CMP 6.3 by Key Media

C M or he tg ck ag o eB ut t r ok he er ne w N ew s. ca

March 2011, 6.3 www.mortgagebrokernews.ca

SPECIAL FEATURE Commercial Mortgages

MORTGAGE AWARDS 2011 A complete listing of all your finalists

PROFILED Dwight Bakken: Inspirational PUBLICATIONS MAIL AGREEMENT #41261516

66 2011 Canadian Mortgage Awards The planning started literally a week after last yearâ&#x20AC;&#x2122;s Canadian Mortgage Awards and the time has finally come to announce the finalists for 2011

6. 03 issue

cover story

34 Building a network Having a network of professional partners, such as lawyers, real estate agents and financial planners can be a great way for brokers to grow their business. Jesse Kinos-Goodin spoke to several brokers who say they owe their success to their referral networks

contents 8

PROFILES

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

72 Profile: The same determination and stubbornness that helped him overcome a traumatic neck injury has helped Dwight Bakken become a successful mortgage broker. Jesse Kinos-Goodin talks to him about his path to becoming a mortgage broker

NEWS 10 News: Street Capital acquired by Counsel, Equity Trust Financial open for business, Argentum launches private-label mortgage, Desjardins to join forces with Meridian, and more 18 Business Advice: Creating your business fingerprint 22 In The Community: Genworth’s “Meaning of Home” writing contest 26 On the Book Shelf: Mortgage Freedom 54 Tax Time: Tax season provides a fantastic opportunity for mortgage professionals who view themselves as trusted advisers, providing holistic planning advice to clients as part of team. Sandy Aitken advises brokers how to build their mortgage business by telling a tax story 60 Marketing – Six referral mortgage marketing mistakes: Doren Aldana explores some of the reasons why new brokers fail in the first two years of their career (Part Five)

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44 Special Feature: Commercial mortgages The commercial real estate market in Canada has rebounded since the recession and according to some lenders and brokers CMP spoke to, there is a healthy appetite and lots of money available for commercial deals in 2011

74 Provider: Genworth Financial’s National Homeownership Education Week 2011 is a great opportunity for brokers to share resources that help clients make better-informed decisions about their home purchase 76 Insight: Mortgage Architects is poised for growth with expansion into franchising in the Canadian marketplace

regulars 32 This time last year 33 International News 79 CMP Service Directory Follow us on Twitter Twitter.com/CMPmagazine

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Editor’s Letter

Awards Season Spring is in the air, although it also seems to carry with it some snow. This time of year also brings what we like to refer to as the “Oscars of the mortgage industry.” Our fifth annual Canadian Mortgage Awards is only a month away and the CMP office is in full planning mode for the upcoming gala. We’ve been slowly leaking the finalists on our website, MortgageBrokerNews.ca, but this is the first issue to show all the finalists in one place. Check them out on page 66. And don’t forget to book your table now. Visit www.canadianmortgageawards.com. For a closer look, check out our Mortgage Broker of the Year finalists in our April issue. It’s also the time of year for our annual Broker Sentiment Poll, where we survey brokers across the country on issues ranging from future prospects to how the government is handling the economy. You can visit MortgageBrokerNews.ca to complete to the survey. Speaking of our website, you may have noticed a new look. That’s because we’ve launched a newly redesigned and improved MortgageBrokerNews.ca. It’s just the next step in our mission of being the leading independent online industry news source for mortgage professionals. And we’re not stopping there. In addition to our cleaner, easier-to-read look, we will also be launching a photo section to highlight what brokers and companies are doing, including corporate events and community outreach. I invite you to send me your photos. Stay tuned for more features, such as blogs, video and other multimedia as we continue to enhance and expand our offerings to you. As always, I encourage you to contact us with any news related to the broker and mortgage industry or just to share your opinion about how we’re doing. It is an exciting time for our industry and we look forward to keeping you informed about the industry and your business. Cheers. John Tenpenny Editor john.tenpenny@kmimedia.ca

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6. 03 issue

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Quotables

“There was last year and this year a lot of money is in the system, on both the equity side – people looking to buy real estate – and from a lending perspective there’s lot of money out there. And when you flip forward there’s going to be even more money out there in 2011.”

“I really don’t need to work more than 30 hours a week because I’m working with people who want to do business with me,” she says. “Now, when anybody calls me, the first thing I ask is who gave them my name. If they aren’t from a referral, I pass them off to another broker.” Sandra Lastovic, mortgage agent with The Mortgage Centre in Guelph, Ont. discussing how a professional referral network is helping her business. Page 34

Jeremy Wedgbury, Managing Director of Commercial Mortgages with First National Financial discussing the Canadian commercial real estate market. Page 44

March 2011 Publications Mail Agreement #41261516 Postmaster: Return undeliverable addresses to KMI Publishing, 100 Adelaide Street West, Suite 300, Toronto, Ontario M5H 1S3

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Readers Write Web comments

Report calls for increased mortgage qualification standards

These six people just wasted six months of their time, since the government is already taken action this year. The only smart thing they are suggesting is making a qualifying amortization, but leaving the option of taking a longer amortization if the client wants. What does not make sense is what the government already did, which is force everyone to pay more for the same amount of mortgage debt. And by placing the blame for high debt loads on mortgages, this task force is ignoring the real problem. As a mortgage broker, I see clients all the time who can easily afford their mortgage and have consumer debt with extremely high payments. For example, if you have a $20k car loan, your payment is $550 per month. If you have $20k in credit card debt, your monthly interest is $310 per month. If you have a $150k mortgage, your payment is $550 per month. So paint an accurate picture here. The problem is not the mortgage, it’s the easy access to consumer credit that is the problem. I can provide a mortgage to a client, maxing out their ratios, and they can turn around and be approved for $2k or $3k worth of additional debt payments. That’s the problem. – Vancouver Broker

There are many responsible borrowers/ first-time buyers that have no debt when they purchase, but within the first couple of years their unsecured credit increases due to the banks/credit card companies overextending them. Let’s not put the cart before the horse and clean up unsecured lending regulations. – Gale Tracey Banks need to improve service to keep customers: E&Y

This is where we can make huge gains as mortgage brokers. We as an industry are service-oriented and clients notice the huge difference. People are just plain sick of lousy service from the banks. “Your call is important to us,” is their message and then they leave you on hold for 30 minutes. – Tracy Luciani Price BC, Alberta, Saskatchewan and Ontario most vulnerable to mortgage rate increases

I can see if interest rates increase in the next couple of years it can be harsh on people buying new homes or refinancing, but we have to make sure that we let the country know that if they’re in a five-year fixed term that it will not affect them as much. Sometimes these stories give I agree with the writer that qualifying consumers is the impression that because interest rates are going up that people are going to lose their critical but not with mortgages. There is enough qualification already for mortgages. Institute some house. This is the No. 1 question I get asked by qualifications for consumer debt like lines of credit clients when it comes to purchasing or and credit cards. That would go a long way to fixing refinancing, and I tell them if we are doing our job right and you follow the plan you will not the perceived problem. Oh, but the banks may not have a problem. like that. – Dave Trihart – Vittorio

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News Industry

Argentum launches private-label mortgage with trailer fee Argentum Mortgage and Finance Corporation launched its own branded mortgage, which features trailer fees. “It’s the most aggressive trailer compensation in the industry,” Argentum president and CEO Albert Collu told MortgageBrokerNews.ca. Since opening in 2009 Argentum has grown to more than 500 agents in Ontario, B.C. and Alberta. “We felt the next smart thing to do was start offering our own products,” said Collu. The reason for launching the product and for offering trailer fees relates, as Collu sees it, to three issues affecting the broker industry. “This is one of the few businesses where we wake up every day whining and complaining about the competition, only to return that business to our competition and in doing so 90 per cent of the clients we send to our lenders, with all respect to the lenders, will renew with them. We have a one in 10 chance of regaining our client and that’s always sat wrong with me,” said Collu. “The other thing that always troubled me is that this environment is very transactional; you work so hard to find a client, you do all you can to win over the client, you close the mortgage and once that mortgage funds that’s it. You’re back to square one.” Collu also thinks that brokers lack an exit strategy. “How long can you do this with no income protection?” he asked. “So when I came out with the product, I wanted to deflect all that and try and find a way to make sure that the agents are compensated for renewal. I also wanted to make sure that they had an opportunity, just as financial planners do, to build future revenue. It’s always nice to be paid for today’s efforts tomorrow.” And Collu thinks this is just the beginning for trailer fees. “Come 2012 you’re going to see a lot more trailer fees come to fruition because of the new accounting rules for lenders,” he said. “It’s not a big secret that lenders will have to either reduce compensation or change the way they compensate, because of the accounting rules, it’s just that simple and that’s going to manufacture more trailers, as you saw recently with Street Capital.” CMP

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Street Capital acquired by Counsel Corporation Counsel Corporation, a private equity investor and alternative asset manager, announced that it has reached an agreement to acquire Street Capital Financial Corporation. The transaction is expected to close in April. Street Capital’s Chief Finance and Risk Officer, Lazaro DaRocha spoke to MortgageBrokerNews.ca. “The potential to partner with Counsel Corp. we believe represents a tremendous opportunity. They’re experienced investors with capital markets and financial services financial services and have a long track record in the mortgage business,” he said, referring to the fact that Counsel launched FirstLine Trust, which is now CIBC FirstLine Mortgages. “We envision being able over the next few months to broaden Street Capital’s offerings to the market,” added DaRocha “Counsel has a strong commitment to the broker market and feel that the overall fundamentals of that market are quite compelling. Street Capital is fully committed to brokers and we do our best to always work with them serving their customers and Counsel has absolutely that same attitude.” “The long-term fundamentals for this industry are compelling, and under the direction of its experienced senior management team, we see great potential to continue Street Capital’s growth trajectory while creating real value for our shareholders,” said Counsel chairman and CEO Allan Silber. CMP

Equity Financial Trust now accepting deals from brokers Canada has a new entry in the mortgage lending field as Equity Financial Trust received final regulatory approval to become a deposit-taking institution and will immediately begin accepting applications for alternative residential mortgages. Nick Kyprianou “Deals have already started to flow in,” Equity Financial Trust CEO Nick Kyprianou told MortgageBrokerNews.ca. “We had spoken to brokers over the past four weeks, getting them signed up and as of yesterday we started contacting them to let them know we are now accepting deals.” Kyprianou indicated that EFT has already signed up approximately 200 individual brokers. On the deposit side, he said that EFT has signed up two large securities dealers and that the company is doing “nominee business only.” “We’re actually over-capitalized right now, so we don’t need to go to the deposit market for another month or two. Our target for Year One is to do $100 million in closed business and we think we should achieve that goal.” According to Kyprianou, ETF will concentrate on the Alt-A and B mortgage market, which they estimate makes up around 10 per cent of the total Canadian mortgage market. “We’re looking at people that are being underserved by the big banks,” he said. “But the real estate must be marketable, that’s the foundation of the underwriting model.” CMP

