CMP 12.02 by Key Media

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STEP UP YOUR SERVICE How brokers can add value during the due diligence phase ONE ON ONE WITH AJAY SONI The CMBA president talks technology, regulations and going mainstream MORTGAGE BROKERS VERSUS OTTAWA What the industry is doing to fight back against the latest rule changes

WHY DIVERSIFY? Brokers who’ve been there share how diversification has paid off for them – and offer advice for those looking to branch out

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ISSUE 12.02

CONTENTS

WHY DIVERSIFY? COVER STORY

Thinking about adding alternative revenue streams like insurance or a secured credit card? Get the scoop on how to get started from brokers who have been there

24 HOW PLANS BECOME SQUARE FEET. Romspen Investment Corporation is a non-bank mortgage lender specializing in commercial real estate across Canada and the United States. With over $1.7 billion under administration, we offer customized mortgage solutions for term, bridge and construction financing from $4M to $100M.

Blake Cassidy or Pierre Leonard | 800 494 0389 | www.romspen.com

DATE:

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ISSUE 12.02

CONNECT WITH US Got a story or suggestion, or just want to find out some more information?

CONTENTS

twitter.com/CMPmagazine plus.google.com/+MortgagebrokernewsCa facebook.com/MortgageBrokerNewsCA

UPFRONT 04 Editorial

The post-regulation numbers are in

06 Statistics

Has the tide turned on Canada’s debt problem?

PUTTING PEOPLE FIRST

10 News analysis

08 Head to head

When should clients consider variable-rate mortgages?

FEATURES

44 34

Find out how one brokerage has handled the growth that comes with diversification

INDUSTRY ICON

CMBA president Ajay Soni weighs in on what part the industry should play in promoting technology and controlling regulation

Why adaptation is key to survival in the mortgage business

BROKER INSIGHT A strong work ethic and profitable niche have rocketed broker Kyle Green to success

CMY

16 Opinion

PEOPLE

PEOPLE 47 Career path

Chris Turcotte chronicles his rapid rise to the top

48 Other life

On pointe with dance teacher Crystal Donnelly

FEATURES

NAVIGATING DUE DILIGENCE Helping borrowers through due diligence is a key way that brokers can add value. Here’s how to smooth the way

A new study finds Canadian consumers are relatively slow in adopting financial services technology Brokers are divided on whether DLC’s purchase of Marlborough Stirling is a good thing for the industry

STOP REFERRING CLIENTS

PEOPLE

12 Technology update

14 Broker network update

FEATURES

If your only attempt at diversification is sending clients to an insurance agent, discover how you can go further

Brokers push back against the latest round of mortgage regulations

MORTGAGEBROKERNEWS.CA CHECK IT OUT ONLINE

www.mortgagebrokernews.ca

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XCEED Full Page Feb2017.pdf

2017-02-14

1:45 PM

CMY

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UPFRONT

EDITORIAL

www.mortgagebrokernews.ca ISSUE 12.02

Brokers’ fears confirmed

peculation (very rightfully) abounded following last year’s mortgage rule changes – brokers feared they would have a material impact on home sales. That suspicion was confirmed by the Canadian Real Estate Association’s first market update of the year. Sales declined 1.3% month-over-month – an ominous start to the year. As a result, resales fell to their lowest level since late 2015. Sales activity was down in half of all local markets, led by the GTA, Greater Vancouver and Montreal. CREA didn’t sugarcoat it. “Canadian homebuyers face some challenges

“Housing activity will not provide the boost to overall economic growth in 2017 that it did in the first half of 2016” this year, including new mortgage rules that make it harder to qualify for a mortgage, and regulatory changes that will push up mortgage financing costs,” CREA president Cliff Iverson said. “It will take some time to gauge the extent to which these challenges will weigh on homebuyers in different housing markets across Canada.” As for the impact of the changes, they are expected to extend further than just the housing industry. “Housing activity will not provide the boost to overall economic growth in 2017 that it did in 2015 and the first half of 2016, as first-time homebuyers will find it more difficult to qualify for a mortgage, and credit availability is diminished by the disproportionate impact of the new regulations on non-bank lenders,” wrote Dr. Sherry Cooper, Dominion Lending Centres’ chief economist, in a research note following the release of the CREA data. However, it’s not all doom and gloom. As you’ll see in this very issue, the industry is hard at work trying to amend these dire mortgage rule changes. Let’s keep our fingers crossed. The team at Canadian Mortgage Professional

EDITORIAL Editor Justin da Rosa Writers Joe Rosengarten Libby Macdonald Ephraim Vecina Kimberly Banks Copy Editor Clare Alexander

CONTRIBUTORS

SALES & MARKETING Associate Publisher Trevor Biggs General Manager, Sales John Mackenzie National Account Manager Trevor Lambert Marketing and Communications Melissa Christopoulos Project Coordinator Jessica Duce

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ART & PRODUCTION Design Manager Daniel Williams Designer Loiza Caguiat Production Manager Alicia Chin Advertising Coordinator Kay Valdez

CORPORATE President & CEO Tim Duce Office/Traffic Manager Marni Parker Events and Conference Manager Chris Davis Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil Global CEO Mike Shipley Global COO George Walmsley

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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 the magazine can accept no responsibility for loss

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UPFRONT

STATISTICS

Debt on the downslide?

WHAT PART DO MORTGAGES PLAY?

A recent CIBC study suggests the government’s mortgage regulation crackdown may be having the intended effect of slowing Canada’s debt rate ELEVATED HOUSEHOLD debt is regularly cited as foretelling of massive economic doom in Canada, but according to recent research from CIBC, the nation’s lending is soon to enter a period of relative calm. The bad news? That tranquillity may be coming largely at the expense of brokers’ business – CIBC cited factors such as more stringent qualifying conditions, higher mortgage rates and slowing activity in high-profile markets like Vancouver

$405 billion Estimated value of new mortgage originations in 2016

5.5%

Increase in new mortgage originations from 2015 to 2016

in predicting that 2017 will see a slightly cooler rate of growth for mortgage originations (5% versus 5.5% in 2016). While CIBC projects softening growth in nearly every credit vehicle (mortgages, credit cards and auto loans), the overall picture reveals that, despite all the commotion in Canada’s housing market, the recent rate of the nation’s credit growth has by no means been rapid, and will likely remain stable.

Annual rate by which mortgage debt is expected to rise over the next two years

Mortgages now account for almost 72% of total household debt, the highest proportion in nearly 20 years. CIBC estimates that in 2016, mortgages were responsible for more than 80% of the growth in household debt.

Residential mortgage credit as a share of total household credit Major changes to government-backed mortgages

Growth in total Canadian household debt in 2016 Sources: CIBC Economics, February 2017

MORTGAGE DEBT PEAKS

DEBT FALLS AS ASSETS RISE

The amount of mortgage debt incurred by Canadians started to decline in the latter half of 2016 as marketcooling measures were introduced.

Over the past six years, Canadians’ financial assets have grown at a slightly faster clip than their debt load. Today, the ratio of debt to assets is 16.69%, which is among the lowest since 2010.

MORTGAGE DEBT, YEAR-OVER-YEAR CHANGE 14%

RATIO OF DEBT TO TOTAL ASSETS 20%

15%

12% 10%

10%

8% 6%

4% 2% 0%

0% 2004

2006 2008 2010 2012 2014 2016 Source: CIBC Economics, February 2017

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 2016 Source: CIBC Economics, February 2017

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72%

2011 • Maximum LTV for refinances lowered to 85% • Amortization term reduced to 30 years

2008

70%

• Amortization term reduced to 35 years • Minimum down payment on insured mortgages increased to 5%

68%

2016

66%

2004–2006

2010

• Maximum LTV for refinances raised to 95% • Down payment on insured mortgages reduced to 0% • Amortization term extended to 40 years

• Maximum LTV for refinances lowered to 90% • Borrowers must qualify at five-year fixed rate 2012

64%

62%

• Minimum down payment for insured mortgages increased to 10% for houses over $500,000 • Borrowers must qualify at Bank of Canada benchmark rate

• Maximum LTV for refinances lowered to 80% • Amortization term reduced to 25 years

2000

2002

2004

2006

2008

2010

2012

2014

2016

Source: CIBC Economics, February 2017; University of Toronto, TD Economics

ARREARS REMAIN STABLE

LOW RATES PAY OFF

The mortgage arrears rate has stabilized at close to 0.3%, not far from the figure seen before the recession and well down from the tumultuous days of 2009. Not surprisingly, oil-dependent provinces continue to see the highest number of people behind on their mortgages.

Reflecting the ongoing low-interest-rate environment, the share of household income Canadians spend on interest payments has steadily decreased since 2010.

% OF ARREARS TO TOTAL NUMBER OF MORTGAGES 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 1991 1994 1997 2000 2003 2006 2009 2012 2015

ARREARS % BY PROVINCE 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 BC MB/SK AB

AVERAGE % OF HOUSEHOLD DISPOSABLE INCOME SPENT ON INTEREST

Canada

QC Atlantic

Source: CIBC Economics, February 2017

2010

8.1%

2011

8.0%

2012

7.7%

2013

7.5%

2014

7.2%

2015

7.0%

2016

6.7% Source: CIBC Economics, February 2017

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UPFRONT

HEAD TO HEAD

Should more clients move to variable-rate mortgages? The rising cost of fixed-rate mortgages may have clients turning to variable-rate options, but is that the wisest course of action?

