CMP 7.7 by Key Media

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July 2012 / issue 7.7 / $6.95

2012

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2012 Broker Sentiment Poll has brokers talking. Hear more. page 24

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contents / issue 7.7 NEWS & VIEWS

FEATURES

6| Roundup The latest market news from the world of property, economics and mortgages

38 | Search Engine Optimization The term is as enigmatic as the Mona Lisa’s smile, but brokers looking to land leads online have got 1.2 million reasons to solve that mystery

14 | Product News The latest market news from the world of property, economics and mortgages

MARKETING 48 | Employee mortgage benefits program: In his latest series, Doren Aldana explains how to attract a steady stream of closed deals that requires the least amount of time, energy and money

16 | Viewpoint What MortgageBrokerNews.ca visitors are saying about the need for better training of new mortgage agents 18 | Analysis A new industry report shows homeowners are focusing on paying down their mortgage debt faster while taking advantage of low interest rates for refinancing

14 14

20 | Big Story A compilation of the top quotes from our weekly multimedia broadcasts 22 | This Time Last Year Taking a new look at what made headlines this time last year

issue

7.7

Cover Story

24 | 2012 CMP Broker Sentiment Poll CMP presents our fourth cross-Canada broker sentiment poll to gauge what’s on brokers’ minds. Some of the results may surprise, while others simply confirm what brokers already know

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contents / issue 7.7

52 | Stats This month’s roundup looks at the most recent data on residential new listings and resale activity

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54 | Broker In an ever-increasingly complex industry, broker Nera Emmanuel has built her business upon simple things such as returning phone calls and staying in touch with clients

62 | Guest There are five things A-brokers need to get straight before heading into the private lending side

56 | Provider Street Capital President Paul Grewal discusses the new Options Program

64 | CMP Service Directory

regulars 60 | Favourite Things

58 | Insight If money matters, says Troy Tisserand of 4 Pillars, budgeting, debt management and financial literacy matters even more

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contents / Editor’s letter

you said it, broker We heard you loud and clear, brokers: “It’s the economy, Stupid.” OK, CMP added the “stupid” for effect, but that extra word is in keeping with the message mortgage brokers, from one end of the country to the next, offer in this year’s Broker Sentiment Poll. To be precise, more than 500 of you sat down and answered each and every one of the questions designed to expose concerns about the business and the direction brokers, the government and, indeed, consumers are taking it. Aside from worries about the economy, the poll highlights the regulatory changes now in the works. If all goes to plan – the government’s plan – brokers will have fewer deals to close and more competition for those that remain. It all creates uncertainty and that’s reflected in the poll results. The hope is our research will add weight to the industry’s ongoing efforts to chart a new course for itself and its clients. That journey begins on page 24. But on your way there, don’t forget to read the latest industry news that CMP has sifted through and digested in order to better arm you for the battle ahead. More and more, the rate wars are being fought on the Internet and this issue offers an in-depth look at what it takes to win on that staging ground. Patrick Herman, with www.searchenginepeople.com, provides a very down-to-earth look at search engine optimization (P. 38) as the tool to help brokers up their profile as well as their online lead generation. This month, marketing guru Doren Aldana, honoured at this year’s Canadian Mortgage Awards, will also provide a tutorial on going after and winning Employee Mortgage Benefit programs. It’s a way of maximizing your output while minimizing time and energy commitments (P. 48). And speaking of output, now would be a good time to mention what’s coming up next issue. The CMP TOP 75 represents an expansion of the TOP 50. It’s also a better way of acknowledging the success of mortgage professionals in 2011, despite all the doom and gloom projections of a housing correction. This year, leading brokers in markets where home prices are below the national average will also be honoured with a ranking of The TOP 20 Small Market Brokers. So, as always, please contact us with any news related to the broker and mortgage industry or just to share your opinions on how we’re doing. It is exciting times for our industry and we look forward to helping you and your business navigate them. Cheers.

CMP connect

Contact the editor: vernon.jones@kmimedia.ca

4 | mortgagebrokernews.ca

COPY & FEATURES Editor John Tenpenny Associate Editor Vernon Clement Jones SUB-EDITOR Rachel Naud staff writer Caitlin Nobes contributors Doren Aldana Wayne Robinson Patrick Herman

ART & PRODUCTION

gRAPHIC dESIGNER

Alicia Chin

SALES & MARKETING

NATIONAL SALES MANAGER Trevor Biggs Marketing and Communications Julia Comitale PROJECT COORDINATOR Jessica Duce

CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker Events and Conference Manager Chris Davis

Editorial enquiries vernon.jones@kmimedia.ca Advertising enquiries trevor.biggs@kmimedia.ca Subscriptions tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca KMI Publishing 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 mortgagebrokernews.ca Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as CMP magazine can accept no responsibility for loss.

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News / RoundUP INDUSTRY FORECAST

Mortgage approvals to grow

A recent report is predicting conventional mortgage approvals to grow by 4.8 per cent in 2012 with total mortgage approvals rising 1.8 per cent, though that is down from earlier predictions. In its 2012 Spring Metropolitan Housing Outlook, The Conference Board of Canada in partnership with Genworth Canada, downgraded its forecast for total mortgage approvals “due to a bigger decline in high-ratio mortgages (–1.8 per cent this time compared with –0.7 per cent last time).” Its forecast for conventional mortgages is an increase of 0.4 percentage points over the previous forecast. The report also forecast 2.5 per cent growth in new home prices in 2012 and 2.4 in 2013. In the resale market, price growth this year is now expected to be weaker in 2012, but stronger in 2013. “A softening market will result in resale price growth slipping to just 0.9 per cent in 2012, down from our expectation of two per cent growth in the last Metropolitan Housing Outlook,” said the report. “Next year, resale price growth should reach 3.2 per cent, a modest increase from the 3.0 per cent growth forecast previously.”

regulations

OSFI nixes re-qualifying guideline The federal regulator issued a letter in early June clarifying its position on requalifying borrowers at renewal – effectively maintaining the status quo and confirming CAAMP’s understanding. “The following provides a brief description of OSFI’s decisions on key issues, which will be reflected in the final Guideline,” writes the regulator in the letter sent to federally regulated financial institutions. “Re-qualification at

renewal – current practice regarding residential mortgage renewals has served FRFIs well. OSFI agrees, for example, that having a good payment record is one of the best indicators of credit worthiness. OSFI, therefore, expects that FRFIs themselves will remain responsible for deciding what level of review to place on borrowers’ qualifications at the time of renewal.” The letter confirms the message coming from CAAMP CEO Jim Murphy, the association leader, telling MortgageBrokerNews.ca earlier that OSFI was prepared to hold its fire

6 | mortgagebrokernews.ca

on the most contentious component of its draft guidelines for mortgage underwriting. At the same time, the message confirms that the regulator will uphold its guideline reducing the maximum loan-to-value ratio for HELOCs to 65 per cent. Still, brokers appeared most concerned about the possibility of lenders having to re-qualify clients at each and every renewal. The OSFI decision may leave some room for lenders to do just that, however. “FRFI renewal practices should be articulated in internal policies governing their

underwriting of residential mortgage loans,” writes OSFI. “FRFIs, however, will be expected to refresh the borrowers’ credit metrics periodically (not necessarily at renewal) so that FRFIs can effectively evaluate their credit risk.”

stats

211,400

–

seasonally adjusted annualized rate of housing starts for May, compared with 243,800 units in April

Source: CMHC

News / RoundUP non-banks

LEGAL ISSUES

Broker channel consolidation underway

National Bank aims to grow road rep ‘contribution’

Broker channel consolidation is again in play, with B2B Trust announcing it has signed an agreement to acquire Verico lending partner AGF Trust for a cash amount equivalent to its $242-million book. The subsidiary of Laurentian Bank should close on the deal in August, if it wins the necessary regulatory signoffs. At the same time, the move is expected to grow B2B’s influence in the broker channel, marrying its own growing success around HELOCs and fixed-rate re-advanceables with the inroads AGF has made with Verico brokers across the country. While AGF Trust currently provides GICs, term deposits and investment loans through some 20,500 financial advisers, it has also focused on growing its mortgage book, using 1,050 mortgage brokers to originate the business. Analysts are already calling the move a strategic one set to help the Quebec-centred Laurentian – the third largest lender in that province – gain a stronger foothold in the rest of the country. That growth will come directly through its B2B Trust, already gaining traction among brokers, particularly in Ontario.

We’re going to look at hopefully increasing the branch and mobile sales force contribution in Ontario and (although) we’re not pulling out of the mortgage brokers market, on a relative basis we’d like to reduce it a little bit

according to bank officials. Still, despite those cross-selling opportunities, profit margins attached to broker sales have hemmed in profit, suggested bank execs during the conference call. The lender is now looking to transfer a greater share of originations outside its home province of Quebec to its proprietary branch network and mobile mortgage specialist teams. That formula would better mirror the model used with La Belle Province, suggested Vachon, quick to reaffirm the bank’s commitment to the continued use of brokers.

force contribution in Ontario and (although) we’re not pulling out of the mortgage brokers market, on a relative basis we’d like to reduce it a little bit.” The comments came with the release of second quarter results pointing to a 13 per cent rise in the funded volume of residential mortgages, compared to the year-ago period. Brokers, outside of Quebec, have contributed a disproportionately large share of that business to the bank, at the same time National has focused on cross-selling to those broker clients,

Brokers may represent too much of a good thing for National Bank, its president suggesting the lender will ease up on their use as it focuses on growing originations through, ahem, road reps and branches. “In Ontario, we’ve seen good volume growth,” President and CEO Louis Vachon told analysts during a conference call in early June. “A lot of that is coming – 40, 45 per cent – from brokers. “Clearly, for the next few quarters we are going to look at net margins in that business … and we’re going to look at hopefully increasing the branch and mobile sales

Canadian Debt Picture by Province, by household BC ON

$157,784

$109,279

$144,178

$85,903

MB/SK

ATL

$116,019

$92,231

Source: Leger Marketing/BMO

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News / RoundUP housing

Suburbs drive Toronto housing market growth

Toronto’s housing market continues to surge with sales, listings and prices all above last year’s totals, with a large share of that growth coming from the ‘905’ region, according the city’s real estate association.

home improvement

Renovation slowdown to hit brokers

There’s yet more indication that brokers should brace for further slowdown in refis, with a new CMHC report identifying a weakening renovation sector across much of the country. “Almost $21 billion was spent on renovations in 2011 across the 10 major centres surveyed, a decrease from 22.8 billion in 2010,” said Mathieu Laberge, the

CMHC’s deputy chief economist. “As well, when Canadian homeowners were asked about their renovation plans for this year, 38 per cent indicated that they intend to spend $1,000 or more by the end of 2012.” The pace of renovation is considerably slower than in 2010 when 42 per cent of respondents, drawn from 10 major centres, indicated that they had or would make a similar investment in their homes.