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News Industry

Report calls for increased mortgage qualification standards A report by a six-person task force recommends that banks take more responsibility for improving Canadians’ ability to manage and repay debt, while also suggesting the federal government introduce more stringent standards for mortgage qualification. Action Canada’s Task Force on Household Debt, which has been meeting for the past six months, released its report entitled “Debt Crunch: Policy Recommendations for Addressing Canada’s Record Level of Household Debt, which called on the government along with Canada’s banks and financial institutions to implement a Code of Conduct on Lending (CCL) to “promote standards that would decrease borrowers’ financial vulnerability associated with high levels of household debt and ensure they understand the potential risks associated with mortgage and consumer debt.” Derek Dunfield, from MIT’s Sloan School of Management, and a member of the task force, suggested Canada could be in for a reckoning, and argued banks needed to play a more active role in discouraging Canadians not to borrow more than they can afford. The report referred to the “culture of borrowing” in Canada, which presents two possible problems for the economy. If interest rates rise and housing prices drop, more people could begin to default on their mortgage and credit card payments, Dunfield said.

mortgagebrokernews.ca

As well, “an equally worrying – and perhaps more likely scenario – is that interest rates go up a little – and more of people’s disposable income goes to repaying their debt, leading to a significant reduction in consumer spending.” Since personal spending on consumer goods and services accounts for 58 per cent of Canadian gross domestic product, such a drop could lead to a made-in-Canada recession, Mr. Dunfield said. The report outlined five key areas the CCL should focus on: matching loan products to repayment plans, using more conservative amortization periods to qualify mortgages, offering loans based on need not affordability, offering higher loan repayment methods as the default option and recognizing financial awareness as a corporate social responsibility. In its call for more stringent mortgage qualification standards, the report said this could be done “by implementing a higher test interest rate or shorter “qualifying amortization.” The qualifying parameters would be used to determine the maximum mortgage value a consumer could obtain. Should the consumer then choose to amortize over a longer period, they would not be eligible for a larger mortgage. Instead they would be able to reduce their monthly payment by spreading it out over the extended amortization period.” CMP

58% Amount of Canadian gross domestic product made up of personal spending on consumer goods and services (Action Canada Task Force on Household Debt)

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News Industry

The rise and fall of mortgage rates Research released by the Bank of Canada, not surprisingly, suggests that Canada’s largest banks are slow to pass on cuts in the central bank’s policy interest rate. “Canadian lenders appear to be extremely slow to pass on changes in the bank rate to their customers,” author Jason Allen wrote in the report entitled “Competition in the Canadian Mortgage Market.” Researchers found that “in the short run, five of the six largest Canadian banks adjust their rates upward more quickly when there are upward cost pressures than downward when costs fall,” he said. Having market power in Canada, “there is scope for banks to coordinate implicitly or explicitly,” Allen wrote. If costs rise they all want to increase their prices, but if costs fall they wait before reducing rates “because all the banks can earn higher profits.” Vince Gaetano, vice-president and principal broker with MonsterMortgage.ca is not surprised by the report, calling the banks’ practice of holding off discounting for longer periods “common practice.” He said banks’ usual lenders hold off until after the end of the month before passing on lower rates because this is when renewal notices for maturing mortgages are printed and issued in advance of the maturity date. “Renewal notices with a higher rate printed on them provide the illusion of a potentially bigger discount that can be offered to the client – a client who most times does not want to put in the effort in the mortgage transfer process.” Dave Larock, a broker with Integrated Mortgage Planners-TMG in Toronto said there is another group affected – borrowers who are just about to close their mortgage transaction. “Since most rate drop policies are in effect until seven days prior to closing, it is this group that misses the savings if rate drops are delayed,” he said. “From a lender’s perspective, this group is not very ratesensitive because they are so close to their funding date that switching lenders is usually not feasible, while mortgage applicants who are earlier in the process will eventually receive the lower rate through any standard rate-drop policy, provided that the rate decrease is sustained.”

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The research also indicated that borrowers who use a mortgage broker pay less, on average, than borrowers who negotiate with lenders directly. This average discount is about an additional 19 basis points. The report stated that Canada’s mortgage market represents “almost 40 per cent of total outstanding private sector credit.” It is dominated by the nation’s six major national banks plus a large credit union, the Desjardins Movement, and the Alberta province-owned ATB Financial. Bruno Valko, director, national sales for Resmor Trust said there is an advantage because the mortgage broker marketplace is not dominated by a few big players. “In the broker/wholesale channel, there’s more competition and lenders will move quicker to lower rates and attract business when the opportunity presents itself,” he said. “Furthermore, the scale of product offerings is greater, so in the event a person doesn’t qualify at the Big Eight, a broker can potentially offer solutions. “And if we agree that the broker/wholesale channel moves quicker to lower rates when the opportunity presents itself, that’s another advantage for consumers to choose mortgage brokers.” CMP

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News

Business Advice

Creating your business fingerprint “L

owest rates guaranteed!” Is that a promise that will set you apart in this market or increase your profitability? Not likely. When a client reflects on the service of their mortgage professional, rarely are they satisfied by rate alone. Even if you win the client, it is rare to build a profitable business when your differentiator, is completely out of your control and easily matched by competitors. Price cannot be what distinguishes you from the many others in the market. Discovering your unique “Business Fingerprint” or plan means understanding what your business offers beyond what is provided by the competition, which is compelling to your target client and within your control. Your business fingerprint is the customized mark your business leaves on everything it touches. In order to justify the time investment required to launch on the discovery of this value proposition, first consider what benefits it can provide. Intentional Pausing to research and reflect on what your approach to business offers compared to competitors provides your business the opportunity to be intentional. Intentionality can be in communications, in target markets, in marketing expenses, and in services offered. When a business lacks clarity about their differentiator the tendency is to try to be all things to all people. With a clear plan, the business day moves from being a random chase to a targeted, intentional process driving success.

guarantee. Aside from good feelings, a meaningful message that drives high satisfaction quickly translates into a higher client referral rate as well as longer relationships as loyalty is created. Profitable The ultimate goal is always profitability. The efficiency and consistency created through defining your business plan allows your business to spend less time pursuing more ideal prospects, knowing their satisfaction rating will be exceptional. By having a plan you can save time by only pursuing those who are a fit, which increases your conversion rates, leaving you more time to service existing clients and solicit even more clients through more targeted, cost-effective marketing. Increased revenue, increased margins, and increased time availability to drive more business are the results of creating a plan. The benefits of discovering your business fingerprint build a compelling case for taking the time to discover what that means for your business. The process of discovery includes a few familiar steps that will provide clarity about your differentiators.

Consider competitors First, define competitors as the three to five service providers that are likely to take away your existing clients or be selected by your prospects as an alternative to your business. Be specific. Once you have determined which businesses this includes, write down why they are considered a competitor. Visit their Measured website, review any materials you have seen from Knowing what you do, how you do it, and for whom you them, and assess the strengths and weaknesses of their want to work means you can set specific goals and track marketing. Also make notes about who you believe results. Having clarity of purpose can result in their target client might be. Finally, write down what measured responses, structured processes and allow you perceive as areas you are superior and inferior to your business to be the best in the area you are them competitively speaking. If you can articulate what targeting. If your business fingerprint in part identifies your competition’s business plan could be, it will be you as a ‘quick response, online mortgage professional much easier to do the same for your own business. you can start to track the minutes or hours of your response rates and how that correlates to business won. Survey feedback Choose a dozen referral sources and clients to send a Tracking this information now allows you to set new targets to improve the implementation of your promise brief survey requesting feedback about what your strengths and weaknesses are as a business. Ask why of quick response without compromising conversions. they have chosen to make referrals or use your services Put more simply, you can now aim to respond faster personally – what stands out to them about your with even more business wins. business versus other options. Ask them what they Meaningful would most want to see improved in your business and By defining your business fingerprint, clients will have service offerings. Now you will begin to receive a more a higher level of satisfaction in the service you provide, robust perspective of how others already interpret your because the service and process you promised will be business fingerprint even if you are unable to define consistent with their experience. It is a satisfaction it yet.

mortgagebrokernews.ca

Business consultant Carla Wood advises brokers on how to set yourself apart in a saturated market

News

Business advice

Clarify your values Invest time making notes about what your business stands for with regard to values. What are the core motivators of how you operate your business? Going back to the earlier example of a business that operates as a ‘quick response, online Mortgage Professional’, perhaps the leadership of this business values efficiency. Alternatively, the value might be technology or respect. Respect could be the value that is interpreted to reflect timely response as a sign of respect for the needs of clients. If relationship is a value, perhaps an online model would not be the best fit in reflecting an accurate business plan. A business typically has between three and seven core values and these will be at the root of your ultimate business fingerprint. Reflect on your SWOT Understanding your SWOT means understanding reviewing your Strengths, Weaknesses, Opportunities and Threats. First, reflect on the internal strengths and weaknesses of your business that set you apart from others in the marketplace. Write them down. Second, consider the opportunities that exist currently for your business due to external factors that you may want to incorporate into your business. Write them down. Finally, reflect on those external factors that threaten the success of your business at a significant level. Write them down. Reflect on whether this provides a well

rounded view of what your business is today and could be tomorrow. Define your mission Believe it or not, once you have completed the above four steps, everything is in place for you to articulate your business plan. The challenge is now to articulate that effectively. A great place to start is to determine your mission statement and in one or two sentences state what the more meaningful purpose of your business should be. This statement does not need to mention mortgages. Often a mission statement is the inspiration for a more succinct tagline later. In this process, it is the culminating piece to determining your business plan. Discovering your value proposition is your launching point, but that must be followed up with making changes to your business that reflect that fingerprint. Ultimately, when the changes have been implemented to your business, knowing how to effectively communicate your business plan to your prospects and consumers will be your opportunity to draw them in and prove you are what you promise. Start with step one, start to discover your one-of-akind, easily identifiable business fingerprint. Carla Wood, MBA, MSRE – Managing Director, EDI Implementation Engineers. CMP

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News

community

Right Tyler Gerke from Edmonton was one of six finalists in the “Meaning of Home” national writing contest.

