As over 40% of all client estimate requests submitted to The Renovation Co-op include the need for some form of financing, The Canadian Renovation Funding Program acts as a Free Advisory Service that provides referrals to Co-op-Approved Mortgage Brokers and other financial-related professionals. The Program is also responsible for the approval, management and administration of all Subsidy and Rebate Programs developed by The Renovation Co-op.
Working on behalf of both Co-op member-services and homeowners alike, the Renovation Funding Program consists of an experienced group of Financial Service Professionals, along with management specialists that have been selected from the residential and commercial construction industry.
Subsidy Fund Approvals
Upon the completion of the bidding session conducted for each project, an automatic request is submitted to a Subsidy Approval Panel to determine what (if any) available subsidies or discounts that can be applied toward the final price (Best Co-op Price see Estimating Procedures)
Throughout each day, several of these Subsidy Fund Approval Sessions take place, during which each estimate is reviewed to determine the amount of funds that can be accessed to reduce the cost of the proposed work.
During these reviews, the Funding Approval Team discusses the type and level of work being performed, the type and level of contractor required to fulfill the work, along with other factors such as the current availability of all subsidy funds compared to the current volume of requests. Although the monthly balance of Subsidy Funds transferred to its member-contractors must be totally exhausted each month, great care is given by the Fund Managers to provide a fair and balanced approval process for each project.
Disclaimer: Neither The Canadian Renovation Funding Program nor any other related organizations or entities that are publicly displayed as being under the “umbrella” of The Renovation Co-op act or claim to act in the capacity of lenders. mortgage brokers or other licensed professional services. Nor do such related organizations or entities engage in the arranging of mortgages.
The role of the program is to assist homeowners who are seeking renovation financing by individually referring the client to a licensed mortgage broker (or other licensed, financial service professional) who can best deal with the client’s unique situation.
Types of Loans:
As over 30% of all renovation-related inquiries are referred through licensed Mortgage Brokers, Bank Loan Officers, Financial Planners and other Financial Service Professionals, The Co-op pays strict attention to any feedback given by both clients and contractors who have used their own lending professionals.
The reason: By identifying and approving those licensed mortgage brokers who not only “know their stuff”, but who will always put the client first, the Co-op can confidently refer homeowners to them.
In addition, if a construction or renovation-related loan is required, it is always in the best interest of both the client and the contractor-member to refer the client to a Co-op-approved broker who is totally familiar with the construction process. For example, if a client uses an inexperienced mortgage broker who mistakenly obtains an approval from the wrong type of lender, the terms of the progressive payments may be impractical for a contractor to accept, and the loan approval becomes useless.
Over the years, this has helped the Renovation Co-op more precisely target the referral of approved Mortgage Brokers to a wide variety of homeowners.
When a homeowner seeks financing for a renovation project, The Co-op will refer the client only to those mortgage brokers who specialize in the arranging construction and other renovation-related loans or loans that best suit the requirements of the client.
In addition, there are brokers who specialize in arranging such loans through institutions such as Banks and Credit Unions, while there are other brokers who work solely with Private lending Sources (see Private Mortgage Loans below) such as MIC’s (Mortgage Investment Corporations) and those individuals who invest in Private Mortgages
As timing and precision play such important roles in the construction process, it is essential that the client is given a referral to the most appropriately-matched lending specialist/broker. Mortgage Broker Referral Request
Poor Credit, Debt Consolidation etc.
A large percentage of financing inquiries come from homeowners who may have equity in their homes, but whose credit has been tarnished due to the overuse of credit cards, personal loans and/or other personal circumstances. In some cases, the client may also be facing Power of Sale or Foreclosure.
Mortgage Broker Referral Request
Private Mortgage Loans
Although many licensed mortgage brokers/agents typically claim to have access to “all kinds of private lenders”, the type of broker needed to remedy many of these more personal, time-sensitive situations requires a high degree of skill and experience.
With such a wide variety of Mortgage Loan Products now available for so many different, individual levels of credit, most Brokers have found it more efficient to specialize in specific types of mortgage products.
