Bruised Credit Solutions

3 Tips for Planning an Exit Strategy

For your clients who need a quick-fix mortgage, putting together an exit strategy is a must!

Here are three tips for planning an exit strategy that will help you transition your borrowers:

1. Begin Right Away.

Successful exit strategies depend on getting started right away. The best practice is to formulate a plan while the ink is still drying on the quick-fix mortgage. This is especially true if bruised or thin credit necessitated the short-term, higher rate mortgage, as credit takes time to build and repair.

2. Diagnose the Problem.

In order to find a solution, it’s important to know where your borrowers are struggling. The culprit is usually bruised or thin credit, but in this age of entrepreneurs, proving income may also be an issue. No matter the problem, there are almost always ways to address it and fix it.

3. Follow Up.

Set milestones for your borrowers and check in on them regularly to make sure things are progressing according to the plan you set up.

If everything is coming along nicely, you can begin building the file for their transitional refinance nice and early and have it ready to go when the quick-fix mortgage renews!

Register for Magenta’s back-end portal to access useful tools and forms today!

About Magenta Capital Corporation

Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.

For more information, visit us at magentacapital.ca or contact our broker representatives at brokers@magentacapital.ca

Packaging Your Deal: Top 5 Things to Include in Your Submission

Crafting a mortgage file for submission is an art, but did you know that your submission notes can be one of the most important parts of your deal?

Thorough broker notes can lead to speedier approvals and a smoother underwriting process.

Here are the top 5 things you should always be including in your submission notes:

1. Your Contact Details: Be consistent about putting your best contact telephone number and your business email address in your notes, especially if the submission agent is not the same agent who will be looking after the deal. This will allow underwriters to reach you quickly and easily if they have any questions while reviewing the file.

2. The Basics: Is the deal a purchase or a refinance? Is it a rush? Are your clients looking to pay out specific debts or do renovations? Will the property be owner occupied or rented? Providing a brief outline of the file in your notes can help a deal take shape quickly for your underwriter.

3. Rates and Promotions: Are you looking for a special rate or a lender-specific program or promotion? Request it in your broker notes!

4. Potential Issues: Have you spotted something you think may cause a hiccup in your deal? Is it something that may need an explanation? Be sure to include the details in your notes. Broker notes provide an ideal forum to explain and mitigate any issues that may affect a deal.

5. Documentation: Do you have all your paperwork ready to submit?  Sending required documentation up front is a best-practice strategy, but if you give your underwriter a list of what you’re able to send, they’ll know to expect it, and it will be added to the file with little to no delay.

Thorough broker notes show the underwriter that you have a good grasp of both the deal and what your clients are looking for, and they can make the underwriting process quicker and more efficient for everyone.

About Magenta Capital Corporation

Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.
For more information, contact our broker representatives at brokers@magentacapital.ca or visit www.magentacapital.ca.

 

Hard Questions Mortgage Brokers Should Ask Clients with Credit Challenges

In the process of interviewing a client, you’ve discovered some challenges with their application.  You recognize that something about the application either doesn’t add up or requires further questions and investigation.   But what does that look like?

It’s not uncommon for mortgage brokers to struggle with asking the hard questions.  Even experienced agents can feel uncomfortable asking hard questions and delving deep into their clients’ background and personal history.  They recognize the need to get more detail but also feel their questions are intrusive or confrontational.  They don’t want to offend their client or put them on the spot 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 borrower.

As a mortgage professional you should explain that your job requires that you understand the root cause of their challenges, you are completely non-judgmental about their circumstances, and that their information will be held in confidence.  Explain that this is how you will ultimately get them the best mortgage suited for their situation and future goals.

Getting to the Bottom of Your Client’s Credit

What are some typical ‘hard questions’ that you may have to ask your borrower?

Here are questions that can help you position your client to the correct lender the first time:

1. What caused your bankruptcy/consumer proposal?

   Bankruptcy is a very difficult decision for those who have had to experience it and it’s usually the end result of a very difficult period in someone’s life.  The circumstances leading to this outcome are important to know because it allows the underwriter to make a determination as to whether those same problems are likely to re-occur.

2. Why did you change jobs so often?

   Rapid and frequent job changes could be a sign of your borrower taking advantage of better opportunities, or a sign that he/she cannot hold a job.  Understanding the reasons for the job changes and knowing how long the periods of unemployment were between them is a key part of the underwriter’s review

3. What are the negatives related to your property?

   Most people feel that their home is their castle and they tend to over-value the property and under-estimate the negatives associated with it.  Many lenders put significant weight on the quality of the property when determining if they want to lend on it.  Talk to your borrower about what challenges the property might present so that they can be addressed early on in the process.  Some examples might be related to it’s condition, location, visual appeal, upkeep, unique features (indoor swimming pool) previous insurance claims, etc.

4. Do you have any payments owing to your property taxes or income taxes?

   Most lenders require property taxes and income taxes to be paid up to date prior to funding a new mortgage, so discovering this late in the process can potentially bring the deal to a hard stop.  Even if the borrower’s credit is immaculate, ask this question early in the process and then ask for proof.  Bring the deal to a hard stop.

5. What is the status of your legal separation/divorce?

   You need to understand your borrower’s legal marital status because a borrower who is recently separated or divorced may be required to provide additional documentation, such as a separation agreement or independent legal advice from their ex-spouse.  It’s important to know up front what you are dealing with and the level of co-operation that a separated applicant is expecting from their ex.  Non-co-operative ex-partners sometimes have the power to derail a mortgage application.

6. Why are you behind on your credit card/loan/cell phone payments?

   Arrears on one single trade line that appear on an otherwise strong credit bureau report always seem out of place to an underwriter.  It’s important to have the explanation as to why that account is behind.  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.  As a rule, it’s best to ask for an explanation for all trade lines that are currently R2 or worse, or past trade lines that are 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.  Underwriters want to know if this is reoccurring or simply a true blip.

 

Once you’ve asked the tough questions, ensure that you document the explanation and then don’t be afraid to ask for verification from the borrower.  You should anticipate that the underwriter will ask for this, so be up front in disclosing it, explaining it and verifying it.

About Magenta Capital Corporation
Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.

For more information, call us at 888-267-1744 or  visit www.magentacapital.ca.