The Toronto Real Estate Board reported 10,850 transactions in May 2012 – an 11 per cent increase over May 2011. Sales growth was strongest in the ‘905’ regions surrounding the City of Toronto, due in part to Toronto’s land transfer tax, said TREB’s President Richard Silver. “While lower average prices are certainly one factor that has contributed to this trend, recent polling also suggests that the City of Toronto’s land transfer tax has also prompted many households to look outside of the City for their ownership housing needs,” he said. New listings were up substantially on a yearover-year basis in May – rising by more than 20 per cent. The average price for May 2012 sales was $516,787, representing an annual increase of 6.5 per cent compared to $485,362 in May 2011. Price growth continued to be driven by the low-rise market segment.

stats

3.9 -

predicted dip in the annual average home in B.C. price to $539,400 this year. Source: BCREA

OverOver 600 Million 600 Million LentLent sincesince 19971997

80% 80%

5.75% 5.75%

6.75% 6.75%

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News / RoundUP mortgage industry

Rental apartment vacancy rates

Broker channel clinches four spots on 2012 Profit 200

Broker Channel companies are all over the Profit 200 – with four of the industry’s high-flyers winging their way to the top half of the list honouring Canada’s fastest growing companies. Boutique brokerage True North Mortgage climbed the highest, with its 1,674 per cent growth earning the company No. 23 on the list of 200. Dominion Lending Centres and Pacific Mortgage Group – parent company of Mortgage Architects and Radius – claimed spots 32 and 33, respectively, reporting growth of 1,236 per cent and 1,161 per cent. Lender outsourcing firm Paradigm Quest earned the 96 spot on the annual listing, which ranks companies by their five-year revenue growth. Revenue and net income are verified through financial statements and growth rates calculated using base-year revenue of at least $200,000. The performance is a boost to all four players, but also for the industry they serve.

Lowest Regina 0.6% Québec and Saguenay 0.7% Guelph 1% (Province) Manitoba 1.2%

Highest Saint John 8.4% Windsor 7.7 % Kelowna 5.2% Moncton and Charlottetown 5.0 % (Province) New Brunswick 6.2%

Average monthly rent (two-bedroom) Highest Vancouver $1,210 Toronto $1,164 Calgary $1,113 Ottawa – Gatineau $1,104 Victoria $1,046 (Province) Alberta $1,055

Lowest Trois-Rivières $543 Saguenay $553 Sherbrooke $581 (Province) Quebec $677 (Source: CMHC Rental Market Survey)

stats

10,850

- number of home sales in the Toronto area in May, an 11 per cent increase over a year ago Source: TREB

12 | mortgagebrokernews.ca

Boutique brokerage True North Mortgage climbed the highest, with its 1,674 per cent growth earning the company No. 23 on the list of 200

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News / Product Round-UP

PRODUCT

NEWS A bite-sized guide to the newest products as they come out of the box Who: Community Savings Credit Union What: Collateral-charge mortgage The facts: •

•

• • •

Accelerated payment options allow for an extra 30 per cent of the original mortgage amount annually, payable in multiple amounts at any time of the year, as well as up to double the monthly payment Mortgage typically registered for 1.5 times the value of the property allowing for readvanceability Broker clients have the option of attending a branch for a face-to-face closing or we will simply contact the primary applicant by telephone and then instruct the legal firm directly, allowing the signing of all documentation at the legal firm 120-day rate holds Competitive product, pricing and finder’s fee Knowledgeable staff, exceptional service and a make-sense approach to lending makes CSCU a good option for broker clients

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What they say: “Experienced staff, exceptional service, competitive rates and finder’s fees, as well as a make-sense approach to lending makes Community Savings Credit Union a great option for broker clients.” – Debbie Kirby, Manager, Mortgage Broker Division, Community Savings Credit Union

Who: Teranet-National Bank What: Canadian House Price Index The facts: National Bank and Teranet are pleased to announce that the Teranet – National Bank House Price Index will now provide a more timely indication of the housing market. The index will be published a full month sooner, no later than 30 days after the transaction month. The Teranet – National Bank House Price Index is an independent representation of the rate of change of Canadian single-family home prices. The measurements are based on the property records of public land registries, where sale price is available. The monthly indices cover 11 Canadian metropolitan areas: Calgary, Edmonton, Halifax, Hamilton, Montreal, Ottawa-Gatineau, Québec, Toronto, Vancouver, Victoria and Winnipeg. The Index

is based on the “repeat sales methodology,” which is widely accepted as the most reliable and robust approach for tracking the housing market. In fact, this same methodology is used for the house price benchmark index in the United States. To be included in the calculation, properties must have been sold at least twice. The two prices are used to measure the increase or decrease in property value in the period between the two transactions.

What they say: “With the recent expansion into 11 cities and our focus on continuous improvement, the Teranet – National Bank House Price Index continues to strengthen its market acceptance as a reliable and trustworthy source of Canadian housing market performance for financial professionals. This will further strengthen HPI’s position to become the most accepted measure when evaluating the rate of change in Canadian house prices.” – Eduardo Alzamora, Director, Financial Services, Teranet

LAUNCHING A NEW PRODUCT?

Launching a new product? Want it to be considered for inclusion on this page? Send the details to the editor: vernon.jones@kmimedia.ca

News

News / comment InternatIonaL

u.s.

90.6% 52.1%

Viewpoint

inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing. U.S. housing market worse than thought More than two years after the recession The number of Americans who bought previously officially ended, many people can’t qualify for occupied homes rose in October. But the National loans or meet higher down payment Association of Realtors says it overstated more than requirements. Even those with excellent credit three million sales during and after the Great Recession, and stable jobs are holding off because they fear showing the housing market was weaker than Percentage of that home prices will keep falling. Sales are also previously thought. homeownership being hurt by a decline in first-time buyers, who The private trade group says sales rose four per costs, including are critical to reviving the housing market. cent in October to a seasonally adjusted annual rate of mortgage payments, Sales have fallen in four of the five years 4.42 million. That’s below the roughly six million homes utilities and property since the housing boom went bust in 2006. a year that economists say are consistent with a healthy take up a Declining prices and housing market. But it’s ahead of 2008’s revised sales, Agents taxes saythat brokers are failing torecord-low trainmortgage them rates typical household’s haven’t been enough to boost sales. now considered the worst in 13 years. monthly pre-tax At the samethe time, home construction has The trade group revised its sales from 2007 to 2010 Brokerages have largely failed to give young agents structure, training and income in Vancouver begun athemselves gradual comeback and shouldfrom add to the down 14 per cent, from more than 20.6 million to mentorship nearly theyand need to make business for – that criticism none Toronto, economy’s growth in 2011 for the first year since 17.7 million. Among the reasons for the lower figures, other than the newcomers themselves, according to research. respectively (RBC the Great Recession began in 2007. Last month, the Realtors group says: changes in the way the Census “After completing the course I enthusiastically sought out a brokerage that Economics Housing builders broke ground on an annual rate of Bureau collects data, population shifts and some sales Trends and would continue my training through a mentorship says said one recently. young 685,000 homes,program,” the government being counted twice. Affordability Report) agent, cited in the report from industry trainer REMIC. “I could find the right That was a 9.3 per cent jump from October and The Realtors consulted with government and product and lender for a client, I just didn’t know how to find a client. And I the fastest pace since April 2010. private housing experts, including the Federal Reserve, Most home prices willthat keepwould the Department of Housing and Urban Development, couldn’t find a brokerage to teach me that in economists a concrete,say structured way falling, by at least five per cent, through 2012. the Mortgage Bankers Association, the National produce meaningful results.” Many forecasts don’tof foresee a rebound prices Association of Home Builders, mortgage giants Fannie The story is but one of many gleaned over the course several monthsinand until at least 2013. Mae and Freddie Mac and CoreLogic, a California-based through ongoing discussions and feedback, according to REMIC’s Joe White. As a The high rate of foreclosures has made data firm that first raised doubts about the annual group they expose the very practical training gapscheaper in the education of new resold homes than new ones. Theagents as numbers earlier this year. they embark on a new career path. median price of a new home is roughly 30 per CoreLogic has estimated that the Realtors group Many of Canada’s next generation cent of mortgage the been biz coming above thebrokers price of enter one that’s occupied overstated sales in 2010 by at least 15 per cent. before – twice the normal markup. Investors The changing numbers could affect how economists straight from university or college, says White. They’re “hungry” for that kindare of view the trade group’s data. It could also affect companies structure in the brokering industry. taking advantage of the discounts. housing market is struggling evenand that use the figures for hiring and expansion plans. That model would treat agents to moreThe formalized post-hiring training as the broader economy has improved in Sales are measured when buyers close on homes. mentorship. recent months. But many deals are collapsing before that point. Although several brokerages already provide that kind The economy grewof atnuts-and-bolts an annual pace of two One-third of Realtors said they had at least one contract instruction, concedes White, it isn’t the norm. per cent in the July-September quarter. Many scuttled in October, up from 18 per cent in September. Brokerages tend to focus on providing hard-skills so that the industry economists expecttraining slightly better growth in the Contracts are being cancelled for several reasons: October-December quarter. Banks have declined mortgage applications; homehas technically proficient practitioners, “which is fantastic forCMP consumers,” said

Each issue we select a story from MortgageBrokerNews.ca that has got the industry talking and publish the best responses. This month – the need for better training of new mortgage agents

The story:

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News News / comment aPPoIntments White. However, “young entrants in this industry are craving more in-depth, soft skills training to learn how to manage their business, incorporate technology, grow that business ethically and flourish as a young professional in what can be a fantastic lifelong career.” Other industry players have touched upon graduated licensing as a possible solution to what many charge is an educational gap. “Allow part-timers and new agents, with no experience who wishappointments to develop into full-time agents, but do not allow them to be licensed,” Brian Matthey, head of Verico The Mortgage Professionals in Kingston, Ont., told MortgageBrokerNews.ca last Mortgage Intelligence announced that fall. “Have a minimum two-year supervisory period during Steve Heimbecker, Marg Green, which they have to work for a licensed broker who has a Donna Ramsay and Concierge minimum of five years’ experience. That broker (would then) Mortgage Group are joining have to sign off on everything they do and assume the company. responsibility.” Green in Mississauga, Ramsay in

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Orangeville and Heimbecker in Waterloo, are equal owners in Concierge Mortgage Group. Brian has the right idea. In B.C. our assistants have to be licensed to Concierge is a new boutique work on our files and view confidential client information. The broker brokerage firm that will focus on decides they can broker a deal depending on experience level as we are elite and experienced brokers, fully responsible for them. Most of us veterans are former bankers with offering exceptional needs-based years of experience, whereas today’s agents more The often than not do not customer service. goal is for come from a banking background. Just likeMortgage a trade, an apprenticeship Concierge Group to have offices throughout Ontario. program is definitely worth considering. Concierge will operate as a network partner with Mortgage Don C Intelligence, developing its own Problem is, most new agents are a reflection of the mass, which is the brand while taking advantage of industry today. Before even having a deal to work with or a plan to get Mortgage Intelligence’s key deals, the first thing they ask is resources “what’s my split?” Not sure where they like compliance, payroll, pick this up from, perhaps the education I say like the “mass” exclusive providers. mortgage products, and marketing. because the bulk of agents are solely focused on splits, but fail to realize Intelligence splits do not equate to money (long “Mortgage term). No disrespect tooffers smaller firms us competitive compensation whatsoever, however many (but not all) are simply not equipped to put and the support that Concierge resources in place to ensure a proper education process for new agents needs to be successful,” are set up for producing agents to excel. said Heimbecker.

