There’s been a not so subtle shift in the industry this year.

It started with the tightening up of requirements from lenders. It then moved to documenting proof of not some but almost all items stated on the submitted applications. Next they’ll be asking for birth certificates. “We don’t believe you were born.”

It used to be I could call and explain a situation to an underwriter. We’d have an agreement in principle IF I could supply some kind of proof of the story. Now we have deals where I can offer an explanation, but that doesn’t matter. If I don’t have a square peg in a square hole the deal is likely not going to get approved. The decision making has been taken away from the underwriter and give to “risk management”.

Today if there is anything out of the ordinary with a file, I might as well call up Home Trust and negotiate with them. They are the only, what we call in the business, “equity” lender still left in Canada.That’s right. ONE.

When I started in the business, they referred to Home Trust as the lender of last resort. At the time, we had B lenders or sub-prime lenders coming out our ears. Something wrong with the file? Go to lender X. Only after finding out lender X wouldn’t do the deal would you consider HT.

Now lenders B through X have all disappeared (at least from accepting broker deals). Leaving me with the option of someone who doesn’t quite fit an A lender requirements to go to HT or as a desperate measure a private money lender.

Now HT has moved forward and have decided they want to play in the A lending space, blurring the line even more. They too have limited where they lend… major urban centers was the last line I was told.

Strange how I find that the B deals I find are almost never in a major urban center.

I have no proof yet, but I get the feeling private money lenders have seen a major increase over the last while. I know one company that started up a little over a year or 2 a go by two former bankers who knew what a good deal was and how to work with clients to solve problems. They understood that bad things happen to good paying customers and that sometimes things get better if you can just solve a problem for a short while until they are back on their feet. Oddly enough they understand that they have to pay a higher rate for a short term until things are cleared up. Put these folks into homes (or more likely keep them in the one they’re in) rather than force them out and offer up countless explanations to landlords who likely will see them as a risk as well.

The common sense lending is gone. Along with it the trust factor. Trust of just about anything. From lenders not accepting government documents because the fax machine slightly altered the document, to the outright non-acceptance of letters from lawyers stating they have funds on hand for closing/downpayment. “Where did the lawyer get the funds from?” He’s a lawyer. Won’t he be disbarred if he commits fraud? Yes, but we still want to know where the funds are coming from. I’m sure it’s coming from that drug dealer he knows that funds most of his practice.

I love that joke. “99% of the bad lawyers are given the 1% of good ones a bad name.” From one lender it seems there have been a few lawyers who have been willing to take a large sum of money to sign a letter which wasn’t exactly truthful. Rather than cut off certain firms one at a time or create a list that everyone shares (Hm. like they do with brokers, called RED-X, which we have no input, but that’s another topic for another time), they simply state that they don’t accept letters/confirmation of funds of whatever from all lawyers.

And yet they still are willing to let these same lawyers close the deals. Hm. Do you think that these same lawyers that were willing to sign for cash might be able to come up with another way of making money out of the deal? I guess because lawyers are professionals they can’t be blacklisted.

So much for having a silent joint venture partner on a deal. I think the only way left now is to have a corporation with shares purchase by the partner, of course they can’t have voting  or majority shares.