An insider article from mortgage guru Rob McLister prompted me to get this important message out: Underwriting is tightening up at the banks. Not just from what I’m reading in the paper, but also seeing it on my lending submissions too.
I’m seeing it happen in realtime.
Underwriting is the process that the lender goes through to decide on whether or not to approval or decline a loan. When underwriting tightens up, it means that lender’s guidelines for determining if they approve or decline a loan become more strict.
They make it harder for people to get a loan.
Rob’s article talks about how BMO is targeting self employed applications for people in specific industries that are going to be most affected by tariffs, or an economic downturn in general.
Maximum allowable debt servicing ratios go down, and the credit score requirement becomes higher for self employed applicants, in this case.
Industries affected are construction, transportation, leisure/Entertainment, Retail Sales, Banking/Finance, Manufacturing, Farming/Natural Resource, Wholesale Trade, Utilities, Steel and Aluminum.
Don’t be surprised by the list being so long and covering so much. Really, this is more of a tightening on self employed applications in general.
It’s no secret that if our economy faces large uncertainty, the banks will start pulling back on what they consider riskier lending. Battening down the hatches, one could say. Less applications get approved because the banks risk appetite goes down.
Over the years, I’ve seen underwriting policy go in ebbs and flows, but generally, mortgages have gotten harder to approve over time. I’ve seen so many policy changes that make things harder to qualify, and not too many policy changes making things easier.
There’s two ways that we see underwriting tightening take place. First, when the guidelines themselves are changed by a lender or insurer. For example, maximum loan to values or debt servicing ratios for specific scenarios. These are tangible changes to underwriting.
The second kind of underwriting tightening is more unspoken. There’s no specific rule change, it’s just “the lender’s appetite for the lending” isn’t there. It’s a lender’s lame excuse for just not wanting to do the deal. They’re just not feeling it.
BMO’s change in underwriting from above is an example of both. They’re changing specific lending guidelines, but also making it somewhat vague for who they apply these rule changes to. They give themselves more outs if they just want to decline a deal.
Generally, if you’re trying to get approved for a loan right now or in the near future, you care. A lot.
Here’s the brass tacks. Figuring out the best strategy for the optimal loan approval is a science and an art. It takes knowing lender policies inside out, AND also knowing where each lender sits with exceptions to the rules. The latter is just built with experience.
It takes experience in having done thousands of loans over time, knowing when and how to get an exception, or how to get something approved. Tactics. Strategy. Knowing the underwriting game, inside and out. This level of knowledge and know-how is out of reach for most in the game.
If you’re trying to get approved for a loan, who do you want helping you with strategy? The 2nd year junior banker or first year broker? Or me and Darla, seasoned veterans that have been in the trenches of lending for now over 25 years, between the bank and brokerage.
It’s not just that we’ve been doing this for so long, but we know that science and art of underwriting. How to get things approved. We’re really good at it. We work as a team. We’re mostly efficient. We get everyone sorted and approved. Everyone.
100% closing ratio. 0 deposits lost. That’s a track record.
Managing 15 to 20 loans a month is a big ordeal. Considering each deal requires 10 to 20 experienced person hours between endless phone calls, emails, follow-ups, submissions, re-submissions, more phone calls, more emails, more followups.
More people are calling and inquiring with us now too, because I think people can sense that they want to work with the best.
So Darla and I are being more choosy on who we take on as clients. Before we start working on a deal, we determine if our client is going to be loyal, or if we’re just being used in the race to the bottom.
I’m still in a position to make sure everyone who calls me knows where they stand. It takes me about 15 to 30 minutes to really sort someones situation out. By the end of that 15 minutes, you’ll know facts like; if you’re insured, insurable, or un-insurable. If you’re an approval and at what percentage downpayment. I’ll be able to give you some approximate rates and expectations for your approval.
As the phone rings more and as we take on more business, I’m thankful that I have good and consistent help with Navreet joining the Steinberg team. Nav is helping me stay scheduled and on task, she’s helping me manage my phone, and just being a great help in general.
To book in, reply to this email, and we’ll schedule a time. Or, call me at 2508587160.
Or, book into my calendly directly for a meeting.
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