Building home with words Now in its fourth year, Genworth Financial’s “Meaning of Home” writing contest has raised money and awareness of the issue of housing in this country

hile Genworth Financial Canada had been a supporter of Habitat for Humanity for quite some time, four years ago the company was wondering what else it could be doing beyond donating money. “We were looking for a way to help Habitat have an impact and we came upon this idea of the writing contest, which allows us to reach out to people across the country and make them aware of what they have – what does a home mean to me?” says Linda Belanger, leader, community relations with Genworth, who added that in addition to money, the company also encouraged staff to volunteer with Habitat and provided educational material for the charity. The Meaning of Home contest is now in its fourth year and since its inception, $357,000 has been donated to 23 Habitat for Humanity Canada affiliates. “The Meaning of Home contest is a chance for us to raise awareness about the value of a home and to help teach a new generation the importance of caring,” says Peter Vukanovich, president and COO of Genworth Financial Canada. “This initiative gives young Canadians the ability to help others by putting into words what is most special about their home.” This year’s winner, Grade 6 student Karson Simpson, used poetic language to compare a homeless teen with one who has a comfortable

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home. Selected from more than 2,400 submissions, Karson’s winning essay earned her the ultimate prize: a $60,000 donation to help build a Habitat for Humanity Home in the region of her choice. Karson decided to donate the home to the Guelph Habitat affiliate. Simpson was one of six finalists and this year’s runners-up were: Kevin from St. John’s Nfld., Lucy Gay from Oakville, Ont., Margaret Ovenell from Vancouver B.C., Tyler Gerke from Edmonton, Alta. and Samuel Dion-Dundas from Longueuil, Que. Each finalist also chose a Habitat for Humanity affiliate to receive a $5,000 donation. According to Belanger, the contest is not only an opportunity to make young people aware of housing issues in Canada, but it also gives kids a voice. “When you give the kids the chance to think about an issue like this they really respond and are quite articulate about their ideas. It’s great to not only have a chance to help Habitat and develop people’s awareness of housing issues, but also to give some great writers a chance to shine.” It can also have an affect on the students themselves. Finalist Tyler Gerke’s mother, Holly, said she’s seen a change in her son from the experience. “I really think something like this can be life-changing for a young person, when they have an opportunity to really make a difference in the life of someone less fortunate.” CMP

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Canadian lenders report growth in mortgage originations As various Canadian lenders began to post their 2010 financial reports, it became clear that there was a definite increase in mortgage originations last year. Home Trust, Coast Capital, HomEquity and Equitable Trust all reported year-over-year increases in mortgage originations, while First National saw a small decline in originations, but an uptick in mortgages under administration.

First National Financial Mortgages under administration totalled $53.3 billion, up from $47.8 billion. Although mortgage originations for the year decreased from $11.8 billion in 2009 to $10.5 billion in 2010, new mortgage production exceeded mortgages lost to regular portfolio run-off. Total 2010 single-family mortgage originations declined by a moderate two per cent from $8.5 billion in 2009 to $8.3 billion in 2010. “Despite a slowing market and increased competition, we increased our portfolio to over $50 billion in mortgages under administration, a significant milestone,” said First National Stephen Smith, chairman and president.

Coast Capital Savings Coast Capital Savings announced that its portfolio of residential mortgages grew by 10.7 per cent last year from $5.6 to $6.2 billion. Coast Capital’s net income also increased by 20.4 per cent from $54.3 million at the end of 2009 to $65.4 million at the close of last year, an all-time high for the B.C.-based financial institution. “Our strong results for 2010 come at the end of an extraordinary year in which we launched key initiatives such as smartphone banking and the award-winning You’re the Boss Mortgage, arguably the most flexible mortgage product in Canada today,” said Coast Capital Savings president and CEO Tracy Redies.

Continued on page 28

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Housing gains have Canadians saving less: CIBC Canadians are spending 96 per cent of their after-tax income and are now saving less than Americans, according to a recent report. Much of this buying spree has been inspired by a real estate boom in Canada, said the Canadian Imperial Bank of Commerce report, authored by Deputy Chief Economist Benjamin Tal. Canada’s savings rate is now 4.2 per cent, below the U.S. rate of 5.8 per cent, the largest gap on record. Canadians used to save more than their neighbours to the south, but that’s changed in the past couple of years as the housing markets have gone in opposite directions. “With the average house price in Canada more than doubling since 1997, many households have been saving indirectly or passively via the increase in their home equity, and thus felt less pressured to save from their current income,” said Tal in his report. Unlike stock market gains, gains in housing equity feel secure to owners, he said, thus eliminating the urge to save. That will change if housing prices stop rising, however “While we do not see a major correction, the projected flat housing market will strip households of their primary means of passive savings,” said Tal. “And as is currently the case in the U.S., this process will bring back old-fashioned active savings by way of actually putting money aside.” But Tal said it doesn’t take much to return the savings rate to six per cent in Canada. Achieving that would take just a 10 per cent cut in the annual average of $11,000 spent individually in Canada on clothing, personal care, recreation, games of chance, tobacco and alcohol. CMP

Banks could raise HELOC interest rates Total Canadian debt per consumer, excluding mortgages, increased to $25,709 in 2010’s fourth quarter but credit card debt actually declined by almost three per cent from the previous period, according to a TransUnion report. Meanwhile lines of credit, revolving loans and instalment loans all increased but the credit card debt dropping is still a surprise for the holiday shopping season. Merix Financial says if Canadians continue to rely more on lines of credit to finance purchases it could affect the mortgage market in an indirect way. “With less competition in home equity credit lines moving forward and activity moving from profitable credit cards to these less profitable credit lines, there will be incentive for the banks to increase the interest rates they charge on home equity lines of credit in the future,” Merix’s director of operations Andrew Kuyper told MortgageBrokerNews.ca. Currently, lines of credit are the second largest consumer debt carried by Canadians after mortgages. It accounts for 42 per cent of outstanding debt by the end of 2010. Albertans and Ontarians are the largest users of LOC, making up more than 57 per cent of all outstanding LOC debt. CMP

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On The Book Shelf

A new book aimed at Canadian homebuyer and homeowner is also useful for mortgage professionals who are looking to build a long-term strategy for their clients

Four steps to freedom S

andy Aitken wasn’t the first person to think a book about tax-deductible mortgages was a good idea, in fact he was third in line. After some prodding from several people Aitken finally got around to it and the result is the recently released Mortgage Freedom: Retire House Rich and Cash Rich. “[Financial Post writer] Jonathan Chevreau, who wrote the forward for the book, had asked me back in 2008 when he wrote a piece about my company (TDMP) if there was a book in the works,” recalls Aitken sitting in his office in Toronto recently. “My publisher Michael O’Connor became a TDMP client and he started talking to me about a book. He felt there was a need for it,” continues Aitken. “They pointed out to me that with so many homeowners with mortgages in this country and no one had written a book on the subject in 10 years. “A lot has happened since Fraser Smith published The Smith Manoeuvre in 2002, from a technology perspective driving innovation, with a myriad of products such as collateral charges, multi-component HELOCs and court cases that have changed the landscape.” According to Aitken, the conventional wisdom in Canada is people work hard for 20 or 30 years paying off a mortgage and then spend the last decade of their working lives saving for your retirement. And that plan is not working. “[People] tend to be retiring house rich and cash poor,” he says. “The premise of Mortgage Freedom is that you should get into the right home with the right mortgage and then shift the mortgage over to your retirement and get 30 years exposure to the equity markets and you’ll build a retirement fund that is equal to the value of your home.” The book lays out the four stages of home ownership. Stage one explains the basics for first-timer homebuyers and

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what they need to know about getting into a home. Stage two begins once homeowners have established 20 per cent equity in their home and how to start the process of what Aitken calls “cash damming” where as homeowners pay down their mortgage they start borrowing it back on a line of credit to invest. Stage three, Sandy Aitken says Aitken, accelerates this plan. That’s the Tax Deductible Mortgage Plan and that’s the business we’re in, is automating that process for homeowners who want to convert their mortgage into an investment line of credit – 100 per cent tax-deductible – so that they’ve got a portfolio of retirement funds complementing their RRSPs and bulking up to ensure that when they retire they don’t just have their home free and clear, they have their portfolio as well.” Stage four describes a strategy for homeowners who want to de-leverage and be debt-free going into retirement. “Instead of selling stuff to get rid of your debt, you can make some room in your RRSP by liquidating the bonds and the GICs and put your own mortgage in your RRSP and be your own lender,” says Aitken. While the book is aimed at the Canadian consumer, Aitken points out that it “promotes the value of independent advice from a mortgage professional” and he encourages brokers to read it “because it can be helpful to them in their business. “This book is a useful tool for a mortgage broker who understands the value of building their business by selling their clients on a strategy and going into a 15- or 20-year plan,” says Aitken. “By talking to their clients, even first-time homebuyers, about a strategy for the next 20 years, that’s how you get that client to come back to you when they’re ready to refinance or renew.” CMP

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Continued from page 24 Equitable Trust Equitable Group Inc. ended the year with $2.5 billion in total mortgage production, an increase of 8.7 per cent over 2009. The growth was driven by a 164.5 per cent surge year-over-year in single-family conventional production to a record $1.02 billion. “We are particularly pleased with the high quality nature of mortgages funded, and the early success of our lending business in Quebec and British Columbia,” said Equitable’s President and CEO Andrew Moor. “We have achieved these gains in market share through dedicated focus on providing superior service to our brokers and customers.” Single-family residential mortgages now represent the largest component of Equitable’s lending businesses at almost 45 per cent of total mortgage principal, up from 30.2 per cent in 2009.

Home Trust Home Capital Group, including its principal subsidiary Home Trust saw mortgage originations grow more than 40 per cent year-over-year. The total value of mortgages originated was $6.87 billion for the year, an increase of 43.1 per cent over the $4.80 billion originated in 2009. The company reported residential mortgage originations of $6.46 billion for the year, representing an increase of 40.8 per cent over the $4.59 billion originated in 2009. Home Capital’s traditional business of uninsured mortgages experienced solid growth in 2010 with increased originations of $2.85 billion for the year, up 60.4 per cent.

HomEquity HOMEQ Corporation and its wholly owned subsidiary HomEquity Bank revealed that it originated $206 million of reverse mortgages in 2010, an increase of 87 per cent over 2009. HomEquity’s mortgage portfolio also grew by 17 per cent to $1 billion. “We are seeing broad market demand for reverse mortgages as the demographic wave and other macro-economic factors affect retirement trends in Canada,” said HOMEQ President and CEO Steven Ranson. CMP

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Brokers see uptick in house purchases Climbing resale housing activity is the result of consumers trying to get a jump on mortgage rule changes being implemented by the federal government in March. This is backed up by the latest numbers from the Canadian Real Estate Association (CREA) that indicated national resale housing activity rose 4.5 per cent in January 2011 compared to the previous month, reaching the highest level since April 2010. “We have noticed an increase in pre-approvals and clients who are actively looking for a home to purchase,” said mortgage broker Paula Roberts of The Roberts Group. “Some of our Realtors are working hard to put deals together. This combined with recent interest rates hikes is pushing anyone who is on the fence about purchasing in the spring.” Roberts says that although her office is noticing an increase in business, clients aren’t panicking. ”We find that most clients who are purchasing are fitting within the new rules. Like the changes last year, they are an adjustment but before long will be second nature and accepted.” “We anticipated the recent announcement of tighter mortgage regulations, which will come into effect this March, would pull forward sales activity into the first quarter of 2011, particularly in some of Canada’s more expensive housing markets,” said Gregory Klump, CREA’s chief economist. “It will take some time before the longer term impact of the latest mortgage regulations on the housing market can be known,” said Georges Pahud, CREA’s president. “For that reason, further action shouldn’t be taken until the impact can be measured. In the meantime, if last year can be used as any guide, sales activity may heat up further as we get closer to the date on which tighter mortgage regulations come into effect, especially in some of Canada’s pricier markets” John Panagakos a mortgage broker with The Mortgage Centre Canada in Toronto has also seen business pick up recently. “I have seen my mortgage business double in January with quite a flurry of calls from clients and Realtors,” he said. “I have seen a considerable amount of multiple offers since the [mortgage rules] announcement.” Actual (not seasonally adjusted) national sales activity via the Multiple Listing Service (MLS) Systems of Canadian real estate boards came in 6.6 per cent below levels in January 2010. This was the smallest year-over-year decline since May 2010. CMP

