CMP 5.5 by Key Media

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May 2010, 5.5

best simply the

The 2010 Mortgage Award Winners

FEATURE PRIVATE LENDING DOWN AND DIRTY MORE MONEY for WITH BROKER HUBS MORE PEOPLE

Profiled Garth Ellis Industry Advocate

NEWS ANALYSIS MATURING SUBPRIME MORTGAGES – WHAT TO DO? PUBLICATIONS MAIL AGREEMENT #41261516

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52 the pros and cons of broker hubs As lenders increase their minimum volume requirements and efficiency ratios, mortgage brokers are pooling their office deals to take advantage of favourable fees and continue their relationships with preferred lenders. Gina Monaco takes a look at the pros and cons of this growing trend

5. 05 issue

cover story

26 Simply the Best The fourth annual CMP Canadian Mortgage Awards could almost be named the Oscars for the mortgage industry, where the best of the best came out to celebrate and share their success among their esteemed colleagues; and focus on a bigger and brighter future

Straight forward lending

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contents

NEWS 8

Web comments from mortgagebrokernews.ca: Some of the best stats and comments from CMP’s website.

62 private lending a growing option

10 AIG rebranded to Canada Guaranty; New MCAP program for immigrants; myNext mortgage revamping its products ; an upswing in commercial real estate; Housing trends; and more…

NEWS ANALYSIS 24 Maturing subprime mortgages: With subprime mortgages set to mature over the next few years and many of the non-conforming lenders out of the market, Eric Putnam examines the current state of the industry and what, if anything, brokers can do to help their clients.

PROFILES 77 Provider: Innovation and leading-edge technology at core of customer service: CMP talks to Concentra Associate vice-president Jane Kulbida about the company and its unique place within the mortgage industry

With a strong housing market and rising property values, private lending has become more available to borrowers who need it, particularly those affected by the new mortgage rules. Erin Letson explores the option of private lending and explains how brokers can access this type of funding.

78 Guest Column: George Hugh, Vice-President Broker Services & Treasury, ING Direct

regulars 22 This time last year 79 CMP Service Directory

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Editor’s Letter

Hope for an industry in transition Although I’m relatively new to CMP, I’ve had some interesting conversations with brokers, agents and lenders, which have given me some insight into the issues facing the mortgage industry. It is an industry in transition. Not surprising, since mortgage brokers are a relatively new phenomenon. And with all things in transition, inevitable is coming. In researching the story about broker hubs, I heard the pros and cons from both brokers and lenders. I heard about funding ratios, minimum volume requirements, reduced compensation for brokers and lenders. I heard about the inability to develop relationships with underwriters and reduced levels of customer service because of lender access limitations. (See story on page 52.) Then I attended the CMP Mortgage Awards (story starts on page 26) and it was awesome. Here sat the best people — leaders in the industry, both lenders and brokers – in one room, exchanging pleasantries, cheering each other on and having a great time. It didn’t matter what each one thought about the other — they came together to honour each other and to celebrate everything that’s good in the industry (see awards story starting on page 26.) And I knew right then and there. The industry would survive this issue and the many others to come. There is a lot of good in the mortgage industry. In a Maritz Survey conducted for CAAMP in the fall of 2009, those working in the mortgage industry are generally satisfied with their jobs with only seven per cent indicating some level of dissatisfaction. Garth Ellis, who won the Lifetime Achievement Award (see page 74 for Garth’s story) talked about the industry and said, “The great strength of the industry right now is the intellectual capital and experience of people who have been around for awhile. It’s a constant legitimization of the industry – we have a lot of leadership and brainpower that we didn’t have when I first started and that grows every year.” I believe all the challenges right now between brokers and lenders stems from an industry in transition. This issue may always be on the table, but stakeholders who can put aside their personal agendas and do what’s right for the entire industry says a lot. I look forward to how the industry will evolve over the next five to 10 years.

‘Til next time Gina Monaco Editor Gina.monaco@kmimedia.ca

mortgagebrokernews.ca

5. 05 issue

“

The word is on the Street. Street Capital works with us to get our deals done. They make us feel like valued clients and partners. Andrea Wadden Bedford, NS, CEO Status

Street Capital is broker friendly and broker exclusive, they are very supportive and a valued partner for INVIS. Kevin Boucher Newmarket, ON, CEO Status

”

Street Capital is a big reason for our success during our first year and will be an integral part of our brokerage’s aggressive goals for the foreseeable future. Whether it’s underwriting, sales support or the efficiency of the closing department, Street Capital truly understands how to help us grow our business. Bottom line: Street Capital gets it. Glenn May-Anderson Belleville, ON, President Status

Talk to your RVP for more details, including how to become a Street approved mortgage professional. Vince Agozzino

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Quotables

We’re Listening! Mortgage Protection Plan was designed exclusively for mortgage brokers.... and we continue to make changes based on your input. Today, large financial institutions are becoming more aggressive. That means forging long-term client relationships is more important to you than ever. We can help. Talk to us about how.

“if you’re on your own today, it’s tough to get lender access so you’re forced to be part of a team to get better rates and service” - Michael Sjerven, a mortgage agent with Dominion Lending Centre in Vancouver, B.C. on the new trend toward broker hubs, Page 52.

“our primary criteria is the condition the property is in, where it’s located and how easy it is to sell if the borrower gets into trouble” - Chuck McKitrick, of Alta West on the criteria used for getting a private mortgage. Page 62.

Listening to you made us #1. We’re still listening, so give us a call.

May 2010

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COULD YOU BE CANADA’S NO 1 MORTGAGE BROKER? CMP IS NOW CALLING FOR SUBMISSIONS FOR ITS TOP 50 BROKERS LIST FOR THE FINANCIAL YEAR FOR 2009 DON’T MISS YOUR CHANCE TO BE RECOGNIZED AS ONE OF THE INDUSTRY’S TOP PERFORMING BROKERS! ENTER ONLINE AT WWW.MORTGAGEBROKERNEWS.CA SUBMISSIONS CLOSE TUESDAY JUNE 1, 2010

Readers Write Web comments

I just wanted to say thanks to CMP for the nice write-up on creditor life policies. I always appreciate the chance to answer questions for your magazine - you guys do such a great job and I feel like the article was very accurate and did a good job of presenting the salient points. - Gord

95 per cent LTV loan. If not, they don’t qualify for any CMHC insurance.

Just read your article re: the new BFS rules: First off, self-employed borrowers with more than three years in the same business who apply for a mortgage using stated income, as well as commissioned-income borrowers, are now required to provide traditional proof of income (or “third-party validation”) through documents like financial statements, contracts and T4s. Those who have recently become self-employed and don’t have third-party validation can still apply for a mortgage, but have to come up with a 10 per cent down payment instead of five per cent. Refinancing will also be cut to 85 per cent loan to value instead of the previous 90 per cent. Does this mean that self-employed borrowers, with more than three years in the same biz, can apply for a mortgage with five per cent down? Article was a little confusing, if you could please clarify, that would be great. - Krista

I wanted to take a moment and congratulate you and your team(s) for this year’s CMP awards night. This is only my second year attending, and while I was duly impressed last year, I can quite honestly say this year’s event was executed with excellence once again. As a past president-elect of CAMMP and years of experience in this industry, I know first-hand just how difficult pulling off a professional and yet entertaining event can be. You have done just that, and based on the collective feedback from my team at paradigm and colleagues within the industry, I can tell you with certainty my opinion on the success of your event is widely shared.

Editor’s Note: From what we understand, BFS clients who have been in business three years or more will have to show “traditional” proof of income under the new rules to qualify. If they have that, it looks like they can still qualify for a

Kathy

mortgagebrokernews.ca

Here is the BFS guideline sheet from CMHC http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/ hopr/upload/OPIMS65614-CMHC-SelfEmployed-03-27-09.pdf

Congratulations on bringing to close another outstanding event, and equally important the valuable content each and every month in your magazine. A very much needed and welcome addition to the Canadian mortgage industry. Best regards,

Kathy Gregory Founding President/CEO Paradigm Quest Inc

www.hometrust.ca

News

community

Above On Thurs., April 22, 2010, MonsterMortgage.ca hosted the 5th annual Monster Cup at Upper Canada College in Toronto. This yearly event allows lenders, clients, agents, families and friends to come out and have some fun with an afternoon of skating and hockey. The event was a great success and MonsterMortgage.ca hopes to see you out on the ice again next year! Bottom Left The team from Resmor was one of 64 exhibitors at the IMBA Trade Show. From left to right: Nikki Seguin, Mary Neary, Steve Futyer, Julie Sanderson, Anne Wright and Shane Scott. Bottom Right Arlene Dickinson of CBC’s Dragons’ Den fame was the keynote speaker at IMBA’s Annual Conference and Trade Show held in April at the Toronto Congress Centre. Here she is with Caryn Markman, V.P. Residential Mortgages at Equitable Trust.

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News Industry

AIG Sold and Rebranded The name AIG United Guaranty is no longer. The Ontario Teachers’ Pension Plan and National Guaranty Mortgage Holdings Inc. successfully completed the acquisition of the private mortgage insurer in April and renamed it Canada Guaranty Mortgage Insurance Company. The transaction means the company has no more ties to the U.S. or its former parent company, American International Group (AIG). In addition to the name, the new owners are rebranding the company as the only 100 per cent Canadian-owned private mortgage insurer.