For example, a mortgage broker who has previously worked for a major bank (as so many of our Approved Mortgage Brokers have) prefer to specialize in dealing only with those clients who qualify for bank lending for a 1st Mortgage. They do this because they are most familiar with the goings on within the banking system, which gives them an “edge” when working on behalf of a client.
With so many types and levels of bank mortgage lending in itself, and given the number of professional relationships the broker must develop and retain within that “world” in order to properly service such clients, it is rare to find this level of broker who is equally as skilled at Private Lending on an ongoing basis.
Brokers who specialize in Private Lending must carefully walk a “thin” line when arranging a mortgage between a client and a private lender. As opposed to the large banks that have their own large-scale, organized approval procedures, the individual Private Lender must rely upon the Broker to gather enough accurate information about the client’s personal financial situation to make an informed decision as to whether or not to accept the risk. In some cases, the private lender may want to physically view the property first before making a final decision (Even though a valid appraisal may have been completed).
And, as the mortgage industry has evolved along with other professions, only those brokers who have shown to truly specialize in working with Private Funding are referred by the Co-op to clients who need such a loan.
These are highly-skilled brokers who have access to private lenders that are willing to take risks without overly “gouging” the client with unreasonable interest rates and lender fees. Through our Mortgage Broker-Partners, the Co-op provides access to over $1 Billion in Private Mortgage Funds across Canada. Mortgage Broker Referral Request
CMHC Purchase-Plus Improvement Mortgages
Genworth Purchase-Plus Improvement Mortgages
Instead of waiting until after the mortgage closes and then applying for a separate, additional loan for the renovations, a Purchase-Plus Improvement Mortgage enables you to add the cost of the renovations to the total mortgage, which also means that the interest rate paid for the renovations will be at the same low rate as the mortgage.
With this type of mortgage, the bank will provide additional funds for the renovations and include the amount as part of the mortgage. It does this by projecting the future value of the home with the renovations as being completed.
However, most mortgage brokers have little or no experience with this type of mortgage product (which has actually been in existence for over 20 years). In fact, many of the bank’s mobile mortgage reps have limited experience as well. Most of them view this type of financing as being too cumbersome and complicated to deal with or to explain to the client.
The truth of the matter…It really isn’t!
The Renovation Co-op has developed good working relationships with both independent mortgage brokers and banking professionals whose training enables them to easily arrange Purchase-Plus Improvement Mortgages.
Unsecured Lines of Credit
An Unsecured Line of Credit of up to $25,000 is available for renovations performed through The Renovation Co-op.
This type of loan is based upon credit scores and income only, and is not tied to the equity of the home.
The Canadian Mortgage Brokerage industry as it exists today is relatively new to Canadian society. Prior to 1999, only a handful of independent mortgage brokers were offering alternative lending to homeowners and home buyers who had “less than an ideal” credit records.
The then-small brokerage industry was unregulated to any great degree, and many of these mortgage brokers took advantage of such clients, charging excessive and unfair fees and rates.
Around the same time, Canadian Government regulators were starting to ease the rules regarding the entry of foreign-owned banks into the country, to enable a more competitive environment that mainly consisted of the 5 major banks across the country.
And in doing so, more Canadians were given a wider choice and the affordability to buy a home. And by enabling the purchase of homes on a such a wider public scale, the result boosted the construction industry across the country and created new jobs in all sectors ranging from financial services, renovations, new home construction and all of the satellite industries related to construction.
Large U.S. banks such as Wells Fargo, American Express and other European and East Asian banks were admitted into the “club” of Canadian Lenders with a target market of high-ratio loans, which was designed to offer minimal down payments to new home buyers.
To ensure the safer exposure to a more professional environment for the general public, and the anticipated volume of mortgages that was being created by the easing of bank regulations, Ontario became the first province to tighten its Mortgage Brokerage licensing and educational standards for persons involved in the sale of mortgages, including the broker’s own agents. This also included mortgage reps employed by the major banks, who also had to take approved mortgage broker/agent training courses and obtain individual agent licenses.