Gale Tracey

Terrilyn Moore

TMG Theidea. Mortgage Group moving I totally agree with the whole internship It is good foristhe newbies three of its regional leaders up the to learn hands on but not a sink or swim method. I think hiring the corporate ladder, billing the move asof person either on a per file basis, hourly wage or a small percentage in keeping with its philosophy of the commission is a great way for that person to learn. You cannot promoting from within. Effective expect somebody to work for free. Essentially you would be hiring the Jan.1, 2012, Bud Jorgenson person to do a lot of administrative work, the withposition specificofinstructions assumed VP for the along the way and they would be getting thatRegion; hands on experience. Prairie Gord Appel, VP,

Alberta Region; and Gerald Krahn, Ontario Region. “These three have already made positive changes in their respective regions,” said Mark Kerzner, president of TMG. “Their dedication to TMG agents and Top: Steve Heimbecker brokers is very important Visit mortgagebrokernews.ca to comment for the Middle: Marg Green company’s long-termheadlines success. They in on this making Middle:and Donnaother Ramsay stories Middle: Gord Appel are a great asset to the TMG the industry Bottom: Gerald Krahn family.” CMP

l a e Ownership that makes R sense.

Voice your opinion

Call Ron De Silva at 877-677-7778 ext: 5 for more information

www.rmabroker.ca

News / analysis

Comfortable

situation A new report shows homeowners paying down their mortgage debt faster to take advantage of low interest rates for refinancing

Canadian homeowners are comfortable with their current mortgage, focusing on reducing their mortgage faster by making lump sum payments, reducing amortization periods and refinancing with lower interest rates, according to CAAMPâ&#x20AC;&#x2122;s most recent survey report, Confidence in the Canadian Mortgage Market. According to the report, Canadians are taking prudent steps to manage their mortgage debt levels, making lump sum payments, paying off their mortgages early and securing lower interest rates.

Accelerated repayments

23 per cent are increasing their regular payments 19 per cent are making lump-sum payments 10 per cent are doing both 50 per cent of borrowers pay $100 per month (or more) above their required payments Amortizations

Buyers indicated the amortization period will be about 20 per cent shorter than their contracted length

For mortgages on homes purchased between 2008 and the present with extended amortization periods, the average expected amortization period of 22.8 years is considerably shorter than the original contracted periods of 31.9 years, 30 per cent of the original contracted period. Mortgage holders, particularly those who purchased homes recently, are making considerable efforts to accelerate repayment of their mortgage. The survey found that 23 per cent of mortgage holders have increased their monthly payments

year saw their new interest rate decrease. On average, the interest rate was reduced by one-half percentage point Market share

Mortgage brokers account for 26 per cent of all mortgages For borrowers who took out a new mortgage in 2011, 31 per cent obtained it from a mortgage broker Equity

Interest rates

74 per cent of borrowers who renewed in the last

83 per cent of Canadians have at least 25 per cent equity in their home

Source: CAAMP

18 | mortgagebrokernews.caâ&#x20AC;&#x201A;â&#x20AC;&#x201A;

News / analysis

stats

38%

- of Canadians planning renovations in 2012 Source: CMHC

during the past year. In addition, 19 per cent have made lump sum contributions to their mortgage in the past year, and 10 per cent have done both. For those who voluntarily increased their regular payments, the average amount of increase was $400 to $450 per month. There are approximately 5.85 million mortgage holders in Canada and roughly 1.35 million voluntarily increased their payments, resulting in a combined amount of about $7 billion per year. Lump sum payments averaged $12,500, and with about 1.1 million people making these payments, this produces a combined repayment estimated at $13.75 billion.

MortgageBrokerNews.ca Reader Poll Will the reduction of the maximum loan-tovalue ratio for HELOCs to 65 per cent hurt your business?

Looking for

the latest mortgage news and talk?

NO YES (50%) (50%)

mortgagebrokernews.ca

News analysis / MULTIMEDIA

Story

MortgageBrokerNews investigates the burning issues affecting the mortgage industry. Here are the biggest stories highlighted by our weekly newscasts – and uncensored feedback from brokers the topic

The Mortgage Summit Paul Grewal: “For brokers, the advantage of coming here is that you get to learn from other brokers. A lot of the panel sessions have been brokers assisting other brokers to become better at running their businesses and helping customers. For lenders, I think the value is that we’ve got a lot of brokers here, these are our customers and for us it’s important to advise them of new products and services that we have.”

Harry Singh: “This event is a huge opportunity for mortgage brokers, especially those who are starting out in the industry,” said Equitable Trust’s Harry Singh. “It gives them the opportunity to 20 | mortgagebrokernews.ca

meet people and get a comprehensive view of what the industry is all about, learn about trends affecting brokers and it’s a tremendous educational opportunity for new as well as seasoned brokers.”

the topic

Brokers being more competitive Calum Ross: “It would be unrealistic for any individual to believe that there is not going to be a more competitive market in front of us. I want people to realize that price is not a sustainable competitive advantage nor is being able to get a product from a lender is not a sustainable

competitive advantage. Now more than ever, people need to invest in themselves. When the smoke clears, only the best originators will be there. The option of maybe reading a book or maybe taking a course or maybe understanding how top people are successful is not enough. Now the time has come to improve. People need to start to invest in understanding what they do better than other people. What makes them unique versus other suppliers? We’re in a market where we are basically a commodity and if people can’t figure out how to invest in themselves and how to make themselves more valuable than their closest industry peer, there’s going to be a lot of trouble. And I hate to say it, but I’d be very surprised if we don’t see a mass exodus from the mortgage industry in the next couple of years.”

News analysis / MULTIMEDIA

the topic

The broker-underwriter relationship Nick Kyprianou: “I think for the relationship between the broker and the underwriter to work, communication is key, especially for B lenders like ourselves. We need to have clear communication between the underwriter and broker. The broker has to be completely honest and tell us what they need and what they can do and make sure before they issue the commitment to tell us what the problems and challenges are with the deal. Then we reach a conclusion together about what the pricing should be and then issue the commitment. The problem I find sometimes is that the mortgage underwriter and broker agree on a deal and then the broker continues to shop the deal to save a few basis points, when that broker could be spending time getting more business and they’re actually hurting the relationship between the underwriter and the broker.”

The problem I find sometimes is that the mortgage underwriter and broker agree on a deal and then the broker continues to shop the deal

Look no further than your free daily online news source for mortgage professionals

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WATCH IT NOW! To watch the industry-leading newscasts and have your say on the issues of the day, visit mortgagebrokernews.ca

mortgagebrokernews.ca

News / this time last year

YOUR TRUSTED NEWS SOURCE

JULY 2011, 6.7

P R ES E N T E D BY

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This time

Last year

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2011

11-07-13 12:39 AM

Macquarie Financial to leave Canadian broker channel Brokers have lost another lender, with Macquarie Financial announcing it will outsource servicing of its $8 billion mortgage portfolio to Paradigm Quest, although Canadiana Financial will continue to draw on Macquarie funding for its own mortgage originations. “The Canadian mortgage landscape has been one of, if not, the most challenging environments,” Matt Rady, head of Macquarie Banking and Financial Services Group, North America, told MortgageBrokerNews.ca. “What we’ve seen is a narrowing of margins that have made it a challenging business to operate on a mediumterm basis. While it’s profitable for us, it’s difficult to see what opportunities there will be. The treatment of broker commissions, coupled with those tighter margins, has put a strain on returns on regulatory capital.” Canadiana will originate mortgages under its brand through the broker channel. Those mortgages will be originated funded, in part by Macquarie.

22 | mortgagebrokernews.ca

ONE YEAR LATER Canadiana Financial has seen a lot of changes in the past twelve months. In the year since moving from Macquarie, Grant MacKenzie has seen staff numbers almost double from 13 to 24, volume increase “considerably” and the company has increased their reach by opening an office in Ontario. There have also been challenges, with fewer brokers Grant MacKenzie than hoped transferring their existing Macquarie relationships to Canadiana. It has been a year of reviews and updating processes, MacKenzie says. From finding efficiencies in who the company worked with to reviewing their distribution strategy – it’s all about perfecting the processes and improving efficiency. The company also reviewed and recently launched a new compensation structure, giving brokers the choice between both upfront and renewal commission options. In November 2011, Canadiana opened a regional office in Toronto, giving it a base in Western and Eastern Canada to ensure brokers nationwide can get prompt replies no matter their time-zone. As Canadiana continues to develop and evolve their processes and value proposition, they hope more brokers will renew relationships they built with Macquarie. “Any time there’s a change in the marketplace brokers will retrench with some of their existing relationships,” MacKenzie says. “We may not have

realized all of our targets set for this year, but I think you have to earn the right to proceed. You have to provide consistent good service and if you do that I think you start to win that battle.” The company values its relationships with brokers because as a monoline they understand that brokers are their customers as much as the final borrower, MacKenzie says. “We’re very much aligned with the brokers. We don’t want to steal their customer, we have no interest in selling them additional products or services at this stage and if we do, we’ll do that in conjunction with the broker,” MacKenzie says. The year to come will be about building on the foundations Canadiana has built – getting the offering consistent, focusing on good service and competitive rates and continuing to develop the value proposition, MacKenzie says. “We want to make sure our brokers understand that we are here for them. The only thing we want to do is help brokers be successful – that’s this year’s message.” - Caitlin Nobes

Any time there’s a change in the marketplace brokers will retrench

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COVER / 2012 BROKER SENTIMENT POLL

201

CMP Broker Sentiment Poll puts out an open call to the Canadian broker community each year to participate in an online survey. This year’s poll received more than 500 responses from mortgage professionals across the country.

N E M I T N E S R E K O R B CMP presents our fourth cross-Canada sentiment poll, gauging what’s on the minds of brokers. Some of the results may surprise. Others simply confirm what brokers already know CMP Broker Sentiment Poll puts out an open call to the Canadian broker community each year to participate in an online survey. This year’s poll received more than 500 responses from mortgage professionals across the country.