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New or in need of repair? Homebuyers split When it comes to buying a new house or a fixer-upper Canadians are split about which to purchase, according to a report from TD Canada. According to the 2011 TD Canada Trust Home Buyers Report, Canadians are divided about looking for brand-new homes that won’t need any work or fixer-uppers that they can renovate to suit their needs, with men and women sitting on opposite sides of the fence. Half of Canadians would prefer a new home because everything will work perfectly (25 per cent) and it hasn’t been lived in before (24 per cent), while the other half prefer older homes, which they feel offer better quality (34 per cent) or have more character (17 per cent). The report found that men are more likely than women to prefer a fixer-upper because it is more affordable (14 versus eight per cent) and because they can renovate to their taste (37 versus 29 per cent). Speaking with MortgageBrokerNews.ca, Sandra Lastovic, an agent and owner with The Mortgage Centre in Guelph said in her region (Kitchener/Waterloo/Cambridge), it’s hard to find a detached home in great shape for under $250,000; however, this price range appeals to many firsttime homebuyers. “I’ve found that first-time homebuyers often struggle to come up with a good down payment for a home purchase,” she said. “If you are buying an thatMarch also2011_SYD.pdf needs renovations, it can capital older Direct adhome copy changes 1 3/9/2011 12:28:29 PM push a first-time homebuyer’s budget over the limit.” She suggested that first-time homebuyers, who are purchasing with less than 20 per cent

down and want to buy a home in an older neighbourhood should consider a “purchaseplus improvement mortgage.” “It’s a great and easy way to wrap simple kitchen and bathroom renovations into a home that also easily increase its value, said Lastovic. “One benefit of considering this mortgage strategy is that more money can go towards the down payment, instead of having to pay for upfront renovation costs.” Farhaneh Haque, Regional Manager, Mobile Mortgage Specialists, TD Canada Trust counsels that purchasers need to understand the costs associated with buying a home that needs some work. While it can give buyers the ability to transform the space into their dream home, the costs of upgrades need to be taken into consideration when deciding on the price range for a home. In the report, Canadians say the most important consideration when buying a home is cost (97 per cent). Women are more likely to say this is a very important consideration (82 per cent versus 70 per cent of men). Other important factors are features of the home (94 per cent), size (93 per cent), security and safety (92 per cent) and location (91 per cent). “Canadians wisely say that that cost is the No. 1 consideration for a home purchase, evidence that Canadians realize that in order to truly be comfortable in their home, they need to comfortably be able to afford it,” said Haque. CMP

80%

Desjardins to join forces with Meridian A tentative deal has been struck to create a potential credit union powerhouse in Ontario with the amalgamation of Desjardins and Meridian credit unions. The Boards of Directors of Desjardins Credit Union and Meridian Credit Union have agreed to amalgamate their respective organizations in order to create a credit union in Ontario with 263,000 members and $8 billion in assets under management. The deal still requires approval by the membership of both credit unions, to take place in April and the required regulatory approvals. The amalgamation includes all 19 Desjardins Credit Union branches, Central Loans Unit and head office. However, it excludes Desjardins Credit Union’s six agencies which would be maintained and operated by Desjardins Group through the Fédération des caisses populaires de l’Ontario. CMP

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this time last year Fraser Institute endorses Australian model of mortgage insurance The CMHC should be privatized to minimize taxpayer risk if a housing crisis occurs, conservative think-tank The Fraser Institute argued in a report released in February. “The Canadian government should reduce taxpayer exposure by allowing the private sector to take responsibility for insuring and securitizing Canadian residential mortgages,” said Brett J. Skinner, the Institute’s director of insurance policy research, adding Canadian taxpayers could face a future liability similar to the U.S. bailout situation because of the federal government’s involvement in the CMHC. The report compared Canada’s mortgage insurance market with Australia’s, where the federal government exited the mortgage insurance market and privatized its mortgage insurer more than a decade ago. Skinner said the Australian experience, where homeownership did not drop after privatization, “shows that a market for mortgage insurance can operate effectively without any form of government guarantee.” One year later Government should reduce taxpayers’ exposure to mortgage insurance The federal government should scale back its role in the mortgage insurance market and allow private insurers to take on a larger role says a recent report from the C.D. Howe Institute. Entitled “What Government’s Should Do In Mortgage Markets” the report says the government’s role in mortgage markets, through the Canada Mortgage and Housing Corporation (CMHC), may “encourage excessive lending risks in the consumer marketplace, potentially creating unmanageably large risks in financial markets.” According to the report’s author, Finn Poschmann, vice-president of research at the institute, CMHC’s

mortgage insurance book now backstops mortgage lending equivalent to more than 30 per cent of gross domestic product. While the net exposure is less than this, the arrangement subjects Canadian taxpayers to large, ill-defined risks. “There is no reason for federal taxpayers to be exposed to large mortgage insurance liabilities,” says Poschmann. “On the other hand, private insurers are able to manage such exposures, provided that they are adequately capitalized, prudently managed and regulated, and able to access liquid financial markets. Private insurers currently compete on the margins of the mortgage insurance business, which is dominated by CMHC.” The report recommends: That federal policy should limit public exposure to mortgage lending risks, by winding back CMHC’s role in the provision of mortgage insurance, and allow private providers to take on a larger role. The agency’s capital and staff would be well employed in reinsurance and securitization functions that backed private market insurers. Independent of whether Ottawa pursues the first recommendation, Parliament should adopt legislation that formally requires CMHC to comply with, and report on, compliance with OSFI guidelines, so that market participants compete on level footing. Finally, Parliament should adopt legislation that would support covered bond issuance by domestic financial institutions and clarify creditor arrangements in the event of the bankruptcy of a federally regulated deposit-taking institution. Such legislation would allow those institutions to more readily compete for low-cost capital in the international bond market and better serve the domestic mortgage lending market. CMP

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u.s. Underwater mortgages rise as U.S. home prices fall The number of Americans who owe more on their mortgages than their homes are worth rose at the end of last year, preventing many people from selling their homes in an already weak housing market. CoreLogic said that about 11.1 million households, or 23.1 per cent of all mortgaged homes, were underwater in the OctoberDecember quarter. That’s up from 22.5 per cent, or 10.8 million households, in the July-September quarter. The number of underwater mortgages had fallen in the previous three quarters. But that was mostly because more homes had fallen into foreclosure. Underwater mortgages typically rise when home prices fall. Home prices in December hit their lowest point since the housing bust in 11 of 20 major U.S. metro areas. In a healthy housing market, about five per cent of homeowners are underwater. About 2.4 million people have only five per cent equity or less in their homes, putting them near the tipping point if prices in their area fall. Roughly two-thirds of homeowners in Nevada with a mortgage had negative home equity, the worst in the country. Arizona, Florida, Michigan and California were next, with nearly 50 per cent of homeowners with mortgages in those states underwater. The total amount of negative equity increased to $751 billion nationwide, up from $744 billion in the previous quarter. CMP Housing prices continue to drop in U.S. Despite a slight uptick in U.S house prices during a few months early last year, the latest data shows they have slipped back down again in most cities. The Standard & Poor’s/Case-Schiller Home Price Index has nearly reached its previous low, according to numbers recently released. There has turned out to be no rebound yet in the U.S. housing market as some had hoped this year, and it may not happen in 2011 either. The index declined 3.9 per cent during the fourth quarter of 2010 over the previous quarter, and down 4.1 per cent from the final quarter of 2009. According to Robert Schiller, a Yale professor who helped develop the index, said there was a “substantial risk” the U.S. housing market could drop as much as 25 per cent. The index is already off 31.2 per cent from its peak, according to the release. The national index is now within a percentage point of the low set in the first quarter of 2009, said David Blitzer, chairman of the Index Committee at Standard & Poor’s. “Despite improvements in the overall economy, housing continues to drift lower and weaker,” he said. Some 18 of the 20 cities were down from the start of 2010. Cities such as Chicago, New York, Miami, Phoenix, Seattle and Las Vegas hit their lowest levels since home prices peaked in 2006 and 2007. CMP

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Broker Referral Networks

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Broker Referral Networks

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Broker Referral Networks

Having a network of professional partners, such as lawyers, real estate agents and financial planners, can be a great way for brokers to grow their business. Jesse Kinos-Goodin spoke to several brokers who say they owe their success to their referral networks

hen Sandra Lastovic, an agent and owner with the Mortgage Centre in Guelph, Ont., set out to build her broker business she started out advertising the same way so many other brokers do — the Yellow Pages. The ads worked in that she received calls, but she wasn’t happy with the type of clients. “They were mostly rate shoppers,” she says. Fast-forward five years and already Lastovic is no longer advertising in the phone book. In fact, she doesn’t have to advertise much anymore, as a lot of her business is based on referrals, which not only saves on advertising costs, but increases the quality of customer as well. “Referred customers are more likely to stay with me,” she says. “Plus, I can spend more time and advise them how to set up their mortgage properly. So rather than hundreds of apps and closing 10, I now close 70 per cent,” she says. Based on a network of about 18-20 referral sources, each who send Lastovic approximately five to seven customers a year, she has not only realized her goal of building a successful business, but one that is easy to manage. “I really don’t need to work more than 35 hours a week because I’m working with people who want to do business with me,” she says. “Now, when anybody calls me the first thing I ask is who gave them my name. If they aren’t from a referral, I pass them off to another agent.” But Lastovic isn’t alone. Many established brokers owe their success to their referral networks, which is cited again and again as one of the best ways to build your business. Finding out where to start is one of the most difficult things to do, but for a majority of brokers, the local realty office is often one of the first places to go.

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Quality over quantity There is a good reason that Realtors top most brokers’ lists for referral sources. Not all business partners are created equal, and no other profession deals with more potential homebuyers than Realtors. For Jackson Middleton, a Regina broker with Axiom, Realtors account for 90 per cent of his new business. But getting to that point wasn’t easy, which is why, two years ago, he hired a business development manager specifically to deal with realtors. The need for a BDM stemmed from what Middleton calls a “lack of communication in the brokerRealtor relationship.” “When I would take a Realtor out for coffee or lunch and ask them ‘What’s the biggest problem or headache you have with brokers?’ The answer was always ‘I can’t get a hold of the broker when I need them.” It was a bold step for a start-up company to hire a BDM, but it’s one that has paid off for Middleton. “Our Realtors are very comfortable contacting our office at any time,” he says. “When I’m slammed busy with paper work, Realtors are also busy, but they want answers. This way, even if I can’t get to my phone, I’m still getting answers to them through the BDM.” While Middleton says 90 per cent of his new business is based on Realtor referrals, he has only developed really solid relationships with about 10 to 15 of them. That might not sound like a lot considering how many Realtors are out there, but the goal here is quality, not quantity. Maintaining a relationship with one Realtor who gives you five deals a year is easier than maintaining relationships with five Realtors who only give you one each. So how do you find the quality Realtors? For a lot of brokers, sharing an office with a group of Realtors is the answer, but unfortunately that is not an option for every broker out there.