“The launch of Canada Guaranty benefits lenders, mortgage professionals and consumers by fostering a competitive market dynamic and creating new choice in mortgage default insurance providers,” said Andrew Charles, the insurer’s president and CEO, who remained on board from AIG United Guaranty. While the private investment arm of the Ontario Teachers’ Pension Plan led the acquisition process, which was first announced in January, a private holding company called National Mortgage Guaranty Holdings led by First National president Stephen Smith also had significant involvement. Canada Guaranty, which is headquartered in Toronto, has identified its key differentiators in the marketplace as financial strength, including the backing of the Ontario Teachers’ Pension Plan, and service excellence. It added mortgage insurance policies that were underwritten prior to April 19 will receive mortgage insurance coverage through Canada Guaranty. CMP

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New immigrants to Canada are getting a new opportunity to qualify for mortgages following the recent release of MCAP program that allows newcomers who have not established a local credit rating to still qualify for a mortgage. Cholo Insua “This is finally a common-sense approach to lending to new immigrants,” said Invis broker Cholo Insua of the program. “The new alternate credit source rule makes perfect sense because most immigrants I know are weary of credit cards and consumer loans, which hinders their ability to get a mortgage right off the bat.” Introduced on April 1, the program works on a case-by case basis by looking at international credit, rent payments and savings habits. Customers must have jobs, although no minimum length is required, and either landed immigrant status or a valid Canadian work permit. Reference letters from foreign financial institutions or six months of bank statements can also help qualification chances. “These guidelines are intended to be more flexible for these borrowers, and we rely on a common-sense approach to evaluate their handling of credit and expense obligations responsibly,” said MCAP marketing director Emily Hencz-Thornton. Cholo said the five per cent minimum down payment requirement will also help new immigrants, who under previous rules usually had to put down 10 per cent. CMP

mortgagebrokernews.ca

$500

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CMHC’s estimate for a typical home inspection

different cities, different housing market trends The housing market is overheated in Vancouver, Victoria and Toronto, according to a new house price survey by Royal LePage, while other cities have seen more modest and sustainable growth. “In Vancouver and Toronto, the dramatic unit sales fluctuations exhibit a significant degree of market irrationality: inordinately fearful when faced with poorer markets; and overly enthusiastic when the tables turned,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Montreal is an example of a city where the market has been much more stable and homeowners there seem quite happy with the relatively slow pace of change.” The report identified three house price trends. The first was the roller-coaster effect seen in Toronto, Vancouver and Victoria. Then there were the “non-stop growth” areas where housing markets were resilient during the economic downturn and saw steady price increases over a two-year period, including Halifax, Ottawa, Regina, Saint John, St. John’s and Winnipeg. Lastly were the “level markets” where prices stayed relatively unchanged – Calgary, Edmonton, Moncton and Montreal. Despite continued price and sales jumps in most cities, Soper said he expects calmer activity in the months to come. “Even in our most frenzied pockets of market activity, the inevitable rise in interest rates coupled with home price appreciation will rein in demand as affordability erodes,” he said. “Expect house prices to continue to rise, but the rate of appreciation should ebb steadily, month by month, throughout the remainder of the year, as balance returns to the industry.” CMP

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News

mortgages in the press

Industry

Reform will cause more mortgage securitization, Canadian banks warn Proposals on global financial reforms by an international committee are raising concerns among Canadian bankers that lenders will be forced to resort to more mortgage securitization, according to a report in the Financial Post. The reforms, entitled Basel III, are part of an effort to prevent another credit crisis by setting international regulations. But the Post reports the reform proposals – which specify stricter capital requirements for banks – don’t take into account that insured Canadian mortgages are guaranteed by the federal government through CMHC. This could force lenders here to securitize and sell more mortgages as opposed to holding them on their balance sheets. “Our unique Canadian mortgage market was one of the important reasons why we did so much better than others, and this now may be in peril due to several proposed rules that go over and above the requirements for more capital,” said Bank of Nova Scotia chief executive Rick Waugh during the bank’s annual meeting. He added that banks, regulators and the Canadian government must “rigorously state our case and protect our interest” to global policymakers. Finn Poschmann, vice-president of research at the C.D. Howe Institute told the Post that the proposed rules could put Canadian banks in a potentially troubling scenario where they could face slower asset growth on their business or be forced to securitize things that are relatively easy to sell, such as high-quality mortgages. The preliminary new rules by the Basel Committee are scheduled to be released by the end of the year. CMP

Islamic financing takes step forward It looks as if the Canadian market is making way for Islamic Finance, an issue being explored since earlier this year. Global bankers, politicians and lawyers recently gathered at the Usury Free Association of North America (UFANA) to discuss the issue. The two-day conference, held in downtown Toronto recently, saw big-name attendees as senior representatives from four of the big five Canadian banks were present, as well as representatives from the Ontario Ministry of Finance and the Federal Ministry of Finance, all of whom are busy preparing internal reports focusing on the potential of this alternative financing. “Islamic financial products should not present any particular difficulties under Canadian accounting standards,” said Guy David, a speaker at the conference representing the Canadian law firm Gowling Lafleur Henderson LLP. Other attendees present were representatives from the Ontario Division of Federal Trade Commissioner’s office as well as Toronto Financial Services Alliance (TFSA) – both of which are also said to be preparing soon-to-be-released reports. Earlier this year, a report concluded that while Islamic financing would be legal in Canada, the CMHC has no plans to insure Shariahcompliant mortgages. This would open the door to private lenders who would be free to pursue this type of financing. CMP

MyNext Mortgage Company in revamping stage The residential mortgage lender associated with Mortgage Architects, myNext Lending, is ceasing to offer its products for the time being to retool the operation, according to an e-mail obtained by mortgagebrokernews.ca. The e-mail said the company will instead focus on its myNext Investor initiative with Macquarie Financial, which includes expanding Mortgage Architects’ white-label products. All commitments in the pipeline with myNext will be serviced, the company said. “There are several initiatives underway,” said Alex Haditaghi, whose company Pacific NA recently acquired Mortgage Architects and myNext Mortgage Company, in an e-mail to CMP. “We are currently in final negotiations with several mortgage buyers that will allow us to expand our product offerings and be very price competitive.” In the announcement of Haditaghi’s acquisition of Mortgage Architects and myNext at the end of March, he said he planned to transform the lender into a Canadian bank “centred around the mortgage financing. CMP

1.8%

The percentage employment fell in Canada during the recession

mortgagebrokernews.ca

News

Industry

BMO files huge fraud lawsuit BMO filed a lawsuit this month alleging hundreds of Albertans conned them out of as much as $30 million, CBC reports. Among the hundreds accused is Calgary Conservative MP, Devinder Shory. According to a CBC report, ‘Shory, a lawyer, executed legal transactions that misrepresented the true mortgage owner of at least five Calgary properties.’ Shory stated that he only learned about the lawsuit against him through reports by the media and told CBC news, “I want to state that I have not yet been served with a statement of claim. When I am, I will defend myself vigorously against these accusations. I have done nothing wrong,” he said. “As the matter is before the courts, I have no further comment at this time.” In BMO’s statement of claim, it alleges Shory, among several other lawyers, was involved in the “fraudulent scheme of the Malik Group” - a group accused of identifying properties to be used in

fraudulent manners, as well as recruiting individuals to participate as straw buyers. None of the allegations contained in the lawsuit has been proven in court. Legal documents obtained by CBC news state lawyers, mortgage brokers, and four of BMO’s employees were all in on one of the largest mortgage fraud cases in Canadian history. According to the documents, the fraudsters generated at least $140 million, half of which was for fake mortgages. BMO allegedly discovered the scam after its security department noticed “irregularities” in some of their western Canada mortgages back in 2006. The bank claims the fraudsters would identify the worst home in a good neighbourhood, buy it, and use the neighbourhood’s quality to leverage the property’s value leading to overinflated mortgages. The bank claims the conmen hired “straw buyers”, people who put their names down on the mortgage for a fee, and created fake income documents to make the buyers appear more affluent. From there, the group’s lawyers (17 have been named in the lawsuit) allegedly drafted the necessary legal documents for the purchase to be legitimized. BMO’s investigators claim to have seized records that show millions of dollars connected to the scam being transferred to Lebanon, India, Saudia Arabia, the United Arab Emirates and Pakistan. CMP

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12/21/2009 8:54:45 AM

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News

Appointments

appointments TMG The Mortgage Group Canada Inc. has three new appointments to announce – Steve Whitehead as executive vice-president, Atlantic Canada. David Skinner joins their broker network in Atlantic Canada and David Larock (Integrated Mortgage Planners) has joined as a Mortgage Agent in Toronto, Ont.

Joanne Vickery named president of MBABC Joanne Vickery, the director of training and development at Dominion Lending Centres, has been elected the new president of the Mortgage Brokers Association of B.C. (MBABC), taking over from MCAP’s Joe Santos. “This next year will be exciting with our constantly changing industry. I am proud to represent the MBABC and am looking forward to supporting its members to ensure we have a voice in the mortgage industry,” said Vickery, who has been on the association’s board for seven years, Joanne Vickery serving most recently as its vice-president. “I advocate teamwork for enhancing and protecting our industry on current legislation, market trends and issues that brokers face.” Geoff Parkin, a Verico broker, is MBABC’s vice-president for the 2010/2011 term. CMP

Invis and MI get new vice-president Invis and Mortgage Intelligence announced April 15 that Jason Humeniuk is the organization’s new vice-president. The company said Vancouver-based Humeniuk’s efforts will be focused on leading sales and recruiting efforts in Western Canada for both the Invis and MI brands. Humeniuk most recently worked as vice-president of sales, Western Canada, for Street Capital Financial for more than two years. He has also worked as a broker and is on MBABC’s board of directors. “I am excited that we are able to bring on a respected industry talent such as Mr. Humeniuk,” Jason Humeniuk said Gord Dahlen, president and CEO of Invis and Mortgage Intelligence. “It’s one more way we are maintaining our status at Invis and MI as not only Canada’s largest brokerage, but also the preferred home for our industry’s most committed mortgage professionals.” CMP

mortgagebrokernews.ca

Equitable Trust also has three new appointments – Anne Synarong in the role of team lead, Residential Mortgage Underwriting, Ray Buela rejoins Calgary’s office as residential underwriter and Don Toste, Cary Davies and Lee Barnett have been appointed as residential underwriters. Equitable Trust also has a few promotions to announce - Brian Leland has been promoted to director, residential mortgages, Peter Guzzo moves to the role of senior manager, residential mortgage underwriting and Aris Athanasoulakis has been promoted to senior account manager, commercial mortgage broker services. Three team leads in residential underwriting have been appointed to the position of manager, residential underwriting. They are Jadwiga Gebalska, Ramesh Rangarajan and Chris Laing.

Anne Synarong

Peter Guzzo

Ray Buela

Brian Leland

Benesure Canada Inc. has an appointment and a promotion to announce – Tracey Robinson as the Mortgage Protection Plan account manager in the Prairie region and Mark Smith, who previously held this position, has been promoted to regional vice-president, Prairie region.

