Underwriting Guidelines

Transcription

1 Title 03 / 03 / 2015 Revised : November 2018 Underwriting Guidelines

2 About ia Financial Group Founded in 1892, ia Financial Group offers a comprehensive range of life and health insurance products, savings and retirement plans (RRSP, TFSA etc) mutual and segregated funds, securities, auto and home insurance, mortgage and car loans as well as a host of other financial products and services. Responsible for the administration and management of over $112.9 billion in assets, our publicly listed company ranks among Canada s largest and most prominent insurance companies. Thanks to our conservative investment policy, wise capital management practices and solid risk management culture, ia financial group enjoys financial stability and flexibility, which allows it to grow withstand and potential economic shocks. To know more about ia, please visit us at 2

3 RATE PRODUCT Standard fixed terms Terms available Rate hold Rate buy down Commission Payment frequency Please refer to the effective rate sheet 120 days As per buy down calculator As stipulated minus buydown if applicable Weekly, bi weekly, monthly Pre payment option 15% and 15% **All mortgages can be refinanced, ported or assumed. The borrowers must be re qualified** Pre approval and rate hold are not offered. Please submit live deals only. 3

4 RATE PRODUCT Variable Type Rate hold Spread hold Spread buy down Commission Payment frequency ARM only (variable rate variable payment) not available 120 days As per buy down calculator As stipulated minus buydown if applicable Weekly, bi weekly, monthly Pre payment option 15% and 15% **All mortgages can be refinanced, ported or assumed. The borrowers must be re qualified** Pre approval and rate holds are not offered. Please submit live deals only. 4

5 RATE PRODUCT Variable product conversion into a fixed rate If not in default and after having paid the first instalment, the borrower may convert into a fixed term equivalent to the remaining term with same maturity date. If the borrower wishes to convert into a longer term, a modification agreement will have to be signed by the borrower. The rates offered for conversion are the broker rates with exclusion of the promotional rates and No Frills rate. Rates cannot be bought down. Please note that no commission is paid on a conversion. To proceed with a conversion, the borrower must send a written request to mortgageloans@ia.ca. 5

6 QUALIFICATION RATE Qualification rate All insurable mortgages must be qualified using the greater of the Bank of Canada s 5 year benchmark rate or the contract rate, no matter the LTV. All non insurable mortgages must be qualified using the greater of the contract rate plus 2.00% or the Bank of Canada s 5 year benchmark rate. rates/canadian interest rates/ 6

7 RATE DROP POLICY RATE RESET The rate will be reset upon written request, whether it is a promo or regular rate. Your commission will be adjusted according to the rate sheet utilized for the rate reset and not according to the rate sheet of origin. Note that we will not be able to accommodate any rate reset request within 3 days of the closing date. RATE ON CLOSING The day of the closing, your client will benefit from the lowest rate between the one guaranteed by the mortgage commitment or the one effective 3 business days prior to the closing date. The notary/lawyer will not receive an amendment as the rate modification will be done internally. Your client will receive a postclosing confirmation. Your commission remains as per the last rate sheet you have used to set the rate. Rate buy down or rate reset 3 business days prior to the closing date is not permitted. Commission reset not permitted. 7

8 GENERAL GUIDELINES Insurable maximum property value Minimum loan amount $ Maximumloan amount Minimum credit score insurable Credit bureau $ , high and low ratio Subject to a sliding scale based on geographical location. Applies to low ratio mortgages only. Conventional insurable loan amount is limited to $ with exception to the GVA and GTA to $ (= to 80% of the maximum property value permitted). 650 insured and insurable* Dated less than 30 days from the submission date. 2 years of established credit with a minimum of 2 active trades with a major bank. GDS/TDS 39% / 44% with a credit score 680* 35% / 42% with a credit score < 680* *see page 16 and 17 for the condition on non insurable mortgages. 8

9 GENERAL GUIDELINES Amortization Minimum 15 years Maximum 25 years Minimum property size Condominium : no less than 600 sqft (56sqmt) balcony excluded. GTA/GVA, minimum sqft is 500sqft (46.5sqmt) balcony excluded. The condominium must have a separate and closed bedroom and a bathroom. House: no less than 850sqft (79sqmt). Minimum purchase price APPLICABLE TO CONDOMINIUMS ONLY GVA & GTA Minimum $ Ontario and British Columbia Minimum $ Alberta, Manitoba Minimum $ Atlantic Minimum $