“ many established brokers owe their success to their referral networks, which is cited again and again as one of the best ways to build your business ”

Sandra Lastovic Jackson Middleton

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Broker Referral Networks

Lastovic, for instance, is not situated in a realty office but her company still manages to close approximately 500 mortgages a year. “Being in a realty office does not mean you are going to do a lot of business with the Realtor,” she says. “What I found was that most Realtors actually don’t do a lot of business.” Again, stressing quality over quantity, the first thing Lastovic does when looking for Realtor business partners is to research their market, which can be as simple as picking up the phone and calling them. What Lastovic is looking for is someone who does about 24 deals a year, at least, which will most likely translate into five mortgage referrals for her. Lastovic, who has about nine Realtors in her referral network, says out of all the potential referral partners, Realtors are the toughest to get onside with you. “A lot of agents don’t realize the benefit that having a mortgage broker on hand gives

“ a lot of agents don’t realize the benefit that having a mortgage broker on hand gives their customer ” their customer. They say ‘I don’t need a broker because my clients are pre-approved,’ to which I cite CMHC market research that says most pre-approved clients still shop the mortgage market, so why not give them access to a good broker?” What’s even tougher though is getting those quality 24-deals-a-year Realtors, which is something Lastovic knows about first hand. When she was looking for Realtors to work with, based on her research she knew of

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Broker Referral Networks

one that had been in the business for 25 years and dealt with quality, ‘A’ clients. “I really wanted to work with her because I knew the quality of the business,” she said. But since most good Realtors already have a few brokers that they refer, she knew this one in particular would be a tough nut to crack. Her approach was to be persistent, calling every other week and leaving voice mails with mortgage tips, sending occasional letters and emails, knowing that one day, one of those brokers will either do a bad job or not be available, perhaps giving her the chance. After four months, the Realtor “finally picked up the phone and said she had a customer,” says Lastovic. The next deal was from another Realtor in the same office who had a tough deal that Lastovic was able to help with. “Once you have a few under your belt the momentum grows,” she says, to the point that today that Realtor is the best referral partner in her network. A plan for success But of course, Realtors aren’t the only professionals out there referring business to brokers. David Gyurits, a regional manager with Mortgage Alliance, prefers financial planners, which he says are the “stickiest” type of referrals, even more so than Realtors. “What I mean by that is a good financial planner has a really tight relationship with the client,” he says, adding that homebuyers are more likely to shop around with Realtors “Financial planners are a huge quarterback for the customer’s whole financial situation, so when someone’s relying on their planner for a recommendation, they take that advice very seriously,” he says.

“ financial planners are a huge quarterback for the customer’s whole financial situation, so when someone’s relying on their planner for a recommendation, they take that advice very seriously ”

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“ you have to especially be careful when you are using financial planners — you really need someone reputable — so it’s important to call around first and speak to some of their clients ” Not only that, but since someone who actually has a financial planer is usually someone who is investing money, the quality of the client tends to be stronger.” The trick to finding a good planner to work with, says Gyurits, is to start with the local Chamber of Commerce. Then, in order to ensure the planners are reputable, simply ask them who they deal with. “You have to especially be careful when you are using financial planners — you really need someone reputable — so it’s important to call around first and speak to some of their clients,” he says. A good method that Lastovic uses is to simply ask her mortgage clients who their planners (or Realtors, lawyers, etc) are, then to use that as an ice-breaker when calling them up to pursue a business partnership. Since you both already have a common bond in the customer, it’s a good place to start and can hopefully lead to referrals. Power in numbers If you’re not the type to cold-call a realtor or a lawyer, introduce yourself and ask them for referrals, then networking groups are specifically designed for you. Russ Mendonca, a broker with The Mortgage Group in Calgary, recommends joining such a group to all his associates, such as the PGIB, breakfast clubs, or service clubs that also have a networking portion to them. If any of the groups incorporate some sort of “give back” to the community, even better, he says. “It’s a great opportunity for us to hook up with referrals, whether it be lawyers, Realtors, financial planners, accountants, dentists, all sorts of small business owners,” he says.

David Gyurits Russ Mendonca

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Broker Referral Networks

“ you just don’t know who’s going to latch on and become the top referral source, which is why you have to go into those sessions with an open mind and realize your business could come from anywhere ” An added bonus to joining an association, he says, is the automatic loyalty that is built in, which is, of course, one of the main purposes of them — getting to know and do business with like-minded professionals from the community. Although, he adds not to be too quick to write off certain members of the group for referrals, as you never know where one will come from. “You would think that the Realtor in the group would provide you with the most business,” he says, “but that’s not always the case. It could be the business coach, the financial planner, the dentist or even the car manager at the local lot. You just don’t know who’s going to latch on and become the top referral source, which is why you have to go into those sessions with an open mind and realize your business could come from anywhere.” Tony Leung, a regional manager for the Greater Toronto Area with Mortgage Alliance, takes the idea of the networking group further. Rather than going to a regular meeting where, in a lot of cases, you will have to pay an annual fee, can consist of any number of people and, worst of all, possibly already count a mortgage broker among its members, he suggests starting your own of about four to five people. If you’re really active and highly sociable, he says it should take approximately three months to form one. “All you need is a group that meets about once a month for coffee, maybe 45 minutes,” he says, adding that you need one Realtor,

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one financial planner, one law clerk, and one insurance agent. To start, it’s important, especially if you are young in your career, to get people that are a similar age, that way you will “grow old together and always support each other,” he says. All this sounds great on paper, but there are a few tips to consider before putting the plan into action. First, don’t go into a Realtor’s office empty-handed, he says. “Bring them a pre-approval and say ‘I’m looking for a person to help me serve this customer.’ Tell them you are looking for someone new so that you can establish and grow a relationship. If you just show up with a rate sheet it will probably get thrown in the garbage. Show them you mean business by having a customer ready to go,” he says. As for financial planners, offer to call their customers on their behalf to see if they want to refinance in order to invest some money, says Leung. “You can offer to call from their office, making sure they know that you don’t want their customers, you just want to do the refinancing in order to give them more business,” he says. Once that group is operating well, rather than disrupting the flow of it start all over again with another group, he says. “It’s tough because you need the preapprovals to get these groups started, but once you get a few of them going, then you’re going out twice a week and meeting with different people and you have referrals coming from many different spots,” he says. And diversification is important. If you rely too heavily on one group of people and they happen to hit a dry spell, it will affect you less. It’s something Gyurits stresses to all the brokers he works with. “I learned this the hard way, that if you rely too much on one place to send you the business, and then something goes wrong, then you’re up the creek, basically,” he says. “It’s all about diversification,” he says. “When you’re investing, you wouldn’t put all your eggs in one basket. Likewise, you don’t want to put all your eggs with one referral source.” CMP

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Special Feature Commercial Mortgages

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Special Feature commercial mortgages

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Special Feature Commercial Mortgages

The commercial real estate market in Canada has rebounded since the recession and according to the lenders and brokers CMP spoke to, there is a healthy appetite and lots of money available for commercial deals in 2011

he numbers speak for themselves. Last year, according to CB Richard Ellis, commercial real estate investment in Canada was up just over $7 billion in 2010 to $18.9 billion. “[Last year] was a good year and relative to 2009 it was a very good year,” says Jeremy Wedgbury, managing director of commercial mortgages at First National Financial. “There was last year, a lot of money in the system, on both the equity side – people looking to buy real estate – and from a lending perspective there’s lot of money out there. And when you flip forward there’s going to be even more money out there in 2011.” Chris Doughty, a mortgage professional with DLC Bankfighter Inc. in Penetanguishene, Ont. thinks for the first time since the market’s peak in 2007 ($32.2 billion), lenders are starting to loosen their purse strings. “In 2007 the amount of commercial I did was astronomical and then when everything apart, the parameters and the guidelines changed so drastically that doing commercial became quite difficult,” he says. “Lenders are now becoming more proactive and willing to look at different scenarios that they wouldn’t have looked at a year ago.” According to Dale Bilton, a commercial mortgage broker with Mortgage Intelligence in Kitchener, Ont., he hasn’t been this busy in years. “My phone has been ringing off the hook with good, serious buyers,” he says. “There are better-positioned buyers right now, ones who can close, as opposed to the ones where we would just go through the motions and not get anywhere.” “The commercial sector is opening up,” says Tony Hili, senior VP and managing director at myNext Commercial Mortgages Inc. “I’ve talked to a number of lenders recently and they are all anxious and very competitive for new commercial mortgage business. With potentially more CMBS on the horizon, real estate companies will have more choice in borrowing funds for their projects.

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commercial broker checklist About to send that commercial purchase through? While requirements from lender to lender vary, here is a sample checklist of requested documentation to be sure you’re on the right track. ❑❑ Application is fully completed, signed by all principals and credit bureau ❑❑ Detailed, separate personal net worth statement for each borrower/guarantor (unless married) ❑❑ Purchase & sale agreement with all schedules and amendments ❑❑ MLS listing with a picture of the property (if applicable) ❑❑ Picture and description of the property (i.e. storefront with commercial unit on the bottom and with two one-bedroom apartment on the second floor) ❑❑ Confirmation and source of down payment with verification. For example: three months of bank statements (large deposits will have to be verified), line of credit statements, and if applicable refinancing or sale documentation for another property ❑❑ Signed loan proposal/letter of intent and “good faith deposit” ❑❑ Property income and expense statement ❑❑ Current rent roll with names of all tenants ❑❑ All commercial leases ❑❑ Indicate if the property is owner-occupied, leased, or vacant on closing

continued on page 48

dedication. Commercial Mortgage Broker Services (CMBS) Equitable Trustâ&#x20AC;&#x2122;s CMBS team is dedicated to providing a fully customized solution for our independent licensed broker network. If your client is either a qualified entrepreneur, owner operator and or real estate investor seeking to purchase or refinance storefronts, retail office, multi-residential, commercial or industrial properties, then give us a call. We can review all commercial deals with assistance of our in-house commercial experts to quickly turnaround your deal. Pick up the phone today or go to www.equitabletrust, click on contact Commercial Lending to find your regional contact. OntariO 416-515-7000 Quebec 514-282-7099 tOLL Free 1-866-407-0004 tOLL Free FaX 1-866-407-5859

Special Feature Commercial Mortgages

“Commercial rates have come down and I’ve heard of some lenders offering five-year term rates below five per cent for good quality commercial deals.” Typically, Hili says, lenders today are becoming more creative in sourcing new deals and commercial mortgage brokers are filling this gap and becoming a growing essential source for the lending community.