24 | mortgagebrokernews.ca

ith interest rate hikes still perhaps a year away and Canada’s economy generally still humming along, concerns for brokers this year have shifted to the lending landscape, according to CMP’s fourth annual Broker Sentiment Poll. It canvassed the opinions of more than 500 mortgage professionals online during three weeks in May 2012. Topping the list of concerns for the coming year is stricter underwriting guidelines and poorer service from lenders, which was named by 56 per cent of respondents. Following on its heels at 48 per cent are fears fewer lenders will continue to operate through the broker channel. Last year’s top two fears – the economy (47 per cent) and interest rates rising (34 per cent) – fell

CMP presents our fourth crossCanada sentiment poll, gauging what’s on the minds of brokers. Some of the results may surprise. Others simply confirm what brokers already know

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mortgagebrokernews.ca | 25

COVER / 2012 BROKER SENTIMENT POLL broker channel. Last year’s top two fears – the economy (47 per cent) and interest rates rising (34 per cent) – fell three spots respectively in this year’s poll. Other concerns cited include consumer household debt (27 per cent), industry reputation being damaged by rogue brokers (24 per cent), house prices falling (22 per cent), and reduced revenue due to lower commissions (22 per cent). When it comes to changes in the industry, brokers feel they will most likely occur over the next 12 months. Here, lenders and their business practices grabbed the top three spots, just as they did in last year’s poll. More than half (58 per cent) of those polled said mobile sales teams at the big banks and the competition they pose represent their No. 1 challenge for 2012, while 49 per cent are concerned about other broker channel banks leaving mortgage professionals behind – just as CIBC has done in shutting down FirstLine. The continuing

What are your biggest concerns over the next 12 months? (Respondents were able to choose more than one answer.) Answers

Total %

Stricter underwriting guidelines and poorer service from lenders

56%

Fewer lenders operating through the broker channel

48%

Economy

47%

Interest rates rising

34%

Consumer/household debt

27%

Industry reputation damaged by rogue brokers

24%

House prices falling

22%

Reduced revenue due to lower commissions

22%

Meeting the requirements of new regulations/licensing

10%

My brokerage failing

What do you think will be the biggest change in the industry over the next 12 months? (Respondents were able to choose more than one answer.) Answers

26 | mortgagebrokernews.ca

Total %

Big banks mobile sales teams competing with brokers

56%

Remaining banks leaving the broker channel

48%

Lenders moving towards efficiency bonuses as opposed to volume bonuses

47%

New commission structures

34%

Brokers as multi-product sellers

27%

Brokerages merging

24%

A steep decline in overall numbers

22%

Brokers charging upfront fees

22%

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COVER / 2012 BROKER SENTIMENT POLL

On a level from one to 10 (one being the lowest), how do you feel the federal government is handling the issue of mortgage regulations?

17% 15%

11%

12%

10%

14%

trend of lenders moving from volume to efficiency bonuses was named by 28 per cent of respondents. Other issues on the table for brokers include new commission structures (27 per cent), brokers as multi-product sellers (17 per cent) and brokerages merging (15 per cent). When it came to brokers sharing their feelings about the federal governmentâ&#x20AC;&#x2122;s handling of mortgage rules and the impact those changes have had on broker business, the results come as no surprise, with 61 per cent of respondents giving the government a rating of five or lower (out of 10). That was, in fact, before Jim Flaherty moved on June 21 to further ratchet down on mortgage rules around amortization and refinancing. When asked â&#x20AC;&#x153;Have mortgage rule changes over the past three years had a positive or negative effect on your business?â&#x20AC;? not surprisingly, 73 per cent of those polled

28 | mortgagebrokernews.ca

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COVER / 2012 BROKER SENTIMENT POLL

What percentage of your loans will be put through: BANKS Answers

27%

Total %

0-25%

45%

26-50%

31%

51-75%

19%

76-100%

NON-BANKS

Answers

Have mortgage rule changes over the past three years had a positive or negative effect on your business?

Total %

0-25%

12%

26-50%

21%

51-75%

37%

76-100%

30%

Will you be hiring new staff over the next 12 months?

73% indicated the changes have impacted them negatively. In terms of job satisfaction, most brokers, it seems, are happy where they are and most have no plans of leaving, either their current job or the industry. More than 90 per cent of respondents (93) said they would not be leaving the industry in the next 12 months, while 57 per cent of independent brokers said they aren’t considering joining a national network and 85 per cent of brokers affiliated with a national network have no plans of becoming independent. New for this year’s Broker Sentiment Poll, was an invitation to rate your brokerage on a scale of one to 10

30 | mortgagebrokernews.ca

Answers

stats

57%

- independent brokers who won’t consider a national network Source: Sentiment poll

Total %

Yes

34%

66%

(with one being the lowest). Two-thirds of brokers responded by rating their brokerage an eight or higher and only six per cent gave their brokerage a failing grade (four or lower). Brokers weren’t as bullish on expansion plans, with only 34 per cent indicating that they would be hiring new staff over the next 12 months, a drop of 20 per cent from last year. That doesn’t mean that they will be contracting though, as 87 per cent say they won’t reduce staff over the coming year. That optimism didn’t extend to marketing budgets, as 57 per cent of brokers indicated that their budgets

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COVER / 2012 BROKER SENTIMENT POLL

If you answered no, will you be reducing staff? Answers No

Total % 86%

Only if market conditions worsen

12%

Yes

2.5%

Do you think you might leave the broker industry in the next 12 months? would remain unchanged in 2012, a 12 per cent increase from last year, while only 34 per cent said they would increase it, a drop of 12 per cent compared to their 2011 intentions. When it came to the use of those marketing dollars, brokers stayed mostly faithful to the methods theyâ&#x20AC;&#x2122;ve been using for years. Email newsletters remained the most important marketing strategy, followed by social networking, the same as last year. Moving up in 2012 in importance were ads on broadcast TV or radio (rising from ninth to fourth) and yellow pages (10th to sixth), while falling in importance were blogging (fourth to seventh) and seminars (fifth to 10th).

Answers

92%

Only if market conditions worsen

If an independent, would you consider joining a national brokerage this year? Answers

Moving up in 2012 in importance were ads on broadcast TV or radioand yellow pages

Total %

57%

Only if market conditions worsen

43%

#10

If part of a national network, would you consider a return to being an independent broker this year? Answers

32 | mortgagebrokernews.ca

Total %

85%

Only if market conditions worsen

15%

COVER

COVER / 2012 Broker sentiment LENDERS ONpoll BROKERS

#11

On a scale of one to 10 (with one being the lowest) how would you rate your current brokerage? “ we strive to hire dedicated and service excellence1 1% oriented senior underwriters that understand our broker partner’s business ”

2value proposition 1% for our broker partners which clearly states our underwriting and business development service standards. In addition, we introduced Express 4.3 in January 2011, in partnership with D+H that enables brokers to have real time access to deal and condition statuses through Expert. 3

Turnaround times Street understands that our broker partners have a client waiting for an approval and that we directly impact their ability to look to their 2% 4 professional clients. We strive to hire dedicated and service Categories (in order of 2011 2010 excellence-oriented senior importance) underwriters that understand our broker partner’s Turnaround times 3.96 3.56 5 business. We believe we’ve 7% built the right team to provide Underwriter support 3.93 3.55 a fast and personalized underwriting experience for Street broker partners. 3.99 3.75 6 6% Overall service

ING Direct

Interest rates We understand the competitive pressures our broker partners are facing. We’ve strived to offer 7 the best rates to our broker partners balancing that with service excellence. We believe that by offering brokers rate specials on terms that may 8 be more suitable for a client’s needs that we enable broker partners to grow their business.

9 Direct ING

Kim Luxton, Director, ING DIRECT Broker Sales

10 has turned out to be 2011 another dynamic year in the mortgage industry. Canadian

CHANGE +/-

+0.40 +0.38 +0.24

3.76

4.54

-0.78

15%3.93

4.25

-0.32

Product Range

3.65

4.25

-0.60

Satisfaction with credit policy

3.89

3.50

24% +0.39

Broker support

3.54

2.95

+0.59

IT/technology

18%2.87 3.40

+0.53

Transparency of commission structure

4.26

4.00

+0.26

OVERALL

3.83

3.28

+0.55

Interest Rates

BDM support

24%

mortgagebrokernews.ca | 33

COVER / 2012 BROKER SENTIMENT POLL

#12

Your 2012 marketing budget will: Answers

Total %

Stay the same

57%

Increase less than 50%

27%

Increase more than 50%

Decrease more than 50%

#13

Rank in order of importance (one being the most important, 10 being the least), each marketing strategy that you plan to use in 2012.

1 - Email newsletters 2 - Social networking 3 - Other 4 - Ads on broadcast (TV/radio) 5 - Direct mail 6 - Yellow pages 7 - Blogging 8 - Ads in print publications 9 - Community events/ trade shows 10 - Seminars 34 | mortgagebrokernews.ca

As the use of social networking by brokers continues to rise, the tools brokers choose remain fairly constant, with LinkedIn and Facebook claiming the top two spots, followed by Twitter and Google+. In terms of what areas brokers see as representing opportunities for growth, private lending was most often cited as a service brokers will be looking to take on or build over the next 12 months, with 45 per cent and 32 per cent choosing private mortgages and private lending, respectively. Other services high on brokersâ&#x20AC;&#x2122; to-do lists were mortgage insurance (31 per cent), financial planning (29 per cent), real estate and commercial (26 per cent) and HELOCs (24 per cent). Repeat business still seems to be the cornerstone for brokers, with 41 per cent of respondents indicating that between 51 and 75 per cent of their business will come from repeat or referral clients. On the other side of the coin, 47 per cent of brokers said that 26 per cent to 50 per cent of their business will come from new clients. With the implantation of OSFI guidelines and worries over the effect the crisis in Europe could have on Canadaâ&#x20AC;&#x2122;s economy â&#x20AC;&#x201C; not to mention talk of a housing

#14

What percentage of your business will come from repeat of referral clients? EXISTING CLIENTS Answers

Total %

0-25%

13%

26-50%

33%

51-75%

41%

76-100%

#15

What percentage of your business will come from new clients? Answers

Total %

0-25%

24%

26-50%

47%

51-75%

21%

76-100%

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COVER / 2012 BROKER SENTIMENT POLL

#18

bubble that just won’t go away – it will be interesting to see how the sentiments expressed in this year’s poll hold up. Will brokers be more confident or less confident about their prospects this time next year? For that answer you’ll have to wait, of course, until next year.

Do you use any of the following social networking programs? (Respondents were able to choose more than one answer category.)

#16

What percentage of your business will come from: (Respondents were able to choose more than one answer and answers reflect the average for each category.) Answers

Total %

Residential

98%

Referral (database)

63%

Referral (referral partners)

61%

HELOCs

31%

Commercial

22%

Insurance

13%

Equipment leasing

Reverse mortgages

Other

79%

78%

41%

#17

Which services will you be building over the next 12 months?

24.5%

(Respondents were able to choose more than one answer.) Answers

Total %

Private mortgages

45%

Private lending

32%

Mortgage insurance

31%

Financial planning

29%

Real estate

26%

Commercial

26%

HELOCs

24%

Construction

19%

Equipment leasing

13%

Development

12%

Servicing

11%

36 | mortgagebrokernews.ca

stats

9.2% 8.3% 7.6% -

overall canadian office vacancy rate in 2009, 2010 2011. Source: Avison Young

Blogging

Other

23% 8% 5%

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Feature / SEO

SEO: a puzzling

work of art & science

The term Search Engine Optimization is as enigmatic as the Mona Lisaâ&#x20AC;&#x2122;s smile, but brokers looking to land leads online have got 1.2 million reasons to solve the mystery, writes Patrick Herman, with www.searchenginepeople.com

38 | mortgagebrokernews.ca

Feature / SEO

1.2 Million

Not all keywords are going to drive relevant traffic to your site – relevant meaning people who are looking for a mortgage and need a mortgage broker’s services

Searches for “mortgage” on Google. Interested?