10 GENERAL GUIDELINES Heating cost $75 x 100sqft (minimum of $900) Condo $900 Province of Alberta Maximum LTV 70% 50km radius from Calgary and Edmonton only. An appraisal will be required (at the borrower s expenses). Lending provinces Alberta (Calgary, Edmonton and 50km radius) British Columbia Manitoba (Winnipeg only) New Brunswick Nova Scotia Ontario 10

11 Unsecured line of credit The monthly payment is calculated considering 3% of the outstanding line of credit REVOLVING CREDIT MONTHLY PAYMENT Secured line of credit The monthly payment is calculated considering the outstanding secured line of the Bank of Canada s 5 year benchmark rate amortized over 25 years. Only the line of credit secured against a real estate asset can be calculated as above. Interest payment only is not considered. Student line of credit Up Dated! 1% of the balance will be considered. If the line of credit is not confirmed student by the credit bureau, the bank s confirmation will be required. Interest payment only is not considered. Student loan with no payment on the credit bureau If the loan repayment amount is not confirmed by the credit bureau, ia will calculate the monthly payment considering 1% of the outstanding balance. 11

12 OTHER TYPE OF DEBTS Credit card The monthly payment is calculated considering 3% of the outstanding credit card. Deferred payment plan : payment is not yet due. the payment is calculated considering 5% of the outstanding, even if the Debts not reported Any registered trade (public records) not reported by the creditor will have to be supported by the loan agreement. Car loan paid by the borrower s company If the trade appears on the borrower s credit bureau, the borrower is responsible for the payment therefore will be added to the liabilities. For BFS borrowers where their company assumes the cost of car lease/loan: the company s last 6 months bank statements will be required to confirm the payments. Company s T1 General may be required. The car/lease payment will be offset. Not applicable if the borrower is not the sole proprietor. If the borrower is not BFS and not the owner of his company, the car allowance will be considered only if taxable. The car allowance will be considered a supplementary income and will not offset the car loan/lease payment. 12

13 GENERAL GUIDELINES Owner occupied only 1 Primary residence only 4 units maximum Property value as is No mobile homes No modular homes No co operative housing No farms No leased lands No native lands No agricultural zoning 5 acres of land maximum to be considered No recreational properties No previous grow op properties No studios / lofts No power of attorney Bridge loans NOT offered 1 Exception for parent, grand parent, brother, sister who is helping to purchase. Close relative must act as a co borrower and co owner and be on title as well, no matter the % of title share. Close relative debts, mortgage, property taxes, condo fees and heating costs will be considered in the TDS calculation. Ratios must be in line. Other family member or friend will not be considered. 13

14 GENERAL GUIDELINES Bankruptcy / Consumer proposal Bankruptcy must have been for a significant amount (>50k) Down payment from own savings. Gifts or borrowed funds will not be accepted. The borrower must be discharged from the bankruptcy for a minimum of 2 years. 2 years of re established credit with at least 2 active trades with a major bank. Credit after bankruptcy/discharge must be in good standing: no late payment/ R2+. Bailiff summary will be required. If a property was included in the bankruptcy, the application will be declined. No refinance. Appraisal will be required if conventional. Borrowers with more than 1 bankruptcy will be disqualified. If the mortgage is not insurable, no past bankruptcy allowed. All of the above mentioned requirements also apply for a consumer proposal. 14

15 APPRAISAL Appraisal An appraisal can be required for a wide variety of reasons. Not limited to, here are some examples:. The property value is $ in GVA and GTA, $ Ottawa or $ in the rest of Canada.. Private sale**. Foreclosure. No MLS available.. New immigrant program.. Location (rural, etc.). Based on loan amount no matter the property value.. Etc... The appraisal is at the borrower s expenses and performed by an appraiser approved by Genworth Financial or an appraiser offered through ia/brookfield RSP. ** if high ratio mortgage, the insurer covers the cost of the appraisal. May change at any time without notice. * (it is highly recommended to disclose any private sale upon submission to avoid any closing delay due to a late ordered appraisal). 15