Robert Mogensen

Michelle Campbell

Christopher Molder

“With the spread between fixed and variable rates as close as it stands today, it’s hard to make an argument to go variable and forgo the ‘insurance’ against a rate bump via a five-year fixed rate product. However, if the clients qualify at the benchmark and can handle a payment shock, the savings and the ability to pay out (with a penalty) are very attractive. The bottom line: If the clients are conservative and couldn’t handle a payment shock, I recommend the fixed rates. While they remain at all-time lows, in my mind, it’s the prudent thing to do.”

“Variable-rate mortgages can be extremely attractive, with penalties considerably lower than a fixed rate; however, there are a few things for clients to consider. Will the client have the time to follow the market? Does the client realize that their payment will likely increase, and have they considered how that will that affect their monthly budget? Even though they are able to lock into a fixed term, typically it would be at the remaining term rate or higher. On the flip side, choosing a fixed-rate mortgage could mean thousands of dollars in penalties if the term is broken early.”

“Variable versus fixed is not a one-sizefits-all solution, and I think it’s important to explain that. As the delta between fixed and variable rates grows, more and more borrowers will gravitate toward VRMs. For brokers, it’s really important that we understand the macroeconomic factors that influence the movement of rates and are able to clearly and simply explain that to borrowers. Any recommendation to a borrower should always be framed within a discussion that considers factors such as their attitude towards risk, financial literacy and ability to deal with fluctuations to their monthly payment.”

Mortgage consultant The Mortgage Advantage Financial Services

Principal broker Mortgage District

Principal broker Axess Mortgage

THE NEW POPULARITY OF VARIABLE-RATE MORTGAGES The difference between fixed- and variable-rate mortgages was negligible for much of 2016, narrowing to as little as 0.2% at times. Unsurprisingly, these figures resulted in a consumer preference for fixed-rate products; CanWise clients, for example, reportedly opted for fixed-rate mortgages at a rate of nine to one. However, that gap is widening: The most competitive available fixed-rate mortgage is up 0.33% since November, to 2.44%. Simultaneously, variable rates have been dropping; the best rate available now sits around 1.85%.

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UPFRONT

NEWS ANALYSIS

Brokers go to battle The industry has mobilized against policymakers who seem intent on squeezing buyers out of the market and brokers out of the mortgage game AT THE beginning of February, a number of mortgage industry players attended a standing committee to share their recommendations on how the government can tweak last October’s mortgage rule changes to minimize the impact they will have on Canadian homebuyers and the broker industry. “The changes announced negatively affect the mortgage broker channel as a whole, and Canadian consumers have been more and more inclined to use the services of a broker to provide choice, advocacy and support, and to assist in the technical requirements of mortgage qualification,” Paul Taylor, president and CEO of Mortgage Professionals Canada, told the committee. “Placing competitive disadvantages, then, for nontraditional bank lenders

mortgage rule changes were designed to curb demand in Canada’s overheated markets, primarily Toronto and Vancouver. As many have noted, however, they have had widespread impacts outside those major markets – including raising the cost of lending for non-bank lenders, which has resulted in higher mortgage costs for consumers. However, the industry is certainly fighting back. Taylor presented five recommendations to the government, aimed at levelling the playing field and minimizing the unintended impact of the recent rules: • Suspend all regulatory measures not yet implemented. • Adjust the November 30 change to allow refinance mortgages to be included again in

“Placing competitive disadvantages for nontraditional bank lenders will adversely affect [the mortgage broker channel]” Paul Taylor, Mortgage Professionals Canada will adversely affect this segment of the Canadian mortgage marketplace, which consumers are clearly voting for with their purchasing habits.” Taylor noted that 33% of all mortgages are funded by brokers, more than 50% of firsttime buyers use the services of a broker, and the total economic activity created by the industry amounts to more than $80 billion. Announced October 3, the government’s

portfolio insurance. If an 80% loan-to-value is unacceptable, please consider moving the threshold to 75% rather than removing eligibility of these products entirely. • Reconsider the increased capital reserve requirements implemented in January for insured mortgages . • Review the long-term impact of regionalbased pricing on the Canadian economy as a whole and the potential additional harmful

effects on strained economies. • Uncouple the stress test rate from the Big Five banks’ posted rates. Use an independent mechanism to determine the rate and require its use to qualify all mortgages, not just those insured. Plenty of other industry heavy hitters were on hand to share their opinions as well, including Dominion Lending Centres president Gary Mauris. “This is the only time that the industry has come together and said we want to at least provide our feedback because there has been an error [made by the government],” Mauris said after the meeting. “This is the only time the government has made changes unilaterally and very quickly without proper consultation, and that is having a massive impact on Canadians and their families.” Mauris argued that the new rules reach much farther than Toronto and Vancouver. “These national-scale changes are impacting the entire country, when they are clearly directed at two hot housing markets, Toronto and Vancouver,” he said. “We think smart

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MORTGAGE RULES IN THE GOVERNMENT’S WORDS When the Government of Canada announced its mortgage rule changes on October 3, it offered the following aims as the impetus for the changes: Bring consistency to mortgage insurance rules by standardizing eligibility criteria for high- and low-ratio insured mortgages, including a mortgage rate stress test. Improve tax fairness by closing loopholes surrounding the capital gains tax exemption on the sale of a principal residence. Consult on how to better protect taxpayers by ensuring that the distribution of risk in the housing finance system is balanced.

policy would be to implement proposals on a regional basis, taking into account differences across the country. It’s about an overreaching policy to cool two markets, Toronto and Vancouver. That’s the equivalent of a teacher having two misbehaving children and pun-

paying down a mortgage on their appreciating asset, but instead that of their landlord. However, most federal government policies, such as latest crop of federal mortgage rules, which are intended to promote economic stability by curbing consumer debt, have only

“This is the only time the government has made changes unilaterally and very quickly without proper consultation” Gary Mauris, Dominion Lending Centres ishing the entire classroom.” The Canadian Mortgage Brokers Association was also represented at the meeting by its president, Ajay Soni, who shared his association’s recommendations. “It goes without saying that people have to live somewhere,” the CMBA wrote in a letter to the standing committee prior to the meeting. “If they are not able to purchase housing, they must rent. In doing so, they are no longer

a singular, narrow focus on the economy. These policies fail to consider that housing affordability problems impact both lower- and middle-income households, renters, first-time buyers, and even established homeowners.” The CMBA went on to provide the following recommendations: • Exempt fixed-rate five-year (or greater) mortgage borrowers from having to qualify at the Bank of Canada’s benchmark rate.

• Permit 30-year amortizations for first-time buyers. • Allow borrowers with an LTV of 80% or less to amortize up to 30 years. • Exempt insured mortgages of $499,000 or less from having to qualify at the BoC benchmark rate. • Modify the benchmark rate to include the averages of all federally regulated lenders, not just the big banks. • Find ways for the government to remove excessive red tape relating to housing development. • Reduce high-ratio insurance premiums so that they are revenue-neutral. • Have the government focus more on the impact of unsecured debt. • Ensure lenders of unsecured credit qualify borrowers on income and debt ratios, and not just credit scores. It remains to be seen what impact industry testimony will have on the government’s decision to tweak the rules. If nothing else, however, it’s become clear the industry is operating on a united front in a bid to fight for its right to continue to thrive. Axiom Mortgage CEO Michael Cameron perhaps put it best on a recent episode of Canadian Mortgage Hangout. What we are seeing, he said, is a “movement to hold the government accountable.”

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UPFRONT

TECHNOLOGY UPDATE NEWS BRIEFS Analytics to be used to calculate credit assessments

In a collaboration with Toronto-based fintech company Borrowell, consumer credit reporting agency Equifax said it will start using analytics to calculate credit assessments. “With new technologies, we can get a better picture of the consumer when they come through the door and incorporate it into scores,” said Equifax Canada chief marketing officer Chris Briggs. The Equifax/Borrowell partnership will analyze records from as many as 1,600 sources, a method that will particularly help new immigrants and other consumers who lack Canadian credit data.

Editorial argues for open real estate information

The editorial board of The Globe and Mail has posited that the secrecy surrounding home sale price data is actually making the Canadian real estate industry more prone to risks than necessary. In a recent editorial, the paper argued that the industry’s preference for keeping this information hidden is stifling competition and innovation in the sector. “Who does the secrecy benefit? Certainly not the public,” the editorial said. “Information is what makes markets work. The more information, the better for buyers, sellers, and the health and efficiency of the market itself.”

Tech company turns mortgages into a game Tech firm Mogo aims to become the premier digital player in Canada, and its latest product attempts to gamify mortgages by rewarding homeowners for paying down their debt. MogoMortgage promises benefits

to clients for making milestone payments, as well as offering perks like dinner and celebratory champagne upon funding a mortgage. “Unlike any other mortgage experience in Canada, we focus on keeping our members on track through an interactive dashboard that is designed to encourage and reward members for paying down their mortgage,” said Mogo founder and CEO Dave Feller.

