We are all familiar with the banks and local credit unions, but what are monoline lenders and why are they in the market?

Mono, meaning alone, single or one, these lenders simply provide a single yet refined service: to fulfill mortgage financing as requested. Banks and credit unions, on the other hand, offer an array of other products and services as well as mortgages.

The monoline lenders do not cross-sell you on chequing/savings account, RRSPs, RESPs, GICs or anything else. They don’t even have these products and services available.

Monolines are very reputable, and many have been around for decades. In fact, Canada’s second-largest mortgage lender through the broker channel is a monoline lender. Many of the monoline lenders source their funds from the big banks in Canada, as these banks are looking to diversify their portfolios and they ultimately seek to make money for their shareholders through alternative channels.

Monolines are sometimes referred to as security-backed investment lenders. All monolines secure their mortgages with back-end mortgage insurance provided by one of the three insurers in Canada.

Monoline lenders can only be accessed by mortgage brokers at the time of origination, refinance or renewal. Upon servicing the mortgage, you cannot by find them next to the gas station or at the local strip mall near your favorite coffee shop. Again, the mortgage can only be secured through a licensed mortgage broker, but once the loan completes you simply picking up your smartphone to call or send them an email with any servicing questions. There are no locations to walk into. This saves on overhead which in turn saves you money.

The major difference between a bank and monoline is the exit penalty structure for fixed mortgages. With a monoline lender the exit penalty is far lower. That is because the banks and monoline lenders calculate the Interest Rate Differential (IRD) penalty differently. The banks utilize a calculation called the posted-rate IRD and the monolines use an IRD calculation called unpublished rate.

In Canada, 60% (or 6 out of every 10) households break their existing 5-year fixed term at the 38 months. This leaves an average 22 months’ penalty against the outstanding balance. With the average mortgage in BC being $300,000, the penalty would amount to approximately $14,000 from a bank. The very same mortgage with a monoline lender would be $2,600. So, in this case the monoline exit penalty is $11,400 less.

Once clients hear about this difference, many are happy to get a mortgage from a company they have never heard of. But some clients want to stick with their existing bank or credit union to exercise their established relationship or to start fostering a new one. Some borrowers just elect to go with a different lender for diversification purposes. (This brings up a whole other topic of collateral charge mortgages, one that I will venture into with another blog post.)

There is a time and a place for banks, credit unions and monoline lenders. I am a prime example. I have recently switched from a large national monoline to a bank, simply for access to a different mortgage product for long-term planning purposes.

An independent mortgage broker can educate you about the many options offered by banks and credit unions vs monolines.

 

Bob Taylor
Mortgage & Business Leasing Specialist
www.mortgagealliance.com/BobTaylor
btaylor@mortgagealliance.com
705 479 5445

 

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There is scientific evidence that not being able to perform a seemingly quick and simple task, such as drawing a clock, is linked to one’s ability to drive a car. Drawing a clock is actually considered to be a brain task that requires a higher level of brain function. The Clock-Drawing Test can indicate deficits related to your visual perception. As well, the Clock-Drawing Test can identify problems with short term memory and planning. There are a number of valid scoring methods for the Clock-Drawing Test that include the order, spacing and placement of the numbers and clock hands. The person being assessed is usually asked to draw a certain time on the clock, which is scored in terms of accuracy.

The Clock-Drawing Test was not developed for the specific purpose of evaluating driving in seniors. However, the research evidence evaluating the Clock-Drawing Test for assessing driving ability has been shown to be of moderate to strong quality. The research shows that the Clock-Drawing Test is a quick and easy way to identify drivers who may be experiencing cognitive changes . However, performance on the clock drawing test alone is not sufficient to revoke a person’s license. Researchers have suggested that this test, alongside other screening mechanisms, be used as part of a first step when assessing fitness to drive in older adults. In fact, the Ontario Ministry of Transportation has recently instituted a version of the Clock-Drawing Test as part of its Senior Driver Renewal Program that targets drivers aged 80 and older.

Concerns with public safety when it comes to screening older drivers must be balanced with costs to their mobility and health

Driving enables seniors to remain connected to their communities, maintain social ties, and access needed services, particularly in rural areas lacking public transit (2). Loss of licensure in older adulthood, whether voluntary or otherwise, has negative consequences, including depression, reduced out-of-home activity levels, social isolation, loneliness and a higher risk of placement in long term care . Any changes in licensing policies and procedures that affect older drivers (due to concerns with public safety) need to consider all the consequences. Taking away a senior’s license because of potential risk, must be balanced with potential negative consequences to the mobility and health of older adults.   Courtesy of CIEPC 0 Pulse Jan issue

 

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