Canadian Mortgage Broker Magazine - Spring 2020 by CMBA (National)

SPRING 2020 $6.95

THE MAGAZINE FOR PROFESSIONAL MORTGAGE BROKERS

+ 10 THE NEW NORMAL Perspectives, priorities and building more housing p.18

The Difference: Stabilizing income vs. economic stimulus p.11

Privacy Principles: Practices and strategies to comply with legislation p.42

PM No. 41297283

I n s u ra nS I D E ce mortga every b ro ke ra g e ge need s p.38

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inside VOLUME 5 ISSUE 2 SPRING 2020

10 PRIVACY PRINCIPLES COVID-19 has played havoc with the tested and established systems and procedures of your mortgage brokering business. These information practices and strategies will help you maintain compliance with privacy legislation. BY JEANNETTE VAN DEN BULK

features 11

14 18 20

STABILIZING INCOME VS. ECONOMIC STIMULUS – WHAT’S THE DIFFERENCE?

APPRAISERS ADAPT TO COVID-19 CHALLENGES

Understanding the difference – and their effectiveness – is key to responding to the current economic downturn

Proactive changes create a solid foundation for the way appraisers will conduct business in the future

BY JASON CLEMENS, NIELS VELDHUIS, MILAGROS PALACIOS

BY LEIGH WALKER

WE’LL MEET AGAIN Over 600 mortgage brokers, lenders and suppliers gathered at the Parq Vancouver in February for the annual CMBA-BC Conference and Trade Show

INSURANCE EVERY MORTGAGE BROKERAGE NEEDS Four types of commercial insurance coverage every brokerage owner should purchase BY DERRICK LEUE

NEW PERSPECTIVES AND PRIORITIES Call for partnerships to get the economy back on track and build more housing BY HESAM DEIHIMI

departments

RULES UPDATE OVERDUE

8 Editorial summary: Weathering the storm 46 Advertisers Index

Allowing personal service mortgage broker corporations in Canada will provide tax fairness for brokers and enhance consumer protection BY SAMANTHA GALE

EYES ON THE INDUSTRY A national advertising campaign raises the profile of mortgage brokers and promotes the MB® brand across Canada

DEALS ON WHEELS Since 2016, Quebec mortgage broker Alexandre Grégoire has brought new meaning to the term “mobile mortgages”

columns 28 Off the Clock: Far removed from the hustle and bustle of the mortgage industry, Lee-Ann McEllister volunteers as an emergency baby snuggler BY LISA GORDON

31 Legal Ease: Note Worthy – Arranging and closing mortgages in the COVID-19 environment BY RAY BASI

BY LISA GORDON

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VOLUME 5 ISSUE 2 SPRING 2020

THE CANADIAN MORTGAGE BROKERS ASSOCIATION CO-CHAIRS:

Rob Regan-Pollock (CMBA-BC), Kim McKenney (CMBA-Ontario) DIRECTORS:

Sylvain Poirier (CMBA-Quebec), Wes Sudsbury (CMBA-Ontario), Meg O’Leary (CMBA-Atlantic) EXECUTIVE DIRECTOR:

Samantha Gale CMBA - ONTARIO INDEPENDENT MORTGAGE BROKERS ASSOCIATION OF ONTARIO 7 - 40 Winges Road, Woodbridge, ON L4L 6B2

CMBA - BC MORTGAGE BROKERS ASSOCIATION OF BRITISH COLUMBIA 902 - 777 West Broadway, Vancouver, BC V5Z 4J7

CMBA - ATLANTIC MORTGAGE BROKERS ASSOCIATION OF ATLANTIC CANADA 12 M - 7095 Chebucto Road, Halifax, NS B3L 0A1

CMBA - QUEBEC L’ASSOCITION DES COURTIERS EN HYPOTHECAIRES DU QUEBEC

SPECIALISTS IN INNOVATIVE MORTGAGE SOLUTIONS

Email: info@achquebec.org CANADIAN MORTGAGE BROKER magazine is produced by the Canadian Mortgage Brokers Association (CMBA) EDITOR: Samantha Gale STAFF WRITERS: Samantha Gale, Ray Basi MANAGING EDITOR: Kathleen Freimond ART DIRECTOR: Scott Laing CONTRIBUTORS: Ray Basi, Jason Clemens,

Hesam Deihimi, Samantha Gale, Lisa Gordon, Derrick Leue, Milagros Palacios, Rob Regan-Pollock, Jeannette Van Den Bulk, Niels Veldhuis, Leigh Walker IMAGES: Adobe Stock, Cory Clift, Alexandre Grégoire, iStock, Cory Van Ieperen BILLING: Debra Hiller CANADIAN MORTGAGE BROKER © All rights reserved. The views expressed in CANADIAN MORTGAGE BROKER are those of the respective contributors and are not necessarily those of the publisher or staff. Publications mail agreement 41297283. Please return undeliverable Canadian addresses to 902-777 Broadway W Vancouver, BC V5Z 4J7 Printed in Canada by Transcontinental Publishing.

Web: mandatemortgage.com Email: info@mandatemortgage.com Phone: 604-731-2899 6

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editorialsummary

WEATHERING THE STORM CMBA’s support mechanisms – education, government relations, events and shared resources – will be more important than ever as we rebuild after the pandemic BY ROB REGAN-POLLOCK

s the incoming co-chair of the Canadian Mortgage Brokers Association (CMBA), I had hoped to introduce myself under very different circumstances from those facing all of us today. As I write, the coronavirus pandemic is taking the world into uncharted territory. Like virtually every other business sector, mortgage brokers face unprecedented challenges that will require unprecedented responses to emerge intact and able to rebuild when the pandemic passes. In a time of social distancing, mandatory lockdowns and forced isolation, we need to find ways to maintain contact with our key stakeholders – clients, lenders, realtors and others – to keep our businesses and those of the people who depend on our services from suffering any more than is inevitable during this crisis. I’m sure that each one of you has already implemented a contingency plan to get through this as best you can. I urge you stay 8

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in touch with your colleagues and share what may be working for you so that others can benefit from your experiences. This is the power of brokers helping brokers, and it’s the foundation of CMBA, our broker-led umbrella organization consisting of four associations and seven member provinces. Each association appoints two people to serve as CMBA directors. Our interprovincial network shares information and resources to promote the broker channel and help each local region be as strong as possible, which is what we need right now. But as we weather this storm, we must not lose sight of why CMBA and its affiliates exist: education, government relations, events and shared resources to create economies of scale and drive consumer awareness through the MB® logo. These support mechanisms will be more important than ever as we rebuild when the pandemic is over. Let’s also not overlook the positives in our industry. Thanks to your support, CMBA

and CMBA affiliates are marking significant milestones this year. On April 21, CMBA celebrated its fifth anniversary. CMBA-BC recently celebrated its 30th anniversary with a conference and trade show in Vancouver. One of my personal highlights was hearing from our past presidents how 30 years ago a small group of brokers, fearing a change in the Mortgage Brokers Act, each put $50 into an account and formed MBABC (now CMBA-BC) so they could have a unified voice representing the interests of mortgage brokers with the Ministry of Finance. In speaking with a few of the founders, they expressed their awe in seeing a sold-out conference with 600 delegates and a thriving local association with 1,300-plus members. This year also marks the 20th anniversary of CMBA-ON, and I look forward to helping celebrate its history and success when its conference is held later this year. I also want to congratulate CMBA-ATL on its eighth anniversary.

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editorialsummary

Our most recent addition to the CMBA family is Quebec, which is celebrating its second anniversary and gaining traction within the broker community. We are pleased to see ACHQ launch its CH® consumer branding initiative, which is the French equivalent of the MB®. With respect to our branding and consumer awareness, I’m pleased to announce we recently launched a new consumer-facing website, MBAdvice.ca, that has already attracted more than a million views. This site is part of our new social media campaign to be delivered on YouTube, Facebook and Instagram where the most important 25- to 40-year-old demographic spend the majority of their screen time. The campaign will consist of MB®-branded videos targeted to consumers who will be directed to the

But as we weather this storm, we must not lose sight of why CMBA and its affiliates exist: education, government relations, events and shared resources to create economies of scale and drive consumer awareness through the MB® logo.

MBAdvice.ca website, where they can search for a local member broker (see page 23). I would like to end by telling you a little about myself. I am a former airline pilot who had the good fortune to find this amazing industry by accident after being furloughed by Canadian Airlines in 1993. I started out as a sole practitioner 26 years ago and built a business that led to me becoming a broker/owner in a national network. During this time, many people have been instrumental in helping me, which is why I’m honoured to volunteer my time and give back to the industry. In my view, the spirit of collaboration and sharing is what CMBA is all about. And finally, thank you all for supporting your local mortgage broker association. We appreciate your commitment.