LendMart launches online tool for SMEs In late January, LendMart introduced a smart digital platform that will allow small and medium-sized Canadian businesses that are at least six months old to find, compare and apply for verified loan options within five minutes. “Every year, a third of Canadian small businesses apply for a loan, and on average, over 33 hours are spent on each loan application,” said LendMart co-founder Lana Tayara. “This is a waste. We want to let entrepreneurs focus on the core of their business while leveraging technology to quickly find and apply for the financing they require.”

CMHC abolishes mortgage records monopoly

In late December, the CMHC granted a new mortgage records certification to Canada’s CST Trust Company, demolishing a 30-year monopoly held by Australia-based firm Computer Share Inc. “It’s taking out a lot of risk by having an alternative provider and ultimately provides flexibility in the capital markets about how mortgages are financed,” said CST Trust Company senior vice-president Frank Turzanski. CST said its setup will allow issuers, originators and investors easy access to specific bits of asset information at any time.

Canada lagging in fintech adoption Overwhelmingly, Canadian consumers say they still prefer in-person mortgage advice Despite the growing pervasiveness of technology in all aspects of the economy, a recent Accenture study found that Canada is behind other countries in accepting financial services automation. The company noted in its 2017 consumer survey that approximately 59% of Canadians prefer to use digital support for their banking transactions, citing “improved speed and convenience [as] the main reason consumers will turn to automated servicing.” However, only 14% of Canadian millennials said they would trust investment, insurance, banking or purchasing advice from an online platform such as Amazon or Google, which is far below the 40% global average. The same study revealed that 61% of Canadian consumers have no plans to move into robo-advice for mortgage transactions, but instead plan to rely on in-person advice in bank branches. The 23% of Canadian respondents characterized as bargain-hunters were among the segments most heavily dependent on human advisors. The study found that less than a quarter of Canadian consumers were what it deemed ‘Nomads’: “a highly digitally active group” who are most willing and prepared to use next-generation models of financial services delivery. This is the cohort to watch out for, Accenture said, as Nomads do not see

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themselves tied to traditional providers such as banks. Canadian consumers may need to adjust their attitudes quickly – last September, US-based industry observer Brad Finkelstein theorized that an increased dependence on digital networks and artificial intelligence will become all but inevitable in an industry that aims for minimal errors and maximum efficiency.

Only 14% of Canadian millennials said they would trust advice from an online platform “Current automated underwriting systems are rules-based and still require human intervention to address exceptions to standard rules,” Finkelstein said. “But as machine learning advances, artificial intelligence will be able to fill that role, helping lenders cut approval turn times and costs from their operations.” A corollary of this development is that appraisals may become outmoded, he added, but this doesn’t imply the complete removal of the human factor. “[There] will always be a need for lenders to understand the conditions of a subject property,” Finkelstein said. “That’s why lenders will require borrowers to share the results of their home inspection. The inspection, combined with the results of the [automated valuation model], will provide the details necessary to evaluate the collateral backing mortgages of the future.”

Q&A

Monika TarnikJedrusiak Mortgage planner MORTGAGEPAL

Years in the industry 4+ Fast fact Together with her husband, a fellow mortgage planner, Tarnik-Jedrusiak also runs the site BestRates.ca

Finding opportunity amid disruption How have your years in the industry shaped the way you conduct your business? When I joined the industry, the main source of lead generation was marketing via printed media: fliers, newspaper ads and editorials. When I was working with my clients, I was able to meet with them either in the office or at their homes to sign all the documents required by the lenders. Currently, our main stream of business comes from referrals and internet marketing on two major platforms and our website, BestRates.ca. In terms of technology, what has changed in the industry between the time you started and the present? Just four years ago, we were using fax machines to send documents to lenders, and digital printers to print out copies for the clients to sign. Today’s mortgage agent has to know technology very well, as most applications are now processed online, sometimes even without meeting the client face-to-face. There are so many mobile apps you can use to either schedule your meeting or process the documents right into the database. Very soon, we might even use digital signatures – it is available today to real estate agents, just not accepted by the lenders yet. How should mortgage industry players keep updated on the latest technological developments? You can only do it by using the right tools; otherwise, you can easily lose your mind. You need to keep your eyes open for any apps that will help you streamline the mortgage application process. In your view, what should a mortgage professional’s role be in an increasingly online world? More and more people are browsing online mortgage comparison sites to search for the lowest rates, but not every mortgage product is the same; the lowest mortgage rate doesn’t mean the best product for your client. Every scenario is different, and that’s why we need to guide today’s shoppers so they will know the difference and don’t end up paying hefty penalties when they sell their properties. By having online access to almost every lender, we can educate clients and help them make the right decisions. How do you see the relationship between client and mortgage professional evolving in this digital landscape? I think that in the coming years, most mortgage transactions will be done online, from application to credit check and approval. Our relationship with the client will be limited to either phone conversations or a few emails. It is already happening in the US, where you can get mortgages approved within 10 to 15 minutes without ever talking to a real person. That’s what’s scary, but it is coming nevertheless. I will always miss meeting with my clients for a coffee.

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UPFRONT

BROKER NETWORK UPDATE

Industry reacts to major DLC purchase The network’s purchase of Marlborough Stirling will position MorWEB to become a more dominant industry player – but not all brokers are in favour of it

“It’s never a good thing when any one entity has too much concentrated power in any industry,” said John Bargis, vice president of Mortgage Edge, who also questioned how lenders will react to the purchase. “I think the lenders certainly have to be scratching their heads on this one and wondering what this play has in store for them,” he said. “Increased technology investment at a time when the industry is in a state of flux might be tough to swallow.”

“It’s never a good thing when any one entity has too much concentrated power in any industry”

Dominion Lending Centres procured mortgage software company Marlborough Stirling in December 2016 for a reported aggregate purchase price of $5.5 million. The deal includes MorWEB, the country’s secondlargest mortgage processing platform. MorWEB is still a relatively small player – accounting for less than 10% of the market – compared to its main competitor, D+H Expert. But with the country’s largest network behind it, MorWEB is likely to see its share increase. “We believe this transaction is a significant

NEWS BRIEFS

step forward for the DLC group of companies,” DLC president Gary Mauris said. “It provides us an additional origination delivery platform and allows us to have material influence on user experience and data management, and will easily allow us to add additional revenue streams under a central platform.” The acquisition was another major growth move for DLC in a year that also saw it acquire major competitor Mortgage Architects, which has some questioning whether DLC’s reach is becoming too broad.

DLC touts brokers with online ad campaign

With its online ad campaign, which started last fall and will run into the spring, Dominion Lending Centres aims to educate hopeful homebuyers on the advantages of working with a broker. Among the ads, which feature the 1982 Madness single “Our House,” is one featuring an Obama lookalike searching for a new home. “With the 15-second commercials, we’re really trying to tap into a little bit of humour and what’s current,” said Dave Teixeira, VP of marketing, public relations and communications for DLC.

Brokers affiliated with the network, meanwhile, were positive about the deal. “It’s not going to be anything but a good thing for brokers,” said Dustan Woodhouse of Dominion Lending Centres Canadian Mortgage Experts. “That’s a platform that hasn’t seen a lot of action for brokers. There’s no question it’s going to be a major player in the space.” While some non-DLC brokers have already voiced their apprehension about sending deals through a company owned by a competitor, there’s no question more deals will filter through MorWEB than ever before. “Between DLC, MCC and Mortgage Architects, we’re talking 5,000 brokers,” Woodhouse said. “At the end of the day, what does the platform look like? If it’s more userfriendly, it’ll get used.”

Centum announces appointment of new president

In December, Centum named Chris Turcotte as its new president, making the 35-year-old the youngest high-level executive in the channel. Turcotte cut his teeth in banking before turning to the broker channel, launching a Centum franchise in Brandon, Manitoba. Within five years, Turcotte had grown his franchise into the sixth largest by volume in the network. “I did that by leveraging technology,” he said. “My wheelhouse is online marketing, SEO and especially social media. I think that’s what’s going to be Centum’s edge going forward.”

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Q&A

Bill Whyte

A shared mortgage for expensive markets

Senior vice-president and chief of member experience MERIDIAN CREDIT UNION

Years in the industry 34 Career highlight For most of his career, Whyte worked at CIBC as a VP overseeing the GTA market

Tell us about Meridian’s Family + Friends Mortgage. It’s basically the same as a regular mortgage, with the same rates and features as all our other offerings, except it can allow up to four people to be entitled, versus the traditional mortgage, which is usually up to just two people.

What factors led you to launch this product? Primarily the hot housing markets in Canada, especially in the GTA and Vancouver. The cost of homeownership still remains out of reach for many. By putting more people on a title, friends or family may say, “Yeah, we want to purchase a condo together instead of renting.” Aside from groups of friends, the mortgage would also be attractive to those who want to live together with their extended families. It will be helpful especially for families who want their elderly parents to stay with them, versus opting for assisted living facilities.

How does the Family + Friends Mortgage stand out from the other mortgage offerings on the market? There are no extra fees for setting it up, period. You get the same great mortgage rate; you get all the features and benefits, including the pre-payment privileges. It’s built around giving friends and extended families the opportunity to get into the market, which they might otherwise be unable to do alone.