Tracey Robinson

Mark Smith

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News Industry

Group has mixed views on the Bank of Canada’s next move The Bank of Canada should aim for a target interest rate of 1.25 per cent by October and 2.50 per cent by April 2011, the C.D. Howe Institute’s Monetary Policy Council recommended, but were divided on the next action the central bank should take. Six of the 10 members of the council – which provides an independent assessment of the Bank of Canada’s strategy to reach a two per cent inflation target - recommended the rate still be held at 0.25 per cent in June, while the four remaining members were split between wanting a 0.5 per cent and 0.75 per cent target rate. The council’s formal recommendations to the Bank of Canada are based on the group’s median votes on rate changes. In a report, the council said members who favoured the Bank stay with its commitment tended to “highlight the role of emergency stimulus and inventory swings in recent growth numbers” while noting the disappearance of one-time factors affecting prices will cause year-over-year inflation to moderate. In contrast, members who wanted the Bank to raise the policy rate sooner and more steadily said domestic demand and inflation are running ahead of what was expected when the Bank’s commitment to keep rates low was made, adding the yield curve and money growth rates are “consistent with continued expansion.” “In general, the strongest sentiment was that credibility in controlling inflation should be the

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Bank of Canada’s paramount consideration,” the report said. “There was strong sentiment in favour of the Bank’s signaling clearly that monetary policy is likely to become much less accommodative as it exits its emergency stance.”transaction.” CMP

housing bubbles have lasting effects: study In an interview with the Financial Times, Boston money management firm GMO’s Jeremy Grantham says of the 34 international cases of housing bubbles he researched over the past few decades, 32 have steadied themselves. Canada’s housing market did not make the list. According to Grantham, who wrote a study on the topic, a housing bubble is a large overvaluation so monumental it takes more than 20 years to run its course. “It is not usual that you get three bubbles in a 10- or 12- or 13-year period. Normally, one bubble will chew up 20 years because it leaves such a painful experience. People don’t cue up to put their hands on the same stove and burn themselves again,” he said. The bubbles in the U.K. and Australian housing markets are the only two that remain following the financial crisis, says Grantham, but added home prices will eventually sink back into their long-term trends for the two countries. “You should be prudent and cautious and recognize that after a 65 to 70 per cent rally, the U.S. market and European markets have moved from very cheap to decently expensive again,” he said. CMP

News

Industry

Confidence in commercial 62% real estate prices rises

Canadian homeowners who plan to retire with a mortgage debt according to a poll conducted by Investors Group

The amount of money invested in commercial real estate in the GTA dropped by 11 per cent from the fourth quarter of 2009 to the first quarter of 2010 and transactions fell by 10 per cent, according to a report by RealNet Canada, causing more balance in the market. The numbers show that owners want to hold onto buildings instead of trying to sell them at a discounted price, as many sellers did during the recession. The last three quarters of 2009 saw sales growth in commercial real estate, including offices and industrial buildings. “Nobody wants to sell in a rally,” John O’Bryan, vice-chairman of CB Richard Ellis, told the Globe and Mail. “We’re in a lull period here, where everyone wants to wait a quarter or two to see where things go. This is happening around the world as the recovery takes hold.”

The Globe said the trend of slowing sales shows growing optimism that the real estate rebound is sustainable and property prices will continue to rise. This is in contrast to the prediction that a wave of discounted properties would hit the market as distressed sellers tried to clean up their balance sheets, the paper said, adding distressed sales accounted for only 8.7 per cent of the $1.95 billion worth of transactions in Toronto in the first quarter. “The concept of distressed selling just never materialized in Canada,” Mark Rose, chief executive officer of Avison Young, told the Globe. “What the data tells me is that if you are looking to pay a distressed price for something, then please take it off your screen and get back to real investing.” CMP

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TOP BROKERS TOP 50 TRENDSPOTTING

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this time last year Don’t like the current market? Buy globally This time last year, Lloyds TSB was attracting consumer attention with its International Mortgage Service. At the time, property values were falling allowing individuals to purchase internationally at lower costs. The International Mortgage Service allowed Canadians to purchase property in 11 countries, including the U.K. and the U.S. Lloyds TSB offered interest-only payments and international banking service for customers to set up mortgage payments. One year later, Lloyds TSB still offers its International Mortgage Service in the same 11 countries. According to business development manager Paul Viverious, international investments have increased since the same time last year because of a robust Canadian dollar and the relative stabilization of the U.S economy in terms of housing prices. Viverious says the majority of Lloyds’ inquiries have been in the U.S market because of its close proximity to Canadians and the potential upside American investments can yield. Lloyds TSB also profits from international refinancing, allowing people who have inherited homes abroad to access that equity while Canadian banks have no means to do so. CMP Manitoba to introduce broker legislation Last April, the Manitoba government was introducing amendments to its Mortgage Dealers Act, making licensing for brokers mandatory. “We have seen in the United States the financial and emotional harm that is inflicted when a mortgage broker is allowed to recommend a mortgage that is inappropriate to a borrower,” said former finance minister Greg Selinger. The regulations also required brokers to disclose any fees or commissions being paid to them by the lender for referrals. One year later, The regulations haven’t been proclaimed law yet. They’re being worked on by the legislative council and, from there, have to be approved by the cabinet. Bill Baluk, registrar of the Real Estate Brokers Act, is hopeful the regulations will be finalized sometime this year. According to Baluk, a consultation took place last fall with mortgage brokers that included a

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presentation and discussions. No objections or controversies arose as to how the Manitoban government was proceeding with the legislation. “What we’re doing is for consumer protection. It provides some protection for them whereas now they don’t have any,” Baluk said. Manitoba-based Integrity Mortgage Services owner Jason Zarrillo says the new regulations will weed out the amateur brokers. “There’s a lot of people out there right now that are just [brokering] on the side, here and there, which doesn’t give a good name for brokers who are doing this full time…this regulation is definitely a long time coming,“ he said. CMP HELOCs, alt-A products to be investigated Last year, the Office of the Superintendent of Financial Institutions said it would examine Home Equity Lines of Credit (HELOCs) and alt-A mortgages because of the potential problems they could leave lenders as home values fall. HELOCs allow homeowners to use equity in their property to borrow money. At the time of a CMP news story, 15 per cent of mortgage holders took equity out of their homes totaling $34 billion. Over half used the funds to pay debt or for consolidation. Most institutions required 20 per cent equity in a home before HELOCs can be used. One year later, As part of OSFI’s on-going supervisory process, it conducted a review of U.S home equity lending activities. The rationale for the review was primarily due to the mortgage lending issues in the U.S housing market namely substantial declines in residential property values. OSFI also wanted to understand U.S practices around home equity lending. Its risk-based supervisory process monitors and reviews financial institutions’ exposures and practices in any number of business lines over the course of a year and if it identifies issues, it discusses them with the individual financial institutions. “As a prudential regulator, we are constantly examining a wide range of emerging and existing risks, including products, exposures and risk management practices at financial institutions to identify concerns,” said OSFI spokesperson Rod Giles. For the 2009-2012 planning period, OSFI will also focus on post implementation issues associated with the Basel II Capital Accord. CMP

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News Analysis

Maturing subprime mortgages will challenge brokers With subprime mortgages set to mature over the next few years and many of the non-conforming lenders out of the market, Eric Putnam examines the current state of the industry and what, if anything, brokers can do to help their clients

on-conforming mortgages represent five per cent of the Canadian mortgage market today and are growing rapidly, according to a 2007 article published in the CMP Guide to Subprime Lending. It was also reported that the alt-A and subprime market in the United States represents 22 per cent of all mortgages. In April 2009 the Globe and Mail reported that a committee representing the Canadian nonconforming mortgage lenders had approached the Canadian government to request the creation of a pool of $5 billion to fund the estimated 30,000 non-conforming mortgages maturing in December of 2009. These maturing mortgages — referred to as “orphaned mortgages” — will be difficult to refinance due to the credit crisis and the challenges experienced in the capital markets. This fund was intended to last a maximum period of five years until the borrowers could, hopefully, qualify for prime or insured financing. The government denied this request and there appeared to be no assistance forthcoming. In a May 2009 posting on Candianmortgagetrends.com, a consumer with a mortgage from a defunct non-conforming lender wrote, “after paying our mortgage for three years always on time and paying a high interest rate they will not renew us. What will happen? Will they take our house? We tried to get another mortgage and we can’t get one now. Does anyone have suggestions?”

Beneficial, HFC and The Associates, which were subsequently acquired by competitors during the ’90s and became Citi Financial, HSBC Finance and Wells Fargo Financial. Because of the recent credit crisis, Citi Financial and HSBC Finance no longer accept applications from mortgage brokers; and as of July 2009, Wells Fargo exited the Canadian mortgage market leaving no finance companies for brokers to work with. Lending by a second mortgage to those not qualifying for mortgage insurance was the status quo until 1997 when IMC Mortgage, an American lender, opened a Canadian subsidiary. IMC used mortgage-backed securities (MBS) for its capital and specialized in originating and servicing “non-conforming,” high loan to value first mortgages via brokers across Canada. FirstLine Mortgages soon followed and opened its Access unit in 1998. After the Russian ruble crisis of 1998, IMC was sold and became Xceed Mortgage, which later was listed on the TSX. Xceed successfully grew its “non-conforming” business using MBS to raise capital. In 2007, Xceed reported having $2.6 billion of mortgages under administration. Many lenders, who specialized in nonconforming, high loan to value, first mortgages opened offices in Canada during 2003 -2006. Many were subsidiaries of American firms such as Accredited, GMAC, GE Money and Wells Fargo. Other new entrants were Canadian firms such as Abode, MoneyConnect and N-Brook. Many of these A look back new lenders provided more than 100 per cent Prior to the late 1990s, it was common for those financing for purchases or refinances without the borrowers unable to qualify for mortgage insurance need for mortgage insurance. to obtain a second mortgage supplied by a During early 2007 the capital markets consumer finance company or private lender to imploded globally as a result of the subprime “top-up” a first mortgage from a bank, trust mortgage crisis in the U.S. The result in Canada company or credit union. There were many was a freeze on capital for lenders issuing nonconsumer finance companies providing second insured mortgage-backed securities. After the mortgages during that period such as Avco, collapse of the asset-backed commercial paper

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Eric Putnam

News

Analysis

market, these ceased to originate new loans and in several cases went out of business. The estimated 30,000 existing non-conforming mortgages continue to be serviced by either the originating lender or a third-party mortgage servicing firm. In the majority of cases consumers are being advised by the non-conforming lenders two to three months prior to maturity to obtain alternative financing to pay out the existing mortgage or face power of sale action under the terms of their mortgage. A large percentage of these non-conforming mortgages were advanced at 85-104 per cent LTV prior to 2008. For those that don’t meet the requirements of the mortgage insurers today what options remain? What does the future hold? Assuming there is no government funding available to assist these maturing orphaned mortgages, we should be asking what brokers and lenders are doing for their clients who have these non-conforming mortgages. At the very least clients should be advised as early as possible that they may not be able to be renewed at maturity. Brokers need to work with their client to help

devise a plan so they can qualify for prime financing and mortgage insurance. Business-forself clients may need to better document their financials. Other clients may need help to improve their credit scores. While one non-conforming lender has opened for business since the credit crisis, with the backing of a Canadian bank, that extends up to 90 per cent uninsured financing, there remains a large unfilled market across the country. Mortgage professionals should seize the opportunity to better educate consumers and their referral sources as to the changes in the mortgage market due to the economy. To assist borrowers who have one of these orphaned mortgages, a mortgage professional needs to implement a plan well before maturity to be able to obtain affordable financing to meet the borrowers’ needs.