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CMBA-ACHC.CA SPRING 2020 I

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RESIDENTIAL MORTGAGE LENDING CRITERIA

Mortgage Type

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Christine Perkins - Residential cperkins@lanyardgroup.com

CMB MAGAZINE

Mortgage Type

Loan to Value (up to)

Loan Amount Range

Interest Rates Starting at

Single Family + Condo

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economicactivity

STABILIZING INCOME VS. ECONOMIC STIMULUS – what’s the difference? Understanding the difference – and their effectiveness – is key to responding to the current economic downturn BY JASON CLEMENS, NIELS VELDHUIS, MILAGROS PALACIOS

here’s a great deal of discussion right now regarding the need for governments to “stabilize income” and “stimulate the economy.” It’s critical to understand the difference between the two if we’re going to introduce effective policy in response to the current economic downturn. Programs such as employment insurance (EI) aim to stabilize income by providing income transfers when people are laid off. The general idea behind the program, and others like it, is that by providing income

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transfers, individuals and families affected by layoffs during a recession are able to consume – purchase goods and services – at levels comparable to when they were working. Put differently, these types of income transfer programs try to “stabilize” the level of spending in the economy during difficult economic times by “stabilizing” the incomes of individuals and families. An important aspect of programs such as EI is that they automatically respond to recessions. There’s no need for government action as the program is designed to

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economicactivity

automatically collect less taxes from the EI payroll tax while spending more as an increased number of workers are eligible for benefits. The government has already announced several positive changes to the program to make it easier for affected workers to receive benefits more quickly. The federal government could make further adjustments to programs such as EI to ensure incomes are stabilized. For instance, EI currently only covers income up to $54,200, which means the potential benefit (55 per cent) paid to unemployed workers maxes out at $573 per week. Increasing the benefit rate (55 per cent), level of income covered ($54,200), and/or extending the benefit period (maximum 45 weeks of coverage) would go a long way to stabilizing incomes for affected workers. “Stimulus” is something quite different. As the term implies, stimulus is meant to evoke a specific reaction. It seems whenever

In reality, the economy is much more complicated and organic. It’s not a simple machine but rather millions and millions of people acting as workers, entrepreneurs, businessowners, as well as consumers, each with their own preferences and individual circumstances. When economists accept this simple equation, they often recommend – even advocate – for more government spending (more G!) when the economy slows or enters a recession. As one category, say consumer spending declines, we simply pull the lever for more government spending to offset the decline. And presto, economic problem solved. Economists at several of Canada’s largest banks have already called for immediate, large-scale fiscal action to counter the economic downturn, including temporary increases to the federal government’s Canada Child Benefit. This is a clear example of

The reaction to COVID-19 has imperiled trade, disrupted international supply chains and harmed sectors of the economy including tourism. Transferring income to households to “stimulate” more consumer spending does almost nothing to counter these problems. the economy takes a sudden turn towards recession, economists revert to a rather mechanical understanding of the economy and the need for “stimulus.” Often, these “solutions” have nothing to do with economic recovery, often waste vast sums of taxpayer money and fail to address the underlying cause(s) of the recession. This mechanical view of the economy is a result of how macro-economics is taught in undergraduate and even some graduate programs. The economy is depicted as a simple algebraic equation – consumer spending (C) + investment (I) + government spending (G) + trade (exports minus imports). This mathematical approach betrays a misunderstanding of how the economy actually works. 12

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“stimulus” that will cost taxpayers significant money, do little to stem the recession, and ignores the underlying causes of the economic slowdown. First, the experience with such temporary income transfers in Canada, the United States and elsewhere is pretty clear. They don’t fool people into spending more. The distinction here is important – stimulus is about getting people to do something above and beyond the status quo whereas the stabilizing policies referenced earlier are concerned with solidifying normal levels of spending. People generally understand these transfers are temporary and eventually must be repaid through higher taxes since the government borrows money to finance

them. Subsequently, most people use the extra one-time (or temporary) money from government to pay down debt or save, which improves their household balance sheet but does little to “stimulate” the economy. Second, because our federal government has increased spending significantly since 2015 (annual spending is up $77 billion or 36 per cent over the past four years), primarily through borrowing (annual borrowing will eclipse $28 billion next year), any new spending means a significant increase in the federal budget deficit. Such borrowing creates more uncertainty in an already uncertain time, which dampens economic activity. Moreover, the borrowed money must come from somewhere. When governments borrow to increase spending, they take money from some Canadians (those buying government bonds) who will in turn have less to spend on goods and services or invest in the private market. In the end, the increase in government spending is essentially offset by an equal decrease in private-sector spending and investment. And third, the “stimulus” proposal fails to address the cause(s) of the recession. The reaction to COVID-19 has imperiled trade, disrupted international supply chains and harmed sectors of the economy including tourism. Transferring income to households to “stimulate” more consumer spending does almost nothing to counter these problems. Finally, since almost everyone agrees that better infrastructure improves the economy, infrastructure spending remains a popular response to recessions. However, because such spending takes significant time to plan and execute, by the time the spending actually occurs, the recession is usually over. Understanding the differences between policies aimed at stabilizing incomes versus stimulating economic activity, and their actual effectiveness are key to responding to the current economic downturn. Jason Clemens is executive vice president, Fraser Institute; Niels Veldhuis is president of the Fraser Institute; Milagros Palacios is the associate director for the Addington Centre for Measurement at the Fraser Institute. This article originally appeared in Fraser Forum, the Fraser Institute blog. More at fraserinstitute.org

Everybody has a story

A mortgage application is just a snapshot Letâ&#x20AC;&#x2122;s partner and ask the right questions to truly understand your clientâ&#x20AC;&#x2122;s story. Together, we can develop the right financial solution. To see the whole picture, visit hometrust.ca/realstories

We’ll meet again ... don’t know where, don’t know when, but we know we’ll meet again some sunny day ...

ver 600 mortgage brokers, lenders and suppliers gathered at the Parq Vancouver in February for the annual CMBA-BC Conference and Trade Show. This year’s event was a major celebration of the industry, as our Association marked its 30th anniversary. It also became, in retrospect, the final large-scale gathering of the mortgage broker community in Canada prior to the onset of social distancing and COVID-19 pandemic protocols. Those in attendance were treated to eight thought-provoking and prescient plenary sessions, an opportunity to connect with dozens of lenders and suppliers, world-class dining, an elegant awards luncheon, and plenty of occasions to enjoy

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a refreshing beverage with friends and colleagues. The format proved to be a major success, and we received a number of glowing post-event reviews from the attendees, exhibitors and sponsors, some of whom described it as the best conference they had ever been to. Our keynote speaker, Preet Banerjee, very effectively set the tone when he described his vision for the future of the financial advisory industry as being a hybrid model where advisers would need to balance automation of technical processes with human interaction and practical advice. It served to reiterate the message that in a rapidly changing world, getting smart and cogent advice is essential, and

that your best mortgage advice comes from a mortgage broker. There is a strange sense of nostalgia that accompanies these photos. It seems as if they come from a distant era; one in which it was normal to assemble a large group of individuals who would be shaking hands, engaging in face-to-face conversations and dining together. Part of the mission of CMBA-BC is to unite the mortgage broker industry, to create unique networking platforms and deliver quality education. The ideal way to do that is to gather in person, and while we’ll shift to online offerings in the short-term, we look forward to the day where we can stand in each other’s presence once more. We’ll meet again, some sunny day.

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Sarah Almond and Michaela Ross from First National Financial LP enjoy the conference and trade show. CMBA-BC 30th anniversary panel discussion featured Jose Dos Santos, John Ribalkin, Joanne Vickery, Brian Peterson and Ajay Soni. CMBA-BC president Camilo Rodriguez, with CMBA-BC past presidents Hank Van der Woerd, Troy Resvick, Jose Dos Santos, John Ribalkin, Joanne Vickery, Hali Strandlund-Noble, Brian Peterson, Ajay Soni and Jared Dreyer. The trade show featured more than 60 exhibitors discussing business with mortgage brokers. Seen here are the Canada Guaranty team. Mortgage brokers enjoying the MB Awards luncheon. More than 600 brokers, lenders and suppliers were able to connect, enjoy refreshments and share ideas. Mortgage broker Shaun Francis and Jason Parlee from First Circle Financial. Mortgage broker Sabeena Bubber was presented with the MB Award for Community Service. From left: CMBA-BC vice president Rob Regan-Pollock moderated a panel discussion featuring Craig Backman, CEO, B2B Bank, Chris Brossard, CEO, CMLS and John Veltheer, CEO, Liquuid Home Ownership.