FICOM says it will attempt to regulate networks

BC regulator FICOM hopes to compel networks to disclose all bonuses under recent regulations, saying it “expects that franchise and network corporate heads will provide information to related mortgage brokers to ensure related mortgage brokers are able to meet ... disclosure requirements.” However, the networks are pushing back. “FICOM can only regulate those who they regulate,” said DLC’s Dave Teixeira. “In certain cases, they would not be able to regulate the networks because the members are not actually [licensed] brokerages.”

What role will your network play in this offering? We can help clients who are still deciding on the degrees of ownership in their cooperative purchases. We can also help them think ahead and consider any possible future sales of the home. Like, what happens when something unintentionally goes wrong, and one or more parties break off for some reason? We can help them with the steps that can be taken to resolve the situation, even when they are apart. We will certainly make information on this new product available with our existing mortgage options, whether within our branches or through our websites – drawing people’s attention to the mortgage as an option that they may want to consider, and engaging in conversations whenever someone says, “I’d really like to take out a mortgage, but I can’t afford it.” They need to know that splitting the cost with friends or family can increase their chances of getting the house they need.

How do you see this product affecting the market? I hope that with the new mortgage rules that came in last fall – especially the stress test and the qualification changes – we will succeed in giving people another choice if they really want to own a home. First-time buyers might not be able to get houses on their own, so they can invite family or friends and find an entry point into building equity together.

Calum Ross named Verico Broker of the Year

Verico has selected Calum Ross as Broker of the Year for 2016, citing Ross’ contributions as an industry player, public speaker and thought leader. “He has been of the very few [brokers] who have successfully culminated a unique academic approach while maintaining the traditional fundamentals of hard work, execution and unwavering commitment to create a distinguished niche which transcends the basic premise of simply selling a mortgage transaction,” said Verico president Albert Collu.

Network blames regulatory changes for sales slowdown

Changes to federal mortgage rules are dampening home sales numbers, says Dominion Lending Centres chief economist Sherry Cooper, who warns that 2017 could be a challenging year. “Housing activity will not provide the boost to overall economic growth in 2017 that it did in 2015 and the first half of 2016,” Cooper said, “as first-time homebuyers will find it more difficult to qualify for a mortgage, and credit availability is diminished by the disproportionate impact of the new regulations on non-bank lenders.”

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UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email mortgagebrokernews@kmimedia.ca

Brace for change in 2017 Grappling with new rules? You might as well get used to it, because the only constant in this business is change, writes Dustan Woodhouse

WE ARE rocketing deeper into 2017 and getting ready for a spring market that has seen many predictions thus far, most of which have been rather polarized. Depending on who you speak to, it’s either going to be extremely difficult to get approvals and thus won’t be a strong market, or it’s going to be extremely difficult to get approvals, but we will rise to the challenge and will be rewarded with stacks of business. There’s no question that things have changed in our industry … again. Have you? Will you? Can you? Adaptation is the key to this business; any broker with more than a few years of experience will confirm this. So get with the program and sign up for any and every mortgage education program you can find. I started in this business in 2008. My first week was the same week that the federal government announced the end of zero-down mortgages and 40-year amortizations. I didn’t know much, but I knew that was a meaningful announcement. More than a few brokers told me, ‘That’s it – that’s the end of our industry.’ It clearly was not. It wasn’t the end of changes, either. Changes have kept coming at us every year since then. And each year, brokers’ market share grows. As I write this, some desert-bootwearing, Duck Dynasty-bearded, man-bunsporting rookie broker is unpacking his hipster satchel at his new desk, wondering

what all this whirlwind of change might mean, but not worrying about how it will end him before he begins. Instead, he’s looking past it and ignoring the crusty broker eight years or more in, telling him ‘That’s it – that’s the end of our

tarian interest-rate environment can feel counterintuitive to clients. They believe their 20% LTV mortgage with a 10-year amortization, combined with their impeccable credit and strong income, makes them the lowest risk, and thus entitled to the lowest rate. The best analogy I’ve heard for explaining to clients the variety of different interest rates comes from First National Financial’s national sales director, Ben Kawa, who said, “It’s now like car insurance.” It’s not about how the lender views the clients. It’s how the investors view the lenders’ assets. And one cannot escape the fact that a government-backed (insured) mortgage signals the gold standard of a low-risk product. Now that lenders are no longer able to bulk-insure Mom and Dad’s mortgage, or Grandpa and Grandma’s HELOC, those products, even in spite of an impeccable client profile, simply do not measure up.

“Adaptation is the key to this business, so get with the program and sign up for every mortgage education program you can find” industry.’ This rookie broker is going to get educated, learn to explain the nuances of mortgage financing to clients clearly and simply, and he’s going to crush it. That broker should rip this article out, stick it in his desk drawer, and in 2018 when he breaks 100 transactions, he should email me and say, “I was the one.” It is my hope there is not just one broker, but rather hundreds of new brokers out there with the fire and the belief that they will succeed. They will see past the current turmoil, dig in and get educated on how to read new rate sheets, how to articulate new approval policies smoothly and how to do so in language that is easily understood by clients. The ability to make complicated matters simple is a skill not to be underestimated in our ever-changing world. For example, the reframing of a previously somewhat egali-

And so it goes that the twentysomethings with their 5% down, limited credit history and 90-day employment history get the better interest rates because an investor will accept a lower return on these lessrisky bundles of mortgages. What seems illogical at first is actually quite logical once explained. Mastering explanations such as this is our new job for 2017. Come 2018, there will undoubtedly be new things to explain – perhaps more before the end of 2017 even. Adapt!

Dustan Woodhouse is Vancouver-based mortgage broker with DLC Canadian Mortgage Experts. Woodhouse has been in the business since 2008, and is the author of three volumes of Be the Better Broker.

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PEOPLE

INDUSTRY ICON

MORE THAN A MORTGAGE BROKER From world traveler to broker to head of the Canadian Mortgage Brokers Association, Ajay Soni is using his decades of expertise to advocate for change within the industry LIKE SO many others, Ajay Soni fell into the mortgage industry by accident. Having recently graduated from UBC, Soni was in the middle of a year-and-a-half-long backpacking trip around the world when a listing for a job in the mortgage industry caught his eye. “This was long before the days of the internet; in those days, we’d look at job boards for opportunities,” he recalls. “I saw an ad for something about mortgages, and I’ll be honest with you – I barely knew what a mortgage was.” The mortgage broker industry presented an opportunity at the same time further education did. Soni had applied to an MBA program prior to taking the broker job and was eventually accepted, forcing him to juggle his broker duties with his schoolwork. “By September 1988, I was a broker,” he says. “I was doing an MBA on the side, but I just took off as a mortgage broker. Not being a quitter, I continued with my MBA at night.” He remembers the time fondly, noting the excitement of working in a fledgling industry that didn’t have a large number of players. By 1992, Soni had left that first broker job to set up his own company, Mortgage Corp., which he led from 1992 to 1999. Then, in 2001, there was a big merger of all the superbrokers. Mortgage Corp., which had become a big player in Vancouver, was

rolled into Invis, where Soni is still affiliated to this day. “What’s very interesting is that I gave up ownership, became a broker at Invis, and all my brokers merged in,” he says. “Invis had been owned by HSBC before then, and there was a broker buyout in about 2008, and I ended up coming back to being an owner of Invis.” But that wasn’t the last back-and-forth Soni would see during his career. “Last year, Invis

“I think we are now finally at the dawn of technology really shaping our industry,” he says. “As much as that has been something that we’ve been working with for 15 years, there was this large promise 15 years ago that the internet was going to take off, but it never really did replace that need for one-on-one customer service. “Technology for our industry has finally evolved, and it is going to really start shaping

“Technology for our industry has finally evolved, and it is going to really start shaping where we go next. Technology has to be harnessed to get to the mortgage consumer now more than ever before” Mortgage Intelligence ended up selling out to Multi-Prêts. I’ve given back the reins to somebody else now,” Soni says with a chuckle.

Changing times The industry is facing a number of changes that are poised to reshape it, and according to Soni, one of the most prominent is the growing capability and influence of technology.

where we go next,” he continues. “Technology has to be harnessed to get to the mortgage consumer now more than ever before. As much as we were doing it before, more sophisticated forms of technology are going to come to the forefront.” According to Soni, it will be up to the younger generation of mortgage brokers, lenders and other players to truly determine

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PROFILE Name: Ajay Soni Title: President Company: Canadian Mortgage Brokers Association Years in the industry: 29 Career highlight: “Just really sticking with a profession, despite the highs and the lows. Knowing that you’ve made a big difference – not just to your clients and to yourself by earning money, but to the industry overall. I’ve volunteered since the beginning on so many boards.” Career lowlight: “That 2008–2009 period was a tremendous learning experience. Sticking to what we knew really benefited us – not just myself, but all of us as owners of Invis and all our brokers in the industry. We bounced back with a vengeance.”

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PEOPLE

INDUSTRY ICON AJAY SONI’S CAREER TIMELINE 1985 what role technology will play in the future of the industry. “Who will champion those? I don’t know,” he says. “I’m probably past my career highlights; I’ve been doing this for 29 years now. It’ll be interesting to see what the next model for mortgage brokers and distribution of services might be – if it really, really takes technology to the next level. I think that’s where we’ll probably be going both on the brokerage side and on the lender side.”