Eric Putnam is the managing director of Debt Coach Canada (Debtcoach.ca), which specializes in assisting consumers with resolving their financial challenges and improving their credit scores. CMP

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simply the best The fourth annual CMP Canadian Mortgage Awards could almost be named the Oscars for the mortgage industry, where the best of the best came out to celebrate and share their success among their esteemed colleagues; and focus on a bigger and brighter future

ith much of the economic downturn over but not forgotten, the direction of the industry is certainly moving in a positive direction, which was obvious in the overall mood of nearly 500 mortgage professionals who gathered at the fourth annual CMP Canadian Mortgage Awards held at the Liberty Grand in Toronto, Ont., to recognize the collective efforts of their colleagues. The event – platinum-sponsored by ING Direct – took on a ’60s theme (think Mad Men) that brought out a funky and fun vibe, from the ‘60s-themed animators who greeted guests as they arrived at the pre-awards cocktail party, which was sponsored by FirstLine Mortgages to the life-sized cutout figures of Elvis and Marilyn Monroe. The black-tie event added glamour to the evening. One highlight of the evening was the videos of finalists from across the country who got into ’60s characters from various television shows and movies such as The Brady Bunch, Gilligan’s Island and Austin Powers. There was plenty of cheers and laughs from the audience. The humour continued with MC Jessica Holmes, a favourite on CBC’s Royal Canadian Air Farce, who got the awards ceremony off to a great start with her laugh-out-loud skits and jokes. Other entertainment included ’60s themed dancers from DeAngelis Entertainment – who showed off their groovy moves while performing to the song “Fever” – and lots of danceable music from the eight-piece band God Made Me Funky, who played at the after-party sponsored by Merix Financial. There were two new award categories added this year — Best Newcomer Lender Underwriter of the Year, won by Ambrose Wong from Bridgewater Bank in Calgary, Alta., and Best Newcomer Lender BDM, won by Rachelle Gregory from Merix Financial in Toronto, Ont. The Lifetime Achievement Award went to Garth Ellis, of Ellis Mortgages Canada who graciously accepted the award for the industry as a whole.

Tables with guests who cheered the loudest throughout the evening received bottles of Champagne and the best dressed man won a bottle of Stoli Elit Vodka while the best dressed woman won a gift basket by Solisco. There were other wonderful prizes given away throughout the night – four sets of golf tickets, two from Maples and two from Royal Woodbine as well as Carlberg & Tuborg vouchers. ING Direct’s George Hugh, VP, Broker Sales and Treasury, commented on why his company took on the role of platinum sponsor this year. “ING became the platinum sponsor this year because we’ve made a lot changes to our model and we believe we’ve had a lot of success over the last year. It’s our coming out party and what better way to celebrate then at the CMP Awards where everybody who’s anybody is always here every year.” Tim Duce, president of KMI Publishing, CMP’s publisher and event organizer, was delighted with the outcome of the gala, particularly since attendance rose over 25 per cent this year compared with last year. “I’m particularly pleased that the industry responded so well to the popular voting we set up for some award categories – that was an initiative that was requested by the industry after the 2009 awards.” What are his plans for next year’s awards? - A simple promise to raise the bar and give the industry another great night to remember! “Congratulations to the winners and nominees and a big thank you to ING and all the other sponsors for their support this year. I would also like to thank my team here in Canada for doing such a brilliant job.” In the following pages are all the winners, who are sure to continue to have a bright future in the mortgage industry in Canada. All of them were happy to tell us what they thought contributed to their big win of the night.

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The Firstline Mortgages Award for Best Internet Presence Canadian Mortgage Trends Raj Singh, Robert McLister and Elaine Ferrara “It’s a lot of late nights - it was the wife saying ‘why are you not in bed yet at 2:30 in the morning’ - and caring about the industry and making sure we put out a lot of good material.”

The TDMP.com Award for Best Branding Dominion Lending Centres Chris Kayat, Sandy Aitken and Gary Mauris “A lot of it is just our agents getting back and believing in the brand and taking a chance four years ago and joining the company that had an ad campaign that was different than anybody else and I am very, very grateful to all of them for taking a leap of faith and getting the system out.”

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Thank you for your support! Thank you for voting First National the Best Industry Service Provider and Employer of Choice at the recent CMP Canadian Mortgage Awards. With nearly $50 billion in mortgages under administration, First National is Canadaâ&#x20AC;&#x2122;s largest non-bank lender. Our products are innovative, our team is knowledeable, and Merlin ensures we are able to continue to deliver the best-in-class service that you have come to expect from us. Again, thank you! ou! nk Y a h T

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Best Industry Service Provider & Employer of Choice

firstnational.ca First National is licensed under the Mortgage Brokers, Lenders and Administrators Act 2006 (Ontario) Licence No. 10514

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The Street Capital Award for Best Newcomer (Firm) Obsidian Mortgage Corporation Paul Grewal and Suganthan Thavarajasingam “We don’t work individually, we work as a team. Five or six people work on each deal and there are many steps to go through before a deal is done and I think that is the success for this award. We’re going to work harder and maybe win more awards next year.”

The Genworth Financial Award for Best Newcomer (Individual) Nick L’Ecuyer, Verico, The Mortgage Wellness Group, Barrie, Ont. Debbie McPherson and Nick L’Ecuyer “You know what? The one thing I wanted to say down there was that I thought Beyonce should’ve won! I didn’t think it was appropriate down there but definitely up here! But absolutely No. 1, is a strong mentor. I had that with Darick Battaglia; he mentored me right from the start, gave me all the tools I needed, and as a result here I am.”

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The CHIP Home Income Plan Award for Employer of Choice

First National Financial LP Stephen Smith and Gary Morrison “I think we are extremely flattered. To be nominated is a reflection to our employees’ feelings that we provide an environment and a culture that they enjoy working in, lets them fulfill their dreams and also deals with the mortgage brokers and provide a service that is second to none.”

The HLC Award for Best Community Service Effort Peter House, Mortgage Intelligence, Belleville, Ont. Angelo Froudakis and Peter House “It’s the community that supports us and we supported the community that we are in for the past 17 years and I think just contributing and helping people out is a wonderful thing.”

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The Merix Financial Award for Best Customer Service from an Individual Office Mike Averbach, TMG Averbach Mortgages Chris Kayat, Mike Averbach and Boris Bozic “Our dedication is to our clients. Every client gets a 100 per cent satisfaction guarantee from us. Typically a mortgage broker will touch a file five, six times maximum and that’s all they want to do because they want to move on to the next deal. We have a certain capacity of mortgages that we can do per month because we want to make sure that every client receives the best treatment possible, so we’ll touch a deal 12 to 15 times if we have to, to make sure that everything is going to plan and our clients are completely satisfied.”

The Stoli Award for Best Advertising Dominion Lending Centres Kevin Cochran “You know what? Bottom line is Dominion Lending has a unique advertising campaign right now. We are spending a lot here on television advertising creating a brand in the industry that they’ve never seen.”

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The National Bank Award for Lifetime Achievement Award in the Mortgage Industry

The Home Trust Award for Best Alternative Lending Mortgage Broker of the Year

Garth Ellis, VERICO Ellis Mortgages Canada

Dave McKitrick, Alta West Mortgage Capital Corporation, Calgary, Alta.

Garth Ellis and Sebastien Kuperhause

Dave McKitrick and Martin Reid

“Personally, I’m elated. I really consider it an industry award as opposed to an individual award. The contributions of all the other brokers who have managed to elevate the status and broaden the understanding across Canada, it serves to help me as much as themselves individually so regardless of company or regardless of individual broker some things transcend those individual agendas and that’s the industry itself.”

“We invested in providing excellent service to our customers, we invested in our software, we invested in our staff and so through education and through our upgrading of our equipment and software, we’re able to provide the best service to our clients and I think for that reason it’s noticed in the industry.”

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The MBN Award for Best Commercial Mortgage Broker of the Year Randy Buckley, Murray & Company, Toronto, Ont. Randy Buckley and Gina Monaco “A mystery nominator! I’m totally humbled. There are a lot of great commercial mortgage brokers in Canada and I don’t why I would be selected and I’m pretty humbled and honoured by it.”

The TMG Award for Best Industry Service Provider First National Financial LP Mark Kerzner and Scott McKenzie “Our staff and our technology. Also service is one thing we can control and it’s the one thing we’ve tried to control for 20 years now. Our staff is keen on getting good service back to the brokers and a quick turnaround time. It’s important to us and always has been.”

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The Macquarie Financial Award for Mortgage Broker of the Year (less than 25 employees)

The Bridgewater Bank Award for Mortgage Broker of the Year (more than 25 employees

Lou Perrotta, Domus Financial, Oakville, Ont.

Gary Meger, Neighbourhood Dominion Lending Centres, Barrie, Ont.

Lou Perrotta and Doug Lee “I honestly don’t know why I won. I received a questionnaire and answered the questions to the best of my ability so it must have been something in there that triggered the judges’ curiosity and interest. Two things that I do is respect the clients and respect my business partners. I also take time to give back to the community.”

Todd Poberznick and Gary Meger “Do what’s right for the customer — if you do that everything will fall into place. Invest in yourself and it will pay you back in spades.”

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The Resmor Trust Company Award for Best Newcomer Lender Underwriter of the Year Ambrose Wong, Bridgewater Bank, Calgary, Alta. Ambrose Wong and Anne Wright “It can be a tough business with policies changing and the rates going up so I think a lot goes towards customer service. All the banks actually offer the same type of products but I think customer service really stands out and will make a difference. Also consistent, hard work, just make the deals, make exceptions if you can within your premise and get it done for your broker team out there.”

The CMHC Award for Best Lender Underwriter of the Year Barb Starr, Macquarie Financial, Vancouver, B.C. Sam Carnovale and Barb Starr “I am truly humbled; it was the help of my team for me being here tonight and winning this award.”

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Celebrating the best of the best.

With the support of our broker partners, we achieve great things. Macquarie is delighted to congratulate Barb Starr, winner of Best Lender Underwriter at the 2010 CMP Canadian Mortgage Awards.

We also proudly recognize the nominations of Business Development Managers Brad Checknita, Dan Pultr and James Haines.

Weâ&#x20AC;&#x2122;re on your side. 1 877 462 3788 MacquarieFinancial.com No entity within the Macquarie Group of Companies is registered as a bank or an authorized foreign bank in Canada under the Bank Act, S.C. 1991, c. 46 and no entity within the Macquarie Group of Companies is regulated in Canada as a financial institution, bank holding company or an insurance holding company. Macquarie Bank Limited ABN 46 008 583 542 (MBL) is a company incorporated in Australia and authorized under the Banking Act 1959 (Australia) to conduct banking business in Australia. MBL is not authorized to conduct business in Canada. No entity within the Macquarie Group of Companies other than MBL is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Australia), and their obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of any other Macquarie Group company.

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The Mortgage Centre Award for Best Newcomer Lender BDM Rachelle Gregory, Merix Financial, Toronto, Ont. Eddy Cocciollo and Rachelle Gregory “My company has always been so supportive and I’ve had a lot of mentors. My mom is the president of a servicing company and she has always been such a great role model. Boris Bozick, the president of our company, has always taught me to give the best service that I can.”

The Verico Award for Best Lender BDM Cynthia Kramer, Paradigm Quest, Toronto, Ont. Colin Dreyer and Cynthia Kramer “I’m passionate about this industry and I receive back a lot of enthusiasm every day from my partners. Every day I enjoy coming to work and I think it shows. I enjoy working with my partners; they continue to make me grow and strengthen me in what I do every single day.”

