Remember when McDonald’s was only open for lunch and dinner? Neither do I, but prior to the seventies it didn’t serve breakfast. Then a guy named Herb Peterson decided to utilize the golden arches’ existing infrastructure, come up with a passable product (Egg McMuffin) and leverage the chain’s loyal customer base. The rest is history and now breakfast is 15% of Mickie-D’s revenue.
A similar evolution has been occurring in the mortgage business. Lenders like Merix Financial have primarily sold only prime mortgages for the longest time. Why wouldn’t you want to take that infrastructure, loyal broker base and funding capability and sell another product? And that’s exactly what it’s done.
Merix’s Lendwise brand has formally launched NPX, an uninsured non-prime mortgage. Here’s the quick gist:
Self-employed borrowers without traditional income documentation (e.g., NPX will verify income with three months of business bank statements, among other things)
Credit challenged borrowers
Home buyers who are new to Canada
Maximum LTV: 80% (75% if a rental property)
Terms: 1-, 2- and 3-year fixed
Maximum GDS/TDS: 45%/50%
Penalty: Greater of 3 months’ interest or interest rate differential
Minimum credit score: 500 (or lower on a case-by-case basis)
Permitted security: Urban properties that are highly marketable
Province: Ontario only (for now, with a nationwide rollout later this year)
Is this a cutting-edge product? Not so much. Albeit, “Every lender has shades of grey relative to policy. NPX is no different,” says Merix founder and CEO Boris Bozic. “…We offer full provincial coverage at varying LTVs…[and] credit history will dictate documentation requirements.”
From Merix’s standpoint, “This offering gives us an opportunity to deepen our relationships with our current supporters,” notes Bozic. “It also provides an opportunity for us to introduce Lendwise to brokers who are unfamiliar with the brand.”
“Origination is about creating a rhythm and cadence. The more often a broker pushes our button, the greater the odds are that they will come back to us.” The move gives Merix brokers one more option in the growing non-prime market. In addition, submitting NPX deals helps brokers earn status rewards faster.
As for pricing, the company says rates and fees are “competitive” and “flexible” to suit the broker and client. Today, for example, a BFS (business for self) borrower with a 700 beacon score and 45% GDS/TDS would be quoted a rate of 3.79% with a $750 fee. “First and foremost, the challenge for brokers is to find a lender to actually do these deals,” adds Bozic. “Pricing comes second. Our pricing reflects supply and demand.”
“We’ve assembled a team of smart, passionate and experienced individuals to originate and service this offering,” Bozic concludes. “It’s their responsibility to gain the trust of brokers, and that is exactly what they will do.”