Stated Income Mortgages
February 29, 2012 | Posted by: Crescent Mortgage Corp.
According to CAAMP, Canada has approx. 2.67 million self-employed citizens, about 15% of the work force.
Due to how they report income and deduct expenses, these individuals are frequently reliant on stated income mortgages.
A few weeks back, Bloomberg quoted Canada's bank regulator, OSFI, as saying stated income mortgages "have some similarities to non-prime loans in the U.S.” and just weeks before that, CMHC announced limits on bulk mortgage insurance used by lenders to reduce risk on conventional deals.
Given these developments and heightened risk aversion in the industry, it’s not coincidental that mainstream lenders have begun to tighten up—or in some cases abruptly eliminated—their stated income programs. Various lenders have also either increased rates for these deals, or started charging insurance premiums on conventional “business for self” mortgages.
BFS borrowers are likely to value the services of a mortgage broker more than ever as a result of the changes in the market.
Whereas most banks seem averse to uninsured 80% LTV stated income mortgages, alternative lenders (which distribute mainly through brokers) offer self-employed financing solutions with: far less paperwork, longer amortizations and greater flexibility in terms of secondary financing options.