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postpandemichousing

NEW PERSPECTIVES AND PRIORITIES Call for partnerships to get the economy back on track and build more housing BY HESAM DEIHIMI

or most of us, preoccupation with the human tragedy and social upheaval brought on by the COVID-19 pandemic has left little time to look beyond the daily health briefings and concern for the welfare of our families and friends. But as we start to slowly emerge from this crisis in the months ahead, we will need to examine the challenges – and opportunities – of a “new normal.” We should expect significant changes in both our macro and micro economies. Migration, nationally and internationally, is likely to change as people who are able to choose where to live move to countries and regions that are politically stable and perceived to have managed the COVID-19 crisis well on both health and social levels. With its world-class health-care system and robust social security net, Canada – and especially British Columbia – stands out. On the micro level, we can expect far more people to work from home, shop online, have groceries and other purchases delivered to their door and – at least at first – look for entertainment that doesn’t involve large crowds.

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What does that mean for Canada and B.C.? The Canadians Abroad project of the Asia Pacific Foundation of Canada estimates that there are as many as 2.8 million Canadians living abroad, but many are now coming home. Having lived in an immigrant community for the past 24 years, I have witnessed an inflow of Canadians over the past few months. Most, if not all, are planning to stay here permanently. The pandemic has given people a new perspective on their lives and reoriented their priorities. They want to live in a country that looks after its people, has a stable political system and provides a social safety net for its citizens. Many returnees include people in their 20s and 30s who may have been living with their parents but who will now require their own accommodation. And with the prospect of B.C.’s economy resuming its robust growth based on a global resumption in demand for natural resources and the continued expansion of the tech sector, it’s not hard to imagine a substantial net increase in interprovincial migration as Canadians from elsewhere seek job opportunities in the province.

We have all seen firsthand how the Apples, Amazons and Microsofts of the world have been establishing footholds in our region. Enrico Moretti writes in his book, The New Geography of Jobs, that for each new high-tech job in a city, five additional jobs are ultimately created outside of that sector – lawyers, teachers, nurses, servers, hairdressers, carpenters … the list goes on. While this would appear to be good news for B.C.’s economy, any growth in the provincial population will undoubtedly place even more pressure on our region’s rental housing market, which is already grappling with a 1.1 per cent vacancy rate (according to Canada Mortgage and Housing Corporation’s 2020 Rental Market report), and it’s almost impossible to predict how that will be resolved in the short-term. According to 2019 British Columbia Financial and Economic Review (79th Edition), construction, real estate, rental and leasing comprise 27 per cent of B.C.’s gross domestic product. The post-pandemic economic downturn combined with significant delays and uncertainty in the permitting phase of any development project could

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postpandemichousing

become major obstacles to meeting housing demand and contributing to the regionâ&#x20AC;&#x2122;s economic recovery. But it neednâ&#x20AC;&#x2122;t be so if we are prepared to consider innovative solutions to the challenge. We need local governments to work with community builders, BC Housing, non-profit housing providers, other provincial bodies and CMHC to create the partnerships needed to help put our economy back on track and get more housing built in the province. For example, we should consider the following: n Waive public hearings and readings: This would apply to projects that fit existing zoning, design guidelines, OCP designations and other existing policies in place in many municipalities. Specifically, those that do not result in displacement of existing tenants. n Use certified professionals: Using certified professionals with adequate insurance coverage could help municipalities address their backlogs and speed up the review process. n Provide local workforce housing: The pandemic has highlighted our reliance on essential workers in health care, emergency

The post-pandemic economic downturn combined with significant delays and uncertainty in the permitting phase of any development project could become major obstacles to meeting housing demand and contributing to the regionâ&#x20AC;&#x2122;s economic recovery.

response, grocery stores, delivery services, etc. Many have risked their own health to travel long distances to work and stay on the job to serve our needs. We need to immediately address the provision of workforce housing in our communities as part of an inclusionary housing framework. These are unprecedented times that require unprecedented measures. While we are confident that human ingenuity and science will help us overcome this crisis, we need to be prepared to deal with the aftermath that will impact us all for years to come. Hesam Deihimi is an award-winning community developer who serves as the president and principal at Milori Communities and Placemaker Group of companies. He currently serves as the representative of the development community on the District of North Vancouver Rental and Affordable Housing taskforce. CMB MAGAZINE

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RULES UPDATE

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newconcepts

Allowing personal service mortgage broker corporations in Canada will provide tax fairness for brokers and enhance consumer protection BY SAMANTHA GALE

ritish Columbiaâ&#x20AC;&#x2122;s Ministry of Finance closed a consultation on a review of the Mortgage Brokers Act (MBA) at the end of April. B.C.â&#x20AC;&#x2122;s Act dates to 1972 and is one of the oldest mortgage broker licensing statutes in any Western jurisdiction, making it ripe, if not overripe, for an overhaul. When the MBA was first enacted almost 50 years ago, it was forward thinking, but so much has changed over five decades. A fresh statute provides opportunities to adopt new concepts not found in any current provincial mortgage broker licensing statutes. One such concept is that of the personal mortgage broker corporation. This is the CMBA-BC submission to government on this subject.

liability. In addition, under the Regulations, voting shares may only be issued to a licensed professional. The benefit to professional licensees who are able to incorporate professional service corporations is that they can take advantage of income splitting and tax deferral options. The professional can then defer the payment of corporate dividends to shareholders to maximize personal tax benefits. In addition, income splitting is a clear advantage for professional corporations as it can pay dividends to shareholders, such as spouses, children or affiliated corporations, who are at a lower tax rate than the professional. However, the incorporation of a professional corporation is only possible if it is provided for in the professionâ&#x20AC;&#x2122;s governing legislation.

CURRENT STATUS

CHALLENGES WITH THE CURRENT STATUS

The Act does not directly enable individual mortgage brokers to collect broker earnings through a corporation in order to split income for tax purposes or defer the payment of taxes. Personal service corporations are permitted for most licensed professionals in Canada, including lawyers, doctors, dentists and realtors. Amendments to the Real Estate Services Act (see Part 10 of the Real Estate Services Act Regulations) were introduced in 2009, which permit licensed real estate professionals to incorporate personal real estate corporations. Remuneration paid to a real estate professional may be paid directly to his or her personal corporation, and then payment of fees or dividends may be paid from the personal corporation to the professional. The personal real estate corporation may only provide real estate services by the licensed professional and cannot avoid regulatory

In the absence of provisions within the Act to permit personal service mortgage broker corporations, mortgage broker registrants utilize franchising and co-brokering strategies to incorporate while also maintaining ties to a larger, well-known mortgage broker. Under this arrangement, the mortgage broker must incorporate a franchisee-type entity, set up a separate office, enter into a franchise arrangement and a co-brokering relationship with the franchisor entity and then register the new entity as a mortgage broker. The challenge for franchisees that operate as co-brokers with their franchisors is that the public may be confused about which mortgage broker entity they are dealing with, as the two mortgage broker entities may share part of the franchisor name and management operations, in addition to operating in close proximity to one another.

This creates a cloudy and muddled landscape, which is a significant departure from the original goal of the Act to create simple relationships between an employer mortgage broker and its employee mortgage broker. In an era where accountability and transparency are of paramount importance in order to combat money laundering and enhance consumer protection, personal service mortgage broker corporations provide an easy solution that benefits both the public and mortgage brokers.

RECOMMENDED CHANGES The Act should be amended to enable mortgage brokers to incorporate personal service mortgage broker corporations that are capable of collecting and retaining broker fees and commissions owing to a mortgage broker from their mortgage broker. This provision would: n modernize the legislation and put mortgage brokers on the same footing as other professionals, such as realtors, lawyers and dentists; n harmonize incorporation rules between mortgage broker and real estate licensees, which will both be regulated by the BC Financial Services Authority once the Real Estate Council is dismantled; and n provide a simpler and more transparent mechanism for mortgage brokers to utilize corporations for tax-savings strategies than co-brokering strategies, which create confusion for the public. The net benefit of permitting personal service mortgage broker corporations is therefore twofold: enhanced consumer protection by creating organizational transparency, and the removal of economic barriers and tax fairness for mortgage brokers. CMB MAGAZINE

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videocampaign

Eyes on the Industry National advertising campaign raises the profile of mortgage brokers and promotes the MB® brand across Canada

n April, CMBA launched a new advertising campaign that encourages consumers to seek out the expert advice of a mortgage broker. We know that, in these uncertain times, it’s essential to get expert advice and that your best mortgage advice comes from a mortgage broker. Our advertising campaign

delivers our key messaging to stakeholders whose personal finances are being impacted by these uncertain economic conditions. The featured video ads invite borrowers to connect with a broker via our dedicated website, MBadvice.ca, which automatically displays the contact details of all CMBA provincial association members. The con-

Video 1 portrays a man overcoming a stack of bills and paperwork while being supported and reassured over the phone by a mortgage broker.