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The ING Direct Award for Mortgage Brokerage of the Year (less than 25 employees)

Monster Mortgage.ca Kim Luxton and Nick Ametrano “The real focus for us is really building a strong foundation of core values and customer service. And I have to thank all the staff who do a great job at that every day.”

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The ING Direct Award for Mortgage Brokerage of the Year (more than 25 employees)

Dominion Lending Centres Gary Mauris and Mark Kocaurek “It was a monster night for us. I’m very grateful and very proud of our team. Four years ago we had one broker and today we have 1,700 of them; we won best advertising and best branding. I look at the other winners and just think it’s the quality of people and the culture that we have in our company and it’s been a great four years. This is a combination of all the success of everyone giving back and going beyond the call of duty and giving more than what’s expected at every level through our network. I think tonight we were rewarded for that.”

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ONTARIO’S With Ontario’s new mortgage brokering legislation now in effect, not even two thirds of the province’s mortgage professionals were registered with the Financial Services Commission of Ontario (FSCO) by the July 1 deadline

s of the Canada Day deadline, almost 3,300 mortgage agents from across Ontario found themselves in contravention of the new provincial act, putting themselves at risk for reprimand by the provincial regulator. With an estimated 9,000+ agents in Ontario, this translates into approximately 37% who failed to hold approved licences by the deadline. Ontario’s mortgage agents were bombarded with stern notifications CAAMP, IMBA and FSCO in June, enforcing the fact that, after July 1, mortgage agents not registered under the new Mortgage Brokerages, Lenders and Administrators Act 2006 are forbidden to practice in Ontario. The low number was a surprise to some. After all, the act was designed to improve the mortgage brokering profession by implementing educational requirements, mandatory errors and omissions insurance, and introduce a whole slew of other factors to ensure the safety of consumers and, consequently, improve customer confidence.

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The fact that such a low number of agents took the steps to proactively stand behind it led some to believe that a large percentage of Ontario’s mortgage agent population didn’t care about the best interests of the industry. Others said there were a number of factors at play.

Agents being agents Up until a week before the deadline, Jeff Atlin, vice president and chair of government relations for IMBA, had only received a handful of queries regarding the new act. That number escalated in the week leading up to the mandatory changes – signifying that many mortgage agents weren’t apathetic, they were merely disorganized. “It seems mortgage professionals tend to do things last minute – so, in many ways, it doesn’t surprise me,” he said. “On the other hand, I am surprised that there isn’t a stronger sense of urgency.” While the lack of urgency might be disturbing, Phil McDowell, president of AMBA, said it’s not uncommon. Alberta

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As lenders increase their minimum volume requirements and efficiency ratios, mortgage brokers are pooling their office deals to take advantage of favourable fees and to continue their relationship with preferred lenders. Gina Monaco takes a look at the pros and cons of this growing trend

The

& pros cons

of broker hubs T

he controversy surrounding broker hubs, pooling deals and co-brokering boils down to one thing for brokers – lender access. A lot of agents today are forced to pool or co-broker their deals to get the best rates and service from lenders. Some feel disadvantaged without access to lender status programs. Some agents say it’s eroded their ability to get the best deals for their clients. Others lament the loss of developing a relationship with an underwriter. As the industry evolves, the broker hub will become more prevalent. New agents who have only worked with pooling and co-brokering accept it as the norm. It’s the agents who have been in the industry for a number of years who

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bemoan the loss of access. And although the concept of a hub sounds good in theory, its success depends on the system each brokerage has set up. For lenders, working on deals that are submitted through hubs and pools makes more efficient use of an underwriter’s time. Bank and non-bank lenders who have tightened up their requirements by introducing funding ratios and volume minimums have done so partially due to the growing number of brokers, approximately 15,000 across the country, who are accessing mortgage funds. Of course, lenders are also trying to find ways to increase efficiencies and maximize profits.

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Broker owners and the superbrokers may not like what the lenders are doing but understand the need to strike a balance between what the lenders are asking and the needs of their agents, while at the same time increasing their own efficiencies and bottom lines. The idea of co-brokering or pooling deals is not new but has become more prevalent. Broker owners are putting systems in place to benefit all parties. While most still use a variation of the standard pooling model, other brokerages have designed centralized hub systems that offer their agents the ability to access underwriting services, lead generation services as well as training programs and other business development programs. Agents in the trenches New agent Lisa Perrot of First Foundation in Edmonton, Alta. is only familiar with the pooling process. She is not overly concerned with status because the office maintains its volumes and funding ratios. More importantly for her, as a new agent, is the team environment that’s been created in her office. “We have an open concept office where everyone helps each other,” she said. “We believe that if our brokerage does well, then we all do well.” And although she doesn’t see the bonuses that her broker receives, she does get rewarded in different ways. “Our broker is fair to us and gives back to us in other ways, but he also generates our leads for us.” For Michael Sjerven of Dominion Lending Centres in Vancouver, also a new agent, broker hubs have become a major issue. “If you’re on your own today, it’s tough to get lender access,” he said. “So you’re forced to be part of a team to get better rates and service.”

“ if you’re on your own today, it’s tough to get lender access, so you’re forced to be part of a team to get better rates and service ” Sjerven much prefers to submit under his own name so he can build a rapport and develop a relationship with the underwriters, which he said is part of the job of being an agent. “In some systems, I might not even get the conditions e-mailed back to me.” Although he understands the rationale behind the hub concept and how it will help agents who don’t meet minimum requirements demanded by lenders, he doesn’t like the direction the industry is going. “Every lender and every brokerage is set up differently so it’s hard to say what works best and if you cut out too many people, the whole process might backfire.” He doesn’t like the idea he can only use a handful of lenders; and not all brokerages have status with all lenders, which goes to the heart of providing the best service to clients. “This is a good industry and we have a lot of issues to work through to balance off doing the best for our clients and satisfying the demands of the lenders.” Customer service is and always will be the key to success in the mortgage industry. Some brokers believe that the trend toward broker hubs because of lender requirements will erode their ability to give their clients the best deals.

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One of those brokers is Faye Drope of Verico Sand Dollar Mortgage in Parksville, B.C. who is quite vocal about the importance of customer service. “The general public is being sorely misled and I don’t know what the repercussions would be if they realized the direction we’re going. I believe our industry would change dramatically.”

“ I’m not doing the best job for my client if I don’t at least try to get them the best deal, even if that means sending it to a lender who might or might not approve it. You never know! I’ve had approvals that I thought I would never get ”

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Funding ratios and volume minimums are nothing new to Drope who has been working in the industry since 1999. “Ever since I started in the industry, lenders have always talked about cutting us off if our funding ratios weren’t high enough – this is nothing new – but it does comes down to choice for our clients,” she said. “I’m not doing the best job for my client if I don’t at least try to get them the best deal, even if that means sending it to a lender who might or might not approve it. You never know! I’ve had approvals that I thought I would never get.” When she first started working in 1999 there were funding ratio issues. Her deals were co-brokered and she was given a split. “That’s why I left and went to another brokerage.” She doesn’t know why lenders think this is a good idea. Drope understands that lenders may now be overwhelmed over too much business from a ‘ton of brokers’ but still, she can’t see the benefits for the long run.

Lisa Perrot

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“Forcing the creation of hubs and pooling is creating an uneven playing field.” And then there are the ethical questions. In fact, part of the educational requirement for completing an AMP designation is a course in Ethics & Responsibilities. This is a concern for Drope. “Are we going to make the right decision for our clients now that we can only access a few lenders? They (lenders) have created this and we, as an industry, are so divided about it that we let the lenders push us around.”

with the recognition that brokers need access to products when volume minimums aren’t there. “We like the idea of holding one person or the aggregator accountable for the submissions, whether through a broker hub or deals pooled under one name,” Poberznick says. “That way we are better protected and have more confidence that deals submitted have already been checked, are in compliance and are packaged properly.” On the other hand, he says, lenders have tried to make the process fair and A lender’s perspective profitable for everyone. It doesn’t make With so many brokers in the market today sense for underwriters to work on so many and with increasing incidents of fraud, lenders deals that don’t even meet a lender’s are assuming increasing risk so it’s not minimum requirements. surprising that many prefer to work with Bridgewater Bank is working to bridge this broker hubs and mortgage aggregators. gap by launching a broker compensation For Todd Poberznick, vice-president, program that’s at the low end of the Production at Bridgewater Bank it comes qualification threshold for brokers and allows down to the need for greater diligence toward brokers to qualify every six months. In some nexus-cmyk-halfpgCMPad-march10(2Page 1 09/03/2010 5:20:14 PM compliance and accountability among lenders cases, individual brokers may still need the

Faye Drope

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benefits of a pool to qualify but the recognition of the challenges for brokers is built into the model. “Lenders want to see volume and many brokers weren’t able to achieve those numbers so we had to come up with other ways to help them get there. At the same time we don’t want to turn business away,” Poberznick says. For those agents who like a certain product offered by a particular lender and who doesn’t have the volume, using an aggregator or a hub makes sense. “We deal with a lot of individual brokers still and, in all fairness, I know that the submissions I get from them are good quality, and I’ll probably get eight out of the 10 deals closed, so those brokers get a good turnaround time,” he says. “That’s the machine running effectively, but not everyone can give us that. Poberznick believes the hub concept can work as long as it’s managed properly. “There’s more accountability because we know who we’re dealing with. There is less overhead cost for us and brokers, working through their hub will do more volume and be able to access the best rates and service.” Also at issue is the turnaround in the numbers of brokers themselves. Often underwriters will spend time with an agent only to have that person leave the industry or not comply with lenders’ volume or funding stipulations and that’s not a win/win situation. There has been a push in recent years to make the industry more professional with more government regulations and mandatory provincial licensing. As well, professional accreditation like the AMP designation is encouraged. “There are a fair amount of brokers out there – some make it and some don’t,” Poberznick says. “As time goes on and lenders search for maximum efficiency, brokers will have to find a way to fit the mould or will move on.” The word on hubs There is no standard design for broker hubs, each brokerage does something a bit different. Many offices still co-broker with an agent. Other offices pool their deals under a broker’s name. The most innovation is coming from large brokerages, but even those hub designs are unique to each other. Two of them, TMG, The Mortgage Group Canada Inc. and Centum have designed models that accomplish a number of tasks. At TMG the Deal Centre is intended to help agents grow their business along with

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training programs for new agents, through a mentored submission process and will also assist with alternative lending solutions. “Our brokerage uses various tools designed to make it easier for (new) agents to learn about business and become more successful,” says Mark Kerzner, president and COO of TMG. “Because we have status with a number of lenders, agents and their customers have access by submitting through our deal centre.” The submission process at TMG is designed to walk the agent through it, step-by-step. When the files are ready, the agent is taught how to submit the deal, packaged properly, and in compliance, to the lender through the deal centre. The agent is then guided along through underwriter conditions and subsequent approvals or declines. There is also a built-in admin followup option that any broker can select, meaning if an agent is on vacation when the deal is still with the lender, it will be looked after by someone in the office. “We help out with alternative lending sources for agents who don’t have the experience or the networks to work with private lenders,” Kerzner says. “We also employ experienced underwriters who provide oversight on each deal.”

