Brokers

Spotlight on Second Mortgages 

At Magenta, we know there are many reasons why clients choose to take out second mortgages. For some, second mortgages are valuable financial management strategies for dealing with debt efficiently at lower interest rates. For others, second mortgages are an avenue for funding the acquisition or improvement of homes, paying tuition for oneself or one’s family, or any one of life’s other major expenses.

Business For Self

Magenta offers second mortgages tailored to the needs of alternative borrowers whose unique circumstances may not be best served by other financial institutions. For instance, consider the small business owner looking to use home equity to fund their business. If that business has a significant cash component, it would lack the verifiable income needed to qualify for a bank loan. But with Magenta’s Stated Income Program for Second Mortgages, that borrower would only need to provide non-traditional income documents like business ownership, bank statements and other supporting documentation to qualify for a Stated Income Second Mortgage with up to 75% loan-to-value (LTV).

Rentals

Consider also the property investor hoping to get a second mortgage on a rental property, but running up against the limits banks place on the number of rental properties a borrower can have. With a Magenta Second Mortgage for Rental Properties, not only is there a 100% offset on rental income with no maximum number of doors, there is up to 75% LTV on student rentals. Furthermore, Magenta offers  2-year terms in addition to traditional 1-year terms to better suit the needs of a property investor’s longer view.

Our solutions are designed not only to address your client’s short-term credit challenges but also to help them return to traditional lending channels as soon as possible. Keep reading to find out why Magenta’s mortgages are worth a second look:

Smaller Monthly Payments

We offer up to 50-year amortization, or interest-only payments, and balance our rates and fees in favour of smaller monthly payments, passing the benefits on to your client’s cash flow.

New Longer Terms

Magenta is proud to have recently added 2-year terms as an option on our second residential mortgages, in addition to our traditional 1-year term offerings.

24-Hour Quick Closes

If a borrower’s lending institution option falls through, our team will put in the work to help you meet your client’s deadline.

Capitalized Fees

We capitalize lender fees and broker compensation, meaning the cost is added to the client’s principal and spread over the life of the mortgage.

No Notice of Assessment? No Problem

Even clients with low or no documentation verifying their income are eligible for second mortgages through Magenta, subject to only a small increase in their starting fee.

Simplified Financial Planning

We’ll match the maturity date of our second mortgage solution with your client’s first mortgage, simplifying their financial planning.

A selection of second mortgages funded this year (borrower and identifying property details have been removed):

* Small Centre refers to properties located in towns with a population of 1,000 or more within 45 minutes of one of our urban centres.  Rural refers to properties with septic and well access within 45 minutes of one of our urban centres.

Second Mortgages are available in urban, small centre and rural locations throughout our lending areas. Please view our Google Map or speak with your Magenta representative to find out more.

Interested in what Magenta has to offer?  Connect with our mortgage origination team, or click here to learn more.

Five Discussions to have with your Clients

As a new Mortgage Agent there is a lot of information to take in including processes and regulations. Learning how to conduct a thorough client interview and submit an application in good order is key to hitting the ground running. Successful Mortgage Agents provide full, detailed applications and clearly demonstrate that they know their client. How do you do that effectively? You ask the right questions, listen and take notes.

Here are 5 basic conversations to have with your client to help you gather the information you need:

Question 1: “Tell me about your credit history.”

Your follow-up questions should cover:

• How long they have had credit
• How they pay their credit, i.e. paying minimum payment or full balances
• Whether they have missed payments
• If they have co-signed any loans
• If they have had any collections, judgments, support payments, bankruptcies
• Whether they have filed/paid their income taxes and are they up to date on property taxes

Question 2: “Tell me about your income.”

Your follow-up questions should cover:

• All sources of income
• If they are self employed, how the business is set up, i.e. sole proprietorship or incorporated
• How long have they been at their current and previous jobs
• How stable and consistent is their income?

Question 3: “Tell me about your property.”

Depending on whether it’s a new purchase or refinance, your follow-up questions should cover:

• What type of property is it, i.e. owner occupied, rental, mixed use
• How long have they lived there
• Any improvements they have done or improvements needed
• Unique features of the home
• Known negatives, e.g. previous fire or flood damage

Question 4: “Tell me about your future plans and goals.”

Your follow-up questions should cover:

• How long they intend to stay in their home
• Whether they expect lump sums of income, e.g. work bonuses, inheritance etc.
• Any anticipated job changes
• Expected changes to family, e.g. newborn children or college costs

Question 5: “Tell me what’s important to you about your mortgage.”

Your follow-up questions should cover whether their priorities include:

• Flexible payment options
• Prepayment penalties
• Portable/assumable
• Lowest payment vs quickest payoff

An effective Mortgage Agent will take the time to have a thorough conversation with their clients, personalize the experience by asking the right questions, and then listen. Once you have a complete picture of your client’s situation, you can readily place them with the lender with whom they have the best fit.

Three tips to packaging your deals

Are you doing all that you can to package your deal for success?  Making your deal ‘lender friendly’ is the easiest and quickest way to get an approval.

Here’s what your lender wants to see:

• Documents up front. Sending most of the needed the documents right after you hit submit is one of the best things you can do to make your deal a success. This is especially true if you’re submitting a purchase.
• Clear broker notes. By telling the underwriter exactly what you’re sending and requesting exactly what you need on a submission, you’re more likely to get the answer you want.  What’s more, you’ll probably get a faster turnaround time too! Want a rate special? Ask for it! Have unusual income? Acknowledge it in the notes!
• Accurate details. Ensuring that there are no typos in the borrower names or property address is crucial to putting together a successful package. For instance, a typo in a postal code can mean your deal is rejected for being outside a lender’s preferred lending area.  The details definitely matter, so take the time to get them right!

