Modern banking continues to evolve as the amount of capital available has reached record highs. Traditional banks have been bogged down in some non-performing loans and are hesitant to make certain types of loans. Why are more homeowners choosing alternative lending firms, such as mortgage investment corporation?
Large Canadian banks have numerous regulations, rules and forms, which each branch is forced to use. Some of these financial institutions are spending more time adhering to international regulations, than on providing suitable financial packages to local borrowers.
Alternative mortgage lending can focus on the “market boutique niche” of providing unique, customized housing loans to its customers. These alternative lenders have reduced the paperwork and have a more streamlined application process.
Big, unwieldy banks must follow the rules of their headquarters, even when it takes a lot of time. Many of the local bank employees don’t even understand half of the regulations, but they still adhere to them and do everything “by the book.” This can create a very stifling, robotic loan application process.
The non-traditional lenders have more flexibility. They can tailor the application process and loans to your specific needs by cutting out unnecessary steps.
“Higher Risk Tolerance”
Many large banks have been corralled into an institutional framework where they are required to make certain loans to governments. This has lead to the “crowding out effect” where individuals are the lowest man on the totem pole competing for very scarce capital. The large banks have a very low risk tolerance after the Credit Crunch of 2008; many continue to clean up their balance sheets.
Over the last decade, the mortgage rates have also started to diverge between traditional and alternative lenders. Alternative lenders may have a higher risk tolerance because they are depending on a more aggressive interest rate benchmark than the traditional banks.
Some of the large banks have forgotten the core mission of the industry. Financial packages must be carefully and specifically tailored to meet the needs of each individual. The “cookie cutter” approach may work with large corporations, but is not as successful in the Canadian mortgage industry.
Alternative financiers can look more closely at your specific needs. You might be talking directly with the individual who can approve your loan. This creates a faster and more consistent process. The mortgage investment corporation can provide the personal touch in providing you the necessary capital that you need for your new home.
Valuable mortgage investments have attracted more types of lenders into the industry. This variety has allowed individuals with sub-par credit to enjoy the same benefits of home ownership as others. Homeowners are finding that the doors of alternative lending firms are wide open and mortgage capital is readily available.