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IMBF SUMMIT
A global perspective on mortgage industry challenges p.8
THE HUMAN TOUCH
The value of emotional intelligence p.10
POWER AND PROCESS
Reviewing regulators’ decisions p.18
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Insights on rates and housing trends p.22
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SPECIAL PULL-OUT SECTION
ALTERNATIVE LENDERS
Comprehensive listings of alternative lenders, mortgage investors, private lenders and syndicators across Canada. 10 THE HUMAN TOUCH
Mortgage brokers who hone their emotional intelligence skills now will reap renewals and referrals later
departments 8
Editorial
30 Advertisers’ Index
BY LISA GORDON
18 POWER AND PROCESS
Regulators’ decisions can be reviewed for fairness and reasonableness BY RAY BASI
TAL SHARES INSIGHTS 22 BENJAMIN ON RATES AND HOUSING TRENDS Leading economist advises mortgage brokers to prepare for a strong decade ahead BY CARLA GILES
27 GST RELIEF FOR PURPOSE-BUILT
columns 14
Legal Ease: Reality checks: GST/HST new housing rebate BY RAY BASI
24 Off the Clock: Mortgage broker Corina Murphy helps homebuyers and the homeless BY LISA GORDON
RENTAL HOUSING
Bill C-56 is a drop in the bucket – more needs to be done to boost rental housing stock BY RAY BASI
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VOLUME 8 ISSUE 4 FALL 2023 THE CANADIAN MORTGAGE BROKERS ASSOCIATION
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editorial
Global perspective on mortgage industry challenges and collaborative action
INSIGHTS
FROM THE IMBF INAUGURAL WORLD SUMMIT BY CARLA GILES, MBA, CAE, CEO OF CMBA-BC, MBIBC, EXECUTIVE DIRECTOR, CMBA NATIONAL, AND MEMBER OF
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THE IMBF BOARD OF GOVERNORS n the world of mortgage brokering, where dedicated professionals guide clients through the complexity of mortgage financing, it has become increasingly evident that our challenges transcend borders. On September 8, in Las Vegas, about 100 mortgage brokers and industry leaders from Australia, Canada, the United States, Ireland and other corners of the world gathered for the inaugural International Mortgage Brokers Federation (IMBF) World Summit. This gathering was not just about the challenges we share, but it provided an extraordinary platform for industry leaders to exchange insights, explore market trends and chart a collaborative path forward in our ever-evolving mortgage industry. The IMBF stands as the leading global forum that brings together the international mortgage brokering community and industry providers for the betterment of our profession. Our mission goes beyond unifying the global mortgage brokering community; it is about constantly improving standards to enhance our industry and maintain the highest professional and ethical standards. The IMBF is committed to fostering international co-operation among mortgage brokers and industry professionals, and this commitment to unity and excellence was showcased at the IMBF Inaugural World Summit.
The Board of Governors’ Leadership At the core of the IMBF Inaugural World Summit were the member country leaders who make up the Board of Governors, led by Chairman Peter White (Australia), along with board members Linda McCoy (United States), Carla Giles (Canada), Rachel McGovern (Ireland) and Robert Sinclair (United Kingdom). Together, they played instrumental roles in orchestrating this historic event. The Summit began with a series of activities, including enlightening keynote presentations. Nora Guerra, senior affordable lending manager at Freddie Mac, provided a comprehensive overview of the state of the mortgage industry in the United States. Subsequently, David H. Stevens, CEO of Mountain Lake Consulting and a 36-year veteran of the mortgage banking industry, shared valuable insights, offering perspectives on both the domestic and international aspects of the mortgage industry, enriching our 8 I FALL 2023 CMBA-ACHC.CA CMB MAGAZINE
understanding of the global landscape. In addition, Simon Bednar, CEO of Finsure Aggregation, shared insights into the Australian mortgage industry and the critical role of aggregators in Australia. Building on the insights gained from these keynotes, the Summit transitioned seamlessly to the Board of Governors panel discussion. This panel featured our Board of Governors members, Peter White, Linda McCoy, Carla Giles and Rachel McGovern, along with Ernest Jones Jr., president of the National Association of Mortgage Brokers (NAMB), and Sadiq Boodoo, president of the Canadian Mortgage Brokers Association - Ontario. The panel engaged in thoughtful discussions on shared challenges affecting mortgage brokers worldwide. They also identified promising opportunities for further dialogue and collaboration. The active participation of our delegates brought their unique perspectives and expertise to the discussion, enriching the overall conversation. The Summit highlighted common challenges faced by mortgage professionals across the IMBF member nations. Regardless of the differences in mortgage products and market dynamics, these challenges served as focal points for industry improvement:
Continuing Education and Professionalism. The Summit reiterated the vital role of education in the mortgage industry. In a profession where we are entrusted with intricate financial transactions, a deep understanding of products, suitability considerations and regulations is crucial. Staying updated on evolving regulatory compliance and technology is equally important. The call for robust oversight to curtail unlicensed activities within the industry was strong, emphasizing the importance of professional development, industry association membership, and focus in adapting to changes in compliance and technology.
Housing Affordability. Housing affordability and supply emerged as a pressing concern. Shifting government priorities and industry co-ordination challenges in boosting housing supply have contributed to the issue. Recent monetary policies aimed at combating inflation have compounded housing affordability challenges with rising interest rates. The complexity of these challenges underscores the need for policy reforms and regulatory adjustments that bolster housing supply and
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address taxation and other incentive mechanisms to improve housing affordability and stimulate the housing market. Finding collaborative solutions to enhance housing affordability and preserve the financial sector’s integrity remains a top priority.