Jeremy Wedgbury Dale Bilton

What’s behind this improvement? “Low interest rates are driving a good portion of it,” says Wedgbury. “Five-year government bond is at 2.75 per cent and what that means is a borrower on a good commercial property can go out and borrow money at sub-five per cent.” Wedgbury says that the equity markets have been very strong, with Canadian REITs raising a lot of money in the public markets. “They are flush with cash and when they have cash they don’t want it to sit around, so they tend run out and buy real estate as quickly as they can,” he says. Pension funds have also re-entered the commercial real estate market. “Their portfolios have ramped up over the last 12 to 18 months pretty dramatically, which meant that real estate as a percentage of their overall portfolio was underweighted. So for some of the pension funds they started to run out and buy real estate again.” For Bilton, he has seen people who previously have been sitting and watching and analyzing, waiting to move forward, now entering the market. “Strong growth is being predicted and is being felt by clients who are in a position to move forward,” he says. While he doesn’t see a lot of good buys on the apartment side, Bilton feels the industrial sector has room to grow. “There is a reasonable amount of inventory out there to buy at good prices. The companies that are in a position or need to grow are buying.”

commercial broker checklist continued from page 46 ❑❑ Personal Income verification: ❑❑ If employed, a current letter and pay stub. ❑❑ If self-employed, a self-declared letter and two years of business financial, proof of company ownership (article of incorporation), or two years of T1 General. ❑❑ Latest notice of assessment for each borrower/guarantor ❑❑ If title being held under company name – holding company, registration particulars and financials ❑❑ Signed commitment letter – both places under Borrowers and Covenantors ❑❑ Appraisal report ordered – ask for lenders’ lists of approved appraisers ❑❑ Any other reports requested – i.e. environmental and structural reports ❑❑ Bank statements to support credit (if needed by underwriting) ❑❑ Borrower(s) to provide their solicitor/lawyer’s phone, fax and e-mail address ❑❑ Retainer cheque forwarded and assigned by solicitor/lawyer

Source: Equitable Trust

Fingers Crossed? Deals lost? We understand the challenges commercial brokering presents. If you’re having difficulty finding the solutions you need, now is the time to consider CO-BROKERING with one of the most successful commercial brokers in the business. It’s the smart way to close more deals, INCREASE YOUR REVENUES, and decrease your stress levels!

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“ I have been referring commercial mortgages to Equitable Trust for a number of years. Once I obtained a good knowledge of the types of properties which Equitable had an appetite for, I found out that they could usually give me an indication within the same day the amount they could lend and the interest rate. Getting a rapport like this takes a while. I have found them to be very reasonable to deal with. I also want to mention that the lawyers on their approved list know how to close a deal quickly and have also been great to deal with. ” – Dale L. Bilton, AMP, Mortgage Intelligence (Kitchener) “ I have worked with the commercial mortgage department of Equitable Trust for numerous years and always gained wonderful experiences. Their deep knowledge of the industry helps maximize clients’ experience was well as the brokers’. Other than being reasonable with their pricing and requirements, they are extremely prompt with their replies and take all the initiatives to help brokers fund transactions. I highly recommend utilizing their services. ” – Reza Ghazi, mortgage broker with Mortgage Edge

In the commercial space, Equitable Trust has built trust with brokers that offer clients a customized approach to lending

Commercial experience T

hrough this proven line of business, Equitable Trust specializes in small commercial lending transactions to qualified entrepreneurs, real estate investors, and new immigrants as well as business operators. Equitable lends on property types that include: storefronts, mixed-use, retail and office condominiums, multi-residential, in addition to small commercial and industrial properties. Broker Services has a long history of success built on its extensive network of mortgage broker relationships and its deep understanding of both the commercial property owner’s needs and the client’s small commercial needs. David Downie, assistant vice-president, Commercial Mortgage Origination, leads a dedicated origination team of account managers who are committed to outstanding broker service. The team quickly processes a wide variety of commercial applications across the GTA, Ottawa and Montreal markets and offers timely solutions with a variety of financing options including fixed and adjustable mortgages, open or closed terms. Broker Services originates commercial mortgages in the $100,000 to $2.5 million range. Equitable Trust also offers customized mortgage solutions across Canada for transactions above $2.5 million. Equitable Trust has discovered the most effective way to offer a “customized approach” to lending is by working with mortgage professionals who can share their understanding about customers’ needs, says Andrew Moor, the company’s president and chief executive officer. “The nature of our business is such that every loan we have has a story to it, so we need to have deep relationships with the mortgage broker community to understand those stories,” he says. “Our business takes a customized approach by looking at individual loan applications, working with the broker and understanding why the loan makes sense. Equitable Trust’s service is the reason brokers in Quebec and Ontario have chosen to do commercial business with the company,” Moor says. Another reason brokers rely on Equitable Trust is its strong financial basis, Moor says. Founded in 1970, Equitable Trust is a publicly traded company listed on the Toronto Stock Exchange with more than $9 billion in assets. “Equitable Trust funds its mortgages by issuing GICs. This flexible and efficient source of funding allows the company to be creative in structuring the details of a commercial loan,” Moor says. CMP

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Special Feature Commercial Mortgages

Tony Hili Chris Doughty

He says professionals, such as doctors, are restructuring their portfolios to position themselves to buy more. “People like that [with no debt] are out there now, seriously knocking on doors to buy and that hasn’t been the case for a while.” Wedgbury agrees. “Some of the smaller investors have seen their equity portfolios get beaten around, so they have started to say ‘Forget this. I’m going to buy hard assets.’” Hili says a lot of new private money is coming in from individual investors, mainly retirees, who are looking for more of a return than they would typically get from GIC investments, government bonds or other such low-paying interest vehicles. “They will invest with MICs, who will guarantee them a certain return on their money secured by mortgage and construction loans financing. In general, MICs put their investors’ money out for shorter terms and many are restricted to lower amounts per project and for the most part, they try to lend in areas with the province that they operate in. They’re also cautious, they want equity, typically a 50 per cent loan-to-value ratio.” In addition to private and consortium lenders, Doughty predicts credit unions will become a bigger player in the commercial market. “They seem to have a higher threshold for commercial, a higher budget for commercial and what we also find is that they will do syndication loans. They’re taking a whole different approach to commercial lending.” What you’re also going to see in 2011, says Doughty, is more lenders coming abroad with tailored commercial products to attract the business. “What’s happening is that the lenders have backed down the loan-to-value that they are allowing, but they’re allowing more leeway as to what they’re willing to do,” he says. That doesn’t mean every deal with get approved though. “In 2007 you could send a deal out to five lenders and you knew one or two of them were going to pick it up. You can’t just throw stuff against the wall anymore and hope it sticks.” While Bilton specializes in commercial deals, he advises fellow brokers that there is opportunity. “Just make sure you don’t overlook them and if you’re not comfortable doing them, form a relationship with a commercial broker.” This where a company like myNext Commercial Mortgages can help says Hili. “Our job is to find a lender (conventional or private) where the deal fits and I think there is a niche to be filled. For example, if someone has

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Canadian commercial real estate investment up 48 per cent in 2010 A stronger economy and surging investor confidence triggered a 48 per cent increase in Canadian commercial real estate investment volume in 2010 to $18.9 billion, with the Toronto market growing by a staggering 93 per cent. With the exception of London, Ontario, all regional markets saw an increase in volume in 2010. Toronto finished the year with $7.4 billion in trades, up from $3.8 billion in 2009, according to the 2010 National Investment Report released by CB Richard Ellis Limited (CBRE). Canadian commercial real estate transaction volumes in 2010 increased by 47.9 cent, year-overyear, from $12.7 billion in 2009 to $18.9 billion in 2010, approaching pre-recession 2005 levels when $19.8 billion of commercial property traded in Canada. By year-end, the number of commercial transactions reached 4,589, compared to 3,872 transactions completed in 2009. “This level of activity was not unexpected,” said John O’Bryan, vice-chairman of CB Richard Ellis. “Once we were a few weeks into 2010, we could feel momentum picking up so that by the year-end, we were about where we expected it to be. It’s clear that commercial real estate in Canada is attracting heightened interest from both domestic and foreign investors,” he said. “They recognize that this market is providing relatively strong yields in comparison to the stagnant performance of many financial instruments. In my view, their growing confidence in this product class will be amply justified by its continuing strength in 2011.” “It’s almost as if the recession was 20 years ago, instead of just two,” he observed. “It was really a coast-to-coast recovery – something we haven’t seen before.” “Virtually every asset class in the country showed strong performance,” O’Bryan said, “although operating businesses, such as hotels, manufactured housing, and retirement homes were somewhat slower to recover.” “We saw some extremely large transactions in 2010,” he said, “such as ING Groep NV’s sale of its Canadian industrial real estate portfolio for $2.2 billion. This year we can expect strong transaction volumes, but the size of individual deals will likely be somewhat smaller.” Toronto recorded the highest commercial real estate activity volume of all the major cities, with $7.4 billion traded, and 1,156 transactions.

Special feature Profile

With a national commercial mortgage lending program, Romspen has established a reputation with brokers and commercial clients for making deals happen … fast

Appetite for construction A

Blake Cassidy

s a non-conventional boutique lending company, Romspen doesn’t consider the traditional banks as competitors. “Banks don’t have a lot of appetite for anything that’s out of the box, and at Romspen, our expertise is in fitting square pegs into round holes,” says Blake Cassidy, managing partner at Romspen. “In short – we can do the deals that the banks turn down. Our solutions are individually customized and we work creatively to structure each deal to make it work for every party. We can also make lending decisions quickly.” It’s this flexible approach that has transformed Romspen into one of the largest non-bank commercial and industrial mortgage lenders in Canada. Romspen began in the 1960s as a side business to the Toronto real estate law firm Spencer Romberg. In 1966, the mortgage lending business was formally organized as Romspen and eventually overshadowed its law practices, allowing the partners to focus solely on mortgage investments. Six years ago the company became effectively a private mutual fund for commercial mortgages – a unit trust (not a Mortgage Investment Corporation). “Since then, we’ve grown that portfolio from $200 million to nearly $750 million under administration,” says Cassidy. “We’re a hard money lender. We have the funds at our disposal, we make the decisions, we don’t have to look for partners to make deals work. When we say we’re doing a deal, we are doing the deal.” Romspen generally does deals in larger urban centres, but is comfortable funding quality transactions in secondary markets almost anywhere in Canada, from Fort St John, B.C. to St. John, N.B. Typical transactions range from $5 to $30 million, although deals from $2 million to $60 million have been funded. “Speed is another factor that sets us apart from the banks,” says Cassidy. “In many instances we

can close deals within a couple of weeks which is hugely important for clients where timing is critical and without access to fast reliable funds it would be a deal breaker. We consider time to be our most valuable commodity. We have a lot of money and we see a lot of deals, so our objective is to be efficient at closing them. This keeps our money working and our deal pipeline full.” Romspen often fills the niche lending spaces that more conventional institutional lenders leave underserviced or untouched, which changes depending on where the market is and upon their appetite or restrictions. “In times of abundant capital we were doing predominantly construction transactions and time-sensitive deals. During the credit crisis when the banks scaled back commercial lending almost entirely we were funding across the board, from cashflowing assets to construction to bridge financing. Post credit crunch, bridge financing, term debt and construction loans remain a large part of our balanced portfolio. We step in and provide interim bridge financing for whatever is needed for quality real estate with sound fundamentals until the client has repositioned the property to bring in a more cost-effective source of institutional debt.” According to Romspen, mortgage brokers form a large component of the company’s originations and they look to ensure that that will continue. “We protect brokers through the entire transaction,” says Cassidy. “We structure the brokerage fees right into the transaction and we pay brokers from trust at the time of closing.” Cassidy also encourages brokers to contact Romspen if they have any questions about a potential commercial deal. “We’re quite happy to chat and talk about the transaction and how we would structure the financing and point them in the direction of collecting the relevant information to ultimately get a deal done.” And if Romspen can’t do the deal, Cassidy’s work is far from over. “Even if the deal isn’t for us, I’m happy to refer them to a different source of capital. Or if the deal is too small for us, but I know a regional player, then I’m always happy to make that referral. We like to keep the dialogue open because I’m confident that brokers will refer their larger more complex transactions to us when the time comes.” CMP