16 APPRAISAL SOLUTION You can benefit from ia s registration through Brookfield RPS for your appraisal needs for your ia clients. Interested? Go to On the login page, click on Register now then follow the instructions. 16

17 NON INSURABLE Transactions Purchase $ to $ Refinance Non insurable switch Property value Maximum $ Credit score 680 if the loan amount up to $ if the loan amount is greater than $ At lease 1 borrower for which the income is considered for the qualification must have the reference credit score. THE AVERAGE CREDIT SCORE FOR A TRANSACTION CANNOT BE LOWER THAN 660, no matter the loan amount. Maximum loan amount As per the sliding scale. Loan amount greater than $ are treated on a case by case basis. Qualification rate Bank of Canada s 5 year rate benchmark or the contract rate %, the greater. LTV 80% GDS/TDS 39.00% / 44.00% if loan amount $ % / 39.00% if loan amount >$

18 NON INSURABLE Term Amortization 5 year fixed Other terms are available to accommodate existing ia clients only. Please speak to your BDM for more information. 15 years minimum 30 years maximum 0.10bps surprime for amortization greater than 300 months Buydown Equity takeout Property type Occupation Are excluded Allowed, as per calculator no maximum 1 to 3 plexes Owner occupied, primary residence 900 SIN / Work Visa Past bankruptcy/consumer proposal Leaky condos 18

19 TRANSACTIONS Plan B switch Program This product has been designed to help with the mortgages that are technically not switchable. If the mortgage cannot be switched the traditional way, we can proceed as a «false refinance», which means that the mortgage will be discharged and re registered (as opposed to a regular switch where there is no discharge). The «false refinance» must be done through FCT and the cost of the transaction is at the client s expenses (see section FCT for the fee) but ia will give the client the amount of $515 as an allocation towards the legal fees. This allocation will be paid to the client upon funding. See the following page for the conditions. *May be modified at anytime without notice. 19

20 TRANSACTIONS Plan B switch Program Current mortgage conditions : The mortgage has been registered as 1 component. If the registrations are under the form of 1 mortgage and 1 line of credit (2 nd rank registration), it is not switchable the traditional way nor through our «Plan B». No loan increase: only the outstanding balance can be transferred. Your client must provide with a YTD statement to confirm the balance. The statement can be a print screen, a recent statement or a renewal offer. An amortization schedule is not a statement. No amortization increase. Capitalization up to $3 000 maximum. If the mortgage is default insured (Genworth/CMCH), you must provide with the insurance number. The rate and conditions will vary according to the insurability or non insurability of the mortgage. All documents must be received 15 business days prior to the closing. Although this program is a great option, it remains that some mortgages cannot be transferred due to their nature: if there is a sale only clause or a non refinance clause, unfortunately, our Plan B will not be the solution. Note that we are not aware of the transferability until FCT orders the payout statement. If the lender refuses to issue it, the transaction will have to be cancelled. 20

21 TRANSACTIONS Assumption All mortgages are assumable with ia s prior approval. The borrower looking to assume the mortgage is invited to contact us directly at underwriting.support@ia.ca or The agent/broker is not involved in the assumption transaction. The borrower must qualify according to the effective guidelines at the time of the assumption request. No commission payable to the agent/broker. Refinance of an ia mortgage A new application must be submitted by the broker/agent. Refinance within 1 year after the purchase for debt consolidation not allowed. Rate can be blended and extended. Mortgage must have been in good standing for the last 12 months. The borrower must qualify according to the effective guidelines. The commission is payable on the loan increase. 21

22 TRANSACTIONS Port A new application must be submitted by a broker / agent All mortgages are portable if in good standing for the last 12 months. The borrower must qualify according to the effective guidelines at the time of the port. Rate can be blended and extended. For the penalty to be reimbursed, the new mortgage must be funded within 90 days following the reimbursement of the existing one. If funded after the 90 day period, the penalty will not be reimbursed. The commission is payable on the loan increase. Reimbursement of the penalty If the new mortgage is the same or higher than the current outstanding balance, the rate blended and both transactions done the same day (reimbursement and funding at ia) the payment of the penalty will not be required. If both transactions cannot be completed the same day, the full penalty will be charged upon the reimbursement of the mortgage and will be reimbursed within 4 6 weeks following the funding of the new mortgage at ia. Conditional to the new mortgage being the same or higher than the current one and the rate blended. 22 If the new mortgage amount is lower than the outstanding, a penalty will be charged on the mortgage reduction. The full penalty will be required and a portion of the penalty, if applicable, will be reimbursed within 4 6 weeks after the funding of the new mortgage at ia. Conditional for the rate to be blended.