It’s a pretty impressive number, eh? The keyword that can make lots of money. I recently did a Google Keyword search and found that on average, across Canada, there are 1.2 million searches for the term “mortgage.” To be clear, these are searches on Google.ca for the keyword (search term) “mortgage” on a per month basis. Imagine how much business you’d get just by having some of that traffic visiting your site. It would be great to even turn a small number of those searches into traffic and ultimately business. More visits should ultimately result in more opportunities to close a deal and secure a mortgage for a client. But really, does that sound right? Could there really be 1.2 million people looking for a mortgage every month? If there really are then by default shouldn’t you be seeing more traffic and more business on your site? I’d like to help de-mystify this number and help shed some light on the realities of who’s looking for a mortgage and how to effectively direct relevant traffic your way. Keyword

Competition

Local Monthly Searches

Mortgage

Medium

1.220.000

Broad search terms can be misleading

stats

5.85

million

- Canadian

mortgage holders Source:

The first thing we need to do is understand these 1.2 million searches. Have a look at the Google Keyword Tool screenshot. I’ve selected “broad” search results on the term “mortgage.” What this means is I want Google to include search volumes for any variation of a keyword that includes “mortgage.” Examples could include: mortgage analyst, mortgage rates, get a mortgage, etc. Maybe not everyone is looking for a mortgage, maybe they have other mortgage-related questions that need answered? Sure, some keywords might make sense but a “broad” search result gives us any and every variation of a keyword that used the word. As a mortgage broker, you’re probably aware that not all keywords are going to drive relevant traffic to your site – relevant meaning people who are looking for a mortgage and need a mortgage broker’s services. Are you looking for everyone and anyone to visit your site with the hope that someone would be interested in contacting you? Or are you looking for potential new customers who found you based on getting to your site via relevant keywords? OK, we might be going somewhere now. If you’re looking to attract new customers then you’ll want to be more concise with the types of keywords you’d like to be found for.

CMHC

mortgagebrokernews.ca | 39

Feature / SEO Keyword relevancy matters Now we’re getting deep into things. We can all agree that it’s important to drive relevant traffic to your site. The first question you’ll probably ask at this point is “what is a (relevant) keyword?” A keyword is the one you have typed into the Google search bar seeking a list of results that match what you’ve asked for. A relevant keyword goes a little bit deeper. It could mean adding a location; i.e., “mortgage broker Toronto” or being yet more descriptive; i.e., “interest-only mortgage’. Here’s the key question: do you want to be found for a keyword that might possibly be related to you or would you rather show up for a keyword that is precisely something that you do and offer? This is where we start getting more relevant.

How do I appear for the right keywords? Of course the next question will ultimately be, “how do I show up for the right keywords?” This question, if asked to the right Search Engine company, can start a very lengthy education session. Let’s be short and simple for now so that we don’t lose anyone along the way. What we are talking about is Search Engine Optimization (SEO). It basically means optimizing your website for keywords that are important and/or relevant to your business. In order to “show up,” it’s important to be

able to rank on Page One for the keywords that are relevant to your business. To do this, two things will be necessary: 1. Make sure all of your on-page factors are set appropriately and 2. An effective link-building strategy is put in place.

On-Page Optimization

We’ve all heard about the friend, family member or competitor who gets a million visits to their site and apparently must be doing very well. I’m not saying it’s not possible stats

6.2% 6.0% 6.6% new listing for Ont.,Que; PEI. Source:

CREA (mag)

40 | mortgagebrokernews.ca

On-page factors cover a lot of different things that you as a site owner can control. It means things like title tags (the short line of info you see at the top of a browser), H1 Tags (the “title” of the page of your site), the URL structure, content and more. Think of on-page like getting ready to run a marathon. It’s like putting on your running shoes, shorts and a T-shirt. You haven’t moved yet but you’re ready to go. What you’re actually doing with these on-page factors is you’re letting Google know what you do and what you’d like to be able to rank for. So, if you’re a mortgage broker in Toronto you might want to rank for the keyword “mortgage broker Toronto.” By setting your on-page factors that speak to this would help Google to identify what you’d like to rank for.

Off-Page Optimization I mentioned that on-page factors help you to rank, but they won’t necessarily get you ranked. Here’s the thing, on-page factors represent roughly 30 per cent of the factors it takes to rank for a particular keyword. The other 70 per cent will come from implementing a link-building strategy. Link building? What’s that mean? Link building is the

Feature / SEO key because Google sees ranking websites much like a popularity system. The more positive votes you have, the higher Google feels you should rank because you must be providing searchers with relevant information. The goal is to get other websites to point back to yours using the keyword you want to rank for. If that site is highly authoritative (and relevant to what you do) then Google will like that and should want to rank you for it. The number of links it takes to rank on page one will ultimately depend on what everyone else is up to that’s already on that starring page. This is where a sound strategy and working with a reputable SEO provider will help get you to where you want to go. A good SEO will work with you to find the right mix of building content to attract links, and actually reach out to other sites directly to build links. There are choices to be made.

Conclusion We’ve all heard about the friend, family member or competitor who gets a million visits to their site and apparently must be doing very well. I’m not saying it’s not possible but here’s the thing. The keyword “mortgage broker Toronto” gets on average 880

MORTGAGE SOLUTIONS THAT ARE AS SMART FOR YOUR CLIENT AS THEY ARE FOR YOU

exact searches per month, nowhere near 1.2 million, however, it’s a great keyword to rank for because it’s relevant to someone looking for a mortgage broker in Toronto. You probably won’t get all 880 searches to visit your site no matter how well you rank, but you stand a better chance of acquiring a new client based on the fact you offer the services that the person is exactly searching for. Keyword

Competition

[Mortgage broker toronto]

HIgh

Local Monthly Searches

880

At the end of the day, while it’s good to have a healthy number of visitors to the site, what becomes more important is having relevant traffic that is important to your business. You’ll stop wondering why you have so much traffic and no business to speak for it when you focus on exactly what you do, who you serve and where you serve them. About 1.2 million searches is a great number (better if a dollar sign comes before it) but relevant traffic will be the way to go if you’re looking to improve the way your site serves those who are looking for it.

What’s in it for you? > A unique product portfolio including our award winning All-In-One Banking™. > Niche product lending allowing you to meet a variety of your client needs; including mortgage solutions for ﬁrst time homebuyers, rental properties, new immigrants, non-residents and more 1. > An incentive program built on your feedback, including reward options such as: $2,0002 towards marketing, $15,0003 travel voucher towards a trip of lifetime, rate discounts up to 15 BPS, free appraisals, great cashback offers, and more!

Contact your local BDM or email mortgagebroker@nbc.ca

TM National Bank All-In-One is a trademark of National Bank of Canada. 1 Financing shall be subject to the credit approval by National Bank. 2 $2,000 marketing fee is a one-time reward for the first 65 deals or $20M funded in the fiscal year. 3 $15,000 trip paid for every 125 deals or $40M funded in the fiscal year. The fiscal year is from November 1, 2011 to October 31, 2012.

mortgagebrokernews.ca | 41

Is it time to

refinance a mortgage?

Feature / canadian real estate wealth magazine

Low rates are tempting to buyers and investors alike. But breaking their current mortgage will cost them. Tony Palermo explains the pros and cons of this investment strategy It’s no secret today’s mortgage rates are at all-time lows, which begs the question: Is it worth it for your clients to refinance their current mortgage to take advantage of the lower rates? The short answer is, it depends. “We’re definitely in a very low interest rate environment and there may be an opportunity to save on interest,” says Jessy Bilodeau, a Calgarybased manager of residential mortgages with TD Canada Trust. “Having said that, you need to sit down with your client and do a cost analysis on what breaking their mortgage will look like and what their actual savings will be. There is no catch-all answer and it really has to be figured out on a case-by-case basis” Be aware, the financial penalty for breaking an existing fixed-rate mortgage early can be hefty. Financial institutions like to refer to this penalty as a “prepayment charge,” but chances are when your clients see the numbers, it’ll definitely feel more like a penalty than a charge. The penalty is generally applied as the higher of either 1) the total of three months of interest or 2) the interest rate differential (IRD), which is the nasty calculation that can end up costing you a lot of money. As its name implies, the IRD is basically the interest rate difference between your original mortgage interest rate and the interest rate the lender can charge today for the remaining term of the mortgage. For example, assume your client’s current mortgage rate is 5.25 per cent, and they have two years remaining on your mortgage. If the bank’s current two-year rate is 3.5 per cent, their IRD will be 1.75 per cent (5.25% - 3.50% = 1.75%). This 1.75 per cent will be applied to the remaining two years of the existing mortgage balance and the result will form part of their penalty cost. Let’s see what this means on an existing mortgage of $200,000. Use the space provided to fill in your clients’ numbers if you know them.

Current annual interest rate being charged (expressed as a decimal) Ex: 5.25% = 0.0525 (A) Months remaining on your current mortgage Ex: two years = 24 months (B) Posted annual interest rate for a similar mortgage that most closely matches time remaining in on your current mortgage Ex: two-year mortgage currently going for 3.5% = 0.0350 (C) Difference between the two rates is (A) – (C) (expressed as a decimal) Ex: 0.0525 – 0.0350 = 0.0175 (D) Mortgage amount you want to prepay Ex: $200,000.00 (E) Calculate [ (D) × (E) × (B) ] ÷ 12 = (F)[0.0175 × $200,000.00 × 24] ÷ 12 = $7,000.00 (F)

mortgagebrokernews.ca | 43

Feature / canadian real estate wealth magazine As you can see, the estimated interest rate differential penalty in our scenario is $7,000. Costly yes, but sounds fairly simple, right? Well, not necessarily. This is only a rough estimate and the penalty may be even higher. Each institution calculates the IRD slightly different. Some institutions, for example, will take into account any discounts your client originally received off the posted rate. Others will use the highest posted rate scenario. It all depends on what’s in the fine print of the mortgage contract. Keep in mind that your client may be facing additional charges as well that can run you several hundred dollars: administrative fees, transfer fees, reinvestment fees, replacement fees, appraisal fees, and legal fees (though, some of these fees are negotiable and, in certain cases, can even be waived, so be sure to ask.) The Web is full of calculators that can help your clients estimate their penalty and whether it makes sense to break the existing mortgage. But again, they should only be used as a rough guide. To get the real numbers to see if refinancing is a viable option, it’s important they sit down and crunch them with you.