By 2005-2006, High-Ratio Mortgages had now become the “flavour of the day” in many western countries, with the U.S. leading the “pack”. And with over 8300 banks throughout the U.S. (not branches…8300 individual banks!) the “pack” was huge.
Many of these U.S. banks were now offering mortgages at and above 100% of the home’s value vs. the historic insured bank limit of 85-90% LTV.
And, instead of using its own reserves to fund these mortgages, the banks would sell these loans to investment companies, acting more as “brokers” than bankers. By doing so, both U.S. and Canadian banks were able to turn around and sell more and more mortgages by continuously packaging and selling their mortgages.
Of course, the large investment companies throughout the world that were buying these packages of mortgage portfolios from the banks did not realize that, buried within each package of mortgages they were investing in, (which included more and more of these high-ratio mortgages) were many mortgages sold to people that should never have been approved by the banks in the first place.
By 2008, over 35% of all mortgages sold within the U.S. and other countries had exceeded the regulatory approval parameters of what were considered to be High-Ratio Mortgages.
In Florida, a manager at a grocery store earning less than $40k per year was able to purchase a $600,000 home with no money down and no interest for 5 years. In Texas, a substitute teacher earning $30k annually purchased a $550,000 home with a down payment of only $5,000, with 1% interest and deferred payments for over 1 year.
Such easy terms were incorporated into almost all high-ratio mortgages written across the U.S,Great Britain and Germany.
Luckily, the Canadian Banking Regulators had kept a much tighter lid than did the country’s G-20 partners on such types of transactions, and remained vigilant in ensuring that high-ratio mortgages did not exceed 5-6% of all mortgages sold within Canada.
When these mortgages were scheduled to be re-written after their original 5-year terms, and so many homeowners were now facing payments exceeding 4-7 times their original payments, defaults and foreclosures went wild throughout the U.S and other European countries, which had a devastating effect on the entire financial industry worldwide.
In all parts of the U,S, homeowners that were now facing new, unmanageable mortgage payments simply walked away from their homes after having defaulted on their mortgage payments for months.
In southern states such as Florida, where foreclosures soared along with the temperature, banks were forced to spend millions of dollars to repair and maintain badly damaged homes that had been abandoned and stood empty with no power and no air conditioning.
For several years following the 2008 real estate crash that ensued. investment companies would intensely scrutinize even those bank mortgages that were insured by CMHC, for fear that there may be a “fly in the soup,”
At one point, CMHC actually had to purchase over $20 Billion in existing CMHC-insured mortgages from Canadian Banks because the banks were having difficulty in finding willing investors to buy their mortgages (even though they were all insured against default).
Starting in 2010, as the banking industry throughout the world started its slow recovery, the Private Mortgage Industry began to expand quickly, due to the heavy tightening of credit qualifications that were now being imposed by the banks.
In particular, many hard-working, self-employed homeowners suffered unfairly, as the banks were now rejecting mortgage renewals for self-employed clients who were unable to meet their newer. personal income requirements.
To fill the void created by the banking industry, private Mortgage Investment Corporations (M.I.C.’S) within Canada were established to offer viable solutions.
These investment companies (some of which are public companies) were set up entirely for the purpose of offering investments in higher-risk, 1st and 2nd mortgages. Such 2nd mortgages are normally limited to a maximum of 80-85% of the home’s value. 1st Mortgages, normally limited to 65-75% LTV.
In addition, there are many more private, individual investors available for 2nd mortgages, which range in interest rates from 8%-16% (based on the risk assessment of both the home’s value and the credit history of the borrower.
All private mortgages must be arranged through a Licensed Mortgage Broker or a Lawyer that specializes in Real Estate.
Lenders cannot directly offer mortgages unless through a licensed mortgage broker as well, which is why some of the larger private mortgage corporations (M.I.C.’s) have their own, in-house mortgage brokers. Mortgage Broker Referral Request