Advocating for Mortgage Brokers. The Summit emphasized the importance of collective advocacy in showcasing the pivotal role played by mortgage brokers within our industry. Regulators and government leaders often possess limited insight into industry nuances. Mortgage brokers, in view of their insightful perspectives from their interactions with clients, lenders and the broader mortgage industry providers, are uniquely positioned to inform government policies that influence the housing market. Balancing regulation and industry growth is also a concern, as over-regulation can introduce inefficiencies into the mortgage financing process. Rectifying regulatory discrepancies, comprehending regional distinctions and forging collaborative solutions were cited as essential steps in bolstering the mortgage brokering community. The Summit addressed various other topics crucial to the mortgage brokering profession, such as remuneration models, concerns over commission clawback policies, licensing and re-licensing education, amortization policies and length of mortgage terms, and fact-based advocacy. The question of whether mortgage brokers should be regulated at the provincial or federal level garnered significant attention. Moreover, the discussion on foreclosure procedures, particularly in the context of rising interest rates, highlighted diverse approaches and concerns from various countries. In summary, the IMBF Inaugural World Summit represents a historic milestone, shedding light on the common challenges faced by mortgage brokers worldwide. It has acted as a dynamic platform for industry professionals to share insights and pave the way for ongoing collaboration. This pivotal gathering has emphasized the imperative of collective advocacy and the unwavering strength derived from international co-operation. As a next step, the IMBF Board of Governors is crafting a comprehensive white paper. This document will delineate the challenges requiring resolution in each country and highlight solutions already implemented in specific regions together with learnings. It is intended to become a valuable resource, carrying a resounding message that the mortgage broker community is wholeheartedly dedicated to global best practices. Our overarching aim is to elevate the standing of mortgage brokers and accentuate their vital role in advancing the industry and promoting global homeownership objectives. Mortgage brokers have a distinct opportunity to mould the future of their profession by actively engaging in a global dialogue and demonstrating their resilience through their professional membership associations. Despite the challenges that may lie ahead, the IMBF Inaugural World Summit has firmly established the foundation for a new era of collaboration and advocacy within the mortgage brokering profession.
Canadian Delegation to the IMBF World Summit In addition to Carla Giles and Sadiq Boodoo, the Canadian delegation included directors from the Canadian Mortgage Brokers Association – British Columbia: President Marci Deane, Vice President Rebecca Casey, and Secretary Jane Wakelyn; and Vice President Kelly Curtis, representing the Mortgage Brokers Institute of British Columbia. CMB MAGAZINE CMBA-ACHC.CA FALL 2023
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emotional quotient
THE HUMAN TOUCH
Lee-Ann McEllister
She also pointed to increasing household debt levels, as consumers scramble to juggle the high cost of housing with rising food prices and other demands on the family wallet. “There is an underlying fear and a collective trauma we’re all dealing with,” said McEllister. “That is the foundation of what brokers are now experiencing with their clients.” For mortgage brokers who are personally feeling the pinch of a slowing market, she suggested that this is the time to focus on building solid client relationships. The best way to do that is to brush up on emotional intelligence competencies. “EQ is a range of skills related to recognizing, understanding, managing and effectively utilizing emotions such as empathy, self awareness, interpersonal skills and emotional regulation,” explained McEllister. “For brokers who are building relationships, the biggest thing is understanding client needs. EQ allows you to listen to what is not being said so you can understand client goals, fears and aspirations. Then, you can give them tailor-made solutions.” She remembers that when she was in a client-facing role, many clients were reluctant to talk about money. “A lot of the time, there is shame attached to conversations about money. People don’t talk about money with their friends and family, if they are going into debt. Brokers can let people know they are not alone. As a broker, you can share that you are seeing this more and more these days. You can help them look for solutions.” McEllister recommends that brokers stay curious and ask questions of their
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Mortgage brokers who hone their emotional intelligence skills now will reap renewals and referrals later BY LISA GORDON
W
hen wildfires devastated her hometown of Kelowna, B.C., in August 2023, mortgage professional Lee-Ann McEllister reached out to her home insurance provider to talk about wildfire coverage. Thankfully, her house wasn’t one of the 189 destroyed by the fast-moving McDougall Creek blaze. But still, the evacuation experience had been harrowing – and her insurance adjustor did nothing to reassure her. “We finally got a hold of their office to talk about coverage during fires, and not a single person said ‘I’m sorry to hear you’re going through this,’ ” recalled McEllister. “They missed the chance to make me feel safe and heard.” It’s an all-too-common scenario in our modern society, where service providers fail to connect with clients on a deeper level, demonstrating a serious lack of emotional intelligence – otherwise referred to as EQ, or emotional quotient. And yet, research performed by TalentSmartEQ, a California-based provider of EQ training and coaching, found that emotional intelligence is the critical factor that gives star performers a leg up on the competition. In fact, the company “tested emotional intelligence alongside 33 other important workplace skills, and found that emotional intelligence is the strongest predictor of performance, explaining a full 58 per cent of success in all types of jobs.” McEllister, a 17-year finance industry veteran who is associate director, sales at MCAP Western Canada, said a high EQ has become increasingly important in today’s uncertain mortgage market. “Our current marketplace is consistently full of bad news,” she told Canadian Mortgage Broker. “The economy, inflation, the market and house prices, rate increases, and the qualifying rate... This is all causing a lot of stress. Renters are seeing their rent going up to the point where now, they can’t afford to buy a home. Homeowners are wondering how they will be able to pay the mortgage when it comes up for renewal.”
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clients in order to deepen conversations and uncover any pain points. “Emotional intelligence is not something you’re born with – you can develop it,” she advised. “Like any muscle, you can build it and you can train for it. There are so many resources at your fingertips.” Publications like Harvard Business Review cover EQ, and there are numerous podcasts on the topic. Brokers can also approach someone they admire in this area and ask them for tips and advice. “In an office situation, we had the opportunity to learn from each other,” added McEllister. “Now that most people work from home, I think there is an opportunity for mentorship and to have brokerage leaders make EQ a topic of discussion.” In an industry where artificial intelligence (AI) is playing an ever-larger role, McEllister is not afraid for her job. “Myself, I love technology and innovation,” she concluded. “There is this fear that computers will take over our jobs. I keep saying that as we lean on technology, it creates a space for us to be better humans. AI streamlines the paperwork and data analysis, but we need to remember that our roles will now evolve into trusted advisers.”