The case for the 10-year fixed It used to be a no-brainer – take a variable and your client would come out ahead. But now with these historically low rates, if it does make sense to renegotiate the mortgage, does it also make sense to lock-in for an even longer term, say something atypical like 10 years? “Absolutely,” says Nawar Naji, a Toronto-area mortgage broker with Verico – The Mortgage Wellness Group. “I think the 10-year is certainly a viable option for investors.” At first blush, it almost sounds crazy to lock in for such a long period of time, but what do the numbers say? Let’s assume your client has an outstanding mortgage balance of $200,000 and you take a 10-year fixed at 3.89 per cent, amortized over 30 years. Here’s how the numbers play out: Monthly payment amount: $938.63 Total principal paid over term: $43,175.72 Total interest paid over term: $69,459.88 Mortgage balance at end of five years: $180,485.01 Mortgage balance at end of 10 years: $156,824.28

Now, let’s compare it against two separate five-year terms. We’ve seen several financial institutions advertise four-year fixed deals at 2.99 per cent. But let’s assume you’re an excellent negotiator and the

44 | mortgagebrokernews.ca

You need to sit down with your client and do a cost analysis on what breaking their mortgage will look like and what their actual savings will be lender is feeling generous. They decide to give your client the first five-year fixed at three per cent. Amortized over 30 years, it looks like this:

Monthly payment amount: $841.21 Total principal paid over term: $22,244.04 Total interest paid over term: $28,228.56 Mortgage balance at end of five years: $177,755.96

At the end of five years, your mortgage balance is sitting at $177,755.96, a full $2,729.05 smaller. Not bad, though not unexpected since it was at a lower rate. Here’s where things get interesting. For the next five years, let’s assume the five-year fixed rates have risen to 5.5 per cent. Taking into consideration the new mortgage balance of $177,755.96, this is what the second half looks like when amortized over the remaining 25 years: Monthly payment amount: $1,085.01 Total principal paid over term: $19,210.36 Total interest paid over term: $45,890.24 Mortgage balance at end of five years: $158,545.60

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Some clients don’t like the 10 year because it’s such a long term, but I think based on where we are historically and the spread between the 10 and the five-year, the 10-year does make sense for a lot of people

A couple of interesting things have happened here. Using this scenario, the two five-year terms combined have actually cost your client $4,658.92 in extra interest and $1,721.32 of equity versus the 10-year fixed originally proposed. On top of that, when your client renews for the second five-year term, their monthly payments jump to $1,085.01. This represents a payment shock of $243.80 – a big difference to your monthly cash flow. A large factor in this scenario, of course, is the increased five-year rate we’re using at 5.5 per cent. Is it reasonable? That works out to a half percentage point increase over the next five years. Naji certainly thinks so, and uses the same percentage when illustrating the benefits of a 10-year fixed to his clients. “I’ve pulled historical 25-year data, and the average rates are 5.5 to 6 per cent,” says Naji. “Some clients don’t like the 10 year because it’s such a long term, but I think based on where we are historically and the spread between the 10 and the five-year, the 10-year does make sense for a lot of people.” In addition to the historical data he’s analyzed, Naji is concerned there will be snap-back of rates. “As inflation kicks in over the next few years, the rates will have to go back up quickly,” cautions Naji.

46 | mortgagebrokernews.ca

“The only way to combat inflation is higher interest rates. How else is the government going to control it?” Still, even if the rates haven’t hit 5.5 per cent in five years time, as long as your client waits until slightly past the five year mark of their term, the cost of renegotiating their mortgage drops considerably. This is because Canada’s Interest Act prohibits an IRD penalty on terms over five years after at least five years have elapsed. This means once your client just past that five year mark, they’re only hit with the three-month interest penalty. So really, with the 10-year fixed rates being so low, going that route real does seem to be buying your client a lot of security and stability in terms of their payment, rate and length of their agreement.

As an investor, you’re a business Naji refers to one of his clients who was trying to time the markets. The client was looking at rates and trying to decide between a two-year and a three-year term – bouncing all around and losing sight of the big picture. Naji asked the client what he intended to do with the property in question, only to find out the client ultimately planned to hold on to it as a rental for a good 15 to 20 years. “I asked him why he was trying to time the

Heads up! Watch for a CMP Special Issue focused on Western Canada in an upcoming issue of the magazine and the issues that affect brokers and the mortgage industry in this important part of the country.

Feature / canadian real estate wealth magazine markets, when really, he should be focusing on making his mortgage fit his plan,” says Naji. “Trying to time the markets sounds a lot to me like day trading.” Naji says as a broker who specializes in working with investors, he often needs to remind his clients to approach real estate investing no different than they would if they purchased or ran any other business. “I think too many people just say ‘I want to buy an investment property’ and don’t really run it as a business,” explains Naji. “You have to always be looking for efficiencies and ways to improve your cash flow, just as you would if you were running a Tim Horton’s or a corner store.”

Longer amortization = more property Keeping an open mind and exploring nontraditional ideas is critical to finding efficiencies in your client’s investment business, Naji says. Certainly, the 10-year fixed is one example. For investors in the acquisition stage of their business, another strategy is to stretch out the amortization period of their mortgages. When coupled with a low interest rate, an extended

amortization further reduces their required monthly payment, showing an even greater cash flow from the investment property. This greater cash flow, in turn, shows them as having more available income, making it easier to qualify for additional mortgages. Naji says the extra income can also benefit them on their own personal mortgage too. “Let’s say their rental property nets them $500 a month after expenses, repairs and maintenance, and vacancy,” says Naji. “Suggest they take that $500 and dump it on their own personal mortgage. Their principal residence is not tax deductible. So, if they do a $6,000 prepayment every year, they will be mortgage free on their own personal residence a lot faster.” And, it’s important to never forget the basics. If you do end up renegotiating your investor client’s mortgage for a lower rate, be sure to advise them to use the lower rate to their advantage by fully using their prepayment privileges, where possible. Not only will they be mortgage free faster, you’ll be helping them secure them against future payment shock when it comes time to refinance again down the road.

mortgagebrokernews.ca | 47

Business / marketing

In his latest series, Doren Aldana explains how to attract a steady stream of deals with the least amount of time, energy and money

When it comes to generating mortgage leads, there are lots of ways to skin the cat. With that said, not all lead generation strategies are created equal. The real question you want to ask yourself is, “What’s the absolute best way to attract a steady stream of closed deals that requires the least amount of time, energy and money?” To answer this question, consider the following three factors:

1. Third-Party Endorsement: The degree to which you are being recommended or endorsed by a trusted “third party,” thereby giving you instant credibility and attracting hot, motivated prospects who are pre-sold on working with you before they even meet you.

48 | mortgagebrokernews.ca

Business / Marketing 2. Marketing Reach (Capacity):

It positions

The number of “ideal clients” you’re able to cultivate a relationship with, so when the time comes that they need a mortgage, you’re the first and only logical choice.

you as a

3. Cost of Acquisition:

instead of an

In other words, the average cost of acquisition per client. The lower the cost, the higher your profit per deal. So, with those three factors in mind, here’s one of the best ways to generate more business: Launch your own Employee Mortgage Benefits Program. This is where you offer companies the opportunity to help their employees save time, energy and money when buying, selling and refinancing. You supply all the employee communication materials, and your on-site education seminars bring their employees up to speed on the latest mortgage financing programs and products. It costs the company nothing to have you provide this voluntary benefit to their employees, and it gives you a steady stream of pre-sold mortgage prospects. What a great win-win. Now, as cool as this strategy looks at first glance, the truth is, most mortgage pros get sweaty palms and high blood pressure when they realize they’re actually going to have to start calling on corporate executives to make this thing happen. The intimation factor is a major game-stopper. So why bother doing this in the first place? Good question.

Here are eight exciting advantages of Corporate Benefits Marketing: 1. It positions you as a “wanted guest” instead of an “annoying pest.” Once a company approves your program, you’re no longer an outsider – you’re an insider. No more cold calling. From now on it’s only warm calling. After all, you’re the official, authorized and endorsed mortgage provider for the company. You’re part of the family now.

2. It gives you the “Oprah Effect.” If you’ve ever watched the Oprah Winfrey Show, chances are, you’ve seen her recommend her favourite books on Oprah’s Book Club. Well, knowing the powerful influence Oprah has over her enormous audience of 15 to 20 million viewers per day, I had a hunch this would be big for her featured authors, but I had no idea how big. According to Richard Butler, professor of

“wanted guest” “annoying pest.”

economics and lead author in a recent study conducted at Brigham Young University, “Not only did her picks rocket from obscurity, in most cases, to the top of the bestseller lists, but our statistical tests proved they generally had longer staying power on the lists than other bestselling books.” This massive increase in book sales linked to Oprah’s endorsement has been coined the “Oprah Effect.” According to BookScan, the average U.S. book is now selling less than 250 copies per year and less than 3,000 copies over its lifetime. In contrast, Oprah’s recommended books consistently rise from the dark corners of obscurity to sell millions of copies overnight, thereby sky-rocketing their titles to the top of the bestseller lists, and in most cases, staying at the top much longer than their nonendorsed counterparts. So, what does Oprah’s Book Club have to do with your mortgage biz? Everything. You see, you don’t have to know Oprah in order to benefit from the “Oprah Effect.” All you have to do is find a person or organization with a strong influence over a large group of your ideal clients and then get them to endorse you. That’s exactly what corporate benefits marketing allows you to do.

3. It gives you a captive audience. Have you ever dined at a restaurant in an airport or a ferry boat? If you have, chances are, it wasn’t exactly your idea of “great value.” In my experience, the food is either nasty-as-nasty-gets, or the service sucks or it costs a fortune – or all of the above. However, in spite of all those obvious shortcomings, most of these restaurants are still thriving while most of their competitors (outside the four walls of that controlled environment) are dropping like flies. In other words, they’re succeeding in spite of themselves. Why? Because they have a captive audience. They have a hungry crowd who can’t or won’t go anywhere else. Now, just imagine how much more successful they’d be if they actually delivered great value. So, what the heck does all this have to do with your business? Simply this: If you want to attract a steady flow of hot, motivated borrowers who are ready to take action now, without price shopping, then you need a captive audience. Not only will having a “captive audience” bring you more closed deals more often, it will also position you as the only logical choice in the minds of your prospects and clients. It’s like becoming a BIG FISH in a small pond instead of just being a small fish in a big ocean. 4. It allows you to gain referrals from the mortgagebrokernews.ca | 49

Cover

The Year ahead / marketing Business

employees. You see, the potential for business is not limited just to the employee population itself – the benefits offered can also extend to the employees’ friends and family. Furthermore, studies show that the average person knows at least 250 people. That realityifout there instead trying means your company hasof100 employees, by to sell around it, then making their friends andpeople familywill eligible for the same trust us.” benefits, your marketplace just expanded to 25,000 But any efforts the industry may people. undertake as a whole will have no effect if individual brokers don’t do

5. Companies promote you to their employees. their parts, which means giving

clients theprogram best value-added service, Once your is approved, you can leverage improving efficiencies and funding the “Oprah Effect” gained from having the company ratios with and of course, endorse you lenders, (either implicitly or explicitly) to all of placing clients with the right lenders their employees. This gives you instant credibility for their needs. and “Focus as well as qualified mortgage onmore the best interest of the leads who are pre-sold on working with you client first and foremost,” said before they even meet you. “We are at a crossroads: we Therien. either go back to being the person you go Employees to when theare banks say no as it wasbenefits 6. inclined to redeem 25 years ago, orto.become truly it trusted they’re entitled Think about for a moment. advisers to our customer and move up Have you ever been entitled to a “group discount” at to the next level.” CMP a hotel and not taken advantage of it? If you’re a cheapo like me, chances are the answer is no. Why?

48 morTgagebrokernews.ca 50 | mortgagebrokernews.ca

Because we tend to redeem benefits we’re entitled to. The more exclusive the benefit, the more we’re inclined to take advantage of it. This proven, psychological trigger acts like a slippery slope with no razor wire, causing the employees to gravitate towards you instead of your competitors.

7. It’s very low cost to implement and maintain. Sure, an upfront investment will be required to develop your marketing collateral. However, once that’s in place, the ongoing maintenance cost is relatively low. In fact, aside from marketing to your own database of past clients, I can’t think of a higher leverage, lower cost marketing method than of homeowners say they corporate benefits marketing.

