As the winds of change sweep across the lending landscape, regulatory underwriting guidelines are growing ever tighter. This puts non-bank clients in a precarious position, and mortgage brokers are feeling the pressure.
With diversified funding as an option for credit-worthy borrowers, brokers can act as a beacon of hope, navigating a path toward mutual success both for themselves and their clients.
During market adversity, lenders repeat history—pulling back support for credit-worthy borrowers
In the wake of the recent pandemic, the Canadian economy is showing signs of recovery, but that doesn’t mean it is smooth sailing ahead for everyone.
The lending ecosystem in particular is feeling the impact of current market headwinds, leaving Canadian borrowers—mainly small commercial and business for self-borrowers—with a shortage of mortgage funding. Despite this challenging economic cycle, these non-bank clients are proving their resiliency by finding ways to weather the storm with help from mortgage experts in the space.
While grappling with liquidity issues, lenders are struggling to keep pace and support prospective buyers and renewing business. It’s a particularly tricky situation for those who invested in 2020 during the peak of the pandemic-driven surge in real estate and mortgage originations. Borrowers are reaching their renewal periods and the lack of available funding options has made the situation much more dire.
The urgent need for non-bank alternatives has prompted borrowers and mortgage brokers to turn to non-bank lending specialists like Glasslake Funding, a diversified funder, to help fill the market void.
The impact of today’s funding limitations on Canadian mortgage brokers
- The shortage of capital is limiting alternative funding options for mortgage brokers and their niche clients
In the Canadian alternative lending landscape, the two main types of lenders are balance-sheet lenders, those that hold loans on their business book, and originators, categorized as lenders that rely on third-party providers to obtain loans. The market has noticed a surplus of originators, and while this isn’t concerning, the current economic cycle has resulted in liquidity-related challenges for these lenders due to a lack of investment capital from investors. As a result, brokers and borrowers seeking alternative funding options may face limited choices for sustainable financing.
- Increased regulatory risk enforcement is adding constraints to lender credit decisioning, and less funds in the hands of credit-worthy borrowers
The recent collapse of the U.S. Silicon Valley Bank caused disarray in the financial industry, heightening Canadian regulators’ existing concern about risk and prompting them to swiftly tighten their guidelines, processes, and management. While beneficial for the market, it may have positive and negative impacts for borrowers. The regulatory monitoring in the alternative space helps lenders maintain adequate liquidity management, reducing the likelihood of sudden collapses. However, borrowers are being faced with increased difficulty seeking non-bank options to qualify, with much longer and exhaustive approval processes.
Regulatory tightening continues to reduce financing options for credit-worthy borrowers. These borrowers need access to alternative funding and have shown strength through challenging economic cycles. As this pool of borrowers continues to grow, we can support them by injecting liquidity and expanding product offerings.”
— Mike Forshee, President at Glasslake Funding
- Despite non-bank borrower affordability and steady mortgage demand, brokers are pressured to find solutions to satisfy some of their most financially-sound clients.
Strong demand for non-bank mortgage loans and a challenging economy are pressuring brokers to find tailored financial solutions for secure clients.
These borrowers require sustainable and flexible options. Brokers must balance affordability with financial stability, using diversified funding options to increase financing alternatives and minimize risk.
This approach provides opportunities for successful borrower outcomes.
Over 60% of Canadians feel concerned about renewing or qualifying for a mortgage. Almost 30% of Canadian mortgage holders and those with a purchase plan will look to alternatives to traditional lenders.
— Source: RATESDOTCA
- When banks (and privates) leave borrowers hanging, diversified funding is the key for brokers to pick up the pieces
The federal mortgage stress test has steered borrowers towards non-conventional financing options, including private lenders. However, these lenders are cautious about renewing loans due to the absence of a payment guarantee.
With diversified funding, borrowers can access financing solutions with more flexible qualifying options and longer repayment terms. This helps to secure accessible, sustainable loans with lower fees and competitive rates. Not only does this offer clients greater financial stability and control, it also provides brokers a point of differentiation in the alternative mortgage space, enabling them to offer much-needed value for their clients.
Glasslake: a new sustainable funding option for non-bank clients
Glasslake Funding ULC is a wholly-owned Canadian subsidiary of Bayview Asset Management, LLC — an investment management firm with $15 billion in assets under management as of December 31, 2022. Founded in 2022, Glasslake Funding serves the investment needs of clients through commercial and residential lending.
As regulations become more stringent, alternative financing options have become less flexible and unable to accommodate diverse clients. However, Glasslake Funding operates in a unique market sector, providing greater flexibility in their small commercial and residential product offerings and qualifying programs as they are neither private nor federally regulated.
Glasslake prioritizes a human-centred approach to lending and strives to do right by the client. Led by a team of alternative experts, Glasslake offers longer-term financing plans, eliminating the need for frequent re-qualifications. Their primary goal is to provide intuitive solutions that create peace-of-mind for their seasoned investor clients—without relying on strict box-checking and bloated processes.
Changing lending for a sustainable tomorrow
It’s time for real change. Glasslake is disrupting the non-bank space by challenging traditional mortgage lending convention. The company prioritizes putting their clients first, even when market conditions go against them.
At the heart of Glasslake’s philosophy is a desire to build the best customer experience possible. A fundamental aspect of this belief is to ensure brokers are given fair compensation to avoid passing on costs to the client. This commitment exemplifies Glasslake’s unwavering dedication to placing clients first, setting the company apart as a standout leader in the industry.
Glasslake launched “The Glasslake Reflective,” a new program dedicated to bringing together brokers to discuss industry standards, advocate positive client-driven change and rebuild where the industry shows obvious gaps. Ready to get on board? Connect directly with a Regional Sales Manager today.
Let’s work together to make deals happen.
There are deals to be made today.
Visit glasslake.ca/contact/