Coming together to grow Regulation, regulation, regulation: We’ve heard it all before, and if Soni has his way, we may hear less about it in the future.

dent of the Canadian Mortgage Brokers Association, he feels an obligation to represent the industry and ensure its future success. “We have to stay on the forefront of consumers, politicians and regulators, and show them that we’re a credible force and that we really do make a difference,” he says. “We’ve done that through the CMBA by starting our advertising campaign three and a half years ago, and I think it’s made a difference so that we’re seen as a profession.” Soni even finds something positive in the mainstream media’s coverage of the mortgage industry, even though it often unfairly paints brokers in a negative light. To him, it’s evidence that the general public is becoming much more

“We’re fighting regulator perception as to where we should go. My worry is that we’ll get over-regulated, and that will work against some of the value proposition that is so inherent in a mortgage broker’s services” “The ability to source mortgage funds is a challenge because regulations keep getting tighter and tighter,” he says. “The other challenge is the perception of regulators as to the impact of too much debt. I don’t know if they’re correct as we go forward. They keep saying we have too much debt. When I first got into the business, 25 years ago, they were saying the debt was very high as well.” Soni believes the industry has a role to play in ensuring regulation doesn’t get out of hand. “What we’re doing is we’re fighting regulator perception as to where we should go,” he says. “My worry is that we’ll get over-regulated, and that will work against some of the value proposition that is so inherent in a mortgage broker’s services.” As he approaches his third decade in the industry, Soni has become so much more than just a mortgage broker. As the national presi-

aware of the influence mortgage brokers have on the housing industry. “I’ve seen other media talking sometimes negatively about mortgage brokers, saying we’re cashing in,” he says. “We’ve never had that exposure before. It’s a good thing because they’re recognizing we’re players. We have to let people know we’re significant players in mortgage services and in the financial services industry as a whole.” To that end, the CMBA has registered the title of mortgage broker as a trademark, which Soni argues will bring increased credibility to the industry. It’s an easy way for consumers to find brokers, and it’s a helpful tool he and other veterans didn’t have access to when they were making their way as rookies. “That’s something that brings tremendous credibility,” he says. “That’s something I’m very proud of.”

1986 Graduates from the University of British Columbia 1990

1988 Takes first broker job

2000

1992 Launches Mortgage Corp.

2005

2001 Merges with Invis

2010

2008 Becomes an owner once again under the Invis banner

2015

2015 Becomes president of the CMBA

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ABOUT OUR SPONSOR Canadian Mortgages Inc. was established in 2005 to serve those Canadians who – whether because of poor credit, no credit or nontraditional income – had a much harder time obtaining financing to buy a home. Originally founded as a mortgage brokerage, CMI Loans soon expanded to include two investment branches: the CMI Mortgage Investment Corporation [MIC], which offers a more passive investment opportunity, and the Canadian Lending Inc. [CLI] program, a non-bank residential mortgage lender specializing in providing lending services that fall outside the strict rules and guidelines of traditional lenders. The CLI lending division finances mortgages through the mortgage brokerage community; provides back-end lending for a number of large national operations/franchises; works with a small number of high-volume, relationship-oriented originators; and is composed of a growing team of residential and commercial underwriters, fulfilment staff, mortgage administrators, management, and investor relations personnel. Both investment vehicles allow investors to tap into Canada’s strongest residential real estate centres. The company started in Ontario but has since branched out to multiple provinces, so in addition to diversification when it comes to types of business, CMI has great breadth and depth of experience working in markets across the country in the areas of private mortgage lending and investing, construction financing, B mortgages, and self-employed clients. CMI has successfully funded thousands of mortgage transactions, and as the company further expands across Canada, it continues to increase the variety and scale of its loans and syndications.

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DIVERSIFYING THROUGH CREDIT REPAIR Consumer debt has never been higher – Canadians currently owe almost $1.67 for every dollar of their disposable income. More Canadians are credit-challenged than ever before, and it’s becoming increasingly difficult for these individuals to get mortgage financing. For modern brokers, having access to diversified products that help clients repair their credit is crucial. Josh Balner, founder of Strategic Credit Solutions, explains why. CMP: Why is it so important for brokers to diversify their businesses in the current market? Josh Balner: Brokers are finding that the cozy space on the A side, where deals used to be simple and straightforward, doesn’t really exist anymore. With the banks rejecting people who used to be prime candidates, brokers have to look for others ways to increase their income just to be competitive. If you can’t find alternative streams, you’re not going to have any capital left to advertise, and you’re going to fall behind. CMP: What’s your view on the current state of the mortgage market? JB: As an informal debt settlement company, we’ve found that the volume of brokers asking us to help out creditchallenged clients has picked up tremendously over the past three to four months. These clients have migrated away from the A side and are coming into the alternative market and need assistance. For us, it’s an education process for these new agents and brokers. A lot of them have never come across clients like these before and don’t necessarily know what options are available. CMP: So how can brokers start to help credit-challenged clients? JB: There are secured Visa cards and third-party referral sources, such as trustees,

credit counsellors and debt settlement companies, which all are good options for credit-challenged individuals. CMP: What are the advantages for a broker who works with credit-challenged clients? JB: They’ll be closing more deals – their volume is going to increase tremendously. They’ll also find that the yield per deal gets higher as you move into the private space. It’s also fulfilling. You’re able to help someone who is in dire straits, someone who has no other alternative. If you can present them with a solution for their unique problem, you’ll be their hero, and you can guarantee that when it’s time for renewals, they’re coming back.

Where to expand For some industry insiders who have made additions to their core business, it’s all about seeing a need in the market for a service. For example, after witnessing the devastation that the slumping energy sector was having on the local economy in his home base of Alberta, Gord McCallum and his team at First Foundation were inspired to launch layoff insurance. McCallum says seeing local families struggle to stay in their homes following job losses made him feel that his team had an obligation to introduce the product, which provides a pre-determined amount of money to a mortgage lender if the borrower loses their job. “It’s been a popular product for sure, unfortunately, because of the state of the economy in Alberta,” McCallum says. Others have found it beneficial to expand into new avenues in order to solve a specific problem. Terry Kilakos started his career as a financial planner before becoming a mortgage broker, and when he first launched North East Mortgages, he always had plans to turn it into a multi-disciplinary company. North East does have investment and insurance arms, but the firm’s foray into real estate was born out of one particular challenge: In Quebec, real estate agents get paid by banks to do transactions, resulting in a lot of poaching. Clients would go to Kilakos to get a mortgage pre-approval and take it to their real estate agent to look for a home, but then the agent would send the client to a bank to get financing. “It didn’t happen often, but it did happen often enough that it started to tick me off,” Kilakos says. So he eventually sat down with a friend who had a real estate licence and decided to incorporate another element, North East Realty, into his existing business. The expansion had an added benefit: Because of provincial regulations, the company is licensed to send mortgages to financial institutions that are unavailable to most mortgage brokers. Real estate partnerships can take many

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different forms, such as increasing client access to Realtors and forming networks. Lorne Andrews, ‎broker/owner at Dominion Lending Centres Expert Financial, developed an Agent Marketing System in order to connect with Realtors and provide them all the tools they need to succeed in their businesses, including marketing resources, events and webinars, along with ways to identify gaps in their current business operations. “If we can provide them that type of service and increase their productivity, there’s much more of a connection with us in terms of building long-term relationships,” Andrews says. “I know if I can help you get an extra 10 or 15 or 20 transactions next year,

“We now have to be a little bit more diligent in how we handle our relationships with our clients. There’s a lot more at stake – there’s a lot more money available to us” Terry Kilakos, North East Mortgages you’re going to send me the mortgages … but it’s a process. It’s a compounding effect.” Andrews also saw the advantage of initiating accountability for Realtors and guaranteeing income for his business, so in

January, he expanded the program to launch the Powerhouse Realty Network, a network of hand-picked Realtors from a number of different brokerages who commit to referring a set number of transactions each year.