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Special Feature Commercial Mortgages

a raw, un-serviced parcel of land and they go to a typical lender, they will be given a commitment subject to certain requirements and conditions to be met, such as zoning and development plan approvals, percentage of sales completions and certain percentage of equity in place to mention just a few. We can take them to privatae lenders who can help them purchase the land and guide them through the next steps in the development process. We can assist borrowers when starting the land development process by providing private capital during land assembly, building permit schedules and land servicing and sale to meet conventional lender’s requirements.” Hili advises brokers looking at commercial deals to make sure they arm themselves with basic information. “When looking at a commercial deal, you have to be able to calculate the cash flow; otherwise you’re going into the deal blind. If the cash flow isn’t there, then you’re not looking at a prime lender,” he says. Hili advises brokers to know how to summarize actual or projected gross income less vacancy and operating expenses to derive the net operating income (NOI) before debt service. After calculating the debt service based on the interest rate and loan amount, you will need to calculate the debt service coverage ratio and the return on equity. If agents/brokers are not experienced in commercial mortgages or construction loans they should consider using a company like myNext Commercial Mortgages says Hili. “We pay referral fees on satisfactory completion and funding to the referring agent or broker.” As a lender, First National Financial saw commercial volume drop 33 per cent in 2010,

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but Wedgbury says it more accurately reflected a return to normality for the company. “2008 and 2009 were banner years for us because the banks and life insurance companies effectively left the business for a couple of years because they started to worry about other issues they had on their balance sheets,” he explains. “What that meant was that we were able to step in and respond as the dominant CMHC-insured apartment lender in Canada. We had two years of more than $3 billion in originations. 2010 would be what I would consider to be more of a normal year for us. There is a high level of competition back in the market again so now we’re fighting tooth and nail.” That means a broker’s relationship with their lender becomes even more important, according to Doughty. “A lot of it boils down how you present the deal, which has changed a little over the past two years,” he says. “It’s become less about the client and more about how the product is packaged. Why does the deal make sense?” While most experts are predicting a flat real year for the residential market, the brokers and lenders CMP spoke to are optimistic for commercial real estate in 2011. “I think there’s a lot of people out there that have cash that want to start to put it to work, so if anything the market is going to improve,” states Wedgbury. “Investor are also looking to put out their money– there’s a lot of money around for good commercial product right now,” echoes Hili. “Most of my commercial lenders have a very aggressive appetite for placing money over the coming year,” says Bilton. CMP

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Blake Cassidy (Ext. 4868) 800.494.0389 or 416.966.1100

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Income Tax Season

Every broker tells a story Tax season provides a fantastic opportunity for mortgage professionals who view themselves as trusted advisers, providing holistic planning advice to clients as part of team. Sandy Aitken advises brokers how to build their mortgage business by telling a tax story

t’s tax time again. When CMP asked me if I would be interested in contributing an article based on this topic, my initial reaction was less than enthusiastic because I know from experience that mortgage professionals just don’t care. Tax simply does not factor in their business. Once upon a time, when I was brokering mortgages on a full-time basis, all I cared about was funding the deals on my desk and finding the next one. Tell me something that helps me do those things and I`m interested – otherwise, forget it. Then it occurred to me, what are some of Canada’s leading mortgage planners doing to make more money on each mortgage deal while locking in repeat business by guaranteeing their customer comes back? My favourite line in the 1992 cult sales movie Glengarry Glen Ross, is Ed Harris’s character Moss who says: “What did I learn as a kid? You don’t sell a guy one car. You sell him five cars over 15 years.” Successful mortgage professionals understand this sales mantra, but there is a big gap between understanding and execution. If you have been in this business for a while and the majority of your files are still first-time homebuyers, perhaps you’re leaving too much on the table. In order to keep your customers coming back over 15 years, through every refinance, renewal and home purchase, you need a

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strategy to differentiate yourself. A tax discussion can do this for you and you can apply it to not only keep your customers coming back, but increase your revenue from that same customer with very little extra effort. I promise you, this is not a boring tax article. It’s a business-building technique for mortgage professionals that are actively seeking to increase revenue and profits. Why would you want to consider talking to your clients about tax or any other financial strategy? By the time you read this article, the latest round of new rules will be in effect and high-ratio borrowers can only amortize their mortgages over a maximum of 30 years instead of 35. The natural consequence of this particular rule change is falling house prices. Economists tell us that it’s the marginal buyer that sets prices in any market and when the bar is raised on borrowers, property values fall. Yesterday’s marginal borrower is today’s non-qualifier and many prospective homeowners will have to rent a little longer now. For real estate investors, the lustre is also fading. Last year’s rule change eliminated high-ratio leverage as an option for investors and now that property values are expected to take a turn for the worse, many real estate investors will look to other industry sectors for safety and diversification. As a mortgage

Feature

Income Tax Season

professional, how are you planning to meet this growing demand for financial planning advice? Remember, financial planning is an unregulated term in this country and the most qualified adviser is often the provincially licensed mortgage professional. If your customer is no longer enamoured with real estate, but still feels the need to put home equity to work, what else can you offer? We are headed into a time of fewer customers demanding better advice. Change creates opportunity, and mortgage professionals who plan to meet this growing demand will flourish. Here’s a story. A few weeks ago, one of my original clients, Johnny and Sue, came to me for advice. Johnny is a 39-year-old engineer with a great job who earns $135K and Sue is a 36-year-old teacher making $65K. Their home is worth over a million dollars and they have $200K balance left on their original mortgage. They also own an investment property worth $250K, which is mortgaged with a HELOC at 80 per cent. Their portfolio is already taxefficient as the investment property mortgage is maxed out and 100% tax-deductible. They are also making their own mortgage taxdeductible using the Tax Deductible Mortgage Plan (TDMP). Here’s the interesting part. They went to see their financial adviser to inquire about investing $200,000 in the stock market because they felt it would be an appropriate diversification from real estate. I had already pre-approved the bump in their Principal Residence HELOC to finance the investment. This was the easy part as they are supremely well qualified with verifiable income and excellent credit scores. Their financial adviser inquired where the $200,000 was coming from. When he learned that they were planning to increase their HELOC to fund the new investment, he told them that they are not permitted to borrow to invest in mutual funds. Even though Johnny and Sue have almost $1 million in personal net worth, almost entirely tied up in home equity, mutual fund salespeople are no longer allowed to sell them mutual funds under their new guidelines. I laughed. I’ve heard this story before. Not to worry, I assured them. Although mutual funds are not an option, I would introduce them to something much better. Have you ever heard of Exchange Traded Funds (ETFs) I asked? I went on to explain that ETFs are

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Sandy Aitken

“ they say every cloud has a silver lining. As mortgage planners, our silver lining is that we get to fill the huge void left by the recently departed mutual fund industry ”

like mutual funds only cheaper and more tax-efficient. I asked them to complete one simple form, which I submitted to an investment counsel portfolio manager who uses ETFs. I’m a big fan of complete transparency and, therefore, I felt the need to disclose that I would be paid a referral fee on this investment from the portfolio manager. But more importantly, I explained that as their mortgage planner, I’m not actually providing any specific investment advice or tax advice because I’m solely licensed as a mortgage professional. As financial professionals, we are suffering somewhat under a dark regulatory cloud on both sides of the balance sheet. We’ve had three straight rounds of tightening mortgage rules since 2008 and mutual fund salespeople have been wiped out of the game when it comes to mortgaged homeowners under the MFDA leverage supervision guidelines. They say every cloud has a silver lining. As mortgage planners, our silver lining is that we get to fill the huge void left by the recently departed mutual fund industry. This is a fantastic opportunity for mortgage professionals that view themselves as trusted advisers, providing holistic planning advice to clients as part of team. Here’s how you do it. Tell your client a tax story. I love telling tax stories to my clients. Keep in mind that I’m a mortgage professional not a tax expert. I’m not an accountant and I never give specific tax advice to any customer; although I often make a referral. As a mortgage professional advising clients on debt strategy instead of selling on interest rates, you have a choice of stories you can tell. Many advisers talk about the pros and cons of fixed versus variable interest rates or the merits of various mortgage lenders. Others might talk about the advantages of ETFs over mutual funds or the performance of certain portfolio managers. The danger with such topics is they are all subjective. Customers often have opinions and a subjective discussion around any financial strategy is too risky if you find yourself on the wrong side of your customer’s viewpoint. Consider telling a tax story instead. Taxation is a great topic because you just can’t lose. You can come off brilliant to your client by sharing some very basic tax information and they can never disagree if you stick to the absolute truisms. In

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Feature

Income Tax Season

summary, no taxpayer in their right mind wants to pay a dollar more income tax than they absolutely have to. When you ask your customer if they like the idea of their mortgage being tax-deductible, you can always anticipate their response. The same principle applies to the taxable nature of investment income. Every successful mortgage professional develops their own style for engaging clients in a discussion about mortgage strategy and financial planning. But here are a few tax truisms that I like to work into the mix depending on the situation: 1. Is your mortgage tax-deductible? An oldie but goodie. First coined in 2002 by Fraser Smith and fully updated in my own book, Mortgage Freedom, this provocative question always leads to a healthy discussion around good debt and bad debt. Truism – good debt is better than bad debt by definition since good debt is taxdeductible and bad debt is not. 2. Is your investment income taxefficient? There are four taxable flavours of investment income: Interest, Dividend, Capital Gains and Return of Capital. Truism – Interest is the least desirable type of income as it is taxed at the full marginal tax rate of the taxpayer. All other income types are preferable to interest from a tax standpoint. 3. Is your investment in a separately managed account? A professionally managed portfolio of ETFs can be held in a separately managed account instead of in a pool with a whole bunch of other investors like a mutual fund. Separately managed accounts are more tax-efficient than mutual funds because your tax base is your own. In a mutual or pooled fund you must share the tax base with others in the pool. This can lead to unexpected taxes being triggered even if the value of your holdings does not increase. 4. Are your investment fees taxdeductible? Fees paid by an investor to any portfolio manager are known as the Management Expense Ratio (MER). The reason mortgage planners introduce clients to an investment counsel portfolio manager in Canada, is because their investment advice (management fees) is tax-deductible

