The mortgage industry in Canada is going through many changes, not the least of which as a result of the new lending rules passed by the federal government.
But even before the time of those rules changes, a shift has been taking place in the business; namely a ride in popularity of MICs (mortgage investment corporations).
A MIC is a lending company set up specifically for (primarily residential) mortgage lending in Canada. A number of rules dictate the ownership structure of a MIC: It must be held by more than 20 individual investors, and at least 50% of its value must be in residential mortgages.
But instead of looking at MICs as an investment option, we are focusing on how they play a part in the Canadian real estate economy.
MICs help to serves a segment of creditworthy borrowers who don’t necessarily fit the constrictions of the larger lenders. For a number of reasons, some of them highlighted below, MICs help to finance some of the more nuanced deals in Canada.
Especially here in the true north strong and free (and remote, let’s face it) some of the larger lenders don’t have any experience or simply don’t lend in certain communities. MICs can serve these communities, who qualify for loan products, but might have properties or locales that outside the norm.
Any number of factors can affect the length of a borrowing term. Mics have the flexibility to help with bridge financing while other sales are waiting to close, or any number of other factors and proceedings that might necessitate shorter term loan product.
Not only in communities that underserved but all over Canada, MICs do a great job of offering products for new construction. Homeowners can get financing for their lot and building plans, and have the capital they need to complete the project.
Sometimes a homeowner wants to finance renovations to their existing property, often times as a means of affecting its value. MICs are especially useful in cases where borrowers need a “second” mortgage to help fund renovations projects.
In the Canadian mortgage industry, the relationship between mortgage brokers and MICs is crucial. Brokers’ competitive advantage is the ability to shop their clients’ deals to a number of lenders. Often times it’s MICs that are able to offer the terms that are most favourable for borrowers.
Meanwhile for these lending corporations, the broker channel serves as a consistent source of deal flow; one that is professional prepared and vetted in advance.
We encourage the relationship between brokers and MICs as a complement to the larger lending institutions, that are not always able or prepared to finance nuanced deals.
We believe the relationship between the broker channel and MICs should be fluid, without friction, and enable repeat business for both parties with ease. The way to do that is to remove the wasted time from the approval and application process: duplicated efforts with multiple forms containing the same basic info, unnecessary paperwork and paper-based processes where a digital version would be more secure and efficient.
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