Lender Top Tip:  Use the borrower’s ID to enter their details into your system. This will minimize any spelling or numeric errors.

Taking the time to cover these 3 steps for every deal should mean the pathway to a successful closing is smooth. Try it!

Talking to your client about Damaged Credit

Buying a home can feel like a scary process for some. In all the hustle and bustle of the housing market, brokers need to remember to take a step back and empathize with their clients. This means having difficult conversations.

You may feel your questions to your clients are intrusive or confrontational. You are careful not to offend your clients by asking tough questions that could make them defensive. The reality is that this is the exact information you need to get the best possible deal for your client.

Questions to Ask:

What caused the bankruptcy/consumer proposal?

Bankruptcy is a very difficult experience and it is usually the end result of an arduous period in someone’s life. The circumstances leading to this outcome are important to know because it allows you to provide the lender with the details and determine whether those same problems are likely to reoccur.

Why did they change jobs so often?

Frequent job changes could be a sign of your client taking advantage of better opportunities. It can also be a sign that they cannot hold a job.

Understanding the reasons for job changes and knowing how long the periods of unemployment were between them is a key part of you better understanding your client’s current and future income sources.

Why are they behind on credit card/loan/cell phone payments?

Was it forgetfulness? Is there a dispute with the credit provider? Is this a shared or co-signed account?  Or perhaps this is an early indication of larger financial problem that is just beginning to surface…

It’s best to ask for an explanation for all trade lines that are currently R2, R3 or worse. Don’t ignore past arrears. 

Just because everything is current today does not eliminate the need to explain what happened in the past. You need to know if this is reoccurring or simply a blip.

What is the status of their legal separation/divorce?

You need to understand your client’s legal marital status because if they recently separated or divorced, they may be required to provide additional documentation. For example, they may be asked to provide a separation agreement or seek independent legal advice.

It’s important to know up front what you are dealing with and the level of cooperation that a separated applicant is expecting from their ex. Non-cooperative ex-partners may derail a mortgage application.

Staying Top of Mind with Clients

An agent or broker like yourself is the bridge between a client and a lender. That is both a rewarding and time-consuming position to be in whether you’re using your customer service skills or tackling your administrative tasks.

As a lender, we understand that you are sometimes swamped. Here are some tips we’ve learned along the way to nurture client relationships and stay top of mind, with the goal of always being your client’s first call!

Client-Centricity

“The most important single thing is to focus obsessively on the customer. Our goal is to be earth’s most customer-centric company.” – Jeff Bezos

Leverage Social
Keep in touch in creative ways like following and engaging with your clients on social media. Post relevant topics to spark discussions on your social media! Have a TikTok account yet? It’s a top social media trend in 2022. Click the links below for current trends and best practices.

Lend an ear
People need to tell their story and love an active listener. Active listening is a crucial part of building relationships and is rare in the hustle and bustle of our busy society. Let your client tell their story and take lots of notes!

Evolve
Chat with your clients so you’re always finding opportunities to better yourself and keep their business. If you’ve lost some clients, simply ask why

Follow up strategies to stay top of mind

Deals

Past Deals
Review your files from the past year or two. Check your calendar for files that may be renewing and reach out to those clients to help them make their next move.

Deals that didn’t close
Understand why your deal didn’t close so you can grow professionally. Reach out to the lender’s BDM and ask them why your deal wasn’t processed so you know what to look out for next time. Understanding what makes the lender unique is key.

Future Deals
Remain diligent! Continuous communication with the client and the lender is vital to the success of future deals.

Funding

Before Funding
Talk to your clients about exit strategies. As your deal is being processed with the lender, it’s important for your clients to know their options for the medium to long term. Do a pulse check with them: Is your client happy? How do they feel? Are they nervous?

After Funding
Follow up with your clients after funding is completed. This is a great way to find out what went well, as well as, an opportunity to address any outstanding concerns. Send them a housewarming gift! This can help you grow the relationship. It also creates an opening to ask for a recommendation!

Magenta Answers Broker Questions About B20

The new B20 guidelines are set to come into effect on January 1, 2018.  It is essential for Mortgage Brokers to understand lenders and their niches, and what impact these changes will have.  Accordingly, we have compiled Brokers’ most commonly-asked questions to help you understand Magenta’s lending posture.

Will borrowers have to re-qualify at renewal?
Magenta has always been a short-term lender and will continue to offer short-term loans.  We have always re-qualified mortgages based on payment history and current lending posture, with the goal to move borrowers back to the federally regulated space.

How will it affect your income-verification process?
Magenta has always had a rigorous income-verification process; however, our underwriters are encouraged to apply judgement to each file, and are well versed in identifying and verifying alternative sources of income.

Will Magenta be affected by the restrictions on co-lending and bundled mortgage products?
Although Magenta has previously participated in bundled products, we have always offered our standalone second mortgage product.  We anticipate our second mortgages becoming more popular in 2018.

Will the loan-to-value limits be affected?
Magenta continually evaluates and reviews its LTV posture, and we do not foresee any changes at this time.

Will Magenta still be able to cap their fees?
Yes, this is a key feature of our product offering.

Will the minimum qualification rate (stress test) affect Magenta’s rates?
Although federally regulated financial institutions will be required to qualify clients at the greater of their contract rate plus 2%, or the Bank of Canada posted 5-year rate, this is not the case for Magenta.  We will continue to lend to our clients at our contract rate.  In most cases, this will be equal to, or less than, the qualifying FRFI’s rates.  Our servicing ratios have already taken this rate into consideration.

At Magenta, our goal is to support our Broker Partners during these changes, as well as, help as many people as possible to achieve their home ownership goals.

To find out more about B20, call us at (613) 230-5014.

For more information, please visit Magentainvestment.ca.