True innovation has become a rarity among mortgage lenders. The mortgage crisis and subsequent government policies (which restricted mortgage liquidity) have made it harder to fund unique value-added products.

But every now and then you see a product that creates new competition and gives consumers an important new choice. For eight years now, CMT has recognized the new mortgage that most positively impacted the market in the preceding year. In 2015, MCAP met that criteria with its launch of Fusion, a fully readvanceable mortgage with a fixed or variable mortgage linked to a line of credit. Borrowers get easy funds access and flexible qualification criteria at a compelling price point.

“The MCAP Fusion is important to our business because we are the only mono-line lender offering this unique product,” said MCAP VP of Sales, Megan McDonald, who calls Fusion, “a game changer in our market and for our brokers.”

Indeed, few non-deposit-taking lenders have ever launched a HELOC in Canada, primarily because you need a strong balance sheet lender as a partner. Moreover, the economics are not easy to negotiate since HELOCs cost more to fund, more to manage and more to mitigate risk.

“Structuring a HELOC can be complicated,” says McDonald. “MCAP has been a leading mono-line lender for a long time. We have a great reputation, strong leadership and long-term relationships with key stakeholders. MCAP Fusion is the by-product of all those things.”

For the most part, Fusion mortgages have been priced more competitively than rival products. Competitors include National Bank’s All-in-One, Manulife’s One, CIBC’s Home Power Plan, BMO’s ReadiLine, Scotiabank’s STEP, RBC’s Homeline, TD’s HELOC and others.

And it’s not a stripped-down product either.

• Every dollar you pay in principal is automatically available for borrowing from the line of credit
• The minimum line of credit is only $1 (important for folks who want a LOC but have a mortgage that’s already bumping against the 80% LTV conventional limit)
• The line of credit can be accessed 24/7 online, where you can easily transfer funds into your chequing account
• Qualification guidelines are more flexible than some competitors
• There is no monthly fee for the credit line, unlike some banks out there.

If brokers had a wish list for Fusion, it would probably look like this:

1. Add another LOC account — As it stands, it has only one. Multiple sub-accounts are important for separating personal and investment/business borrowing, and hence keeping tax-deductible interest segregated. But McDonald hints that good news may be coming. “The MCAP Fusion was launched successfully based on phase-one criteria. Phase two is currently underway. Phase two is the incorporation of another segment. Stay tuned for more details in late 2016!”
2. Open it up to more brokers — Albeit, limiting it to top status brokers is by design. “The MCAP Fusion mortgage was launched and will remain with our Ambassador Plus brokers,” McDonald said. “Our loyalty program has been built around status and it rewards partnership. The success of the MCAP Fusion mortgage shows the commitment from both our brokers and MCAP to that partnership.”
3. Raise the maximum approval amount — It is just $750,000 today, which limits Fusion’s adoption by higher net worth clients and those in major markets. Perhaps the maximum loan amount will increase once MCAP’s funder gets more comfortable with borrower quality.

The value of having a product like Fusion to compete with banks cannot be understated. It makes the entire HELOC segment (and brokers) meaningfully more competitive.

If we had one more wish, it would be to make Fusion compatible with MCAP’s discount ValueFlex mortgage (last year’s Mortgage of the Year). That way, HELOC borrowers with mortgage components could save even more. But that would just be icing on a cake that’s already pretty tasty.

About CMT’s Mortgage of the Year:

Canadian Mortgage Trends grants the Mortgage of the Year award to the mortgage product that has offered the greatest innovation, flexibility and/or cost savings to homeowners in the prior year. This is the 8th year that the award has been presented.

Recipients to date include:

• 2015: MCAP’s Fusion
• 2014: MCAP “ValueFlex“
• 2013: RMG’s 35-Year Mortgage
• 2012: No qualifying recipient
• 2011: BMO’s Low-Rate Mortgage
• 2010: Coast Capital Saving’s “You’re the Boss” Mortgage
• 2009: TD Financing Services’ “Specialty Mortgage”
• 2008: National Bank of Canada’s “All-in-One” Mortgage
• 2007: MCAP’s “FlexStar” Mortgage

Last modified: April 26, 2017