23 TRANSACTIONS Purchase for spousal buyout To be eligible, both parties must be on title and the transaction must be supported by the following documents: a sale agreement ; a finalized separation agreement drafted by a lawyer/notary. For any debts to be included in the equity, they must be confirmed by the separation agreement. 23

24 FCT (Ontario, BC, NB and NS only) Cost for a refinance 1 $ Ontario $ British Columbia $ New Brunswick $ Nova Scotia 1 (cost for a mortgage of $ or less, all discharge registration fees included. Additional fees charged if the loan is greater than $ See page 22 for the additional fees). Closing All documents must be received 15 business days prior to closing. No exception. Inclusive Signature of documents and collection of required information at the client s residence. 1 Mortgage registration; title insurance; courier fees (any remaining funds will be couriered to the borrower). 24

25 FCT (Ontario, BC, NB and NS only) Inclusive (cont d) Communication with the mortgage broker: Notification of delay (if any) Notification to confirm the payout statement is ordered and received Notification to confirm the appointment date Notification to confirm the signing appointment is completed Notification to confirm the funding is completed Exclusion If the transaction requires a change on title (ex: co owner buyout, guarantor to be removed from title, etc.) the transaction must be done through a lawyer/solicitor. The reimbursement of a private mortgage must be done through a lawyer / solicitor. All other provinces legal transaction for a refinance is done through a lawyer/solicitor. Legal services provided by First Canadian Titles 25

26 FCT (Ontario, BC, NB and NS only) First Canadian Titles fees Basic fees Ontario $ including all discharge registration fees Additional signature appointment $100 + taxes Loan from $ up to $ Additional premium of $100 + PST on premium Loan from $ to $ Loan from $ to less than or equal to $ Loan of $ to $ Additional premium of $250 + PST on premium Additional premium of $350 + PST on premium Additional premium of $750 + PST on premium Cancellation fees $113 (charged if the deal is cancelled AFTER signature by the borrower) New Brunswick: PID conversion Up to $312 additional fee may be charged for PID and $75 for additional PID 26

27 INDEMNITY The penalty is calculated as follows Variable rate at the time of the repayment Fixed rate at the time of the repayment 3 months interest calculated on the balance of the principal outstanding at the interest rate applicable to the loan at the time of the prepayment, plus applicable additional fees. Penalty will be the greater of 3 months interest at the rate applicable to the loan at the time of prepayment. or The interest rate differential calculated with IA s posted reinvestment rate in force at the time of the prepayment and for the rounded remaining term, plus the applicable additional fees. Additional fees payable Prepayment in full during the 1 st year of the term: $500 Prepayment in full during the 2 nd year of the term: $400 Prepayment in full during the 3 rd year of the term: $300 Prepayment in full during the 4 th year of the term: $200 Prepayment in full during the 5 th year of the term: $100 27

28 PROPERTY TAXES The property taxes will be managed by ia for all high ratio mortgages regardless of the borrower s agreement with the city. The tax management is at the borrower s discretion if the mortgage is conventional. Taxation rate for qualification British Columbia 0.50% of the property value/ purchase price. Rest of Canada 0.75% of the property value / purchase price. To consider a lesser amount, an official document (MLS, most recent tax bill, appraisal) is required. Property tax in arrears Notwithstanding the loan to value, ia will manage the property taxes on behalf of the borrower should we receive a notice of taxes in arrears. 28

29 INCOME Employment Employment letter is dated at maximum 60 days of the application date. The paystub must be dated at maximum 30 days of the application date. Handwritten letter of employment and or table diskette are to be supported by 2 years NOAs and the borrower s last 3 months bank statements If there is a family relationship between the borrower and the employer, the income must be supported by the last 2 years NOAs and T1 General. We highly recommend that any relationship be disclosed up front to avoid a delay with the closing. On a case by case basis, additional documents may be required. 29

