonable ability to pay.”
Greater mortgage flexibility is something to celebrate, but it all comes at a cost. Other things equal, these added options and fee savings would translate to lower profitability for the lender. So to offset this, Fisgard has lifted its rates (now 7% to 8.85% in most cases) so that its yield is “about the same.” But Noble says the clients benefit regardless, due to the lower backend fees.
Sidebar: Fisgard is self-financing this national expansion. Most of its capital comes from its existing 3,700+ investors, many of whom have reinvested to fund this new initiative.