IT’S ABOUT CONNECTIONS, NOT NUMBERS Ottawa mortgage agent Frank Napolitano, co-founder of Mortgage Brokers Ottawa, tries to email his clients as little as possible. Instead, he prefers connecting with them in person, on the phone or on a Microsoft Teams call. “I want them to see my passion for helping them and see how they are presenting,” said Napolitano, who opened his business with partner Michael Hapke in 2005, following 21 years in banking. He, too, said clients are uneasy and anxious these days. “There is fear of losing your house if you’re a current homeowner. There is fear of letting your family down 12 I FALL 2023 CMBA-ACHC.CA CMB MAGAZINE
because you thought you made the right decision to buy a home, but you didn’t foresee the cost of everything around us going up severely. People are nervous about making ends meet,” he said, adding that some of his clients have been forced to cut back on their children’s sports programs. For brokers, Napolitano said income is down while stress has ratcheted up. “It’s hard for brokers not to be stressed right now,” he explained. “If you’re passionate about your job and you care about your clients, you stress with them. You feel for them, because in a lot of cases some people have done all the right things, and still, they are falling behind. They didn’t expect butter to be $10 or to have to cut their kids’ sports.” However, he said that when brokers do all they can to help their clients, it alleviates some of that stress. Having said that, there have been some tough conversations. “I think you can’t sugarcoat it with clients,” said Napolitano. “Times are bad today. Be real with them and explain their options. The rates are where they are now. You have to accept the fact that if things don’t change too much, you may retire and have a mortgage on your home. Today, we want to keep your payments fairly low so you can afford to stay in your house.” As the cost of living skyrockets, Napolitano added he’s particularly worried about young Canadians who aspire to be homeowners, as well as seniors who are struggling with rising costs on fixed incomes. This is the best time, he said, to reach out
and check in with people. “They love to hear your voice. You don’t have to sell anything. Just call to see how they’re doing. Say things are tough and you’re seeing it everywhere. Tell them if they’re concerned, you are here to help. They will remember that and be loyal to you when their mortgage comes up for renewal.” As for AI in the mortgage marketplace, Napolitano said the industry is about more than black and white numbers. “AI is a number – most of us already feel like numbers when it comes to our banks. But EQ is personality – somebody who truly cares, who doesn’t place all the emphasis on making money. “Emotional intelligence understands what you need deep down when it comes to financial assistance and what works for the next three, five or 10 years.”
FOCUSING ON A BRIGHTER FUTURE Every morning, Sabeena Bubber gets up at 5 a.m., meditates for 45 minutes and then heads to the gym for an hour. A mortgage broker with Xeva Mortgage in North Vancouver, B.C., Bubber prioritizes this time for herself, knowing that when she feels focused and strong, she can do the best job for her clients. And right now, they really need someone in their corner. “We’ve been in a situation for more than 20 years, since 2001, where we’ve had lower interest rates,” explained Bubber. “We had Sept. 11, 2001, then the financial crisis of 2008, and finally the pandemic in 2020. “We have an entire generation of people who are comfortable with those lower rates and don’t know how to handle the squeeze of expenses we now have. There is no literacy around it. My first mortgage was at almost 10 per cent – we borrowed less then, although we also made less. Having a perspective on how high it can go is important Frank Napolitano
in helping to manage the expectations of consumers.” She said homeowners who took variable rates mortgages have seen their payments skyrocket. As well, pandemic-era fixed rate mortgages will substantially increase at renewal, two to three years down the road. “Brokers are feeling stress because volumes are down and the market has slowed,” she continued. “Our income stream has changed, too. Brokers used to sell five-year fixed, now we’re selling shorter terms and lower volumes. That affects our incomes and households, and some brokers did not necessarily save for harder times.” Ultimately, Bubber believes humans are ruled by emotions that frame how they perceive the world and how they interact with it. For her, that’s where emotional intelligence comes into play. “Instead of focusing on the hard part of what’s happening to my clients, I focus on what we want to create,” she said. “We can change our perspective on what’s happening. I can help to frame it for my clients in terms of what they want to create. We can look at solutions, provide support for their pain points, and take a compassionate approach to what is affecting them most in their life. I ask them, what are your pain points right now? What would make it easier for you?” One family Bubber worked with had to replace two cars in the past year and their payments were through the roof. “So, adding those payments into the mortgage or taking out equity from their home for cash flow, those are some possibilities. It’s about trying to help them see the situation they want instead of where they are now. Clients tell me how much it means to them that I listened and heard what they said.” Bubber advised brokers to do their best to stay positive in the face of these challenging times. Self-care is critical. “I think it’s really important during this time to better manage our Sabeena Bubber
emotions and take more time to look after ourselves,” she commented. “Do the things that will help you create a positive mindset in the workplace: go to the gym, meditate, find something you enjoy. If you are stressed, your clients will be stressed. But if you are balanced in your emotions, you will help everyone around you.” Like McEllister, Bubber believes mortgage professionals can use this slower time to embark on a learning journey. “Use this time to do the things you never had time for in busier markets, like spending time with family, friends, travelling, or learning something new that’s unrelated to mortgages,” she advised. “Emotional intelligence is a process; there is no manual on how you should do it. Invest in a course, something that will teach you to be better.” When brokers do master EQ skills, Bubber said no bank can ever compete. “Having the emotional intelligence on how to handle a situation differentiates us from the banks, which are purely transactional. We’re here to put an arm around our clients and help them through this challenging time. Sometimes there are hard conversations… maybe they need to sell a car or cut back on extracurriculars.” Ultimately, said Bubber, it’s all in a day’s work. “We always celebrate with clients when they buy a home, but being there for them during the hard times, well, that’s our job. That’s where we can really shine.”