30 INCOME Self Employment The net income will be considered and will be averaged using the last 2 years NOAs and T1 General. If the income of the most recent year is lesser than the previous one, the income will not be averaged and the lesser income will be considered. 15% gross up allowed. Borrower must confirm 3 years of self employment activities (business licence is sufficient). The borrower must provide with an active business licence. No outstanding taxes Stated income Maternity leave Not offered. 100% of the borrower s income will be considered if the employer confirms, in writing, the date of return to work is within 1 year after the funding. 30

31 INCOME Pension / Disability Income from pension is to be supported by the T4As and 3 months of bank statements showing the pension deposits. Disability income to be supported by 2 years NOAs and 3 months of bank statements. The date of return to work must be confirmed by the employer. Income from permanent disability must be confirmed, in writing, from the proper authority and be supported by 3 months of bank statements. Investment income To be supported by the most recent investment statement identified to the borrower and the last two years NOAs and T1 General. At its own discretion, IA may not consider the investment income should the capital be deemed insufficient to generate the required income over the next 5 years. Child tax credit Foster care income Not considered. Not considered. 31

32 INCOME Child support / Alimony Will be considered in full if the child support/alimony is to 30% of the employment income and if declared by the receiver (T1 General of the most recent year is required). If greater or if undeclared, 50% of the child support/alimony will be considered. The child support/alimony is considered as a supplementary income. Income from child support/alimony will not be considered as a sole income. Divorce/separation agreement is required. Last 3 months of bank statements are required to confirm the payment consistency. 32

33 RENTAL INCOME From an independent apartment or 1 rental property 50% of the rental income will be considered as a supplementary income (no offset). 100% of the expenses (principal, interest, property taxes, condo fees, heating) is to be added in the TDS calculation. Heating can be ignored if the lease confirms that the heating cost is at the tenant s expenses. An effective lease is required. If the rental is a suite within the borrower s property, it must be confirmed legal by the city and be fully independent. If the apartment is not confirmed legal, no rental income will be considered. In some situations, we may require, at the borrower s expenses, a confirmation of the fair market rent, from an appraiser approved by ia. Note that despite the fair market rent confirmation, if the property / apartment is not rented out the day of the closing, no rental income will be considered. The lesser between the confirmed rental income and the fair market rent is the rent that will be considered by ia, assuming the property is rented out the day of the closing. 33

34 RENTAL INCOME From more than 1 rented property to a maximum of 4 The T1 General including the T776 Form is required up front. The net rental income will be established considering a 4% vacancy rate, principal, interest, property taxes, heat, insurance, maintenance etc. The net rental income will be considered as a supplementary income. Feel free to ask for our rental worksheet. For a default insured deal, a DCS of 1.10 is required Up Dated! For a conventional deal (insurable or not), a DCS of 1.20 is required Up Dated! The lease (s) agreement (s) and mortgage statement (s) are required. In some situation, we may require, at the borrower s expenses, a confirmation of the fair market rent, from an appraiser approved by ia. Note that despite the fair market rent confirmation, if the property / apartment is not rented out the day of the closing, no rental income will be considered. The lesser between the confirmed rental income and the fair market rent is the rent that will be considered by ia, assuming the property is rented out the day of the closing. 34

35 DOWN PAYMENT Own savings Confirmed by 3 months of bank statements and/or investment statements. It is important to note that any deposit $5000(1depositorcumulative) orany unusual deposit pattern will have to be explained/ supported. RRSP shall be confirmed by the last 3 months statements. Aside from the statements, HBP form and RRSP s redemption request and deposit in the borrower s bank account are required. Sale of existing property Unconditional sale agreement and recent mortgage statement to confirm the outstanding mortgage/ equity available. If the sold property was located in a different country, the lawyer s trust ledger and sale agreement, duly translated in French or English by a professional translator, at the borrower s expenses, must be provided as a confirmation of the transaction and equity. Some conditions apply, please contact us. 35

