Mortgage Blog

Bank refused or rejected your mortgage application? You've come to the right place for alternate mortgage lending options.

July 5, 2014 | Posted by: Kelleway Mortgage Architects

'I was impressed with the care that Glen and Serena showed in arranging my mortgage.  Glen worked out some options that I don't think I would have known about if I had just gone to my bank branch.  I would refer their services to others in a heartbeat.'   - S, an Alberta Homeowner

Definition: 

Alt-A Mortgage Lending Options.

“Alt-A” or Alternative Mortgage lenders offer loans to those who cannot get mortgages from the big banks.  This lending space occupies a grey area between prime (or “A” lending) and sub-prime lending markets. 

Avoid Rejection Fatigue

It is depressing - or even devastating - to find the right home only to have your bank say NO to your mortgage application.  Getting multiple NO’s creates rejection fatigue that, in turn, discourages people from buying or refinancing a home.

Big banks are turning away more borrowers more frequently, basically telling them to come back when they fit the bank’s lending criteria.   Many banks do not tell the rejected, dejected and neglected borrower to consult an experienced mortgage broker for options the bank does not offer!

A Few Years Ago, Major Banks were Welcoming these Borrowers - Now They are Being Turned Away.

Think of a dinner plate as the mortgage market for A-Lending (i.e., prime mortgage market).  A few years back, both mortgage brokers and lenders found many borrowers in that space whose mortgages were relatively easy to fund.  Now, due to tighter mortgage lending rules (for example OFSI’s B20 & B21) and other market factors, the big banks have -in effect - taken a side plate and put it in the middle of that dinner plate.  On that smaller side plate are found only those 'triple A' borrowers who can easily meet the stricter lending criteria of the five major banks.  

Those who don’t land on the side plate are being:

1) pushed into the margin between the side plate and the rim of the dinner plate (i.e., the Alt-A  or Alternative Lending space), or

2) pushed onto the napkin into the realm of private lending, or

3)  pushed onto and off the table to build, or rebuild, their credit history before applying for a new mortgage.

Generally, Canadian Alt-A borrowers do not tend to be serially delinquent in paying their bills.  Neither are they the “no income, no job” type of borrowers who were at the heart of the US Subprime lending crisis.

They do have income but they:

•  - are self-employed (or self-employed
•  - are New to Canada (and don’t fit “A” lending New to Canada criteria),or
•  - have not established a sufficient Canadian credit history, or
•  - have experienced some damaged credit in their past, or
•  - have “piece-meal income” coming from a variety of legitimate sources that are difficult to verify through third parties.

Previously, some may have been A-borrowers who now find themselves in the Alt-A space due to factors beyond their control.  For example, their attractiveness to lenders could be affected by a slower housing market, or tighter lending rules (imposed by government, default insurance companies and/or major banks) – or, some combination of these factors.

What We Can Do to Help?

First of all, when your bank says “No”, keep in mind that you are getting that answer from just ONE bank.  It does not mean that no other lender is willing to grant you a loan. 

What do we do for you?

1) Gather and review information from you, the borrower,
2) Research best potential options from lenders that may provide financing for your specific situation,
3) Explain why in today’s market your situation fits some lenders and not others,
4) Help you select the best financing  option as part of a long term strategy,
5) Negotiate and secure offer(s) from lenders who will lend to you, and
6) Coordinate third parties, manage digital paperwork and trouble-shoot any issue related to your mortgage application that may arise – all to ensure you get the right funds at the right time.
7)  Guide you throughout the life of your mortgage by offering relevant advice and exceptional service.

Through us, our clients have a choice of lenders. It’s our job to sift through those choices and match a potential lender with each client’s financial situation.  Sometimes we find a major bank or monoline lender who will lend to that borrower using A-lending criteria if we can validate the client’s credit-worthiness through alternate third-party sources.   If not, we search for an Alt-A lender or product that will fit before we seek private (at higher cost) lending options.

Examples of Past Client Situations:

Issue:  New to Canada
Solution:  Advised client how to use a secured credit card to establish a Canadian credit history.

Issue:  Self-Employed 
Solution:  Taxable income was too low to “income qualify” for a mortgage.  We worked with the client’s accountant to detail gross revenues and then include “add backs” of business expenses to show that the Stated Income was reasonable for lender and/or default insurance company criteria.

Issue:  Undisclosed Income (Cash) and Disclosed Income (Taxable) 
Solution:  Used lender’s stated income program that allows a reasonable portion of the borrower’s income to come from non-disclosed (cash) jobs.

Our Goals for You:

Short Term Goal.  We arrange the best financing, from a wide choice of potential lenders, to save our clients time and money when purchasing a home or refinancing their mortgage.

Long Term Goal.  Over time, we guide our Alt-A clients along the shortest route possible towards entering the A-lending space where they can later qualify for preferred mortgage terms.   In most situations the movement to the “A” lending space happens in 1 to 3 years from the funding date of their Alt-A or private lender mortgage.

To us, the first mortgage is a transaction when we get to know our clients.  From there, we keep in touch and offer mortgage planning to help Alt-A or private lending clients move themselves into the more desirable A-lending space. 

What's the Next Step for You?
1)    Keep us in mind and on hand in case anyone you know runs into the same sort of situaltion.
2)    Share this post with your friends and family because you never know when the info could come in handy.
3)    Call or Email Us just to connect and get started talking about your plans. (see below)
4)    Sign Up for Glen's Perspective newsletter > Click here 

Glen Kelleway, BSc, AMP, Senior Mortgage Planner & Owner
If you would like us to contact you by phone or email, please click Contact Us Kelleway Mortgage Architects will get back to you within one business day.

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