ING Direct has not only been the bank that’s known to “save you money,” but recently it’s also been known as the bank to make mortgage offers that very few other lenders do. This time, the bank is in the news not for offering a certain kind of mortgage but for pulling “low doc” mortgages from the mortgage products they offer. ING calls these “Express Income Qualifier” (EIQ) mortgages.
A low-doc mortgage will allows borrowers to take out a mortgage, even when they cannot verify their income through, also known as stated income mortgages. Generally with these types of mortgages, a maximum 65% loan-to-value maximum is required, along with some credit requirements. But even with these strict requirements, many lenders have still pulled them off the table, leaving ING Direct as one of the few lenders that did still offer them in Canada. Now though, consumers looking for a stated income mortgage, or “low doc mortgage” won’t be able to turn to ING either.
Martin Beaudry, Vice President of Lending at ING Canada gave many reasons for pulling these types of mortgages. He says that one of the “primary considerations” that was given was the fact that these types of mortgages are no longer one of the norms on the mortgage market; and that ING Direct Canada’s parent bank, ING Group located in Europe, also no longer offers low-doc mortgages. Mr. Beaudry also pointed to the fact that ING Direct Canada was receiving “a disproportionate amount of applications” for the product – probably because they’re one of the only lenders still offering them. However, Mr. Beaudry also wanted to emphasize the fact that even with the high amount of applications for these types of loans, it was still a very strong market segment for ING Direct Canada, and that the low-doc clients the bank had served were already “high quality clients” and that “defaults” were not a problem.
But even with no defaults, mortgages that have less than a 80% loan-to-value ratio need to be insured, and ING Canada could no longer offer bulk private mortgage insurance, as so many customers applying for these types of mortgages needed it. While ING will continue to work with Genworth and Canada Guaranty for insured stated-income mortgages, they can no longer do the same for low-doc mortgages.
The fact that these loans were also stressing the bank’s relationship with mortgage brokers was another reason why they will no longer be offered, as the bank often needed to ask for some kind of verification on loans that don’t require any (perhaps because of the high amount of interest in these loans.) That also made processing the loans much more labour and time-intensive than conventional mortgages.
Mr. Beaudry also said that ING Canada is probably not the first, nor will it be the last, to pull these types of loans from their mortgage offerings. He says that these loans, at least over the next several years, will be increasingly hard to find from any lender.