36 DOWN PAYMENT Gift from close family 1 The gift must be deposited in the borrower s bank account 10 business days prior to the closing date. A gift letter is required. You will find a gift letter draft on our site at A gift letter that is non conforming will not be accepted. For a gi $ or if it was not deposited in the borrower s bank account we will require a copy of the donor s bank statement showing the funds available and the withdrawal. In some situations where the gift is $ , we may require the donor s bank statement. 1 CLOSE FAMILY is mother, father, brother, sister and grand parent only. Closing costs No matter the province, the borrower must, in addition to the down payment, confirm additional savings equivalent to 1.5% of the purchase price. If the closing costs cannot be supported, we will add the amount as a liability and payable over 12 months. TDS must be in line. 36

37 NEW IMMIGRANT PROGRAM Must be default insured. The premium is payable by the borrower regardless of the LTV. Purchase only. Minimum credit score 650. Confirmation of Landed Immigrant Status. The property has a maximum of 2 units where 1 is occupied by the borrower. The borrower must have immigrated/relocated to Canada within the last 60 months. 3 months minimum full time employment in Canada. No probationary period. International credit bureau required (For countries where it is available). Bank statements (12 months history) and letter signed by the landlord indicating : The date the tenant moved in Monthly rent amount Amenities included in the rent Payment history Payments must be timely. No late payment. All documents are required up front 37

38 The rates offered at renewal are the regular broker rates which exclude the promos. Buy downs are not offered. The mortgage agent will receive, through the brokerage firm of origin, a commission as follows: 60% of the effective finder s fee If the final renewal rate was not lowered by more than 15 basis points; 40% of the effective finder s fee If the final renewal rate was lowered by more than 15 basis points; The renewal commission is paid the month following the renewal. ia will not accept to pay the commission to a different agent despite the borrower s request. Important Up Dated! RENEWAL To move a portfolio to another brokerage firm, the new firm must be currently registered with ia. A written request indicating the loan numbers must be provided to underwriting.support@ia.ca. Allow 1 month for the change to be completed. Any commission paid before and up to 1 month after an agent/broker notifies us of a portfolio change will not be claw back by ia. It will be the broker/agent responsibility to obtain payment from the brokerage firm. Only the mortgages submitted under the agent s own Filogix account can be transferred. Subject to the overall retention rate. If the retention rate is lower than 70%, ia reserves its right to revise / terminate the commission payment. No renewal commission payable for mortgages with remaining amortization less than 10 years. 38

39 COMMISSION ON TERM EXTENSION If your clients refinance, port or early renew their mortgage, you will also receive a commission on the term extension. The commission on the term extension is calculated on the outstanding mortgage and is equal to 60% of the new rate s commission*. The calculation: 60% of the finder s fees new term in months months of extension = X Outstanding mortgage prior to the loan increase X = the commission on the term extension. For example: Outstanding mortgage $ Remaining term 24 months New term 60 months Commission 1.30% 60% of 1.30% = 0.78% 0.78% 60 months (new term) = 0.013% (=commission payable by month) 0.013% term extension (36 months) = 0.468% (final commission factor) 0.468% outstanding mortgage ( ) = your commission on the term extension ($ ). This commission is added on the commission on the loan increase. 39

40 DOCUMENT RECEPTION DATE Thank you for taking note of our document reception date policy. Refinance through FCT* ONTARIO ONLY All support documents must be received at ia at least 15 business days prior to the closing date. Documents must be exclusively sent at Transfer in (switch) ONTARIO ONLY All support documents must be received at ia at least 15 business days prior to the closing date. If they are not received. Purchase or refinance through a lawyer/solicitor (all Canada) All support documents must be received at ia at least 10 business days prior to the closing date. Documents must be exclusively sent at underwriting.support@ia.ca *. * If the documents are not received by the date indicatedonthecommitment(whichisequivalentto10or 15 business days), it is important to know that although we will do all that we can to close the mortgage on time, the closing date will not be guaranteed. 40

41 CONTACT To reach us by phone To reach us by fax To reach us by underwriting.support@ia.ca Our address 925, Grande Allée Ouest, suite 520 Quebec QC G1S 1C1 Please note: All inquiries pertaining to: modification requests rate / commission guidelines questions status of a deal discuss a deal prior to submission OR to send us your documents Must be exclusively sent to underwriting.support@ia.ca or Please do not cc or bcc anyone. 41