71%

are in a good position to weather a potential downturn in the housing market

Once your program is approved, you can leverage the “Oprah Effect” gained from having the company endorse you Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAAMP/Martiz Research Canada)

News

Business / Marketing Industry Your trusted news source

8. It provides a reliable alternative to Realtor referrals. One of the principles I teach my clients is to build stability through diversification. As marketing guru Dan Kennedy says, “The worst have expanded their unsecured lendingsource, products. number in business is one.” One income one What our government to realize is that referral source, one leadfails source puts your business unsecured lending has a larger impact on cash in a precarious position. It’s like sitting on a flow than mortgage lending. Particularly when one-legged stool – has you’re setting yourself up to forbe a home ownership already been proven fall. The more you diversify your lead sources, the more affordable than renting in most areas less you rely on one source, the more stable, What (Vancouver is currently a rare exception). they (government) do your see isincome the most consistent, and reliable willpowerful be. lobby group in have the country saying “it’s mortgage So there you it. I’ve just given you eight lending that is the issue.” compelling reasons why it pays to launch your own – Paul Therien Employee Mortgage Benefits Program. So, is it worthwhile? I would to sayEconomics emphatically, They just don’t get it,have do they? 101,yes. says In my next article, I’ll reveal 11 key benefits you canto cool off a hot market by making it more difficult offer through Mortgage borrow, heat your up a Employee cooling economy byBenefits loosening up lending. are off inexcited many markets, Program thatWe will getcooling companies about that wereyou never as hot as Toronto and Vancouver. endorsing to hundreds – even thousands – of Canadian institutional (read bank) mortgage their employees. Stay tuned… lending has been on a 10-year roll, like drunks on a bender, abetted by their “drinking buddy” CMHC. I agree that a 30-year amortization is too long a time in general, but maybe it should be allowed for

first-time buyers, or mortgages that start under a specific price (remember restrictions in 1992 when the first-time buyer program was implemented? Should we look at something similar?) When “Red Ed” Clark at TD was screaming for more government controls on mortgage lending, what he was really saying was that lenders can’t police themselves. If bank A will do the deal why can’t bank B? If Johnny jumps off the bridge, would you jump off a bridge? What kind of people do we have running our banking system? The real culprit in this whole mess is the least regulated and that is Doren Aldana considered by many to be Canada’s credit card debt. Put some sense back inisthe Marketing Coach and recently won the system, put the boots to theleading creditMortgage card lenders, “Best Industry Service Provider” award at the 2012 understanding that it will impact the economy significantly, especially retailCanadian goods. Mortgage GraduallyAwards. Since 2005, he has been tighten the mortgage underwriting “standards” dedicated to helping mortgage professionals attract more that have been perverted over the last 10 years. clients with less effort, regardless of market conditions. Will there be pain? No doubt about it. But an For a free online workshop on “How to Launch Your Own uncomfortable pain now, beats an agonizing pain Employee Mortgage Benefits Program,” visit: later. www.Done4UMortgageBenefits.com. – GTA Broker

About the writer:

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Toronto Suite 1801 130 Adelaide St. West Toronto ON M5H 3P5 Fax: 416-368-3328 Email: toronto@peoplestrust.com CMHC/Conventional Financing Michael Lombard 416-304-2078 Ady Steen 416-304-2089

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mortgagebrokernews.ca | 51 mortgagebrokernews.ca

STATISTICs / RESIDENTIAL RESALE ACTIVITY

National picture

at-a-glance This month’s roundup looks at the most recent data on residential new listings and resale activity Sales activity declined by 3.1 per cent in May compared to April 2012. Having posted the first monthly decline since January, activity ran only slightly above the five- and 10-year averages for May. Activity receded in about 60 per cent of all local markets in May as compared to April, led by the Greater Toronto Area, where sales, nonetheless, remained above levels recorded over most of last year. Monthly sales declines elsewhere overshadowed improving activity in the Ottawa-Gatineau region as well as in Newfoundland and Labrador. Actual (not seasonally adjusted) activity remained nine per cent above levels in May 2011, and also stood above the reading for May sales in the previous three years by a similar margin, reflecting volatile spring markets in each of the past four years. For the third straight month, the number of newly listed homes was little changed in May, edging up just 0.3 per cent from April. The number of markets in which new listings either rose or held steady (49) ran almost even with those where new listings eased (52). The actual (not seasonally adjusted) national average price for homes sold in May 2012 was $375,605, down 0.3 per cent from the same month last year. While the national average price is more or less flat compared to last spring, average sale prices were up from year-ago levels in about seven of every 10 local Canadian markets. “Activity in Greater Toronto is stronger this spring than it was last year, and higher-priced homes are still selling quickly,” said Gregory Klump, CREA chief economist. “As Canada’s most active housing market, and one of the priciest, it is still the biggest factor boosting the national average price but its support was less of a factor in May. At the same time, national average price is finding support from Calgary, where sales and average selling prices are up from levels in May last year. Overall, price growth remains modest amid balanced market conditions in much of the rest of Canada.”

52 | mortgagebrokernews.ca

New Listings

(year-over-year percentage change) Source: CREA

British Columbia 2.4% Alberta 2% Saskatchewan 1.7% Manitoba 4.2% Ontario 6.2% Quebec 6% New Brunswick 9% Nova Scotia 5% Prince Edward 6.6% Island Newfoundland 5.2% & Labrador

National average price is finding support from Calgary

STATISTICs / RESIDENTIAL RESALE ACTIVITY

Sales Activity

(year-over-year percentage change) Source: CREA

British Columbia -7.9% South Okanagan 18.5% BC Northern 17.8% Saskatchewan 19.3% Moose Jaw 50.2% Yorkton District 35.9% Manitoba 7.9%

Quebec 9.1% Trois-Rivieres Saguenay

Portage La Prairie 51.3% Brandon 41%

Nova Scotia

Alberta 1.74% North Eastern 49.5% Grand Prairie 36.3%

15.8% 14.8% 14.5%

South Shore 20.8% Halifax-Dartmouth 18.7% Ontario 8.3% New Brunswick -4.7%

Parry Sound 30.9% Simcoe & District 27.8%

Northern 20.1% Saint John 3.9%

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Profile / Broker

In an ever-increasingly complex industry, broker Nera Emmanuel has built her business on complex things such as returning phone calls

ANSWERING

THE CALL Incoming

Nera Emmanuel

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Most people don’t appreciate it when people talk about them when they’re not present. Not Nera Emmanuel – in fact, encourages such discussions. “Some people told us that they heard about us at a housewarming party,” says the Mortgage Alliance Canada broker, based in Scarborough, Ont. It was a need for a better work-life balance that had Emmanuel get into the mortgage brokering business five years ago, after having spent 10 years working for Scotiabank. After a stint at HLC, she joined her husband, Jerad, a 14-year veteran broker, three years ago at Mortgage Alliance. Emmanuel was drawn to MAC for the same reasons as her husband – training and service. “The tools [MAC] provided, nobody can beat them,” she says. “And the service is excellent – anytime you call, someone always answers and they are always there to help. They don’t say ‘that’s not my department’ and if they can’t help, they will find someone who can.”

profile / Broker between me and my husband, we make sure we return every call.” That two-way communication is key with repeat clients, says Emmanuel. “We do a lot of refinancing with repeat customers who come back after three or five years and some of them stay in touch with us, calling about rates.” She says many new clients are referred to them when previous clients are talking to friends and family and are asked things like ‘what rate did you get?’ and ‘Who did your mortgage?’ Emmanuel also brings in additional business by virtue of her being a Realtor with Re/Max.

Service industry

Happy birthday

stats

22%

- brokers

charging unfront fees

Source: 2012 Sentiment poll

According to Emmanuel, over 90 per cent of their business is referral, something she finds works well as they are committed to keeping in close contact with clients, which, in turn, leads to more referrals. One unique technique they use is sending past clients a birthday card. “Opening a birthday card makes someone feel special,” says Emmanuel. With a large database, Emmanuel is thinking of increasing their “touches” with clients by taking advantage of MAC’s Connect 5 System, which would bolster their lead generation. The system, which includes a Mobile App, gives the broker’s customers ‘real-time’ information, including rates and new mortgage products. A weekly Mortgage Advisory serves as a constant reminder to brokers of their prospects and clients. The system also allows brokers to send current and topical industry updates to their database. A key component of the Connect 5 system is the IMPACT program, which is a cost-effective and efficient direct mail system that allows brokers to send customers personalized information and stay top-of-mind with them. Connect 5 also offers brokers e-Direct, a personalized email-based platform that allows them to select from 12 difference communications that are customer- or prospect-focused and based on the important stages of the mortgage or home ownership cycle. As much at these types of programs can aid brokers in building their business, Emmanuel still chalks success up to the personal touches that brokers sometimes forget about. “When someone calls – make sure it gets answered, because that makes them feel good and certainly if you miss their call, call them back as soon as possible,” she says. “At the end of the day,

During her short time in the broker industry, Emmanuel has seen changes, most notably, the dearth of flexible products, such as 40-year amortizations, although she says that has been offset by changes in the clients themselves. “Once upon a time new immigrants came with little money, but now people are coming with money for down payments, so the need for the zero-down mortgages is much smaller than it was a few years ago.” Other changes, such as continued low interest rates are also good for business, according to Emmanuel, with plenty of renters thinking about buying. The future for the industry remains bright in her eyes, despite calls that there are too many brokers fighting over shrinking originations. “Even with too many brokers, the business is still there,” she insists. “You just need to know how to handle your client, so that after the deal is done you give them service. So many people miss that because they think their job is over once the deal has been closed.” Closing those has for some become more difficult in part because of increased pressure from the banks and their tactic of undercutting rates. Emmanuel, however, thinks people still appreciate what brokers offer them and banks don’t – flexibility and choice. “When clients sit with us they have much more choice than they would if they were sitting in a bank branch,” she says. “Banks continue to try to compete with brokers and undermining us by offering lower rates at the last minute in order to close deals, but I think overall, the service brokers offer is better. We have the choice and sometimes if we have to buy-down the rate we can do that “Banks are focused on their targets and they are so busy looking at the target that they don’t see the client and what they need, whereas brokers have the clients’ best interest in mind.”

mortgagebrokernews.ca | 55

Profile / provider

Giving homeowners

options Street Capital’s new Options Program offers unique homeownership solutions to Canadians who require uninsured financing

R Paul Grewal

ecently launched by Street Capital, the Street Options Program will target the uninsured segment of the mortgage market by introducing unique lending solutions and relying on a common sense approach to lending practices. According to Street Capital President Paul Grewal, brokers will be supported by dedicated senior underwriters, a credit manager and a national sales team who will work together to find solutions that fit the needs of clients with unique circumstances. “Canadians can benefit from more options and choices to home ownership,” he said. “Every homeowner should discuss their situation with a professional mortgage broker who can provide expert advice on the best products to suit their needs. Given the complexity of the mortgage transaction, experienced professional mortgage brokers are the best choice to assist Canadians to

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find the right mortgage.” The Street Options Program is currently available to borrowers through a group of approved brokers in Ontario and Atlantic provinces. Options will be progressively expanded to additional approved brokers across Canada this summer. Street Capital also recently announced impressive results, effectively doubling its percentage share of broker originations in the first quarter compared to a year earlier. According to an industry report, Street was ranked third in mortgage broker market share in terms of funded volume for the quarter ended March 31, 2012. This growth reflects brokers’ growing use of monoline lenders. “We are very excited about Street’s growth over the last year. Street Capital is dedicated to the broker channel and we are working hard to strengthen and grow our broker partnerships,” says Grewal.

profile / provider

Street Options Program • Beacon scores as low as 540 • Loan-to-values up to 80 per cent • Higher-than-normal debt-service ratios • Self-employed income of less than two years • No NOAs or other traditional documentation to prove self-employed income (Street still makes income reasonability assessments and may request alternative income validation, such as bank statements and/or business financials); • A discharged bankruptcy (with no waiting period to apply) • A need for a second mortgage behind a first mortgage (Street will allow another lender’s second mortgage behind its first mortgage, with a total LTV up to 90-95 per cent, depending on the application).