Top: Michael Sjevern Bottom: Bottom: Todd Poberznick

pros & cons of broker hubs Pros for Broker Hubs • Deals properly packaged • Time saver for agents who don’t have to deal with underwriter conditions • Lender is assured of compliance • Agents get access to lenders through their status brokers • Better rates, service and volume bonus Cons for Broker Hubs • Reduced or no personal access to lenders and underwriters • Some brokerages not passing on volume benefits and rewards • Can be miscommunication • Brokerages may (have) fewer lenders to work with

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Over at Centum Financial Group, the system is a web-based platform that offers a “true” hub environment. Called the Centum Equity Builder, the platform was developed to create an environment for agents that would meet all their needs for growing a business. It even allows for third party vendors like Assurant Life of Canada to access the broker channel “Assurant has been wanting into the broker industry for years but has been locked out because they move data electronically over the web,” says Bill Jamieson, president at Centum. “We also have an area where an agent can look

“ we like the idea of holding one person or the aggregator accountable for the submissions, whether through a broker hub or deals pooled under one name. ”

at every lender on one spreadsheet to review their rates and products, which is updated as lenders update their information.” Using the underwriting service at Centum also means that agents get higher compensation. The brokerage meets volume requirement and funding ratios so they have status, which is passed to the individual agent. Other resources on the Centum hub include a unique series of webinars for agent training as well as a lead generation module, including SEO optimization for agent websites. “Our hub has been in place for over a year now and it’s working great. It fills a need for both lenders and brokers,” Jamieson says. “Our lenders love it and our brokers are onboard with it. I believe the future of the industry is in using web-based platforms and it is the next level for the industry.” CMP

Bill Jamieson

In an upcoming feature about technology, CMP, will be looking at all the Superbrokers and the types of hubs they are using.

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Business Private lending

private lending

a growing option With a strong housing market and rising property values, private lending has become more available to borrowers who need it, particularly those affected by the new mortgage rules. Erin Letson explores the option of private lending and explains how brokers can access this type of funding

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Private lending

t the end of 2008 and beginning of 2009, the appetite for private lending was strong, but the uncertainty of the economy and the housing market meant that finding a private mortgage was often a daunting challenge. While there are still complexities in putting together a private deal and finding financing, getting private funds has become considerably easier now that the housing market has rebounded and property prices in many Canadian cities are soaring. “We scaled back funding a lot at the end of 2008, but by the spring of 2009 we started to see an improvement and we have been increasing our LTVs since then,” says Dougal Shewan of V.W.R. Capital Corp., a private lender based in B.C. that offers up to 75 per cent LTV mortgages.

“ our primary criteria is the condition the property is in, where it’s located and how easy it is to sell if the borrower gets into trouble. If that fits, we look at the character of the client, their ability to repay, and the purpose of funds ” Steve Gilmour, a Dominion Lending Centres broker who specializes in private lending, has also seen the tide turn.

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“ for the investor, we’re often seen as that short-term solution – we’re a stop-gape ”

new mortgage insurance rules implemented by the federal government and the CMHC, as well as those looking for commercial or construction funding. The availability of private funds also presents new opportunities for mortgage brokers who want to get their feet wet in this area of mortgages.

“Private lenders are back in full force right now and there isn’t a province that isn’t covered,” says Gilmour, who gets most of his referrals from collection agencies. The fact that many private players are more willing to lend is good news for categories of borrowers like real estate investors and business-for-self clients who are affected by the

Explaining private mortgages Private mortgage lenders operate differently from banks and other mortgage lenders on many levels. One of the major differences is their source of funding – private lenders get their money through individual investors or groups of investors. Some of

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Business Private lending

“ private lenders are back in full force right now and there isn’t a province that isn’t covered ” these lenders pool mortgages into a MIC (mortgage investment corporation) while smaller investors might simply lend out their own money. In both cases, the private mortgage is seen as a short-term investment that can be sold off within a year or two as opposed to something to keep on a balance sheet. “Private mortgages fill the gaps that institutional lenders like banks are unable or VWR half-pg-CMPad-CMYK.pdf

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05/05/2010

unwilling to fill,” says Omid Jalili of OMJ Mortgage Capital, a brokerage that focuses on private lending such as commercial and construction loans. “They offer an alternative source of financing to borrowers and a high-yield investment opportunity for investors.” Private money can cover anything from first mortgages and, more commonly, second and third mortgages that are harder to obtain from institutional lenders. It is also commonly used for construction and commercial financing, which banks are hesitant to touch. “In residential deals, private funds generally come into play for clients with tarnished credit, lack of income verification or those who want a quicker closing,” says Jalili. “On the commercial and construction side,

11:30:46 AM

Carmen Campagnaro

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private funds are primarily used to reach higher LTV ratios. For example, with construction financing, clients are often able to obtain 100 per cent of the hard costs, which is not even remotely possible in the world of traditional lending.” Another difference between bank mortgages and private mortgages is the application process. Instead of the borrower being scrutinized, the property is what gets the most attention from a private lender. This is because private loans are uninsured, meaning the lender must fall back on the property should a default occur. For this reason, properties in smaller towns or rural areas likely won’t qualify for as much money with a private lender – 65 per cent LTV compared to 85 per cent in an urban centre, for example. “Our primary criteria is the condition the property is in, where it’s located and how easy it is to sell if the borrower gets into trouble. If that fits, we look at the character of the client, their ability to repay and the purpose of funds,” says Chuck McKitrick, president of the private lending company Alta West. He adds his company doesn’t often verify borrower income, which can be attractive to many real estate investors or self-employed clients. On the client side, the main differences between private mortgages and institutional mortgages are higher pricing

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the cost of private lending Although private mortgages can help borrowers get out of sticky situations or find financing for unique projects, there are additional costs to consider. First up is the higher interest rate, which can range from a couple of percentage points above a bank loan to upwards of 20 per cent. Lenders weigh the interest rate based on the loan to value needed, the property location and the overall risk factor of the loan. Other costs borrowers have to be aware of with a private mortgage are lender fees, mortgage broker fees, legal fees and an appraisal if a recent one isn’t available. “Typically, private lenders charge a fee of two per cent of the loan, but I’ve seen in some cases if the loan is under $50,000, the lender fees go up five per cent,” says broker Carmen Campagnaro, adding the general rule is the higher the LTV on a private mortgage, the higher the fee. Mortgage broker fees will generally be similar to the lender fee, and often times there are also additional charges for pulling out of a private mortgage early, although terms generally don’t exceed a year –something a broker should check with the lender. For legal fees, borrowers usually have to pay for both their own lawyer and the lender’s lawyer, which can add another couple of thousand dollars to the tab. While in some cases a lender can roll these fees into the mortgage, others might not be so accommodating, so be sure to check beforehand for your client. Also make sure to ask about the fees if you’re not sure about them – it’s a lender’s obligation to disclose all the costs associated with a mortgage before you take one out.

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Business Private lending

(see sidebar), shorter terms (usually between six and 18 months) and, in many cases, a shorter closing time. Putting together a private deal Many brokers who work in the area of private lending recommend co-brokering a few private deals before entering that niche of the market. This is because it can take time to build trust with private lenders and investors and understand the differences between private deals and institutional deals. It’s also important to note that all private lenders have different requirements, rates, fees and standards. Gilmour says he has three rules when putting together private deals. One, he never goes above 75 per cent LTV. Two, he doesn’t charge “ridiculous” fees (only up to five per cent of the loan). And three, he makes sure the client has an exit strategy. “You really don’t want the person to be in a situation they can’t get out of,” says Gilmour. “You want the private money flowing back and forth quickly.” To prevent power of sales or other tricky situations for the private lenders he works with, Gilmour says he treats these types of deals very similar to A deals, including asking clients for all the same documents – credit bureau, employment information, etc. – to find out the story behind why the client needs private money.

“ you really don’t want the person to be in a situation they can’t get out of. You want the private money flowing back and forth quickly ” If a client has no sign of credit history or a job, Gilmour says he is “hard-pressed” to touch their file. “Private lenders still want to know what the mortgage is for and the client’s ability to pay, so there is a lot of due diligence done to protect them,” says Gilmour. “My private lender sees the full package – it’s the same as something I would send to a bank. That way if

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the deal does fall apart, they’re not coming back to me with questions – they have a full package of disclosure upfront. Dougal Shewan, president of the private lender V.W.R. Capital Corp., agrees that even though private lenders are more lenient than institutional lenders when it comes to credit scores, repayment history and employment, his company does look at a client’s serviceability and the purpose of the loan because they don’t want clients who are in over their heads. “Sometimes people are just financing their house away and you don’t like to see that happen – and from a moral point of view, you want to say to the client they should be selling their house and getting their debts under control,” says Shewan, whose company lends in B.C. and Alberta, with plans to expand to Manitoba in the near future. Fortunately, he adds, most clients he sees have a reasonable purpose for borrowing private funds – in other words, not using the money to finance an out-of-reach lifestyle. And while most clients who need private financing understand the higher interest rates and fees involved, Shewan says brokers need to manage client expectations when someone is getting a private mortgage for the first time. “These clients need to realize that they’re not A borrowers and they’re not going to get A rates – that conversation needs to be had right upfront.” Private money uses Two categories of borrowers recently affected by new mortgage insurance rules are real estate investors and business-forself borrowers. The one new federal mortgage insurance rule real estate investors have become very familiar with is the requirement of a 20 per cent down payment for non-owner-occupied investment property purchases. “Not everyone can come up with a 20 per cent down payment, so one of the options is private money,” says Carmen Capagnaro, an Oakville, Ont.-based mortgage broker with RMAI. “Anyone who is buying in that smaller category has the ability to get up to 90 per cent financing with private funds as opposed to 80 per cent with a traditional lender.”