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“The concept of dual licensing – one individual being all things to all people – is a dangerous concept. Having specialists run their respective divisions is the most valuable thing we’ve learned” Chris Karram, SafeBridge Financial Group Forming valuable partnerships Not putting all of your eggs in one basket seems to fly in the face of that other old adage: “Jack of all trades, master of none.” To that end, one of the most crucial aspects of diversification is learning how to form strong partnerships with experts in other fields. For mortgage brokers, that not only means finding people whom you trust and with whom you share basic business principles, but also finding people who are licensed and well versed in the areas where you want to grow. “The concept of dual licensing – one individual being all things to all people

– is a dangerous concept,” says Chris Karram, co-founder and financial advisor at SafeBridge Financial Group. “I’ve never known anyone who could do 18 different things well, and that’s what you need to do. Having specialists run their respective divisions is the most valuable thing we’ve learned.” When diving into a new business segment, Andrews also stresses the importance of perseverance. “You can’t just launch something and cross your fingers and hope for the best,” he says. “You have to gauge where you’re going, and you need to make adjustments along the way. If it doesn’t work, it doesn’t mean it’s wrong. It just means you need to make a little bit of an adjustment.” That adjustment may have to do with the business itself, or it may have to do with your commitment level. For brokers who are thinking about seeking alternative sources of revenue, know that it can be a lot more overwhelming than just trying to increase your deal volume. Diversifying involves more administrative duties, more

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FEATURES

COVER STORY: DIVERSIFICATION

DIVERSIFYING THROUGH SECURED CREDIT CARDS Increasing numbers of Canadian mortgage brokers are seeking out ways to help their clients improve their credit scores. Chloe Gagnon, manager of marketing and programs at Peoples Card Services, outlines why a secured credit card could be the best option. CMP: When and why did Peoples Card Services develop a secured credit card? Chloe Gagnon: We launched a secured card around 2005; although secured cards were starting to be launched in other areas of Canada, we were the first one in Quebec. We saw a definite need for a secured card in Quebec, and felt that a product that focused on helping people perfectly fit our philosophy. If somebody has been through

relationships. In most cases, clients who use the card fix their problems and are able to go back and reapply for a mortgage with the same broker. That client will have good feelings toward the broker who helped them build their credit score and ultimately get a mortgage. Mortgage brokers are positive about the product – they say it helps them build customer loyalty – and most of our

“A client will have good feelings toward the broker who helped them build their credit score and ultimately get a mortgage” bankruptcy, had difficulty with collections or has no credit history, it is hard to get financing. The secured card is a good way of helping them build their credit. CMP: How does the secured card work? CG: The customer gives us a deposit, which is placed into a GIC account and frozen. We then issue a credit card, which functions just like a regular card. The limit on the card is 100% of the GIC, and the minimum is $500. Just like other cards, the secured card is reported to the credit bureau, so having an active trade helps build credit as long as the client makes payments on time. CMP: How can a secured card benefit brokers? CG: Being able to offer a secured card to clients with damaged credit helps brokers build strong, long-term

referrers are brokers. In fact, we offer a referral program where brokers receive a commission if a client they refer gets a secured card.

managerial responsibilities, more bureaucracy when it comes to dealing with various licences – and there are a lot more ways to screw it all up. “We now have to be a little bit more diligent in how we handle our relationships with our clients,” Kilakos says. “There’s a lot more at stake – there’s a lot more money available to us.”

The client perspective Brokers who have diversified their businesses will also tell you that a positive client experience plays a big part in determining whether the risk pays off. When the operation is run seamlessly, clients can access a variety of services under one roof, and service providers will be able to form deeper client relationships and facilitate easier ‘cross-pollination’ from one service to the next. But the road to diversification isn’t a shortcut to fatter pockets, and clients can often sense insincerity. “If you do it just for the money, people notice, people see. Then you’re just like everybody else,” Karram says, adding that putting appropriate processes and people in place will result in stronger opportunities. There’s also a sense that the concept of brokers providing a wider range of services by branching into alternative revenue streams could soon become the norm, rather than the exception. “We’ve designed our company in such a way where, if a client comes in and they work with us, we’re not going to save them five basis points – we’re going to save them tens of thousands of dollars over their term,” Kilakos says. “We make sure that mortgages and real estate transactions are structured properly so that the client is taken care of from A to Z. That’s where you make money. “I think that if more companies were to stop focusing so much on rate,” he adds, “and focus more on what’s actually important – making sure the clients are properly taken care of – our industry would grow and be stronger and more profitable.”

www.mortgagebrokernews.ca

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FEATURES

COVER STORY: DIVERSIFICATION

DIVERSIFYING THROUGH CREDITOR INSURANCE Not sure where to start diversifying? Rich Spence, VP of Canadian sales at Credit Security Insurance Agency, a subsidiary of Manulife, spoke to CMP about how offering/referring insurance products is a natural way for brokers to dive into diversification. CMP: How can brokers benefit from offering insurance products? Rich Spence: Providing clients access to insurance coverage through Manulife Mortgage Protection Plan insurance not only provides brokers with an opportunity for an additional revenue stream, but it can also help protect what might be their client’s single largest investment, their home. Manulife’s mortgage creditor insurance is

an ancillary product brokers can provide their client base right at their fingertips, whether they use Expert or MorWEB. The application or referral form is generated with every deal. Mortgage brokers can offer life and/or disability coverage directly to their customers, and if a client agrees to be referred to an insurance agent, coverage can also be in the form of traditional term coverage, depending on the client’s individual needs or circumstances.

CMP: What do brokers need to know? RS: Provincial regulations have started to heat up regarding the ability for mortgage brokers to offer clients access to mortgage creditor and other insurance products. At Manulife, we’ve been focusing on working with provincial regulators to ensure that our product offerings and distribution partners are compliant and meet the requirements in place within each province. Choosing an insurance partner

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and insurance offerings that are in line with provincial requirements is very important for brokers as well as ourselves. It’s not just a matter of cross-selling or referring a product; brokers need to make sure they’re well trained, have product knowledge and are offering/referring insurance in a legal and compliant way that meets their clients’ needs. CMP: What is Manulife doing to help facilitate the ability for brokers to use insurance products to diversify? RS: Last year we launched Manulife Term

Life Plus as a pilot. Based on the success of that pilot, we’ve now made the term program available to all our brokers. That means, in addition to offering or referring clients for mortgage creditor, life or disability insurance, we allow brokers the opportunity to refer clients to our licensed life agents for term insurance. Many consumers prefer term insurance over traditional creditor products. Most brokers are not licensed to sell term insurance, so we provide an easy avenue for referral. We’ve also created an interactive national training program to help ensure brokers are fully trained

from a product knowledge and procedural perspective. The online training program runs nationally and helps brokers satisfy regulatory requirements and provides great information on how to offer the product to consumers.

www.mortgagebrokernews.ca

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SPECIAL PROMOTIONAL FEATURE

DIVERSIFICATION

Stop referring clients If you’re only relying on referrals for your clients’ insurance needs, you’re not truly diversifying. Joe White of the Real Estate and Mortgage Institute of Canada explains why

OFFERING YOUR clients creditor or Mortgage Protection Plan insurance as a temporary measure, or advising them to consult with a life insurance agent for a more permanent solution, are standard strategies for mortgage brokers. But if you truly want to diversify, neither approach will work. Diversifying is not just a strategy to increase

revenue – when properly executed, it will also strengthen your business by making it, and you, less susceptible to market risks. In other words, diversification creates more money for you and protects you from potentially disastrous market changes or corrections. Let’s look at the example of Jacob, a mortgage agent whose business was hurt by recent

regulatory changes in the mortgage industry. This affected his bottom line, his personal income and his family’s standard of living. Jacob knew he could increase his income if his borrowers opted to purchase creditor insurance or MPP. But to Jacob, that was just an upsell, not something that would provide a different income stream.

www.mortgagebrokernews.ca

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1 in 4 life insurance agents are set to retire in 2018, making life insurance an ideal diversiďŹ cation strategy. Find at hllqp.remic.ca/CMP 1 in 4out lifemore insurance agents are set to retire in 2018, making life insurance an ideal diversiďŹ cation strategy. 1 in 4 life insurance agents are set to retire in 2018, Find outlife more at hllqp.remic.ca/CMP making insurance an ideal diversiďŹ cation strategy. Find out more at hllqp.remic.ca/CMP

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SPECIAL PROMOTIONAL FEATURE

DIVERSIFICATION

take care of the client for him, incorporating a commission split.

Why not just refer clients? Jacob thought about referring clients to an insurance agent, but in the end, he decided against it because he’d be giving away a potential long-term client for short-term income. Jacob also loved the idea of turning one client into two every time. Moreover, he’d be losing the insurance relationship – just as with mortgages, insurance needs change over a person’s lifetime, resulting in multiple sales. Furthermore, Jacob realized that this gave him an opportunity for cross-selling: When he has insurance clients, he can offer them his mortgage services, while clients using him for mortgages will be introduced to insurance.

Diversifying is not just a strategy to increase revenue – when properly executed, it will also strengthen your business by making it, and you, less susceptible to market risks Jacob executed a SWOT (strengths, weaknesses, opportunities and threats) analysis. He came to realize that his personal relationships were one of his strengths, but his inability to control the mortgage market was a weakness. He couldn’t prevent a drop in housing prices or changes in lending practices or regulations, which are all external factors. An additional threat he encountered was an inability to prevent other brokerages from outspending him in advertising and capturing some of his market share. But there was an opportunity: diversification. Jacob chose to obtain his life insurance licence. Not only will he be able to offer his borrowers term insurance for their mortgage, but he can also monitor and manage all of their additional insurance needs throughout their lives. In essence, Jacob will be creating two

clients for every one that he has. If one market struggles, he’ll have the other market to rely on and won’t be wholly dependent on one income stream. To Jacob, that is the definition of diversification.

Won’t dual licences end up hurting both businesses? The potential for dual licences to hurt both businesses was a real concern for Jacob. He didn’t want to lose focus on his mortgage business by getting an insurance licence. The silver lining is that Jacob can do as much or as little insurance business as he wants. If he doesn’t want to process the full insurance application, he can refer it to a colleague to close the deal while still keeping the client because of his licence. This gives him the ability to focus on the client in the future or have another agent

Isn’t the insurance industry saturated with agents? Jacob was concerned about this as well, so he decided to do some research. What he found was shocking. According to management consulting firm McKinsey & Co., the average age of an insurance agent is 59. The expectation is that one-fourth of the industry’s workforce will retire by 2018, so it appears that the need for new insurance agents is on the rise.

