Mortgage lenders say credit appetite is steady, but complex files are slowing deals

At a recent mortgage industry panel, lenders described a familiar frustration: files that might qualify on credit can still stall when borrowers’ finances are complex or key documentation is missing.

**Jamie Doolittle, Head, BMO BrokerEdge**

“I think the prime lending space is very much open for business,” said Jamie Doolittle, head of BMO BrokerEdge, at the Toronto event. “What I would say is there’s a greater focus on affordability. We are every day saying ‘yes’ to borrowers who have a strong credit profile, a strong property profile, and who have reasonable debt servicing ratios.”

The other panellists were Devon Ajram, TD Bank’s vice president of broker services and operations; Enrik Brassard, National Bank’s associate vice president of broker channel; and Elena Robinson, First National’s vice president of residential sales. Several said their risk appetite had changed little, even as borrower finances and documentation requirements grew more complex.

Same credit box, more complex files

**Devon Ajram, Vice President of Broker Services and Operations, TD**

Lenders said more complex files can take longer to assess, a delay brokers may mistake for a change in credit appetite.

“I don’t think that we changed our risk appetite in any meaningful way,” Ajram said. “I think what we tend to see is the general direction of files towards the more complex, and I think that’s a product of the economy that we’re in, and a product of generations that are now adopting multiple careers, side hustles and revenue streams.”

Doolittle added that scrutiny is greatest when borrowers have elevated ratios, are highly leveraged, present affordability concerns or have gaps in their applications. “We are very focused on making sure that the story and the documentation and the numbers align,” she said.

Robinson said deals often fall apart early when brokers don’t ask their clients enough questions upfront. She also noted that declining property values are a growing concern, but said a well-explained file can open the door to exceptions. “If you believe in those clients and you relay that to the lender, you can go farther,” Robinson said.

Ajram said TD has shown flexibility for some clients who might otherwise turn to an alternative lender. He cited brokers who tell him, “Before you go B, send it to TD.”

“Our business-for-self policy is definitely one of the most competitive policies that exist on the street,” he said. “If you haven’t taken the time to really understand the policy, take the time.”

AML checks add to file delays

**Elena Robinson, Vice President of Residential Sales, First National**

Brassard said anti-money laundering and other regulatory requirements have brought the biggest change over the past year. When a file contains an unexplained deposit, he said, lenders must trace the source of the funds, adding time and work to the review.

“This cannot be overlooked, and we all need to do our part,” he said. “Good credit score, good credit behaviour, does not absolve you of good due diligence.”

Asked about the portfolio-level loan-to-income (LTI) limits federally regulated lenders must manage, Brassard said documentation remains the more pressing issue for individual files. He said National Bank can assess applications with high ratios when the circumstances are well documented and supported by mitigating factors.

“All of our credit is manageable with a good story,” he said. “Due diligence is not manageable. You need to know.”

Ajram and Doolittle said TD and BMO have not come up against their LTI limits. Doolittle added that disclosing all household income, even when it is not needed to qualify, helps lenders manage their portfolios against those limits.

Brassard offered the same file-packaging advice he received when he entered the business: submit a complete application, with full documentation and the borrower’s full story, the first time.

“My old boss always told me the file is at its nicest the first time you submit,” he said. “The more you submit, the more it seems like you don’t know your client.”

Banks gearing up for the renewal wave

**Enrik Brassard, Associate Vice-President, Broker Channel, National Bank**

The panellists also discussed growing competition from bank retention teams as more mortgages come up for renewal.

“The banks have been way more proactive in managing that renewal wave than we have in the past,” Doolittle said. “The banks are going to send them offers, it’s probably going to be very focused on the rate, so if you can get ahead of them and have those quality conversations about how things have changed, I think you’re going to have better success.”

Robinson added that brokers should be in touch with clients at least six months before renewal, noting some banks start even earlier. She said the conversation should cover the client’s broader finances, including whether they’ve taken on debt or need to refinance.

“Make sure that you own the client before someone else has the opportunity to do so,” she said.

Ajram said brokers may be better placed than they think. Close to 50% of TD’s new-to-bank mortgage customers come through the broker channel, he said, while the bank still has room to improve at building deeper relationships with them.

“If you think that you’re up against the behemoth when it comes to actually retaining that relationship, you’re probably wrong, and you probably have a much better shot at it,” he said. “Banks are very, very prescriptive about how they contact their customers, because we have to do it at scale.”

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