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legal ease
REALITY CHECKS: GST/HST NEW HOUS Keep the CRA out of your client’s piggy bank BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC
BACKGROUND
Mortgage brokers sometimes concern themselves not only with arranging a mortgage for a borrower client but with helping the client understand how much money is needed to close the subject real estate purchase. Determining whether a buyer qualifies for the up to $6,300 GST/HST New Housing Rebate can be a significant part in determining the cash flow. The Tax Court of Canada in Sindhi v. The King, 2023 TCC 102 provides some guidance. FACTS A son had been the general manager of his father’s gas stations in Kentucky, USA for five years. When the gas stations were sold, the son returned to Canada and lived with his parents. The plan was for the parents to develop and own a trucking company, starting with one truck and expanding. The son would operate the business from the parents’ home. In July 2016, the son entered into a contract to purchase residential real estate for $413,847. His mortgage broker advised him he was pre-approved for a mortgage of $420,000, based on his annual income in 2016 of $60,000. He planned to marry and raise a family in the home. In March 2018 the son completed the purchase; however, his circumstances had 14 I FALL 2023 CMBA-ACHC.CA CMB MAGAZINE
furniture or housekeeping items he had on the premises were a mattress, sheets and pillows, and a table. He obtained occupational home insurance for the residence, as well as internet and natural gas for the stove and for heat. He eventually sold the residence for $455,000. The son claimed a GST/HST New Home Rebate, but the Canada Revenue Agency assessed and declined it, and the matter ended up in the Tax Court of Canada.
GST/HST ISSUES changed considerably by then. In 2017 he broke up with his partner of two and half years, and his employer – his parents’ trucking business – was not doing well. His 2016 income of $60,000 was reduced by the company to $38,000 in 2017 and to zero in 2018. However, he continued to drive a truck for the business and was its general manager, while operating the business out of his parents’ house where he was living. He had only a single income from which to pay the mortgage payments. Due to his limited income, he no longer qualified for conventional mortgage financing and had to rely on more expensive private financing. The son kept the purchased premises heated by natural gas. He did not prepare or consume any meals in the residence and only stayed there for approximately two nights per week. The only
The son would be disqualified from obtaining the rebate under the Excise Tax Act, section 254 if he did not: n acquire the property with the intent to use it as a primary place of residence; and n occupy the property as his place of residence. The Court was satisfied that the son, at the time of entering into the purchase agreement, intended to use the residence as his primary place of residence. The intention is determined at the time of entering into the purchase contract, not at the time of occupancy. There are a variety of factors that determine whether the evidence supports the intention. In this case, the son had no significant experience in the real estate market. He did not have to make any efforts to sell a former property because he had no former property.
SING REBATE The intention was that of the son alone; he would have been a single person although he had a brief discussion with his partner at the time about the purchase. That partner did not participate in, become liable under, or become a party to the purchase agreement. The son’s income at the time of entering the agreement was sufficient for him to meet the monthly obligations of the mortgage. However, the buyer did not satisfy the requirement to in fact occupy the residence as at least a place of residence, as opposed to his primary place of residence. The Court said that: occupancy is something more than simply having a mattress with a set of sheets and pillowcases and a table on the premises. Although the Appellant did some measure of staying at the premises in question, two nights per week, this certainly could not classify one as occupying the premises. What he did was arrange for the heat to be turned on at the premises, but he had to have heat at the premises because of the weather conditions. He arranged for home insurance coverage, but this would be a requirement in order to obtain any financing whether it be a conventional or private lender. He arranged for internet, but then again if he is going to spend anytime at the premises he would need internet in this day and age.
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As well, several things the buyer did not do indicated to the Court he did not occupy the residence. He did not prepare or make any meals at the premises in question. He did not stay or occupy the premises for more than two nights per week. He continued to live with his parents in their place of residence. He did not change his address for mailing purposes. He did not relocate sufficient personal effects to the property in question. There was no evidence that it was more frequently occupied; in fact, there was evidence to the contrary that it was less frequently occupied than his other residence that he was enjoying with his parents. There was no evidence with respect to convenience to a third-party location such as work or more convenient amenities more suitable to the needs of the taxpayer. The son could be excused from the requirement to in fact occupy the property as at least a place of residence if he was frustrated from doing so. For there to be frustration in this sense, the surrounding circumstances must make the frustrating event unforeseeable, beyond the buyer’s control, and deny the buyer any alternative pathway to having the property be their primary residence. The Court was not convinced that the son’s failure to obtain a conventional, long-term mortgage frustrated him from occupying the
property. It was also not convinced that having a private mortgage for the first six months, rather than a traditional mortgage, in any way prevented the son from occupying the property.
DECISION The son did not qualify for the GST/HST Rebate.
TAKEAWAYS The GST/HST New Housing Rebate can provide a rebate of up to $6,300 to qualified buyers. Granted the amount is reduced if the purchase price exceeds $350,000 and is $0 if the purchase price exceeds $450,000. The amount certainly limits the availability of the rebate to properties outside of big centres or very modest properties. However, buyers who satisfy the other criteria to qualify for the rebate need to have acquired the property with the intent to use it as a primary place of residence and need to occupy it as at least a place of residence. They can be excused from this second requirement if they are frustrated from occupying the property. This article is not intended as legal advice. You are advised to obtain legal advice in specific instances. CMB MAGAZINE CMBA-ACHC.CA FALL 2023
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regulators’ powers
POWER AND PROCESS Regulators’ decisions can be reviewed for fairness and reasonableness BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC
REGULATORS’ POWERS ARE LIMITED [Registrant] v. Registrar of Mortgage Brokers, 2023 BCFST 2 provides a good example of some legal requirements regulators must meet when using their powers to regulate mortgage brokers. The case is a decision of the Financial Services Tribunal (FST), the body that hears appeals from decisions made by the BC Registrar of Mortgage Brokers (Registrar). In this case, the FST reviewed whether the Registrar’s decision to impose specific interim conditions on the renewal of a broker’s registration was procedurally fair and otherwise reasonable.