What about MPP and instant coverage? Jacob gave this some serious thought and decided he will still offer MPP as the first stage of protection for his mortgage clients. Once the mortgage closes, he’ll follow up with an appointment to review his client’s insurance and replace it with term insurance, if that’s in the client’s best interest. Jacob will also see if anyone else in the client’s family needs insurance or a mortgage while he’s there. Now that’s diversification. Making Jacob’s story your story is easier than you may think. Your journey begins with finding out how diversifying into insurance can work for you. Learn about the process, licensing requirements and your own personal income potential by visiting hllqp.remic.ca/CMP.

www.mortgagebrokernews.ca

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SPECIAL PROMOTIONAL FEATURE

DIVERSIFICATION

Putting people first Growth is important to every company, but when diversifying, growing smartly with the right agents can be the difference between surviving and thriving

A POSITIVE byproduct of diversification is growth, and over the past 11 years, Canadian Mortgages Inc. [CMI] has grown from an Ontario-based brokerage specializing in private loans to a multi-provincial body with offices in Ontario, Alberta, British Columbia and Manitoba, and with expertise in private mortgage financing and construction loans, among other products. According to Bryan Jaskolka, mortgage broker and vice-president of business development at CMI, one of the biggest challenges the company’s significant growth has brought about is the need to help its expanding staff of agents learn and adapt to new and evolving lending rules. For agents looking to expand their own businesses, however, CMI has much to offer. “We’re focused on working with agents who typically have already been in the industry for a year or two, but may not have been given proper guidance or counselling or access to the right kinds of capital in order to grow their business or do a better job of servicing their existing client base,” Jaskolka says. “Our focus is basically working with existing agents to help them leverage what they already have or to expand it, or new entrants if they have a clearly defined business channel.” One of the keys to helping brokers build

a successful brand for themselves includes having a well rounded knowledge of the industry, including business, marketing and customer service, in addition to core technical skills. CMI has a full-time brokerage manager, Rose Lirantzis, who works specifically with agents who are new to the team to help them understand the industry, improve their deals and provide assistance if they run into any issues. CMI has also switched to a weekly pay schedule for

“We’re not just focused on AAA borrowers. We’re involved in the B market, the A market, and we’re also involved in the private market, so we help our agents diversify across geography as well as business lines” Bryan Jaskolka, Canadian Mortgages Inc. agents. “It’s a full-service offering from that perspective,” Jaskolka says. CMI Loans has been working to expand its list of institutional lenders in order to have a more comprehensive list of lender

offerings. The company is part of the Verico network, and through that partnership, agents have access to industry-leading technology, tools and a CRM system. While Jaskolka says CMI prefers to hire

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agents who are already established, he recognizes that with a number of different operations under his belt, there is great value in having agents from different backgrounds join the company and share their expertise. For example, if an agent coming from another brokerage is lacking in education on mortgage originations, or if someone is new to mortgages but has a history of working at a bank, then the door is wide open for them to become a member of the CMI team. “It’s just about providing an honest, ethical partner for them to have a good foundation and framework to operate their own existing successful business within,” Jaskolka says, “where they have access to a large list of lenders, in-house private funds, technology and tools.” Through CLI, the company’s private

lending program, CMI isn’t just limited to its own agents; the company works with agents and brokers across the country. Jaskolka, who is licensed in British Columbia, Alberta, Manitoba and Ontario, says CMI experienced some pushback in the beginning when it came to working in different jurisdictions – some lenders gave them a hard time because they were based in one province but licensed in others. Over the years, however, this model has become more prevalent in the industry and is proving to be a benefit rather than a hindrance. These days, a lot of agents are getting business through online channels, and that business is coming from places that are not necessarily in their immediate vicinity. If the agent chooses to do business under the table with brokerages that are not

licensed there, they could run into compliance issues. But, Jaskolka says, being licensed in multiple provinces eliminates these issues and allows agents to leverage the business they get online while remaining compliant. CMI has managed to diversify in terms of alternative revenue streams, geographic location and clientele, which not only provides additional opportunities for the business, but also opportunities for individual agents to take advantage of its diverse set of offerings. “We’re not just focused on AAA borrowers,” Jaskolka says. “We’re involved in the B market, the A market, and as a large and growing private lender, we’re also involved in the private market, so we help our agents diversify across geography as well as business lines.”

www.mortgagebrokernews.ca

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PEOPLE

BROKER INSIGHT

Self-made man Mortgage broker Kyle Green talks to CMP about the importance of specialization and his strategy for hitting targets

CMP: What made you first get into the mortgage brokering industry? Kyle Green: I was working for a credit union here in BC, and the unionized environment just wasn’t a good fit for me – I lasted there five months. I was talking to a friend of mine, and she said, “My parents are mortgage brokers, and they probably need help with some paperwork,” but she didn’t really sell it very well. Regardless, I decided to check it out, and I really hit it off with the two owners of the franchise. So, lo and behold, I was 19 years old and became a mortgage broker – that was just over 10 years ago.

CMP: How would you describe your time in the industry? KG: It’s been crazy! There have been a lot of changes, but I really like the industry – it’s incredible. There are not many businesses that have such a low barrier to entry. It’s not like opening a restaurant, where you need a $100,000 loan just to open your first location. You can start from your basement and work your way up to eventually running a large shop if you want to. Changes and challenges come along all the time, but in general, change is an opportunity.

CMP: So what are your thoughts on the recent regulation changes? KG: In my opinion, the government knows that interest rates in Canada will be staying low for an extended period of time. In general, raising interest rates is a good way

of cooling an otherwise overheated housing market, but by doing that, you’re going to impact our exports, which are not doing so well because of commodity prices. In order to target just the housing market, the government keeps coming up with new rules that do not have a wider impact on other industries. It does make real estate still a good investment. I tell clients, “It’s a little harder to acquire the asset, but the asset’s value will be protected if only the cream of the crop are able to qualify.”

CMP: Have the new regulations impacted your business? KG: Yes, big time. Around 80% of my clients are real estate investors; that’s my niche. Although there’s no official rule to impact rental properties, a lot of major banks now do five properties maximum on the residential side. So we’re now looking at ways to get these clients approved. We’re also doing more commercial business. My staff and I know that for the next 12 to 24 months, doing commercial deals is going to be a big part of our business.

CMP: What’s the secret behind your success? KG: I started off as an assistant to a team, which I would highly recommend. It’s a great way of learning the ins and outs, and understanding how to do a deal the proper way. Finding a niche also really helped drive a lot of my success. I started developing mine around eight years ago, working primarily with real estate investors. I’d go to trade shows and explain to investors that my value is in teaching them how to become a wealthier individual. I would suggest trying to find ways of adding value that aren’t rate-driven. Having a niche of some sort is a way of doing that.

CMP: What advice would you give to brokers who want to grow their businesses? KG: When you’re working on your own, make sure you commit to eight hours a day. It’s not that challenging or difficult, but I find that a lot of new brokers sit in front of the computer for an hour or two and then start checking Facebook. The next thing

GREEN ON THE IMPORTANCE OF SETTING GOALS “I write down my goals every year and break them down into monthly targets. I then discuss them so that I have other people to hold me accountable. It’s amazing how frequently you hit your goals when you write them down. A few years ago, I wrote down a goal of hitting $60 million in volume, and I hit $59.7 million. Last year my goal was $110 million, and I did $112 million. Writing down your goals just works!”

www.mortgagebrokernews.ca

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FAST FACTS: KYLE GREEN

Mortgage broker at Mortgage Alliance Meridian Mortgage Services

Started in the industry in 2006

Caters primarily to real estate investors

Works with more than 40 different lenders

Has been the top-producing franchise agent in BC for Mortgage Alliance Meridian Mortgage Services since 2011

“Finding a niche helped drive a lot of my success. I’d go to trade shows and explain to real estate investors that my value is in teaching them how to become a wealthier individual” you know, half of your day is wasted. In the beginning, seven of those eight hours are going to be spent networking and meeting new people, and one hour might be underwriting. But eventually, over time, you’ll start to transition into spending more of your time doing deals.

CMP: What do you get up to in your spare time? KG: Play hockey and … play hockey! It’s my thing. It’s exercise, competition and lets me hang out with my friends. It’s everything I look for, so I try to play two or three times a week.

