Oct
05

An Open Letter To The Globe And Mail.

(Background)

Today I nearly lost it but I had to think long and hard as to what to write to The Globe And Mail. The article in question is (unfortunately) hiding behind a paywall but you can see the article on https://www.pressreader.com/ if you search “To Compete, many alternative lending firms target less desirable borrowers” in google, - it’s the first hit (I can’t link it)

So, here’s what I wrote to the two authors of this story. Here goes:


David and Tim

Thank you for misinforming the public once again with your front-page ROB article about the New Rules and how they will challenge non-bank lenders.

You write:

“The banks, which account for 70 percent of the market, have the highest underwriting standards in the country”

Completely and utterly wrong. How do you define this versus what standards Street Capital, MCAP, CMLS, etc have? Please let me know. The truth from the street is, CIBC, RBC, TD etc., do not have higher underwriting standards they just take much longer to approve the same application. What they do have is much higher penalties if exiting the mortgage, much less information to pass to unsuspecting clients, and much less choice for consumer. Awesome!

You also write “To compete, many alternative lenders target less desirable borrowers”.

Again, totally and utterly wrong. As a matter of fact I would argue opposite; I know from experience many many times I have lost 65% financing deals ranging from foreign buyers to high-net worth buyers without incomes to jumbo loans to the big banks from the so-called “alt lenders” you mention. Why? Because these lenders have much stricter criteria for these off-the-map deals which I have placed myself with the big banks!

I also know that you are not differentiating from your reporting the difference between a sub-prime lender (Home Trust, Equitable Bank et al.) and the prime lenders (First National, MCAP, Street Capital, CMLS et al). What I don’t get is - you talk to two well-known industry professionals and yet fail to identify this exact huge difference between the above? Did you not ask them or were you too busy asking for a quote?

For example, there is a massive difference between a self-employed deal financed through a PRIME lender and one done by a SUB-PRIME lender. I would love to show my book of business and show you the hundreds of well-qualified, great credit, great asset deals I have placed through these “alt lenders” you name. I’d love to show you how and when these lenders also declined deals which I thought were “good” but they didn’t - showing strict criteria. I’m sure my lenders will also show you my book of business’ repayment rate historically and how exceptionally low it is, plus how high their average credit scores are, plus how much they have saved, etc..

As for your opinion that some lenders target alt-a loans more than others - completely not true. Firstly, Genworth and Canada Guaranty have very good self-employed alt-a loans for self-employed borrowers with great credit, and with a very strong reasonability of income test which often times fails and these loans go to Home Trust.  HOWEVER none of these lenders TARGET alt-a loans, which are self-employed. They merely offer them as part of their suite of products. There are no banners, or ads, or emails saying “hey guys! we are the self-employed KINGS and QUEENS!”.

And here’s my opinion (and I’m sorry but I’m going to be blunt). I am absolutely sick and tired of the terrible misreporting done by your newspaper, the incessant chase for the story, the completely wrong facts which paint a single brush over the entire mortgage industry and prop up the big banks which do not hold the consumer’s best interest at heart. I know you have a business to run, that is, to sell press, but I wish that the stories you ran had a lot more fact than fiction.

(Oh, and for the record, I am commending you for your reporting about money laundering in BC primarily, so let’s separate where my issue with you lies)

The bottom line is simple. You are wrong. The banks aren’t better at underwriting. This is what they tell you but not what the truth is.  You’re also wrong that all lenders that are NOT banks are considered risky, sub-prime-, “alternative-chasing-bad-deal” lenders.

Yay! Our housing market is going to correct itself finally. Awesome. Let’s cheer for all the equity lost, jobs lost and potential economic malaise we are going to enter in because the Globe and Mail saw it fit to keep chasing this story (and then, misreporting it time and time again).

Thank you for reading my rant.  Reach me anytime, I’m very friendly and love chatting about this stuff.

Jake

Posted in: News