WHAT HAPPENED? The Registrar received a complaint from a credit union about the broker having included non-genuine documents in a mortgage application submitted to them. An investigation commenced, and two years later a report was completed. About two weeks after that, the broker applied to renew her registration. After another two weeks, the Registrar issued a Notice of Hearing against the broker, with the hearing date set for eight months later. The Notice of Hearing alleged that the broker had conducted business in British Columbia in a manner prejudicial to the public interest, contrary to the Mortgage Brokers Act (MBA) by: n Failing to use reasonable due diligence when 18 I FALL 2023 CMBA-ACHC.CA CMB MAGAZINE
verifying the accuracy of income and documentation that she submitted to lenders. n Submitting inaccurate information in support of borrowers’ income when she knew or ought to have known that the documents were altered or did not represent the borrowers’ true income. n Providing misleading or false information to lenders when stating that the property would be owner-occupied when it would not; providing conflicting rental information; and providing conflicting income information. n Failing to keep books and records necessary for the proper recording of business transactions and financial affairs, contrary to Regulations under the MBA. Eleven days after the Notice of Hearing was issued, a British Columbia Financial Services Authority (BCFSA) lawyer sent the broker a letter advising that the Registrar had determined it necessary to attach conditions to her registration renewal. (BCFSA provides support services to the Registrar.) The 23 conditions related to the following: n Outstanding litigation involving the broker concerning real estate development financing agreements for a number of properties. BCFSA required a satisfactory resolution of the litigation, copies of the agreements at the heart of the litigation, being advised within three days of any dates being scheduled in the litigation, a copy of any examination for discovery in the litigation,
and a copy of any document discontinuing or dismissing the litigation together with any settlement agreement. The Registrar maintained discretion to vary and/or impose additional conditions on the broker upon receiving notice of updates or resolution of the civil litigation. n The broker immediately informing BCFSA of any other pending civil proceedings. n For up to two years, the broker being restricted to a brokerage acceptable to the Registrar and being directly supervised by an agreeable Designated Individual (DI) or by a broker (Supervisor) delegated by the DI and acceptable to BCFSA. n Supervision criteria that had to be met such as: the broker keeping the Supervisor informed of broker services she is providing and receiving the Supervisor’s review and approval of the same; the Supervisor reviewing all transactions in which the broker provides mortgage broker services; the brokerage retaining all relevant transaction documents in appropriate deal files; the DI performing monthly checks to ensure the Supervisor is reviewing the brokers transactions and services; the Supervisor immediately reporting to the Registrar anything of an adverse nature with respect to the services the broker provides; the DI and/or Supervisor immediately advising the Registrar and, if applicable, the DI as to any duties imposed on them by the conditions that they cannot perform;
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notifying the Registrar of any changes in the DI or Supervisor, the DI and/or Supervisor as to any change in the DI or Supervisor. n Prohibiting the broker from handling any trust funds. n The Registrar and the broker agreeing to the conditions, the conditions being in addition to statutory and regulatory obligations, and a breach of the conditions possibly being a breach of MBA, the MBA regulations, or a condition of registration. Within two weeks of the conditions being imposed, the broker appealed to the FST. She raised the argument she had not been provided with an opportunity to be heard before the conditions were imposed. Approximately three weeks later, BCFSA’s lawyer wrote to the broker offering her the opportunity to make written submissions to the Registrar, who would then decide whether the conditions were necessary in light of the submissions. The conditions would remain in place until a final decision was made. The broker responded twice asking for a hearing. After further exchanges, the Registrar issued the decision on reconsideration. The conditions concerning the existing civil litigation were found to be unnecessary and removed; the broker had presented an email from her lawyer indicating the inactivity of the plaintiffs in pursuing the action and that there was little merit to the claim. The condition concerning the broker remaining under the direct supervision of the DI was amended but not in a substantive way. The remaining conditions remained in effect.
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THE FST REVIEW The broker having maintained her appeal of the remaining conditions, the FST proceeded to consider the initial conditions and the revised conditions. Four issues were raised: n What is the standard of review to be applied to each of the matters raised on this appeal? n Was the Registrar’s initial decision to impose the conditions on the broker’s renewal procedurally fair? n Was the Registrar’s reconsideration decision to deny the Appellant an oral hearing procedurally fair? n Was the reconsideration decision by the Registrar reasonable? CMB MAGAZINE CMBA-ACHC.CA FALL 2023
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regulators’ powers
WHAT IS THE STANDARD OF REVIEW BY THE FST? If the matter being reviewed is a question of law (such as, was the applicable law correctly interpreted), the FST will review the Registrar’s decision for correctness. If the matter being reviewed is a question of fact (such as, did the Registrar make an error in believing one party’s version over another party’s version of a fact), a question of discretion (did the Registrar appropriately use discretion), or a question of penalty (such as, was the penalty too lenient or too harsh), the FST will review the Registrar’s decision for reasonableness. If the matter being reviewed is a question of whether the procedure followed by the Registrar was fair, the FST will review whether the Registrar’s decision was fair in all the circumstances.