Top: Chuch McKitrick Bottom: Omid Jalili

Business

Private lending

an overview of four private lenders in Canada FISGARD CAPITAL CORPORATION Interest rates: Rates start at 5.99 per cent Maximum LTV: 75 per cent Terms: Two-year maximum Minimum loan amount: No minimum Maximum loan amount: $5,000,000 (note: depends on the deal presented and borrower’s history with Fisgard) Provinces served: B.C., Alberta, Saskatchewan, Manitoba Market focus: Single-family residential properties, owner-occupied or investment properties including multi-family and apartment buildings , singlefamily construction and income-producing commercial properties Fees: One to three per cent of the loan value ALTA WEST MORTGAGE Interest rates: Seven to 18 per cent Maximum LTV: 85 per cent Terms: One year, interest-only payments or 25-year amortizations Minimum loan amount: $10,000 Maximum loan amount: $2,500,000 Provinces served: Alberta and B.C. Market focus: Owner-occupied, single-family residential and investment properties Fees: Three per cent to six per cent of the loan value, depending on risk factors and loan size THE MONEY SOURCE Interest rates: 12 to 16 per cent Maximum LTV: 85 per cent Terms: One and two year, blended or interest-only payments Minimum loan amount: $10,000 Maximum loan amount: $250,000 Provinces served: Ontario (the GTA) Market preference: Owner-occupied residential properties and rentals Fees: Two to five per cent of the loan value CAPITAL DIRECT LENDING Interest rates: 5.50 to 20 per cent (first, second and third mortgages) Maximum LTV: 80 per cent Terms: One year (can be longer with rate increase) Minimum loan amount: $10,000 Maximum loan amount: $1,500,000 Provinces served: B.C., Alberta, Ontario, Nova Scotia, New Brunswick, P.E.I. Market focus: All residential Fees: 2.5 per cent and up

“ our primary criteria is the condition the property is in, where it’s located and how easy it is to sell if the borrower gets into trouble. If that fits, we look at the character of the client, their ability to repay, and the purpose of funds ” Aside from help with down payments, real estate investors turn to private lenders for a variety of other reasons. A common scenario McKitrick sees is an investor who does “fix and flips” and only needs money for a short period of time before re-selling a property. Another instance is when the investor wants to buy a distressed property – a foreclosure, for example – and fix it up. Because banks often won’t touch these types of properties, an investor can buy with private funds and once the property is fixed and producing a cash flow, they can access cheaper funds from an institutional lender. “For the investor, we’re often seen as that short-term solution – we’re a stop-gap,” McKitrick says. Property investors might also find themselves in a situation where their investment property is not bringing in the current market value of rent and may need time to renegotiate leases or complete renovations that will allow them to charge tenants higher rents. In this case, they could take out a second mortgage with a private lender and once the issue is solved, they could find more conventional financing elsewhere. Another category of borrower that private lenders can help are business-for-self clients, particularly after the CMHC implemented new rules that make it harder for these borrowers to get a mortgage. Sherwen says he sees a lot of private mortgage applications from self-

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Business Private lending

employed borrowers, particularly if they need a higher ratio mortgage than the bank will provide. Private lenders can also do “top ups” if, for example, a bank gives a borrower a 65 per cent LTV mortgage and they need another 20 per cent to purchase a property. Whatever case your client presents to you – be it a BFS client who needs a first mortgage or a more complex commercial deal that needs a patchwork of financing – knowing that private money is an option is helpful and a stronger market means more of these funds are available if a broker takes the time to find them. And understanding a private loan’s purpose as a short-term solution can make the extra costs easier to swallow for a client – especially if it means they can acquire a great property that might have been out of reach without the help of a non-institutional lender’s funds.

“ typically, private lenders charge a fee of two per cent of the loan, but I’ve seen in some cases if the loan is under $50,000, the lender fees go up five per cent ” The cost of private lending Although private mortgages can help borrowers get out of sticky situations or find financing for unique projects, there are additional costs to consider. First up is the higher interest rate, which can range from a couple of percentage points above a bank loan to upwards of 20 per cent. Lenders weigh the interest rate based on the loan to value needed, the property location and the overall risk factor of the loan. Other costs borrowers have to be aware of with a private mortgage are lender fees, mortgage broker fees, legal fees and an appraisal if a recent one isn’t available. “Typically, private lenders charge a fee of two per cent of the loan, but I’ve seen in some cases if the loan is under $50,000, the lender fees go up five per cent,” says broker Carmen Campagnaro, adding the general

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Business

Private lending

rule is the higher the LTV on a private mortgage, the higher the fee. Mortgage broker fees will generally be similar to the lender fee, and often times there are also additional charges for pulling out of a private mortgage early, although terms generally don’t exceed a year –something a broker should check with the lender. For legal fees, borrowers usually have to pay for both their own lawyer and the lender’s lawyer, which can add another couple of thousand dollars to the tab. While in some cases a lender can roll these fees into the mortgage, others might not be so accommodating, so be sure to check beforehand for your client. Also make sure to ask about the fees if you’re not sure about them – it’s a lender’s obligation to disclose all the costs associated with a mortgage before you take one out. CMP

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Brokers

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Profile Brokers

industry advocate After 15 years as a mortgage broker, CMA lifetime achievement winner Garth Ellis still has lots of business ideas and a passion to elevate the status of the industry. Erin Letson talks to him about his path to success

arth Ellis says the biggest risk he ever took was becoming a mortgage broker 15 years ago. He was 25 at the time, fresh out of university and enrolled in a securities course when he bumped into an old school friend who had started a mortgage business six months earlier. Knowing someone in the industry made him change his mind about becoming a stockbroker, but what he didn’t realize then was how foreign the concept of using a mortgage broker was. “It was a totally new word in the vocabulary of Canadian finance,” says Ellis, who lives and works in Vancouver. “So becoming a mortgage broker in the first place was a very blind decision. A lot of people thought I was crazy.” It turns out his risk-taking wasn’t so crazy. Despite the many challenges Ellis faced as a mortgage broker in the mid-90s, he remained patient and confident in his career choice and now he’s one of the most respected brokers in the industry, often sought after for advice and speaking engagements. He has also served as MBABC’s director twice (in 2005 and 2007) and won the Mortgage Broker of the Year award at CMP’s first Canadian Mortgage Awards in 2007. And even though he is far from the end of his career, his industry contributions led him to receive the lifetime achievement award at the 2010 Canadian Mortgage Awards. “Just because it’s a lifetime achievement award doesn’t mean the person has to be retired or out of the industry – it’s for someone who sets the bar high for the brokerage community and who keeps promoting it,” says Sebastien Kuperhause, national sales manager at National Bank, who presented Ellis with his award. “In terms of integrity and how to conduct yourself as a broker, Garth is a great example.” Learning by doing Ellis spent the first several months of his career working with the friend who introduced him to the

mortgage industry before branching out on his own. But the clients didn’t come rolling in – not even close – so the first order of business was finding anyone who could refer leads and help him learn the ropes. “There really wasn’t any structure in the form of education back then, so you just learned by doing,” says Ellis “It was like being a 19-year-old pitcher in the World Series – they’re out there and they’re so young and naive and they don’t know any differently than to just go out and perform.” To learn about the business of mortgages, Ellis spent most of his early days contacting Realtors in the area and attending open houses, especially during slower times and on weekends. While he lost money during his first two years in business, he started to see a foundation of clients and referrals forming at the end of the second year. He also wore a suit to work every day even when he wasn’t making money. Throughout those early days, Ellis says the biggest challenge was changing the mindset of a bank-focused public. “When I started, statistics showed only four per cent of people used a mortgage broker and a lot of that was subprime or B business,” he says. “People thought brokers were a scam, and since you didn’t have the good word-of-mouth from the public, brokers themselves had to spread the word and build a good reputation.” As he progressed, Ellis began to see the value of client referrals over referrals from outside sources. He also concluded the role of a mortgage broker is three jobs rolled into one – an outside salesperson who gets business in the door, an inside salesperson who focuses on customer service and selling the product, and an underwriter knows bank policies and how to package an application. It was this division of labour – or “specialists rather than generalists” approach – that Ellis has built his business on and he now has employees working in three different departments, each with one of those three responsibilities.

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Quick Q&A with Garth Ellis

In the 15 years he has been in business – on his own, with Invis and then with Verico starting in 2005 – Ellis says his company has serviced more than 12,000 mortgages and he still counts efficiency as his top priority in working with both borrowers and lenders. “Garth really has mastered the art of client retention and referrals,” says Jessi Johnson, a Verico broker who counts Ellis as one of his mentors. “He has set up an advanced structure of business that really focuses on getting the customer the best service.”

“No. 1 would be to listen to those who have experience in the industry and capture that knowledge; two would be to develop a real passion for mortgages and understand the responsibility + Toughest challenge? that comes with doing this job; and three would be Having to learn by doing to always focus on goals – if you can’t measure how – there weren’t a lot of you’ve done in a day, then that’s a waste of a day,” people with mortgage he says. broker experience or And although he is considered by many to be a education to look to, so mentor, Ellis says he still turns to some of his that was difficult and mentors today, including Colin Dreyer, president that’s why it took me so and CEO of Verico. long to get going. “The great strength of the industry right + Unfulfilled ambition? I Mentoring and giving back now is the intellectual capital and experience of still want to see where Because he didn’t have a lot of experienced brokers people who have been around for awhile,” says the industry can go and to turn to for advice when he was starting out, Ellis Ellis. “It’s a constant legitimization of the industry how much broker was happy to see the formation of industry groups – we have a lot of leadership and brainpower that marketshare can and joined both MBABC and CAAMP at their we didn’t have when I first started and that grows increase. inception. He also gradually stepped into the role of every year.” + Biggest risk you ever a mentor and industry expert, speaking at industry took? Most of the events and taking on the task of drafting and Looking forward (and back) decisions in the latter teaching MBABC’s two-day Applied Information The biggest changes Ellis has seen during his years part of my career have Course (AIC) for new brokers – a job he just retired in the business is both growth in broker share of been calculated risks and from this year (“my techniques are a bit dated,” he the market – around 34 per cent according to I could base those says with a laugh). CAAMP – and an increase in broker compensation. decisions on my It was at the one of the MBABC courses that The average mortgage in Vancouver has also experience. That said, Jessi Johnson first met Ellis when he was looking increased from $100,000 to almost $400,000. the biggest risk was to for more information on becoming a mortgage “In my first couple of years in the industry, I’d become a mortgage broker. He said watching Ellis speak about the make more in a night’s tips working at a broker in the first place. business and dole out advice helped him make the restaurant than I would from a return on a + If you weren’t a broker, leap to self-employment, and he still calls him for mortgage, because you’d only get paid 50 or so what would you be advice on his growing business. basis points,” he says. “The increase in income has doing? I’d probably be “What blew me away the first time I called him helped me grow my business, hire staff and help a stockbroker. was the fact that he is such a busy guy and he more people – that’s been the really exciting part.” + Hobbies? Spending time went out of his way to sit down and walk me Looking ahead, Ellis thinks the mortgage with family and friends, through some issues I was having,” says Johnson, industry is going in the right direction, especially watching sports, playing who is now involved with MBABC’s education with more lenders focusing on efficiency. He also basketball (even though efforts. “Now when people in the industry call me says he sees a new generation of brokers who are the opportunity to dunk for advice, I always call them back and that has a “very committed to their practices” continuing to gets harder and harder lot to do with Garth’s influence.” build a good name for the industry. each year). Rob Regan-Pollock, a senior mortgage “The future is very bright,” he says. + What words would you consultant at Invis, also drew on advice from Ellis As far as his career goes, Ellis says he now use to describe when he was working on growing his business in spends most of his time managing and yourself? Very happy the late ’90s. The two met in 1995 and started their brainstorming ideas about his business than but not content – I want companies at around the same time. working directly on client files, something that has to continue to move “Garth seemed to be more in the know allowed him to contribute back to the industry. It forward to see what about systems and he was always willing to also means he has more time to spend with his uncharted territory we share his insights,” says Pollock. “I remember wife and two children, who he calls his “favourite can achieve within Garth once saying to me, ‘hey RRP, you look tired people to spend time with.” our business. buddy – why don’t you stop revving out in first And although Ellis received the lifetime gear and get an assistant and switch to second achievement award at the 2010 Canadian gear?’ So I asked questions and soon started to Mortgage Awards, it’s clear that his time in the acquire assistants. Since then we’ve grown industry – the industry he entered on a whim 15 steadily and we’re one of the top teams with Invis years ago – is far from over. in the country.” “It’s interesting to think that this might be my Ellis’ advice for new brokers has stayed first and only career,” he muses. “I have no constant throughout the years and he says it’s ambition to go into anything else, so I could be here based on simple business principles. another 20 or 30 years longer.” CMP