Video 3 shows a woman struggling to work at home while her children play. She is considering borrowing money to renovate and build a home office, or simply buy a bigger home, and a mortgage broker can help her to review options.

sumer response to this campaign has been very strong. Over the course of a few short weeks, the campaign was seen by more than one million viewers in our target market. This represents a sizable exposure for the MB® brand and for our members. The campaign features four videos – see them at cmba-achca.ca/ads.

Video 2 illustrates a market-savvy mortgage broker who closely follows interest rates and can provide insights about when to pull the trigger on new mortgages or renewals.

Video 4 represents a restaurant owner whose business has been closed. He will need to access financing options to see him through the downturn and emerge resiliently on the other side, which is where a mortgage broker can help.

CMB MAGAZINE

CMBA-ACHC.CA SPRING 2020 I

mobilemortgages

DEALS ON WHEELS Since 2016, Quebec mortgage broker Alexandre Grégoire has brought new meaning to the term “mobile mortgages.” With the help of modern technology, he’s closed countless mortgages from his office on wheels, all while experiencing everything North America has to offer. BY LISA GORDON

our years ago, Alexandre Grégoire decided to pull up stakes and take his mortgage business on the road. He and his partner, Valérie Beaupré, rented out Grégoire’s house, closed his home office and sold just about everything they owned in their hometown of

Quebec City. Cramming the essentials into a Winnebago Micro Minnie RV, they and their two dogs hit the road for a year, planning to travel through the U.S. and Western Canada. “We thought we’d go back to a normal life after that,” said Grégoire.

Opposite: Alexandre Grégoire and his partner, Valérie Beaupré.

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ALEXANDRE GRÉGOIRE

mobilemortgages

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CMBA-ACHC.CA SPRING 2020 I

mobilemortgages

They were wrong. Grégoire, 30, has been a mortgage broker at Multi-Prêts in Quebec City for 10 years. While his early years in the business were spent working from his home office, the last four have seen him doing deals from a variety of locations across North America. In the last few years, he and Beaupré have experienced more than most people see in a lifetime, as they criss-crossed Canada, the United States and Mexico. Grégoire told Canadian Mortgage Broker that his father, Michel Grégoire, inspired him to pursue the life of his dreams. “My dad always did what he wanted to do,” he said. “He lost his job just when I was finishing high school. I started studying mechanical engineering and, at the same time, my father was studying to be a mortgage broker. He was taking online classes, and I thought it sounded more interesting

than what I was doing. So, a year later, I took the class. We worked together at Multi-Prêts for about four years.” It was a successful partnership, with Grégoire establishing an easy rapport with first-time homebuyers while his father connected with more established refinancing customers. Sadly, Grégoire’s father passed away in 2013 at just 53 years of age. Three years later, Grégoire and Beaupré decided to

take off for that first year-long trip in 2016. Along the way, they decided to create a video documentary of their journey, naming it Prêts pour la route – Mortgages on the Road. “Valerie used to work for an insurance company, but now she does all the video editing and marketing,” said Grégoire. “When we wanted to get on the road, I figured she’d do all the marketing videos and keep a connection with my customers.” Prêts pour la route has become more popular than the pair expected. Currently, they have 36,000 Facebook fans, 5,500 followers on Instagram and more than 11,000 subscribers following their adventures on YouTube. In 2018, the pair decided to travel to

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Alaska, and they haven’t settled in one place since, although they return home to Quebec every summer. Following the Alaskan adventure, they upgraded to a roomier Airstream RV. “I realized I’d never had the chance to travel the world and experience different things,” said Grégoire, who bought his first house at age 18 and went directly into business with his father after his mortgage broker training. “By this point, most of my first-time homebuyer clients were refinancing, and I didn’t have to meet them in person anymore. I figured I could get on the road and do my business while travelling.” Grégoire said he took care to advise his clients that he wouldn’t be in his office anymore, but he wanted them to know he was still serious about working full-time. He invested in a mobile hot spot and installed an antenna on the roof of the Airstream, adding a secure virtual private network (VPN) connection to safeguard confidential documents. “People reacted pretty well,” he recalled. “I changed my strategy a bit. At first, when I was working from home, my main goal was to get clients to come to my house and meet in person. Once I got on the road, the main goal changed to collecting documents. Once I had the client’s documents, it was almost as important as having a meeting with them.” Grégoire and Beaupré try to travel on weekends so it doesn’t impact Grégoire’s work schedule. No matter where they are, he stays in sync with the Eastern Time Zone so he is always accessible to his customers back home in Quebec. Generally, he’s up at 7 a.m. ET and works until 3 p.m. ET, when he and Beaupré grab the camera and head out to explore. “Usually that’s the best time to take photos because the light is nicer at the end of the day.” So far, the pair has visited every U.S. state, traversed Canada and travelled through half of Mexico. In fact, they were in Mexico in midMarch when Prime Minister Justin

Trudeau called all Canadians home in the face of the COVID-19 pandemic. “What is next? I have no idea,” said Grégoire. “We would like the next project to be Europe. But we have to wait and see what happens with the coronavirus.” He said travel has enriched their lives

from the road, Grégoire is ready for the next chapter. April 1 – the same day he spoke with Canadian Mortgage Broker – was also his last day as a mortgage broker. “The video project we started began to generate income from sponsors and video ads, and it has overtaken my mortgage

When we still had our home, our lives were planned five or 10 years in advance. Since we’ve been on the road, our lives are planned maybe a month or two in advance. We take life more day by day than we used to when we had a house.”

both personally and professionally. “I think it opens our minds to different aspects. It allows me to see how business is done in different parts of the world. I can learn the best practices and apply them for myself.” As for those who’d like to take up the nomadic lifestyle, Grégoire said it’s not for everyone. He recommends trying a short trip first, and said mortgage brokers need to refine their “remote closing” skills before they leave their own driveway. After four years of working

broker revenues,” he said. “Also, another project we have helps people get on the road full-time. They pay a membership and get exclusive content from us.” While he’s excited for the future, Grégoire is also grateful for his years as a mortgage broker. “I liked working with the customers. I liked that I was not selling a product but rather helping my customers to reach their goals.” But for now, life is a wide open road for Grégoire and Beaupré. “When we still had our home, our lives were planned five or 10 years in advance. Since we’ve been on the road, our lives are planned maybe a month or two in advance. We take life more day by day than we used to when we had a house.” EDITOR’S NOTE: While a vacation is probably the furthest thing from your mind during the COVID-19 pandemic, Canadian Mortgage Broker decided to include this story as a reminder of the joys of travel. New places and new things broaden our understanding of the world and enrich us personally and professionally. This is one such tale, and it’s also a reminder that brighter days will surely come.

CMB MAGAZINE

CMBA-ACHC.CA SPRING 2020 I

brokersoff-the-clock

This interview with Lee-Ann McEllister – conducted before the COVID-19 pandemic – continues our series BROKERS OFF THE CLOCK. In every issue, we ask a mortgage broker to tell us what they like to do when they’re not behind a desk. Be it working with animals, travel to exotic places or researching your family roots, we want to know how you unwind. Would you like to be profiled in a future edition – or suggest a fellow mortgage broker? Contact info@cmba-achc.ca

CUDDLER

ON CALL

Far removed from the hustle and bustle of the mortgage industry, MCAP’s Lee-Ann McEllister gets back to basics as an emergency baby snuggler at Kelowna General Hospital BY LISA GORDON

ee-Ann McEllister’s resumé is impressive. As MCAP’s business development manager in Kelowna, B.C., she is responsible for educating and developing her region’s 400-plus mortgage broker partners and is always looking for ways to bring value to their business. But few may know that, in her free time, McEllister is also a trained baby snuggler. A 14-year financial industry veteran who started as a part-time bank teller in university, McEllister discovered a love for banking and eventually pursued a career in that field before moving over to the mortgage broker channel about three years ago. Growing up, she also discovered a passion for volunteering, inspired by her grandmother, who enthusiastically

lent her support to various community causes. McEllister donates her time as an outreach volunteer for HOPE Okanagan, as a financial literacy instructor for kids in Grades 6 to 9, and as a board member for BC Lenders Group Association. Today, at age 32, she is also a trained volunteer in the Kelowna General Hospital’s (KGH) neonatal intensive care unit. In between her busy job at MCAP and the demands of parenting her own son, McEllister puts in roughly three shifts a month as an emergency baby snuggler. “My son is 10 years old, so the cuddle time is over,” she says with a laugh. “I didn’t realize there are so many babies born in the Kelowna General Hospital who are put into the foster care system right away. The nurses do so much to connect with them; but to go in and help those