Was the initial decision procedurally fair? The Notice of Hearing was signed by the Registrar; the letter with the decision as to conditions came later from BCFSA’s lawyer. The letter did not provide any reasons for the conditions; it just stated the conditions with a request that they be signed by the broker and the supervising DI. More than a month later, after the appeal was well underway, the legal counsel wrote to the broker acknowledging the broker had not been provided with an opportunity to be heard. The FST concluded that the Registrar’s initial decision to impose the conditions was procedurally unfair. It provided the following reasons to support the conclusion. The broker was “clearly entitled” to have had the opportunity to be heard. A regulatory body making an interim order must permit both parties to make submissions on the need for an interim order, its nature, and its terms. Having the opportunity to fully and fairly present one’s case is a foundational principle of procedural fairness. Where conditions on a renewal may reasonably be interpreted as adversely affecting the legitimate business activities of a broker, procedural fairness requires that there be an opportunity to be heard regarding the sub-mortgage renewal application prior to a decision being made relating to the imposition of such conditions. A broker should not have to appeal to the FST to obtain the opportunity to be heard 20 I FALL 2023 CMBA-ACHC.CA CMB MAGAZINE
regarding conditions that may reasonably be interpreted as affecting the legitimate activities of the broker, which is what occurred here. Further, that opportunity should take place before the conditions are imposed, not after as in this case. The FST said that but for the conditions having already been revised, it would have set aside the original decision and ordered the Registrar to reconsider the matter. However, since the Registrar had already reconsidered its original decision, the FST moved on to reviewing the reconsideration decision.
Was the delegate’s reconsideration decision to deny the appellant an oral hearing procedurally fair? On questions of procedural fairness, the FST owes no deference to the decision of the Registrar. The standard of review is not that the Registrar’s decision be reasonable but rather that it be fair. However, here an oral hearing was not needed for the procedure to be fair. Firstly, the process of the Registrar attaching conditions to a registration was not close to being similar to a court process and so did not need to include procedural protections (such as an oral hearing) to the same degree. Secondly, it would be contrary to the efficient operation of the mortgage marketplace to require the delay and expenditure of resources involved with an oral hearing to take place prior to the imposition of conditions. Further, there is an interest for the registrant, as well as the public, that such matters be dealt with expeditiously so that the registrant’s ability to practise is not unduly delayed while the conditions matter is outstanding. As well, the terms of the statute, as well as the statutory scheme, do not envisage there being an oral hearing in the Registrar attaching conditions to a registration. Thirdly, the length of time of the conditions in this case is not long; these interim conditions are in place only until a full oral hearing is held. As well, the interim conditions do not form part of the broker’s disciplinary record going forward. Fourthly, based on the Registrar’s past practice and no promises having been made otherwise, the broker had no legitimate expectation of an oral hearing. A fifth factor would be to consider any published policies or guidelines as to the process
to be followed when dealing with the imposition of interim conditions on a registration. That factor is neutral in this case as there are no such policies or guidelines.
Was the reconsideration decision reasonable? The Registrar has the onus of demonstrating a prima facie case that the broker misconducted themself and must demonstrate that the circumstances of that prima facie case indicate a real risk to the public. (A prima facie case is a set of facts that, if not disproved by evidence to the contrary, proves the case.) The misconduct had been demonstrated, in the sense of a prima facie case. There was a real and serious risk to the public if an order was not made. The consequences of the conditions being imposed on the broker’s registration are not disproportionate to the risk the public would otherwise face. The Registrar decided that an interim order was necessary and decided that interim conditions would be sufficient and appropriate, rather than an interim suspension. The FST concluded that the Registrar’s reconsideration decision was reasonable. The revised conditions are not overly onerous and are the least restrictive method of dealing with the risks posed. The FST, however, found it unreasonable for the reconsideration decision to require the broker and DI to report various matters “immediately.” It ordered that word to be changed to “as soon as reasonably practicable in the circumstances at the time.”
THE DECISION The reconsidered conditions were valid and left intact, other than actions required to be done “immediately” instead be required to be done “as soon as reasonably practicable in the circumstances at the time.”
TAKEAWAYS Regulators’ powers are subject to legal requirements, including that their use can be reviewed: n If questions of law, for correctness; n If questions of fact, for reasonableness, and n If questions of fair procedure, for fairness in the circumstances. This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.
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rates and trends
LEADING ECONOMIST ADVISES MORTGAGE BROKERS TO PREPARE FOR A STRONG DECADE AHEAD
I
Benjamin Tal shares insights on rates and housing trends BY CARLA GILES,
CHIEF EXECUTIVE OFFICER, CMBA-BC AND MBIBC;
EXECUTIVE DIRECTOR CMBA
n the world of real estate, few voices carry as much weight as that of Benjamin Tal, deputy chief economist of CIBC Capital Markets, who recently shared his insights during a webinar organized by the Canadian Mortgage Brokers Association – British Columbia. Tal offered a unique view on the current state of the housing market and advised mortgage brokers to prioritize offering perspective to their clients over attempting to predict the market’s future. Tal acknowledged the widespread anticipation of a looming recession, which, much to everyone’s surprise, has yet to materialize. However, it was pointed out that understanding what a recession truly entails is essential, as the term can often be subject to interpretation. While some might label a situation with negative GDP growth as a “recession,” Tal made a clear distinction: a true recession necessitates a significant impact on the labour market, with unemployment rates soaring. This hasn’t been the case in Canada.
THE CONSUMER’S ROLE
One major factor preventing a recession, as outlined by Tal, is the Canadian consumer. He highlighted the fact that consumers had, at one point, approximately $160 billion in excess savings. This financial cushion was a direct result of people maintaining their income during the COVID-19 pandemic while curtailing their spending. People subsequently tapped into these extra funds, continuing to spend even as the Bank of Canada (BoC) raised interest rates. However, as these savings dwindle, consumers are turning to credit cards and the buffer is diminishing. The impact of this shift in consumer behaviour on monetary policy is significant. With the excess savings disappearing, monetary policy is regaining its effectiveness and the BoC’s actions are more pronounced, making the economy more sensitive to interest rate changes. He believes the economy is likely to experience close to 0 per cent GDP growth over the next six months.
