Vital Mortgage Changes During The Pandemic

Vital Mortgage Changes During The Pandemic

By: Robert Floris, Lead Mortgage Broker with 30 years of mortgage experience

Business as usual…uh, I don’t think so.

There is a lot of misinformation out there…some incredible nonsense…not much bottom line, here’s how it really is truth.

You can bet your last penny you will learn all about the new mortgage process.

“Every once in a while, the market does something so stupid it takes your breath away” – Jim Cramer

Let’s begin.

Banks and mortgage lenders have certainly adjusted to the Coronavirus. This includes the mortgage process. Clients are laid off, income is down and so is the economy. Mortgage lenders are bracing for losses, slower growth and are setting aside lots of cash for potential defaults.

It is not hard to figure out that if financial institutions are worried, the any new business they would potentially take on will be done with more scrutiny. Today, you will get the facts on how the lenders are thinking during the pandemic and most importantly, how it affects you, the mortgagor.

A. New Processes for Mortgage Approval

1. Income: Are you currently working? If no, they are not interested in taking the risk. Sounds cruel, but it is just business. If yes, the banks want to see your income upfront. You may be working but the pau stub will reveal if your hours will be cut.

2. Credit: During normal times, the lenders would let you get away with marginal credit, during COVID-19, your rating should be very good. Poor or average credit will not cut it when the financial institutions are scared

3. Purpose: Easy refinances are gone for now. Expect to hear “what will the funds be used for”. Be prepared to have a good reason.

B. I don’t Want an Appraiser in my Home

New Approval Process – The residential appraiser does not want to be in your house as much as you don’t want them to be in yours during this time. As of now, the appraiser uses other data like recent MLS sales. The appraiser will do an exterior look and take pictures of the front and back of the new home.

How can they properly do a top-level appraisal? I suspect they cannot, so the appraiser will need the client’s help. Most of the clients are snapping pictures of their home and sending them to the appraiser to assist in determining the value of the home.

Are the mortgage lenders and banks accepting these appraisals? YES. All of them are accepted until the pandemic ends.

Could these values be true to actual market values? In the Hamilton and surrounding area, the home prices have held up very well. Could they go down in the future? Who knows. So far, the appraisers have done a great job in terms of valuation and the new paradigm. How do I come to that conclusion? We have received no client complaints thus far.

C. Renewals – How are Banks Treating Renewals of Matured Mortgages? Different scenarios.

1. Option 1: You’re happy with the lender and they offer a great choice of rates and you want to stay. Whether you’re working or not due to COVID-19, the lender will renew your mortgage with no questions asked.
2. Option 2: The mortgage matures and you require financing. Are you still working? If not, your choices may be limited until you return back. As discussed, they would want to see your latest pay stubs up front.
3. The mortgage matures and you are interested in transferring it to another financial institution. Again, the question lies as to whether or not you’re currently working, along with proof. Banks are getting tougher as to who gets approved for more mortgage funds.

D. Lawyering Up – Do I Really Need a Lawyer?

Do I really require a lawyer? I’m afraid so. What options do I have?

1. Some solicitors are using technology like Zoom to witness signings. They appear to be the industry leaders.
2. Still meeting clients but at a distance and with plenty disinfectant practices throughout
3. Using an internal institution called FCT. This group works internally for the bank. The positives of FCT (First Canadian Title), is that they are less expensive than a lawyer. As well, the representative arrives with gloves and dressed to prevent the spread of any germs. The negatives are that they are generally slower than lawyers and their communication levels certainly need improving. I guess you get what you pay for.

E. Deferrals

Many good, hard working Canadians have been affected during this crisis. It affects your stress level and the ability to take care of your families. I am always asked if deferring a mortgage is a smart idea.

IF your income has been affected due to COVID-19 than I have an easy answer for you:

YES! Do it. Do not hesitate and do not feel guilty about it. Why?

• Provides valuable cash flow in order to prioritize your family’s needs like food and essentials
• It does not affect your credit score
• Alleviate financial stress
• Alleviate mental stress
• Allow you not to fall back financially
• Your mortgage is a long-term product, what is 6 months to keep the family strong

In two quick months, the mortgage landscape has quickly changed. The bottom line is that if you’re working, you should have no problems as long as you qualify. The process of getting documents has accelerated with technology. This includes s-signing mortgage documents. Appraisals without entry in the home will continue during this health crisis. Visiting your lawyer needs a lot of work to develop. I really believe the role of the lawyer may diminish going forward as companies such as FCT, FNF and Stewart Title continue to gain market share. The reason is quite simple: for a mortgage transaction, they are generally cheaper and more convenient as they come to your home.

Robert Floris has been in the mortgage industry for over 30 years, including working as a Sales Manager for a major chartered bank. Over his career, he has personally lent over 1 billion dollars and proudly continues to advise and tutor his valuable clients.

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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