Opposite: Lee-Ann McEllister, MCAP’s business development manager in Kelowna, B.C., is a trained emergency baby snuggler. 28

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brokersoff-the-clock

nurses is amazing. It’s probably the most rewarding and satisfying volunteer position I’ve ever done.” McEllister and some 20 other volunteers in the neonatal unit are cuddlers on call. She joined the team a little over a year ago and says it’s been an unforgettable experience. “Before that, I used to volunteer for an organization that had me out on the street helping women who were homeless,” she explained. “I found that really started to make me sad; it was very challenging. I was looking for something a little more quiet and relaxing. I met someone who told me they

babies that little fighting for life, it reminds me that we are very lucky to be here. Why not make the most of every day?” McEllister landed her rewarding role after applying with B.C. Interior Health and successfully completing an interview followed by an intensive training program. Prior to working alone, baby snugglers job shadow a more experienced volunteer. Of course, a criminal background check and a yearly flu shot (because preemies are still developing their immune systems) are mandatory. When they’re needed, an email goes out to all emergency cuddlers detailing the available

“I didn’t realize there are so many babies born in the Kelowna General Hospital who are put into the foster care system right away. The nurses do so much to connect with them; but to go in and help those nurses is amazing.”

were always looking for volunteers in the neonatal unit.” When she shows up for a shift, McEllister says she is forced to slow down and take stock of her own mental state. “In the broker industry, we work in a very fast-paced business where everything has to be done yesterday. This is a nice balance. It forces me to check in with my own vibe at the end of the day. If you go in there feeling stressed out, a premature baby really picks up on that feeling.” She said the most incredible moments at KGH have included watching a baby’s reaction to external stimulus. “The most amazing thing to me is that a lot of them are preemies who are connected to machines. They might have a bad dream and you can touch them or sing them a song, and you can actually see their heart rate change as they calm down.” The experience reminds McEllister not to sweat the small stuff. “I think it just goes back to putting things in perspective,” she said. “It’s about getting off the hamster wheel and observing that life is a miracle and very precious. When you see

CORY CLIFT

shifts, depending on how many babies are in the unit at a given time. “One week, you’ll go in four times because there is a huge need. But on average, I’m probably there three times a month for threehour shifts.” McEllister talks to her tiny charges, hoping and wishing they will be adopted into good families. Recently, she spoke to someone who knew a couple who had just adopted. Knowing exactly which baby they had received, McEllister said it was a good feeling to see it come full circle. According to the Adoptive Families Association of BC, a total of 393 adoptions took place in the province in 2017-2018. Many of the babies McEllister sees are suffering from fetal alcohol syndrome, with the youngest being born three months premature. “The babies you see in incubators are so tiny. I’ve never seen anything like it. They could fit in the palm of your hand.” Her experience with the babies has enriched her life, from a personal and professional perspective, and McEllister highly recommends it to anyone who has a snuggle to spare. CMB MAGAZINE

CMBA-ACHC.CA SPRING 2020 I

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legalease

NOTE WORTHY

Arranging and closing mortgages in the COVID-19 environment BY RAY BASI, J.D., LL.B., STAFF, EDUCATION AND POLICY REVIEW

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PROBLEM

GENERAL ANSWER

COVID-19 has forced adjustments to time-tested mortgage arranging and closing practices. This applies not only to the role of the mortgage broker but to roles of various others in the mortgage process (such as appraisers, lawyers/notaries and couriers). What sort of adjustments are being made? Should you be making adjustments? What can you do to better protect yourself from critiques after the urgency has passed? This article will assist you in making these decisions.

COVID-19 has raised the importance of mortgage brokers making detailed file notes about their involvement in arranging and closing mortgages. These notes not only assist the broker to track the progress of individual files but can be invaluable in later explaining the appropriateness of the advice provided and the steps taken. The notes should include the reasons (COVID-19-related or otherwise) adjustments were made to the brokerâ&#x20AC;&#x2122;s usual practices. These notes can be instrumental in protecting the mortgage brokerâ&#x20AC;&#x2122;s business reputation and deciding the outcome of possible future regulatory and legal processes.

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legalease

MORTGAGE PROCESS ADJUSTMENTS Generally COVID-19 is, for a variety of reasons, forcing almost all players involved in arranging and closing mortgages to adjust their usual practices. Some players are short staffed due to staff absences because of illness or COVID19-related precautions being taken. This can result in fewer available people having to work harder and longer to compensate for the absentees. For example, staff from other departments at a financial institution may have to take on the additional responsibility of providing mortgage payout statements. Some players are now in greater demand and cannot be as readily available as prior to COVID-19. For example, couriers are now being used by more restaurants to make food deliveries and are less available to deliver time-sensitive mortgage documents and related funds. Some players have staff working in settings other than their usual office environments, such as from home. The home work environment may lack some of the tools available in the office, such as: a private area to have telephone conversations; office-quality photocopiers, printers and other business equipment; and immediate access to col-

leagues with whom to share ideas, information, documents and workload. Some players are having to change the way they do business. For example, lawyers and notaries have had to be creative in how they meet the land registry document signing requirements. Where permitted, the signatory and the witness are sometimes signing registration documents in counterpart, or a person who is not a lawyer or a notary is sometimes witnessing the signing and then swearing a witness affidavit by way of video conferencing. For further example, many appraisers are not personally inspecting interiors of properties and are instead relying on an occupant of the property providing an appraiser-directed tour by way of webcam (see page 34 for more on how appraisers have adapted to conform with requirements such as social distancing).

By Mortgage Brokers Mortgage brokers have also been forced to adjust their usual processes. Their offices also suffer from adjustments such as staff shortages, availability of related services such as couriers, staff working from home and not meeting with clients personally. (It is acknowledged that many brokers did not meet with clients personally even pre-COVID-19, so this latter point is an adjustment for some but not all brokers.)

An adjustment by any player in the mortgage arranging and completing process can impact other players in the process, sometimes causing those other players to make corresponding adjustments. For example, if COVID-19 requires lawyers, notaries, financial institutions, couriers, appraisers or others to exercise safety measures that slow down the mortgage arranging or closing process, it can become more difficult for mortgage brokers to fully perform their own role. These adjustments can impact the speed and ease with which they receive applications and supporting information, assess the application and information, provide advice to the clients, contact and obtain information from other players (such as obtaining tax information from the municipality) and shop the deal to prospective lenders. Delays in the mortgage closing process can be costly. Many of the transactions are subject to clauses that make time of the essence, meaning that a party can refuse to close a transaction if it is not closed by the stated deadline. Being ready to close a transaction a second late can be too late to insist on the deal closing at all. Mortgage brokers might want to accordingly, where possible, allow for longer times for deals to close or allow for possible extensions to the stated closure times. Some mortgage brokers might assist the closing process by filling in to perform tasks that are not mortgage broker duties. For example, they might deliver the courier package or funds to the lawyerâ&#x20AC;&#x2122;s/notaryâ&#x20AC;&#x2122;s office or between lawyers/notaries when a courier is not readily available. They might assist the signing of the land registry documents by, where permitted, witnessing the client sign them and then swearing a video affidavit as to the witnessing. They might be the person who operates the webcam, under the direction of the appraiser, so as to allow the appraiser a video tour of the interior of the subject property.

VIEW IN THE REARVIEW MIRROR Presumably, an adjustment made by a mortgage broker to close a deal is necessary, desirable or convenient in the COVID-19 environment. It may go so far 32

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as to benefit the client directly, such as by assisting the transaction to close within the permitted time. The question is, will the adjustment be explainable after the urgency has disappeared? Will the broker be able to support the advice given, the steps taken and any adjustment (including any additional assistance provided to others in the process) made if the issue does not arise until years later? What happens when the person the broker witnessed signing the mortgage document later denies having signed the document? Can the broker help prove the signature? What happens when the lender later complains that the appraisal did not take the full state of the property into account and the appraiser blames the broker for not having performed the virtual tour properly? Can the broker prove the circumstances under which the virtual tour was done, the directions provided by the appraisers, the steps taken by the broker, and so on? What if the adjustment is not brought into question until many years after the deal has closed? Memories will have faded. Clients and players may tell different versions of facts that conflict with the mortgage broker’s version. There can be many reasons for the differing versions, some honest and some not. People sometimes dishonestly state versions that are convenient for their own needs. Some people have different recollections because they viewed things from their own distinct perspective. Some people struggle to fill in their partially faded memories.