BANK OF CANADA’S STRATEGY Regarding the BoC’s strategy, Tal says the central bank may be overshooting its actions and suggested it has been slow to respond to the shifting economic landscape. While inflation is a lagging indicator and often relates to past events, the BoC is wary of allowing it to run unchecked, especially when inflation is still elevated. The central bank is biased towards avoiding inflation, as it knows that it can respond to overshooting by reducing interest rates. However, if it undershoots and inflation continues to rise, it lacks the necessary tools to address the situation. This bias toward recession over inflation, while a deliberate strategy, can potentially impact the economy. As for the near future, Tal says there is a 50-50 chance that the BoC will make further rate adjustments. The central bank is watching two key economic indicators closely: the unemployment rate and inflation. Depending on how these indicators evolve, the BoC will decide on the appropriate course of action. But Tal says regardless of the outcome, there is hope that the tightening cycle is nearing its end, signifying a more stable period for the economy.
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CHANGING HOUSING LANDSCAPE Shifting the focus to the housing market, Tal delved into the intricate dynamics at play. He emphasized that Canada’s population is on the rise, and new demand is continually entering the market. With new immigrants and an influx of non-permanent residents, the rental market is facing mounting pressure. This situation, in conjunction with the continued formation of new households, is further straining the already limited supply of housing. Furthermore, Tal stressed that Canada needs a co-ordinated approach between federal, provincial and municipal governments to effectively address the housing crisis. Municipalities need incentives to facilitate housing development, as bureaucratic processes often hamper construction timelines. To provide such incentives, governments could offer funding to municipalities that meet certain housing construction quotas.
The central bank is watching two key economic indicators closely: the unemployment rate and inflation. Depending on how these indicators evolve, the BoC will decide on the appropriate course of action.
LEVERAGING INNOVATION AND TECHNOLOGY Tal underlined the need for innovation and technology to address the housing affordability crisis effectively. Real estate needs to catch up with other industries in terms of productivity and innovation, he says, referring to new technologies such as 3D printing and factory-built housing as potential solutions to improve construction efficiency and reduce costs. The future of the real estate industry lies in innovation and technology. Startups are already emerging with novel approaches to housing challenges, reflecting a growing awareness of the need for change. The use of Public-Private Partnerships (P3s) in which governments invest in and reward risk-taking initiatives can be effective in moving the industry forward, he says.
MORTGAGE BROKERS: NAVIGATING THE TRANSITION In closing, the insights from Tal provide a valuable perspective for mortgage brokers and industry professionals. According to Tal, the period Canadians are currently in can be described as a time of adjustment. The housing market remains robust, and the uncertainty the housing sector is experiencing is a part of a necessary reallocation of market activity. The current slowdown is not a crash but a pause, he says. Once the BoC lowers interest rates, as Tal anticipates, the housing market is poised to regain its momentum. He encourages mortgage brokers to consider the present situation as a period to prepare for what he believes will be a robust decade ahead.
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brokers off-the-clock
Mortgage broker Corina Murphy helps homebuyers and the homeless BY LISA GORDON
WITH OR WITHOUT HOMES
H
omelessness is a growing problem that is making headlines across Canada. As someone who specializes in helping people buy homes, Corina Murphy also has a passion for helping people in need, many of whom may not have a roof over their heads. “I just feel we have a duty to help those less fortunate,” said the Toronto-based mortgage broker and team lead for Premiere Mortgage Centre. Murphy, who grew up in humble beginnings herself, said she never feared being homeless because of her supportive family. However, she understands that people can quickly get into situations that are outside their control. “Pretty much anyone can become homeless,” she told Canadian Mortgage Broker. That’s why Murphy contributes her time and talents to many charitable organizations, including Raising the Roof (long-term solutions to homelessness); Blue Door (promoting affordable housing, health and employment); The Daily Bread Food Bank; The Dam (youth outreach and programming); Habitat for Humanity; and, the Canadian Cancer Society. She credits her move from banking to the mortgage profession as the change that has allowed her greater flexibility to spend more time with family, deliver a more personalized service to clients, and become more involved with a host of charities. “I started in banking when I was just 21,” recalled Murphy. “I was always on the lending side and gravitated towards mortgages. I then worked as an underwriter for a mobile mortgage division and after that I was a training manager nationally for a major bank’s mobile sales force division. I made the move to being a mortgage broker in 2012 because I wanted more time with my family, as I had a six- and eight-year-old at the time, and also the ability to earn some more income based on the hours that I worked.”
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“ It’s nice to give back. If you are ever feeling down about yourself, go volunteer – you will feel much better about yourself. It can be the wake-up call that we need sometimes.
T
Left: After the Premiere Cares Golf Tournament everyone enjoyed a dinner and panel discussion. Michael Braithwaite, CEO of Blue Door Shelter took a selfie to remember the occasion. Below: Picture perfect – a team photo before the start of the Premiere Cares Golf Tournament.
The change ticked another professional box as well, giving her the freedom to do things the way she felt they should be done. “When you are working for the bank, products are limited to what they carry,” she explained. “When I was with the bank, I was selling their brand, but I wanted to sell my own brand that better aligned with my vision and how I wanted to help clients. I wanted the autonomy to do business the way I felt best exemplified that thinking.” When the COVID-19 pandemic struck in 2020, Murphy realized that a strong social media presence had become critical to her business. “We were sending out newsletters, but (I wondered) who had the time to read it? Social media has introduced different ways of doing your business. In a 60- to 90-second video, you can really communicate some key features about a mortgage,” she said. She began ramping up her online presence, offering short video tips for potential homebuyers and real estate investors, as well as updates on the happenings at numerous charities. Murphy provides online advice to self-employed buyers, those who are recently separated and first-time homebuyers, to name a few. For someone who is often on the run, the flexibility to work from anywhere is very appealing. “I like to travel. I am very family oriented and love my Sunday dinners with my family,” she said. “We just purchased a vacation home on Georgian Bay and I am enjoying spending some time there on weekends. I work paperless, so I can look over an application or finalize some documents almost anywhere. This freedom is crucial since my clients may need immediate attention.” Murphy works with a variety of clients and enjoys the diversity of the mortgage business.