Won the Real Estate Action Group Joint Venture Award in 2011

Named as one of CMP’s Top 75 Brokers in 2016

Publishes a weekly blog

Has had articles published in the Vancouver Sun, The Province and Western Investor

www.mortgagebrokernews.ca

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23/02/2017 7:44:40 AM

SPECIAL PROMOTIONAL FEATURE

DUE DILIGENCE

Navigating due diligence The due diligence phase of a mortgage application is often the most stressful. Rob MacCuspic of Vector Financial Services explains how brokers can help ease their clients’ worries

SMOOTHLY NAVIGATING the mortgage process from application to completion is a top priority for any modern broker. The constant stream of new rules and regulations creates fresh challenges that all mortgage brokers must tackle head-on. Having access to tools, services and lenders that can help ease borrowers through the loan application process is one way brokers can improve their value proposition and differentiate themselves in the crowded marketplace. The average mortgage application can be split into three distinct ‘rounds,’ each of which can create obstacles and potentially increase borrower anxiety. Round one involves the initial introduction of the opportunity to the lender and the negotiating of terms between the lender and borrower. Round three involves getting the legal documentation in place and funding the loan. It’s round two that arguably creates the most problems for brokers and borrowers alike. “Round two involves the lender’s efforts to satisfy itself that the risks associated with making the loan are within tolerable limits,” says Rob MacCuspic, head of underwriting and due diligence at Vector Financial Services. “During this phase, it’s the lender’s responsibility to conduct due diligence that’s prudent, while at the same time not strangling borrowers in seemingly endless requests for information, so the loan can be both underwritten and advanced as quickly as possible. “From a lender’s perspective,” he adds, “round two is all about doing what you can to avoid the many things that can go wrong and knowing, should things not go as planned, that you can manage problems and preserve capital.”

When bigger isn’t better For the borrower, due diligence can be a painfully protracted process, particularly when working with a bank. Borrowers are increasingly asked to jump through hoops in order to qualify for loans that previously could have been secured with little or no fuss.

www.mortgagebrokernews.ca

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SPECIAL PROMOTIONAL FEATURE

DUE DILIGENCE

“The banks and other large lenders are encumbered by the size of their institution, the number of people involved in each loan and the often exhaustive processes that are required,” MacCuspic says. “In the current market, banks have a very, very conservative approach to lending, and their compliance, reporting and governance requirements make the mortgage application difficult and stressful for Canadian borrowers.” As well as greatly slowing down the lending process, a bank or large lender’s approach limits a borrower’s flexibility and leaves them in a cycle of uncertainty. “Banks and big lenders demand conformity – all the boxes need to be filled, whether the information is really needed to underwrite a loan or not,” MacCuspic says. “The borrowers we deal with need financing to acquire a property, to refinance an existing loan or to fund development costs. These extra burdens and delays can play havoc with the above and could even derail transactions.” By having fewer people involved and fewer processes to follow, smaller private lenders are able to adopt a more nimble approach. “Although there are fewer steps and processes to follow, private lenders are still committed to adhering to detailed, careful and prudent due diligence,” MacCuspic says. “Working with lenders who operate in small, experienced teams helps brokers set realistic expectations and leads to much faster process and responses. Most small private lenders hire experienced underwriters who recognize real issues that need to be brought forward and are not spooked by every little thing.”

Solutions for developers For developers in particular, securing funding quickly and efficiently is a critical component to the success of their projects. Brokers have a responsibility to partner with lenders that understand a developer’s needs and can fund loans in a timely fashion. In many cases, brokers are finding private lenders to have greater flexibility and an approach that is

better suited to the complexities that are inherent in every real estate development. In contrast to the banks and large lenders, private lenders don’t have the capacity for in-house professionals such as lawyers, engineers and other consultants. As a result,

Lenders encounter two types of borrowers: those who are well organized and deliver information on a timely basis, and those who you have to chase for information. Needless to say, the former group generally avoids unnecessary delays.”

“It’s the lender’s responsibility to conduct due diligence that’s prudent, while at the same time not strangling borrowers in seemingly endless requests for information, so the loan can be both underwritten and advanced as quickly as possible” Rob MacCuspic, Vector Financial Services some forward-thinking lenders are working with teams of external experts in order to provide a quick loan turnaround. “Over the years, we have developed relationships with numerous industry professionals whom we engage on a loan-by-loan basis in a variety of ways to support and supplement the underwriting process,” MacCuspic says. “These professionals both strengthen the analysis and speed up the time it takes to complete the due diligence.” For development projects, no two files are ever the same, so the underwriting has to be adapted to meet the uniqueness of each project and borrower. As a result, Vector’s team of external professionals varies from loan to loan, and might include anyone from environmental and geotechnical engineers to appraisers, insurance consultants and cost consultants. “Like other lenders, we also have contracts with agencies to conduct credit checks and other background checks on the borrowers and guarantors,” MacCuspic says. “All borrowers want their loans funded as quickly as possible, so it is critical that due diligence items are delivered to lenders without delay.

The old adage ‘time is money’ is particularly apt when it comes to development projects, MacCuspic explains. “The return on a developer’s invested capital is eroded the longer it takes to get that capital back and the profits earned thereon. Delays add additional cost to a project and can even result in a developer losing a deal.” MacCuspic gives the example of a borrower who is looking to secure financing in order to start construction on a new project, as well as repay an existing loan. For that borrower, the costs of a one-month delay could include an extra month of loan interest, property taxes, insurance and overheads, as well as higher rates on development charges and trade costs if increases occur during the delay. A delay can also lead to the developer losing tradespeople who are lined up and ready to go but have to be put on hold. “The extra time the borrower has to spend dealing with so many external parties and keeping them appeased during delay periods,” MacCuspic says, “is time that could be spent getting on with the job of building out the project and delivering it to the buyers, tenants or occupants.”

www.mortgagebrokernews.ca

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PEOPLE

CAREER PATH

EYE ON THE PRIZE

Through frequent ups and occasional downs, Chris Turcotte has learned to take the lesson and roll with it

1997 LOSES

HIS FATHER

2000

STEPS INTO THE RING While studying for a commerce degree at the University of Manitoba, Turcotte also trained at the infamous gym run by the Harts, wrestling’s first family. In addition to his budding career in banking at RBC, Turcotte maintained a pro wrestling career on the weekend – one that benefited from his online savvy “As a private contractor, I had to sell myself – in 2000, I was one of the few wrestlers with a website”

2010

BECOMES A MORTGAGE BROKER After consulting a mortgage broker in preparation to buy his first house, Turcotte impressed the broker with his knowledge. When he returned to cancel the mortgage following a job loss, he was offered a position as a broker

“I said, ‘Yeah, what the hell, I’ll try it.’ In my first year, I was the top-producing broker in the office, including the owner. Halfway through my second year, I was outproducing the entire office combined” 2014

GOES FROM STRENGTH TO STRENGTH

Turcotte’s franchise, which had expanded to a staff of 18 by 2014, earned an award for the largest year-over-year growth across Canada. That same year, his office ranked sixth among Centum’s 200 franchises, despite servicing a city of only 35,000 people “We just do that much volume. My staff know I would take a bullet for them. I don’t have to persuade my brokers to work hard; they know we’re in this together. For me, relationships are everything”

Brought up in a small town in Manitoba by parents who had their sights set on retirement when he was born, Turcotte lost his father to cancer on his 16th birthday, and his mother (also to cancer) by the time he was 23 “That’s what started my whole career. That’s when the person I am today was born. There were no rules; no one was saying play it safe or don’t chase your dreams”

2007

DITCHES BANKING FOR SALES Turcotte spent seven years working in Winnipeg as a personal banker to wealthy snowbirds. From there, he moved into sales, ultimately making the fateful decision to take a transfer to Brandon “There was a ceiling [in banking], and I didn’t like that; I had my eye on the prize for a more adult ambition. I realized I could sell; it was cool to be respected for my craft at such a young age”

2012

BUYS A CENTUM FRANCHISE Courted by the owner of Centum, Turcotte decides to buy a franchise. The early months were characterized by Turcotte paying himself little while dedicating his off-hours to renovating the office. The business grew rapidly, forcing Turcotte to lease additional space – which also required work “I was hooked on the idea that now that I had my own brokerage, I could do things my way. I would broker all day, then put on grubbies at night and renovate”

2016

TAKES OVER AS PRESIDENT OF CENTUM When he was appointed to the post of president and COO of Centum late in 2016, Turcotte achieved an ambitious goal he had set only 18 months prior. In his new role, he hopes to replicate the success he brought about in Brandon, including instilling the same loyalty in his team “If you’re on my team, you’re my family – that is what has made me successful and will continue to make me successful”

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PEOPLE

OTHER LIFE

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TINY DANCERS Former ballerina Crystal Donnelly spends her spare time passing on her love of dance to young students

Number of seasons Donnelly has been teaching classical ballet

Age of Donnelly’s youngest student

27,000

Hours Donnelly estimates she has spent teaching

IT WAS little ballerinas dancing in a class on Sesame Street that inspired Crystal Donnelly to take up ballet at age four. Even now, despite having pursued tap, jazz and modern dance, the Edmonton-based mortgage broker’s heart belongs to ballet – a discipline she has been practicing for more than 35 years, and passing on to others for decades. “I simply couldn’t imagine life without the studio and stage, the music, movement, and the relationships built within,” she says. Her dedication to dance and a way with kids led Donnelly to start teaching children’s classes at age 15 at the suggestion of one of her instructors. And, she says, there’s a particular joy that comes from instructing others, an activity she continues to this day. “The personal satisfaction I get from teaching such a beautiful and historic art form is truly indescribable,” she says. “You see the success of a student growing and improving; it’s so rewarding, and I get that in every class. You can see the light bulb go on. That interaction is incredible.”

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