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PROVIDER

CMP talks to Concentra Associate vice-president Jane Kulbida about the company and its unique place within the mortgage industry

Innovation and leading-edge technology

at core of customer service C

oncentra Financial has a long history of innovation and using leading-edge technology to provide better services to its broker clients - from being the first lender to pilot emili for CHMC to being the first lender on Filogix Express, end to end. Who they are Concentra Financial (formerly Co-operative Trust) was created to serve credit unions. It is a credit union company and viewed as an integral part of the Canadian co-operative financial system. “Concentra is Canada’s first federally regulated retail association, which gives us the power of a bank but with the heart and soul of a co-operative.” Kulbida said. Advantages of working with them In late 2009, in response to hearing from their underwriters that they would like to work faster, but were fielding too many calls, Concentra transferred Trudy Hovdestad into a newly created position of business development co-ordinator. This position is unique as it’s a hybrid of underwriting and relationship management capabilities. “The importance of this position is that Trudy has an underwriting background so she’s able to take the calls from the mortgage brokers or agents. It’s considered a support position, therefore giving back that time to the underwriters,” Kulbida said. “We want brokers and agents to recognize who Trudy is and have her as the first point of contact.” Concentra also offers training programs with Hovdestad via the Internet, which allows them to reach agents nationwide. These webinars have been proved to be mutually successful.

Concentra is one of the first lenders to use Filogix Exchange, a web-based document system, which allows the company to get closer to a paperless office while increasing productivity and maintaining privacy and security. “All our brokers using Filogix Expert are able to access the Exchange fax cover sheet, which allows them to fax documents directly into the Exchange, at the same time providing notification of their receipt directly to the administrator handling the file.” Kulbida explained. Services they provide Along with the usual financial services, Concentra offers mortgage financing with insured mortgages as well as the conventional “A” and “B” lending. “Our “B” lending program, the Vision program, gives access to mortgage clients who are experiencing difficulty. “Kulbida said. “Qualification includes a minimum beacon score of 540, TDS ratio of up to 45 per cent, verifiable income and a 120 day rate guarantee.” Who they serve Concentra Financial provides services to credit unions and consumers, referred to them in areas such as Mortgage and Deposit Services, Personal and Corporate Trust and Commercial and Corporate Solutions. They lend nationally, with the exception of Quebec. Recognition Concentra Financial has been one of Canada’s 50 Best Managed Companies for seven consecutive years, this year being designated with Platinum status. They also received the CAAMP Partner in Excellence Award in 2009 for their support and contributions. CMP

Jane Kulbida

Quick Stats + Company Name: Concentra Financial + Number of Broker Partners: 461 Firms + Number of Employees: 345 + Market Focus: Canada + Client Focus: Credit Unions, co-operatives, strategic Partners and Corporations + Corporate Assets: $3.8 billion

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Guest Column

Bridging the Knowledge Gap between brokers and lenders Brokers and lenders often straddle both sides of the same coin, each side trying to balance the needs of customers with maintaining financial viability. George Hugh takes a look at the relationship between the two and how it can be better

n my role in both treasury and broker sales at ING Direct, I’ve had the opportunity to see the challenges facing the broker/lender relationship. When I first took over the Broker Sales Team, I heard that brokers were overpaid. On the flip side, I heard that lenders provided bad service, were too tight with credit and didn’t make all their products available to brokers. My experience was the opposite. I found top quality brokers who have redefined customer service. They are innovative and bring the level of entrepreneurship up a level, which is difficult to compete with. As for lenders, I have met very intelligent individuals who know the ins and outs of the financial markets. So if this is the case, why do we have these issues between the two? Well, very simply, we have a knowledge gap. What I mean by that, is that in order for brokers and lenders to ever be able to work together as a team, we really need to understand each other and to understand each other’s unique challenges. We also need to work on becoming strategic partners, not just partners – they’re a dime a dozen – but true partners in the sense that we share clients and cross-sell our products, with both parties getting the proper compensation. Let’s look at the facts. Profitability is the key to the long-term success of our industry. With a better understanding of each other’s needs, all industry participants will be in a better position to make decisions that will allow our industry to gain more credibility and marketability as a viable source of mortgage originations. In a profitability model, cash is king. So there are three questions we need to ask. Who has the cash? Who bears the risk? Who owns the client? Clearly, the lenders have the cash, which the broker needs for their clients. And clearly, the lenders bear the risk. What’s not clear is who owns the client. At the time of renewal, who will the client call? If a broker is doing his or her job properly, then he or she is the one who will be getting the call. Better yet, the broker will already be in contact with his or her clients long before renewal time.

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But we (lenders) will also contact the client approximately 90 days prior to renewal. In a strategic partnership, if the broker is still in the business and we renew the client, then the broker should also be compensated. Similarly, if a broker cross-sells one of our products, he or she should be compensated as well. George Hugh Lenders answer to shareholders and again, profitability is the key. So we also have to look at efficiencies. The current model is no longer working efficiently. If a broker brings in 10 deals and only five get funded, then we’ve lost money because we still have to use underwriters for all the deals. If this continues to happen, then profits start to erode and shareholders start to make noise. Then what? Will we have to alter funding ratios? Or reduce a broker’s compensation? On the other hand, we need to have brokers to help us grow our mortgage business but there are a lot more brokers in the market today, which is posing some unexpected challenges for us. These are issues that brokers and lenders need to address so that we can start to create the relationships that we want before they are created for us. The continued future success of the channel requires efficient participation from both lenders and brokers. With strategic partnerships, lenders will continue to pay brokers top dollar for value received, which can no longer be limited to volume only. If we can find a venue where we can discuss and better understand these issues, I believe we can further enhance the channel as a viable source of mortgage origination.

George Hugh is the Vice-President of Broker Services and Treasury for ING Direct. CMP

service directory

Banks

Bridgewater Bank www.bridgewaterbank.ca Ph: 1 888 837 2326 Page 19

First National www.firstnational.ca Ph: 1 888 488 0794 Page 29

HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 57

Fisgard Capital Corporation www.fisgardmortgage.com Ph: 1 866 382 9255 Page 17

ING Direct www.ingdirectbrokerteam.ca Ph: 1-800-574-5629 Page 39

The Money Source www.mymoneysource.ca Ph: 416 699 2274 Page 50

Vector Financial Services www.vectorfinancialservices.com Ph: 1 866 483 8018 Page 72

VWR Capital www.vwrcapital.com Ph:1 866 907 5407 Page 68

Home Loans Canada www.hlcmortgages.ca Ph: 1 866 452 1821 Inside Front Cover

Insurance

National Bank www.nbc.ca Ph: 1 888 483 5628 Page 43

Scotia Mortgage Authority www.scotiamortgageauthority.com Page 23

Canada Guaranty Mortgage Insurance Company www.canadaguaranty.ca Ph: 1 866 414 9109 Page 33 & Cover Wrap

Home Trust www.hometrust.ca Ph: 1 877 903 2133 Page 9

Macquarie Financial www.macquariefinancial.com Ph: 1 877 462 3788 Page 47

Genworth Financial Canada www.genworth.ca Ph: 1 800 511 8888 Outside Back Cover

Non-Bank Lenders

Capital Direct www.capitaldirect.ca Ph: (780) 868-0550 Page 53

Equitable Trust Company www.equitabletrust.com Ph: 1 866 407 0004 Page 65

Merix Financial www.merixfinancial.com Ph: 1 877 637 4911 Page 15

LMS Prolink www.lms.ca Ph: 1 800 595 1649 Page 64

Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 25

Mortgage Protection Plan www.mppbroker.com Ph: 1 866 677 4677 Page 6

Broker Networks

Firm Capital www.FirmCapital.com Ph: 416 635 0221 Page 2

FirstLine Mortgages www.firstline.com Ph: 1 800 387 2020 ext. 6044 Inside Back Cover

Resmor Trust Company www.resmor.com Ph: 866 809 5800 Page 59

Street Capital www.streetcapital.ca Ph: 877 416 7873 Page 5

Bayfield Mortgage Professionals www.bayfieldonline.com Ph: 1 888 918 3388 Page 60

Centum Financial Group Inc. www.centum.ca Ph: 1 604 257 3940 Page 11

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service directory Tax-Deductible Mortgages

Dominion Lending Centres www.DominionLending.ca Ph: 1 888 806 8080 Page 34-35

The Mortgage Group www.mortgagegrp.com Ph: 877 899 1024 Page 21

TDMP.com www.tdmp.com Ph: 1 866 500 8886 Pages 66-67

Real Estate

Home n Work Mortgages www.homenwork.com Ph: 1 866 658 0492 x 100 Page 49 & Classified

Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 40

Trytek Mortgage Partners (Family Lending) www.familylending.ca Ph: 866 941 6678 Page 63

Real Estate and Mortgage Institute of Canada www.remic.ca Ph: 1 877 44 REMIC Page 31

VERICO www.verico.ca Ph: 1 866 983 7426 Pages 13 & 41

INVIS www.invis.ca Ph: 1 866 854 6847 Page 61

Services

Mortgage Intelligence www.mortgageintelligence.ca Ph: 1 877 667 5483 Page 55

Verico The Mortgage Practice Inc careers@vtmp.ca Ph: 905 458 4222 Page 12

Best Points Travel www.bestpointstravel.com Ph: 1 800 551 8786 Page 54

Nexus Investment Corp www.nexusinvestment.ca Ph: 1 604 664 7079 Page 56

Eprintagent.com info@eprintAgent.com Ph: 1 888 907 5550 Page 45

Commercial Lenders

OMJ Mortgage Capital Inc. www.omj.ca Ph: 905 482 9393 Page 73

ROMSPEN investment corporation www.romspen.com Ph: 1 800 494 0389 Page 1

RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 69

Technology/Software

Applied Business Software www.themortgageoffice.com Ph: 1 800 833 3343 Page 20

The Mortgage Centre Canada www.mortgagecentre.com Ph: 1 800 423 0107 Page 3

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