PHOTOS COURTESY CORINA MURPHY
“I do have a lot of repeat clients. I work with a number of clients who are in the process of separating and are doing it on their own. I do enjoy helping first-time buyers, although in today’s landscape there are fewer. I do not do a lot of commercial deals, but if I do, I have partners and we work together. I feel my business is pretty well-rounded.” Murphy credits her dedication and drive for helping her reach her professional goals. “I like working in a pay-per-performance situation,” she said. “You can make as much as you want. It just depends on how badly do you want it and are you willing to put the work in? The smarter you work, the better you are compensated.” Her dedication has not gone unnoticed. In 2019, she accepted an Inspiration Award from Women in the Mortgage Industry (WIMI). She followed that up in 2022 with the Mortgage Awards of Excellence Community Service Award as well as the National Community Service award for MCC Premiere Mortgage Centre. “I am very grateful to have the opportunity to serve and have the platform to humanize the homeless,” she said. She offered some advice to anyone who is not feeling the best about themselves: “It’s nice to give back. If you are ever feeling down about
yourself, go volunteer – you will feel much better about yourself. It can be the wake-up call that we need sometimes.” Murphy is the organizer of the Annual Premiere Cares Golf Tournament. The fifth annual event was held on Sept. 19, 2023, raising nearly $57,000 for Blue Door and Raising the Roof. “I am so pleased! I organize it, but it would not be possible without all the efforts from the generous sponsors. It truly is a group effort,” she said. A new annual event spearheaded this year by Murphy and fellow brokers Trevor Daly, Kendra Pyatt, Kerri Reed and Rich Spence was called Walking it Forward, a benefit for the Canadian Cancer Society. Mortgage brokers all across Canada come together on the same day every year for a five kilometre walk in support of cancer research. Looking ahead, Murphy aims to be a leader in the mortgage industry while continuing to volunteer with the charities and organizations she is so passionate about, as well as travelling when possible. At the time of writing, her sights were set on Thailand in November. One thing seems certain: Whether helping a homebuyer or helping the homeless, Murphy will be there to lend them a hand. This interview with Corina Murphy 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, travelling to exotic places or creating an award-worthy garden, 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 CMB MAGAZINE CMBA-ACHC.CA FALL 2023
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rebate enhancement
GST
RELIEF FOR PURPOSE-BUILT RENTAL HOUSING Bill C-56 is a drop in the bucket – more needs to be done to boost rental housing stock BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC
THE CHANGE
The federal government in Bill C-56 proposes specific temporary relief from otherwise applicable goods and services tax (GST) in the form of an enhancement to the New Residential Rental Property Rebate, with regard to purpose-built rental housing. Bill C-56 proposes enacting The Affordable Housing and Groceries Act, which would amend the Excise Tax Act (pursuant to which the GST exists) and the Competition Act. The Bill has not yet been enacted as law. WHO CAN APPLY FOR THE REBATE The rebate would be available to the builder or purchaser of the qualifying construction or of the qualifying interest in the construction.
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rebate enhancement
QUALIFYING TYPE OF CONSTRUCTION The rebate would be available in relation to newly constructed rental housing (purpose-built rental housing). It would apply to certain apartment buildings, student housing and seniors’ residences built for long-term rental accommodation. Generally, rental buildings must contain at least four self-contained apartments (a unit with a private kitchen, bathroom and living areas) for residential units to qualify for the rebate. Buildings for students, seniors or people with disabilities must have at least 10 units (rooms or suites). Also, the building must have at least 90 per cent of the homes designated as long-term residential units. Provided all the rebate criteria are met, conversions of existing commercial real estate into rental housing would be eligible for the enhanced rebate. The rebate would also be available to public service bodies, such as municipalities and charities. Noteworthy exceptions are that duplexes, triplexes and housing
The legislation, once enacted, would apply retroactively to construction beginning on or after September 14, 2023, and before 2031, and be substantially completed before 2036. The maximum rebate at present is
36
per cent of the GST paid. The change would make
100
co-ops would not qualify for the enhanced rebate, nor would substantial renovations of existing residential properties. Having these exceptions creates the potential to miss incentivizing large numbers of property owners who could each make smaller scale changes and as a sector contribute significantly to the cause of providing more rental housing.
TIMEFRAME FOR QUALIFYING CONSTRUCTION The legislation, once enacted, would apply retroactively to construction beginning on or after September 14, 2023, and before 2031, and be substantially completed before 2036.
AMOUNT OF AVAILABLE REBATE The maximum rebate at present is 36 per cent of the GST paid. The change would make 100 per cent of the GST paid and 100 per cent of the federal portion of HST paid available for rebate.
CONCLUSION No, this change would not magically solve the housing supply shortage crisis. Probably no single change could achieve such a goal on its own. Yes, the change would be one more drop in the bucket that could contribute to more rental housing being constructed. At the very least, it could pull in projects that are marginally not profitable enough to start and perhaps cause some stalled projects to recommence. To more significantly increase the amount of rental housing being constructed, changes probably need to be made to other parts of the construction process as well – such as speeding up the municipal permit and approval process, keeping interest rates at an affordable rate, and reviewing other applicable taxes to ensure they are reasonable and not unwarranted obstacles. All of that aside, every little bit helps. This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.
per cent of the GST paid and
100
per cent of the federal portion of HST paid available for rebate.
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