NOTES CAN BE A DECIDING FACTOR Detailed notes made by the mortgage broker at or around the time of the event can help decision-makers decide what happened and why it happened. It can help the decision-maker decide why an adjustment was made. Be sure your file tells the story. Why did you do what you did? How did it make sense at the time? Provide some background, some key factors and some details. The longer the time gap between the event and making the notes, generally the less helpful they are to a decision-maker. As indicated above, memories fade and people’s

interests in being untruthful change as time passes after a deal is closed. The notes should be sufficiently detailed to tell the story of what happened and the circumstances in which it happened. For example, if a broker assists a lawyer by witnessing the borrower signing the mortgage broker document and then signing the witness affidavit by video conference, the notes should include: n the broker’s understanding as to why the lawyer could not take the signature;

to the broker in civil and regulatory cases where the broker’s conduct is, rightfully or wrongfully, brought into question. A mortgage broker’s notes can be useful in overcoming an argument that the client’s memory is more reliable because entering into the mortgage was a relatively rare occurrence for the client but just one deal among many for the broker. The lack of notes can be detrimental to a mortgage broker. A decision-maker could decide that the mortgage broker, as a

Detailed notes made by the mortgage broker at or around the time of the event can help decision-makers decide what happened and why it happened. It can help the decisionmaker decide why an adjustment was made. Be sure your file tells the story. n whether the signatory was already known to the broker, or the identification that was provided by the signatory to prove their identification; n whether the broker visually saw the person sign the document through the house window, the car window, at a distance from the sidewalk or otherwise; n whether the signature obtained matches other signatures of the person the mortgage broker had on file; and n other such relevant facts. The notes can provide the basis for your advice or the action you took. For example, a client may have given inaccurate factual information on which you based your advice about qualifying for a property transfer tax exemption. The client may seek to later blame you for negligent advice. Your notes could be invaluable in demonstrating the correctness of your advice on the information provided to you. The notes can be useful in demonstrating the broker’s level of care in performing the task. If the signatory later denies have signed the document, the broker’s notes could be instrumental in proving the signature. This can be helpful to other parties in civil proceedings, but it can also be of assistance

professional adviser, is expected to have kept appropriate notes and, due partly to a lack of broker’s notes, believe the client’s version of facts. Decision-makers in civil and regulatory proceedings generally accept evidence on the basis of the balance of probabilities; that is, whether the provided evidence is more likely to be true rather than not. A mortgage broker’s notes can be useful in tipping this scale in favour of the mortgage broker. This is, of course, not to say that everything in the notes will automatically be accepted as being true; the accuracy of the notes can sometimes be an issue. Fulsome details can be a factor in the decision-maker accepting the notes as being accurate.

TAKEAWAYS It is always important for mortgage brokers to keep detailed notes as to their involvement in arranging and closing mortgages. It is that much more important to make detailed notes when the broker departs from usual practices, such as sometimes necessary or convenient in the COVID-19 environment. Brokers would do well to keep detailed notes. CMB MAGAZINE

CMBA-ACHC.CA SPRING 2020 I

appraisaloptions

APPRAISERS ADAPT TO COVID-19 CHALLENGES

Proactive changes create a solid foundation for the way appraisers will conduct business in the future BY LEIGH WALKER, CRA, P.App

istorically, real estate appraisals have been a hands-on business with appraisers spending considerable time on site inspecting properties and often engaging face-to-face with owners and clients. But COVID-19 has changed the way we do business more quickly and dramatically than we could have ever imagined.* We started seeing the changes in early February as the spectre of a global coronavirus pandemic loomed on our horizon, but later in the month we still did not fully appreciate the threat it posed. At the Canadian Mortgage Brokers Association conference in Vancouver, delegates cracked corona jokes and friendly

fist bumps replaced firm handshakes. My company even held a client appreciation party with 100 people dancing in a hotel suite. There was no concern about social distancing â&#x20AC;&#x201C; a largely unknown term at that stage, but one that was soon to become very familiar. But the signs of change were already starting to appear. Hand sanitizer conference swag was snapped up more quickly than the ever-popular highlighter pens and stress balls. By the second week of March, many appraisers were realizing that the threat was far greater than we initially thought. Some appraisers were starting to wear masks and gloves to do our work, but it was a personal choice rather than a mandatory procedure.

Professional associations, such as the Appraisal Institute of Canada (AIC), issued guidelines for suggested business practices in a COVID-19 age, but there was no real consensus among other stakeholders, such as appraisal management companies, and messaging tended to be mixed or contradictory. By this point, many appraisers had been following what could be described as Plan A or Plan B approach. When booking an appointment to view a property, we would follow Plan A, which was to ask a series of questions such as: Has anyone in the house been outside of Canada in the last 14 days, or diagnosed with COVID-19 or showing any symptoms?

*New information on COVID-19 has been coming out daily, and readers should note that this article was written on April 25, 2020. It is anticipated that more procedural changes will have taken place by the time youâ&#x20AC;&#x2122;re reading this.

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If the answers were no, the appraiser would proceed as normal, visiting the property and performing exterior and interior inspections. If the occupants answered yes to any of the questions, the appraiser would move to Plan B, which is a full appraisal with modified interior inspection, now known in the industry as the Modified Full Appraisal. In this process, the appraiser books the appointment and visits the property and completes the exterior portion of the site inspection, but rather than personally inspecting the interior of the property, she or he gathers information about the interior of the property such as the layout, quality, condition, finishing, upgrades, deferred maintenance, etc. through an interview with the owner and a review of documents such as MLS records and building plans. Initially, this option was widely used, but many appraisers and lenders believed this procedure was open to fraud. Were the photos current or were they even from the subject property? The solution for almost all of these concerns was for the appraiser to ask the occupant to download an app that would geo-locate and time/date stamp the photos, and for these photos to be sent to the appraiser while they were on site and before they left the property. This would ensure the photos were recent and truly of the subject property. However, we discovered fairly quickly that a significant percentage of the borrowing public had difficulty downloading the app, taking quality photos, emailing the photos or even knowing how to use a digital camera or smartphone. Many appraisers reported it was taking a significant amount of extra time to gather these photos, leading to delays in some cases. Some appraisers decided that a guided virtual tour in which the appraiser guides the occupant through the house using video technology such as FaceTime, WhatsApp or Zoom was a better option because it gives the appraiser more control and choice over what she or he sees. It wasn’t until mid-March – when the B.C. provincial government declared a state of emergency – that the decisions on how we should be doing business were effectively taken out of our hands. The only

option available to us was to proceed with Plan B on all appraisals. This process was further refined in mid-March when the Business Association of Real Estate Appraisers (BAREA) and its technology partner and leading appraisal software firm, Anow, developed Walkthrough, an app that helps homeowners gather and deliver the required information and images to the appraisers as seamlessly as possible. At the time of writing, in the third week of April, five similar products have been released with varying degrees of functionality and ease of use. This new approach maintains the validity of the Full Appraisal when compared to the Drive-by Appraisal or Desktop Appraisal. It is important to emphasize that full appraisals with modified inspections are still considered to be Full Appraisals because the appraiser is still gathering information about the interior of a property, albeit in a modified way. When various stakeholders initially discussed what to do about COVID-19, the solution was thought to be simply ordering

appraisal for the following reasons: n The Full Appraisal with modified inspection is fully Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) compliant and carries the appraiser’s full $2 million professional liability coverage. n A Drive-by Appraisal is intended to be used for only low loan-to-value (LTV) situations and carries a maximum liability and insurance coverage of only $50,000. n A Drive-by Appraisal provides a range of value of approximately 10 per cent of the estimated value while a Modified Full Appraisal gives a single value. n A Drive-by Appraisal will not take into consideration anything to do with the interior finish, quality or condition, so recent renovations may not be captured. In summary, the last six to eight weeks have been quite a wild ride for everyone in the mortgage supply chain, and we’re only just starting to see the light at the end of the tunnel. But before it’s over, I think it’s wise to expect the unexpected. Appraisers are accustomed to change. We are regularly faced with newer, hybrid

Some appraisers decided that a guided virtual tour in which the appraiser guides the occupant through the house using video technology such as FaceTime, WhatsApp or Zoom was a better option because it gives the appraiser more control and choice over what she or he sees. drive-by appraisals instead of full appraisals because appraisers were not able to get inside a property in person. However, appraisal industry leaders decided instead to quickly educate stakeholders about the differences between full appraisals, drive-by appraisals and desktop appraisals. It seemed that many brokers and lenders believed the term “drive-by” implied a process by which the appraiser completed the full appraisal while it is actually a completely different product type. While nothing is better than a full appraisal, even a modified full appraisal is still a far superior product to a drive-by

automated/appraiser products that create new challenges. COVID-19 is our latest challenge, and I am proud of our industry’s collective response so far. The proactive adaptations we’ve implemented have created a solid foundation for the way we will conduct business in the future. Leigh Walker is president of Lawrenson Walker Real Estate Appraisers, director of the Appraisal Institute of Canada – BC Association, co-founder of the Business Association of Real Estate Appraisers, and has been an appraiser since 1996. CMB MAGAZINE

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Four types of commercial insurance coverage every brokerage owner should purchase BY DERRICK LEUE

veryone enjoys a good top 10 list, and although itâ&#x20AC;&#x2122;s possible to list 10 different types of insurance policies that mortgage brokerages could purchase, we believe there are four that require special attention. This list focuses on those four types of commercial insurance that every brokerage owner needs to consider.