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Profile / insight

Money Matter$: Helping Canadians

Troy Tisseran

understand their finances

With more than 15 years in the finance industry, Troy Tisserand’s passion for financial literacy motivates him to help Edmontonians understand and improve their own monetary situations

any Canadians have lost the ability to budget and understand their own financial situation, especially with the increasing use of debit and credit cards, says Centum network partner Troy Tisserand. Tisserand was recently recognized with a Man of Honour 2012 Award from CEASE for his work helping Edmonton residents, especially those in high-risk situations, learn how to understand and improve their finances. It all started seven years ago when the City of Edmonton asked Tisserand to work with other organizations to teach financial literacy to lowincome individuals as a poverty reduction strategy. At that time, the majority of people Tisserand saw were low-income, high-risk – the traditional demographic for financial literacy classes. But the trends are changing. Now Tisserand sees middle-income people coming in, and bringing their children to learn good habits, early.

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Children aren’t taught financial skills in school so if they don’t learn from their parents they’re expected to figure it out for themselves. As a child Tisserand’s did not have a lot of money but he watched his parents make the most of what they had. “My parents had an understanding about how money was to be used and they used it effectively to create the best family environment we could have based on the income we had,” he says. “At an early age I learned respect for money.” One of the main messages he tries to pass on is that money is a non-renewable resource. You can earn more, but what you’ve spent is gone. For people whose spending is often on credit cards or into overdraft it can be a difficult mindset to accept. “Our financial system has fundamentally changed. Twenty years ago you withdrew cash for the week and if you spent it all on Monday then that’s it,” Tisserand says. “People have lost touch with how to budget. Average Canadians are now

profile / insight

coming back and saying how do we learn financial literacy?” The 4 Pillars program has a default rate of three to five per cent for all its consumers. Compare that with a 30 to 40 per cent default rate for trustees and a 60 per cent rate for credit counselling and the importance of teaching financial literacy becomes clear. “It’s not about the transaction, it’s about having consumers understand where they’re at financially and how to implement new skills allowing them to move forward,” Tisserand says. Tisserand’s passion for financial literacy goes far beyond business – he thinks courses for Canadians should be free and the majority of the work he does is on a volunteer basis. “The reward is that you actually are teaching skills to individuals that give them the opportunity to create a fundamental change in how they view money. You have the ability to create change in individuals that they never thought was possible,” Tisserand says. “There’s a spark that occurs and it’s at that moment that they realize that they can change their outcome. They’re being given the skills to make those changes and there is a long-term positive effect about how they’re going to move on from where they’re at and get to a better place.” Tisserand has been working with the organizations for long enough to have seen individuals coming through programs such as an Elizabeth Frye class, which supports women still in or just leaving high-risk situations such as

prostitution or legal trouble, who then return a few years later to learn even more. Having made positive changes to their lives, now they’re looking for ways to leverage the assets they have – a job, reliable income and a stable place to live – and accumulate wealth. “Only three things go up in value: real estate, financial investments and businesses. Sometimes they go up, sometimes they go down but everything else we buy is a depreciating asset,” Tisserand tells his students. “If you can buy more of those three and less of everything else, you’re guaranteed to have wealth in your life.”

People have lost touch with how to budget. Average Canadians are now coming back and saying how do we learn financial literacy?

mortgagebrokernews.ca | 59

Profile / favourite things

Favourite thingsâ&#x20AC;Ś

Mary Poburan

Sr. Mortgage Consultant, INVIS Edmonton, Alta. Sport: Kickboxing Music: Adult Contemporary

Drink: Caipirinha (great Brazilian drink!) Hobby: Shopping

Book: The Girl with the Dragon Tattoo Food: Pasta with cream sauces

Place: Lying on a lounger by a pool reading a book

60 | mortgagebrokernews.ca

Movie: Divine Secrets of the Ya-Ya Sisterhood

Vacation: The Mayan Riviera

su b Ju miss

ly ions 16, clo 20 sE 12

WanT To Tell your ClienTs you're aMong

CanaDa's top 75 mortgage brokers?

Submit & you may even find out what itâ&#x20AC;&#x2122;S like to be no. 1! CMP magazine is now calling for submissions for the Top 75 brokers list for the 2011 financial year. Donâ&#x20AC;&#x2122;t miss out on your opportunity to be recognized as a top performer in your industry.

EntEr onlinE at: www.mortgagEbrokErnEws.ca

GUEST / column

A private

conversation “A” brokers are increasingly gung ho about doing private lending deals as regulations make it harder to attract prime deals, but selling it to clients can be challenging for a novice, says Wayne Robinson, CFA and owner of Pillar Financial. Alternative Lending in a Competitive Marketplace The Bank of Canada estimated in a recent report that Canada’s total housing market was worth about $1.1 trillion at the end of 2011. Alternative lenders have said that the total size of what is called the “non-prime” mortgage market is about 20% of that. We’re talking about $200 billion worth of business that is often not at the forefront of a broker’s mind. With the continuing exit of “A” lenders in an ever-tightening regulatory environment, the partnership that alternative lenders have with mortgage brokers will inevitably strengthen. Still, one of the challenges facing young brokers in doing that “B” business seems to be their communication with clients in preparing them for what to expect before moving forward. Having been a mortgage broker, I understand the process of both understanding the client’s situation and

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guest / column

handling their concerns about rates and fees. But once it is determined that alternative financing is the best route to take, I suggest keeping the following points in mind to ensure your client understands what you are laying out is in their best interest.

1. Full, True and Plain Disclosure is Job #1 in All Professional Relationships

Always remind clients politely of the risks they bring to the table, the complexity of the deal they’re proposing and the options for financing they didn’t qualify for

Present complete information about fees upfront right at the interview stage, but leave room to negotiate them before the discussion ends. Promise your client that all fees and rates will be fully disclosed before they decide to accept an offer of financing. Using plain language and providing honest disclosure builds client confidence

4. Be Clear About Benefits and Responsive to Client Concerns

2. Structure the DecisionMaking Process to Lead to the Right Outcome Always remind clients politely of the risks they bring to the table, the complexity of the deal they’re proposing and the options for financing they didn’t qualify for. Discuss the future exit strategy with clients so they have a full understanding of the process from start to finish. Clients will not act under pressure or if uncertain, but they will respond favourably to your professionalism and service orientation

3. Validate Your Role and Contribution to the Financing Process Convey the depth of your expertise, specifically as it applies to arranging short-term mortgages. Account for the time necessary to conduct the financing process. Be specific about the activities associated with developing and maintaining an established network of lenders who have analyzed your client’s situation. Be clear that these activities are necessary to help find and secure the right financing.

Always remind your client of all the benefits they will gain from short-term interim financing. Directly address each specific concern expressed by your clients thoroughly and in a responsive way that demonstrates you are treating them as individuals. Reinforce that doing nothing changes nothing and won’t help them achieve their goals.

needs to be done. Track all of your financing attempts, review them periodically and return to them for a second look on a regular basis. Reestablishing contact with these individuals can help both your client and your business.

About the writer:

5. Consistently Demonstrate Respect and Acceptance of Client Choice Be confident in the options you provide and respectfully accept a client’s choice. You want to create a positive framework that leads to a good outcome, so allow your client to be in control of the decisionmaking process and at the same time, work to shape the experience of weighing the responsibilities and options. And while “no” or “can’t” are never ideal responses, they will periodically occur. Accept them graciously. Also, If your client is unable to obtain short-term financing due to issues beyond your control, ensure your encounter ends on a positive note and indicate what goals need to be met so they are aware what

Wayne Robinson sits at the head of Pillar Financial Services, a private lender that historically lends in Ontario, but recently began doing business in Nova Scotia in its expansion push.

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service / directory

Banks

Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 51

B2B Bank b2bbank.com/mortgages Ph: 1.800.263.8349 Page 29

Bridgewater Bank www.bridgewaterbank.ca Ph: 1 888 837 2326 Page 9

Home Loans Canada www.hlcmortgages.com Ph: 1 866 452 1821 Page 3

RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 17

Tribecca Finance Corporation www.tribecca.ca Ph: 416 225 6900 Page 57 Commercial Lenders

ROMSPEN Investment Corporation www.romspen.com Ph: 1 800 494 0389 Page 1

HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 37

Insurance

VERICO www.verico.ca Ph: 1 866 983 7426 Page 13

Technology & Software

Canada Guaranty Mortgage Insurance Company www.canadaguaranty.ca Ph: 1 866 414 9109 Page 35

National Bank www.nbc.ca Ph: 1 888 483 5628 Page 41

D+H Limited Partnership www.dhltd.com Ph: 1 866 345 6449 Page 2

Real Estate

Non-Bank Lenders

Capital Direct www.capitaldirect.ca Ph: 780 868-0550 Page 10

Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 16

FNF www.fnf.ca Ph: 1 888 814 4005 Page 24

Services

Equitable Trust Company www.equitabletrust.com Ph: 1 866 407 0004 Inside Back Cover

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

Best Points Travel info@bestpointstravel.com Ph: 1 800 551 8786 Ph: 416 251 9944 Page 50

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

The Lions Share Group www.lionssharegroup.com Ph: 1 866 726 5159 Page 12

Broker Networks

Home Trust www.hometrust.ca Ph: 1 877 903 2133 Inside Front Cover

ING Direct www.ingdirectbrokerteam.ca Ph: 1 800 574 5629 Page 33

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Dominion Lending Centres www.DominionLending.ca Ph: 1 888 806 8080 Page 15

Everyone talks about service. Equitable delivers. It’s a team approach to lending. Open conversation. Partnership success. Unique, in an otherwise compartmentalized world, means Equitable can see & hear what others often miss... ...Client Circumstance. We specialize in business-for-self, newcomers and credit challenged clients who want to be heard. Let’s talk today. ONTARIO/QUÉBEC T: 1.866.407.0004 F: 1.866.407.5859 WESTERN CANADA T: 1.866.940.1201 F: 1.888.440.1201

www.equitabletrust.com

If only shopping for a first home was this easy… With a little help from Genworth Canada, shopping for a first home doesn’t have to be complicated. We understand the importance of owning a home and having the information your clients need to make smart homeownership choices. Our promise is to help them with homebuying basics such as understanding down payment options, maintaining good credit and staying on budget. Find us on Facebook! Visit Genworthsmartshopper.ca for tips and resources to help achieve homeownership dreams.