MORTGAGE BROKERS Mortgage brokers do not typically worry about the types of commercial insurance their brokerage owner has put into place. Two quick stories will hopefully help mortgage brokers realize that it is important to know what type of protection the brokerage owner has purchased.

Story #1: A borrower is upset that they had to pay an origination fee to the mortgage brokerage arranging their mortgage with an alternative lender. The mortgage broker disclosed the fee to its client in advance of having the lender fund the mortgage. The borrower issues a complaint against their mortgage broker through the BC Financial Services Authority (BCFSA) website. The mortgage broker hires an experienced lawyer charging $360 per hour because they want to protect their livelihood and defend their reputation. The BCFSA investigation is closed with no administrative penalty levied after the broker spent $6,500 in legal fees. The mortgage broker becomes depressed after learning that some of the Errors & Omissions Liability (E&O Liability) policies could defend BCFSA investigations. Unfortunately, this brokerage owner did not purchase that

policy and instead focused on the lowest price when shopping for an E&O Liability policy and did not receive any coverage benefit to help their mortgage broker.

Story #2: The mortgage broker had their laptop stolen from their vehicle while parked in a public garage. The laptop contained sensitive financial information on clients. The broker feels the right thing to do is tell clients what happened. One nervous and upset client issues a complaint with the Privacy Commissioner. The Privacy Commissioner launches an investigation. The broker is panicked and does not know what to do next. Their brokerage owner tells the broker they should hire their own lawyer. While brokerage owners can purchase data security and privacy liability policies that provide a cyber breach coach and legal defence services for privacy commissioner investigations, unfortunately the brokerage owner did not purchase the insurance policy.

Errors & Omissions Liability is the must-have coverage for mortgage brokerages

The provincial regulators in Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick and Nova Scotia all require mortgage brokerages to maintain E&O Liability policies. The vast majority of B.C.- licensed mortgage brokerages already maintain E&O Liability. Not all E&O policies and their providers are created equal. The regulators have certain

minimum coverage requirements. The E&O policies available through the different associations will often include: n Coverage for data security and privacy liability; n Directors & Officers Liability; and n Legal advice by telephone for any legal question posed by a mortgage broker. Claims happen in the mortgage industry because borrowers and individual mortgage investors are difficult to predict â&#x20AC;&#x201C; just like the real estate market. Therefore, it makes sense to select an E&O insurer with experience and a long track record of stability. There are many examples from across Canada where a mortgage broker may have reported a claim to its E&O insurer and then the insurer increases the premium by an unreasonable amount or refuses to renew the policy. Choose your E&O provider carefully to ensure you receive long-term coverage stability from an insurance provider who knows how to properly defend mortgage brokers from a broad spectrum of negligence allegations.

Coverage for the biggest risk facing mortgage brokers

The regulators may require mortgage brokers to maintain E&O Liability; however, a privacy breach is the risk most likely to have a negative impact on mortgage brokerages. According to the 2019 CIRA Cybersecurity Survey, 71 per cent of Canadian businesses reported experiencing at least one cyberattack in 2019, and an alarming 43 per cent were

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still unaware of the Personal Information Protection and Electronic Documents Act’s (PIPEDA’s) mandatory breach disclosure requirements. Mortgage brokers represent a potentially lucrative and easy target for hackers because they store the sensitive personal information that criminals value for identity theft or for sale on the dark web. Social insurance numbers, employment details, Canadian Revenue Agency (CRA) information, driver’s licences, addresses and credit scores will always meet the Privacy Commissioner’s threshold of personal information that represents a real risk of significant harm to individuals if there is unauthorized access.

How does cyber insurance protect you? This form of insurance is unique because it provides proactive protection to the policyholder and liability protection if the mortgage brokerage is sued by a borrower, investor or lender. Ask yourself: who would

n Access to public relations and communications firms to issue the notifications to affected individuals and set up the credit monitoring hotline. The hope is to avoid being sued by individuals because you have utilized all of these valuable services to mitigate the impact and help your clients. However, the cyber insurance policy provides your legal defence and covers the damages awarded to claimants if you are named in a lawsuit.

Coverage for the basics

Every business operating in Canada should have a Commercial General Liability (CGL) policy, even if it is a home-based business. Like death and taxes, you can be certain that Canadians will experience bad weather. When someone is injured on private property (i.e., slipping in wet or icy conditions), they typically sue for damages.

Mortgage brokers represent a potentially lucrative and easy target for hackers because they store the sensitive personal information that criminals value for identity theft or for sale on the dark web. Social insurance numbers, employment details, Canadian Revenue Agency (CRA) information ... you call if you experience a privacy breach? When you purchase the appropriate cyber insurance policy, you get access to the following services at no cost to you: n A cyber breach coach who helps you understand your obligations as they relate to the provincial and federal privacy laws. n A lawyer experienced in reporting breaches to the Privacy Commissioner. Experience matters when you are reporting an incident to the privacy office. n IT forensic investigation consultants to determine what happened, how the hacker accessed your network, what data was compromised and whether the data has been released. 40

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CGL provides low-cost (i.e., less than $1,000 for an office location) protection for claims brought against you and your business when someone is injured and is seeking compensation.

Legal expense insurance for everything else

Canada has become much more litigious in recent years. Brokerage owners and mortgage brokers can purchase a legal expense insurance policy that provides unique protection and advice for any legal matter outside of the risk of being sued for errors and omissions related to mortgage broker services. The legal expense policy includes the following features: n Unlimited legal advice by telephone for any legal question. n The legal costs to hire a lawyer to defend investigations brought against you for statutory liabilities, anti-spam infractions, occupational health and safety, employee complaints and allegations. n The legal costs to hire a lawyer to represent you when audited by Canada Revenue Agency. n The legal costs to enable you to hire a lawyer to launch a lawsuit against a third party related to your ownership of physical property, an injury you sustained, or a product or service you purchased. There are two ways to purchase a legal expense insurance policy: on a standalone basis through an insurance broker; or in conjunction with a Mortgage Brokerage E&O Liability policy. There are more than four different types of commercial insurance policies available to protect mortgage brokerage owners; however, we realize that budgets for insurance are not unlimited. The four insurance products outlined in this article are a critical part of the insurance portfolio to protect brokerages with fewer than 10 employees. Derrick Leue is the president of PROLINK Insurance Inc., a national leader in managing insurance programs for some of Canada’s foremost professional associations. Derrick Leue and PROLINK have been focused on providing the mortgage broker, administrator and lending industry with insurance advice for more than 16 years. PROLINK is the endorsed insurance provider of Errors & Omissions Liability and Privacy Breach insurance for the Canadian Mortgage Brokers Association.

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PROTECTING CLIENTSâ&#x20AC;&#x2122; PERSONAL INFORMATION BY RAY BASI, J.D., LL.B., STAFF, EDUCATION AND POLICY REVIEW

COVID-19 has played havoc with the tested and established systems and procedures of your mortgage brokering business. It hit quick and hard. It forced you to adjust, more or less on the fly, to keep business moving. You and your staff are now working from your respective homes. Some of them are working from kitchen tables and are using family computers. Communications of all sorts are less private than they used to be. Others in the households can hear at least parts of the telephone conversations and may have access to the emails. They see the courier packages coming to and leaving the houses. Some of your staff do not have areas where they can secure files to protect against unauthorized people looking at them. One of your staff members had a break in her kitchen pipe. Two plumbers fixed it while she worked at the kitchen table. The computer screen was visible to them. You are aware that while adapted office systems and procedures could compromise client privacy, protecting personal privacy should remain a priority even in the face of pressing business needs. These compromises, while perhaps seen as necessary (or convenient, in the circumstances), can be problematic. Mortgage brokers collect considerable personal information about clients and others, including detailed financial information. They have legal obligations to protect that information. A privacy breach can, among other things: n damage your business reputation; n result in you being required to take costly steps to remedy the consequences of the breach (including notifying all persons impacted and paying for their credit checks for a period of time); and n result in a court requiring you to pay for damages to persons who suffered losses due to the breach. You need assistance to better protect you against these risks. You will find this article by Jeannette Van Den Bulk, Deputy Commissioner at the Office of the Information and Privacy Commissioner for British Columbia, to provide such assistance, concisely. She also provides references to tools to assist mortgage brokers in reviewing their processes and implementing changes. While the article would be helpful to mortgage brokers at any time, it is particularly timely in the present COVID-19 environment. We believe you will find it of considerable assistance in conducting your business in a way that better protects your business reputation and your wallet.

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ÂŠ SAMUEL / ADOBE STOCK

PRIVACY PRINCIPLES

informationpractices

Information practices and strategies that maintain compliance with privacy legislation BY JEANNETTE VAN DEN BULK, DEPUTY COMMISSIONER AT THE OFFICE OF THE INFORMATION AND PRIVACY COMMISSIONER FOR BRITISH COLUMBIA

f you are a mortgage broker, you know how important it is to collect information about your customers. But protecting your customers’ sensitive personal information is also critically important. And, in Canada, it’s the law. Your day-to-day work as a mortgage broker involves handling large amounts of highly sensitive personal information. Privacy regulators know you need this information to do your job. It would be hard to imagine a world in which you could not gather names, dates of birth, address information, marital status, credit scores, bank account information, previous mortgage information, employment histories and other details for your work. In this article, I’ll tell you about 10 privacy principles. They form the foundation of good information practices and are essential for compliance with Canadian

privacy legislation. I’ll also provide some straight-forward strategies to help you collect, use and disclose personal information safely, responsibly and in compliance with privacy legislation.

PRINCIPLE 1: IDENTIFYING PURPOSE Before collecting your customers’ personal information, you must identify verbally or in writing the purposes for which you are collecting the personal information, how it will be used and, upon request, who can answer questions about the collection. Examples of purposes for the mortgage industry might include: n completing a mortgage application n verifying creditworthiness n providing services n providing employee benefits

PRINCIPLE 2: LIMITING COLLECTION This principle just makes common sense: do not collect personal information indiscriminately or without a legal authority. The information you collect from your customers must be necessary to fulfill an identified purpose, and it must be reasonable and appropriate. In addition to being good privacy practice, there are other benefits of limiting collection for organizations. You’ll reduce the risk and/ or impact of loss or inappropriate access, use or disclosure and spend less collecting, storing, retaining and destroying unnecessary personal information.

PRINCIPLE 3: GET CONSENT Meaningful consent is the foundation of Canadian private sector privacy legislation. Depending on the circumstances, consent can take one of three forms.

Explicit consent can be written or oral (obtained in person, by phone, by mail, Internet, etc.) and must notify individual of purposes. For example: “I, _______, warrant and confirm that the information given in this consent form is true and correct, and I understand that it is being used to determine my credit responsibility and will be forwarded to a financial intermediary and/or mortgage lender.” Implicit (or deemed) consent happens when an individual doesn’t expressly give consent but volunteers information for an obvious purpose that a reasonable person would think was appropriate to volunteer in those circumstances. For example: A potential customer calls for information about how to fill out an application form and leaves his name and number on your voice mail. You could use this number to return their call and provide the requested information. However, you could not add that information to a database used for future marketing purposes. Opt out consent gives your customers an opportunity to opt out of consenting to one or more of your other services. For example: Check (or uncheck) this box if you don’t want to receive occasional emails from us about our other financial services.

PRINCIPLE 4: LIMIT USE, DISCLOSURE AND RETENTION You can use and disclose personal information for the purposes you identified when it was collected. But if you want to use personal information in a new way, that use must also have a reasonable purpose – and you must notify the individual about that new use. You must also obtain their consent prior to using the personal information for any new purpose(s). Keep the personal information for only as long as you need it for legal or business purposes. For example, B.C.’s Personal Information Protection Act requires organizations to keep personal information for at least one year if the organization uses the information to make a decision that directly affects an individual. This will give your customer a reasonable opportunity to access the information and make corrections if necessary. CMB MAGAZINE

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State in your privacy policy minimum and maximum retention periods for your data. Take any legal requirement or restrictions into account, as well as appeal mechanisms. And be aware that it is not advisable to keep personal information indefinitely. Once the legal or business purpose has passed, the information should be securely destroyed.

PRINCIPLE 5: REASONABLE SECURITY Good privacy practices commonly include three kinds of safeguards: physical safeguards, technological safeguards and administrative safeguards. n Physical safeguards include alarm systems, door locks, locking filing cabinets and restricting access to offices. Use cross-cut shredders for destroying financial information. Also, it is very important to ensure that the information in mobile workers’ home offices is secure. n Technological safeguards include encryption, passwords, user authentication, firewall software and safe disposal of hard drives. Ensure technological safeguards are kept up to date. n Administrative safeguards include providing access on a need-to-know basis, maintaining confidentiality agreements with staff and volunteers, and ensuring contracts with third parties have limited access and confidentiality requirements. As well, providing privacy training to any staff that have access to personal information is important.

PRINCIPLE 6: BE ACCOUNTABLE Be responsible for all personal information under your control, including contractors’ records. Be sure to appoint an individual responsible for privacy (a privacy officer), and make sure employees know who it is. A privacy management plan will help you be accountable by following good privacy protection practices (see Resources, below).

PRINCIPLE 7: OPEN AND TRANSPARENT Transparency is how you build consumer trust with your clients. Write privacy policies and that are easily understandable and readily available. Produce brochures or other information that explain your personal information policies and practices. Let your clients

know how you are protecting them – and that privacy is an important part of your business. (See Resources, below, to learn how to write a privacy policy.)

PRINCIPLE 8: ENSURE ACCURACY You must make a reasonable effort to ensure that the personal information you collect is accurate and complete if it will be used to make a decision that affects the individual it is about. It is especially important that you know and trust your sources: the decisions you will make about mortgage applicants can have massive implications.

PRINCIPLE 9: RIGHT OF ACCESS/ CORRECTION Individuals have a right of access to the personal information your organization holds about them. They also have the right to request that an error or omission be corrected about their personal information. Note that this provision is for errors like an incorrect birth date and does not provide grounds for appeal for being declined a mortgage.

PRINCIPLE 10: PROVIDE RECOURSE Provide recourse for your customers by developing simple privacy complaint handling and investigation procedures. Tell complainants about your organization’s privacy complaint procedures, along with those related to industry associations and regulatory bodies. Investigate all of the complaints you receive. Notify individuals of the outcome of complaint reviews clearly and promptly, and inform them of any steps taken. Ensure staff members are aware of the policies and procedures for complaints, and know who is responsible for handling complaints. Finally, record all your decisions to ensure consistency. These steps may help to preserve or restore your customer’s confidence and trust in your organization. Understanding and following these 10 principles will build a foundation of good information practices, establish trust between you and your clients, and help keep you in compliance with privacy legislation.

RESOURCES The Office of the Information and Privacy Commissioner for British Columbia website (https://www.oipc.bc.ca) and the Office of the Privacy Commissioner of Canada (https://priv.gc.ca) offer these free tools and guidance documents: Getting Accountability Right with a Privacy Management Plan: This guidance outlines the “building blocks” or baseline fundamentals of privacy management, such as organizational commitment and program controls. It also explains how to maintain and improve a privacy management program on an ongoing basis. Privacy Impact Assessment Template/Guidance for the private sector: These tools will help you understand the flows of personal information throughout your organization, so you can ensure compliance with PIPA at every step. Developing a Privacy Policy under PIPA: Learn how to organize your privacy policy to best address your organization’s needs and risk. Guidelines on Meaningful Consent: Practical and actionable guidance from the Office of the Privacy Commissioner of Canada regarding what organizations should do to ensure that they obtain meaningful consent. Privacy Breaches: Tools and Resources: Learn about the four steps in managing privacy breaches to mitigate harm or prevent breaches altogether. PrivacyRight: This series of webinars, videos and podcasts was designed to help organizations in B.C. understand their obligations under PIPA. PIPEDA fair information principles: A breakdown of each principle under the federal Personal Information Protection and Electronic Documents Act (PIPEDA), with responsibilities, ways to meet those responsibilities and associated links.

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Canadian Mortgage Broker Magazine - Spring 2020

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STABILIZING INCOME VS. ECONOMIC STIMULUS – what’s the difference?

WEATHERING THE STORM

RULES UPDATE OVERDUE

EYES ON THE INDUSTRY

NEW PERSPECTIVES AND PRIORITIES