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“ no taxpayer in their right mind wants to pay a dollar more income tax than they absolutely have to ”

when managed in a non-registered, separately managed account, whereas mutual fund MERs are not tax-deductible. Stick to the tax story. If you are going to refer clients to an independent portfolio manager, and be compensated for your efforts, there are a few things that you should know. First and foremost, you cannot provide investment advice. You’re only licensed to provide mortgage advice and the planning that goes around it. When making a referral, your job is to get your mortgage customer to fill out the form. That’s all. You may provide some information about the general nature of the category of investments and perhaps introduce the portfolio manager, but I strongly recommend that you stick to the material on the investment manager’s website. Sometimes less is more. When it comes to specific tax advice in the context of a client situation, the same rules apply. As a mortgage planner, I try not to talk to my clients about the investments at all and never want to get stuck in an interest rate discussion. I simply segue into the tax discussion at the earliest opportunity. My initial purpose of talking tax strategy is often to avoid the dead-end discussion of interest rates. An interest rate discussion with a mortgage customer is a bear trap. It`s the last bastion of the unimaginative and the only question a customer knows how to ask when given the chance to lead the conversation. When you digress into a rate discussion, the only thing that you can be sure of is that you`re going to take a beating if you don’t immediately change the subject, whether or not you win or lose the deal. Tax talk is always a winner. Interest rate talk can be a loser. So this tax season, talk taxes to your mortgage customers. Ask them if their mortgage is tax-deductible. Ask them how they feel about their exposure to real estate in the current market and if they would like to hear about tax-efficient investment alternatives that you can refer. Talk about a tax strategy and see if your customers get excited about accelerating their retirement plans and being debt-free sooner.

Sandy Aitken, B.Eng., AMP is founder and CEO of TDMP.COM and the Tax Deductible Mortgage Plan (TDMP) and author of Mortgage Freedom. CMP

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Business Marketing

It has been reported that over 80 per cent of mortgage professionals fail within their first two years. That’s a staggering statistic. Doren Aldana explores some of the reasons why this happens and how new brokers can help themselves succeed in the fifth of a six-part series

ere’s a crazy question for you: What does a tree and the Parthenon have in common? Perhaps you’re thinking, “Well, they both reside on Planet Earth.” That’s true, but that’s not exactly what I was getting at. You see, both the tree and the Parthenon have multiple sources of strength. In the case of the tree, it has many roots that anchor themselves deep into the earth in order hold the tree upright – even against strong winds. Similarly, the Parthenon has endured throughout the ages (over 3,000 years) because it has multiple pillars (46 outer pillars and 23 inner pillars) holding it up. Here’s the big idea: diversification leads to stability! Now, let’s relate this principle to your business in general and your referral generation in particular. I don’t care how great and profitable your primary referral source might be, if that is the only referral source you have, you’re sitting on a one-legged stool – you’re setting yourself up for a fall. Let me ask you this: What happens when that one referral source dwindles or dies? Your income just went gonzo! On the other hand, what if you implemented one referral strategy per month, for 12 consecutive months? By the end of the year you’d have 12 additional referral sources flowing into your business. Just think about that for a moment. Imagine what would happen to your income if you were to set up 12 additional pillars for your pipeline. For example, here’s what your annual marketing plan might look like: January: Monthly Direct-Mail Client Newsletter If done right, sending an entertaining, fun, informative newsletter to your prospects, clients and referral partners every month can be one of the most profitable strategies in your marketing arsenal – bar none. February: Annual Mortgage Review (AMR) Campaign This campaign involves three simple steps: 1) Send an AMR card to your clients on their mortgage anniversary 2) You or better yet, your assistant would call each client up and offer a 15-minute ARM session with you to review their mortgage and make sure it’s still up-to-date 3) Do the AMR.

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Start off by asking how they – and their family – are doing, then discuss the following: their current home value (if they don’t know, ask them if they’d like a free home evaluation and send this hot lead to your Realtor), short-term/long-term real estate goals, income changes, debt accumulation (i.e. credit card debt), how happy they are with their current Realtor, financial planner, insurance agent, CPA, etc., and lastly, who they know who might be buying, selling or refinancing in the next six months. If you have a large database of past clients – this campaign is guaranteed to explode your referrals and repeat business. March: Weekly Email Tip Campaign Get your assistant (if you have one) to upload your list of prospects and clients to my Done4U 52-week email campaign. After that’s complete, your assistant would simply need to add new prospects and clients to the campaign on a daily or weekly basis. Once added to the campaign, your prospects and clients would receive a weekly email tip that adds value and builds top-of-mind consciousness. Then just set it and forget it – while it works on autopilot. April: WOW Factor Formula Campaign This is one of my newest, most powerful inventions for WOWING your prospects’, clients’, and referral partners’ socks off with so much amazing value that they can’t help but refer you any chance they get. Your assistant can help you implement this four-card system with as little as 15 minutes per day. I’ve put together a series of video tutorials that walks them through the entire process, step-by-step. It’s a no-brainer.

“ if done right, sending an entertaining, fun, informative newsletter to your prospects, clients and referral partners every month can be one of the most profitable strategies in your marketing arsenal – bar none ”

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“ people love to be appreciated; in fact, they crave it. The more you show appreciation to your clients, the more they will appreciate you – with referrals ”

May: Birthday Call Campaign This strategy goes beyond just sending a simple birthday card in the mail – it actually involves a real, live phone call. Yes, a phone call. Imagine how your client would feel receiving a genuine, heartfelt phone call from you on their special day. No sales pitches, no referral requests, just a simple “Happy Birthday.” It may not seem like a big deal to you but I can tell you with absolute certainty, those calls are golden. The warm and fuzzy feeling you establish or fortify from that simple two-minute phone call can reap abundant dividends in the future. June: Renewal Campaign Send out a “Renewal Card” five months before your clients’ renewal date and then follow up by phone a week later. Do this and you’ll capture a higher percentage of that renewal business. How much is one of those renewal clients worth to you? This is the easiest money you’ll ever make. July: Referral Contest Launch a 90-day referral contest with your clients and referral partners. If compliance allows, come

up with some cool incentives for first, second and third prize (i.e. trip to Las Vegas, big screen TV, portable DVD player, iPad, iPod Touch, etc.). Give one ballot for a referral and two ballots for a referral that closes – the more referrals they send, the better chance they have to win. Send out a weekly update via email with the top 10 point leaders. This is a great way to get people excited about referring you – even in the summer. August: Realtor Marketing Program The secret to getting more referrals from Realtors is to add unique value that no one else is offering. For example, show them how to attract more quality listings and sell them faster and for top dollar. To accomplish those objectives, they will need buyer leads –and lots of them. September: Client Appreciation Party People love to be appreciated; in fact, they crave it. The more you show appreciation to your clients, the more they will appreciate you – with referrals. What better way to express your appreciation than with a Client Appreciation

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Joining a network shouldn’t mean losing your identity.

Party where you can all get together once per year and celebrate, have fun, eat good food, listen to great music and enjoy yourselves? These special events act like Super Glue that turns your clients and referral partners into loyal raving fans for life. October: Set Up Social Media If you hadn’t noticed, social media is the big craze right now – everyone and their 80-year-old grandma seems to be doing it. While it may seem trivial and a complete waste of your time, if you use it properly it can bring you referrals with very little effort. The first step is to get your social media platforms set up. Here are a few to start with: Facebook, Twitter, LinkedIn, YouTube, Myspace, and a blog. You can hire a social media expert on Elance to do all of this for you for under $100. November: Weekly Video to Consumers on Facebook Fan Page Last I heard, Facebook has now topped Google as the No. 1 highest traffic site on the Internet. Over 700,000 new members join Facebook every day. Do you think there might be an opportunity here? One of the easiest ways to generate mortgage leads on Facebook is to set up a Fan Page and post a weekly home/real estate/mortgage related video tip that your fans/clients would gain value from. Make it two to three minutes long. Include a call to action at the end of each video (i.e. for more info, call us or visit our website). Each video you create acts like a little 24/7 lead machine.

Join our network and build your own brand!

December: Weekly Video to Realtors on Facebook Fan Page This is the same as the previous strategy except for one thing: this time you’re providing video tips to help Realtors grow their business. You’ll need to create a separate Fan Page for this. If you offer great tips, you’ll get Realtors calling you for more info. Seems like a lot to accomplish in one year doesn’t it? Agreed – compared to most mortgage professionals, it is. However, if all you do is dedicate three hours per week to working on your business, not just in your business that would give you an extra 12 hours per month to implement these strategies into your business. Just imagine how profitable and successful you’ll be once you build this solid foundation of multiple business-building pillars feeding your pipeline. Remember, the key to success is consistent, focused action. No more excuses. As Saint Nike says, “Just Do It.” About the Author: Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. Aldana is also the author of a new 3-disc DVD/ CD set titled, “7 Secrets to Attract More Referrals on Autopilot.” To pick up your free copy, visit: www. freereferralsecretscs.com. CMP A NATIONAL NETWORK LIKE NO OTHER

1-866-955-7624 • www.rmaifinancial.com

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The planning started literally the week after last year’s Canadian Mortgage Awards, and the time has finally come to announce the finalists for 2011

o start, we would like to thank everyone who took the time to submit a record 1,300 nominations this year, and after a careful vetting process the results are finally in. And with over 150 finalists from nearly 70 companies and seven provinces, this promises to be the largest awards yet. This year we’ve added one new award: Mortgage Broker Network of the Year. This award of excellence will be given to the outstanding national broker network for their commitment to the brokers, agents and support staff in their network and to the mortgage industry as a whole. In terms of nominations, Dominion Lending Centres and Verico lead the pack this year with 18 and 16 total nominations, respectively, while BTB Mortgage Solutions had the next highest amount with 10. For the lenders, Merix Financial tops the list with 12 nominations, closely followed by Street Capital at 10 and First National and ING weren’t far behind with seven each. Like every year, our nominees are selected by industry members through an online, phone and e-mail campaign conducted by the CMP team. The only criteria were that you couldn’t vote for your own company, and that you had to be within the industry to vote.

the 2011 CMP Canadian Mortgage Awards Date April 29, 2011 Venue The Liberty Grand, Toronto, Ont. Number of Awards 21 Dress Black tie Service Four-course gourmet dinner and unlimited bar Table bookings $2,750 for table of 10 or $300 per person. Go to CanadianMortgageAwards.com for details Theme Las Vegas

All of the categories will be awarded based primarily on the judges’ deliberations, which is why it was important for us to ensure this year that only industry members were asked to participate. Obviously this creates a chance for any conflicts of interest to arise, so in these instances where a direct conflict does exist (i.e. a member of their own company is a finalist) they will not be voting in that category. Which brings us to the judges, a group of esteemed professionals from all aspects of the industry who we are confident will use their good judgement to make the best choices. They are: Margo Wynhofen, a broker with Verico One Mortgage Corp. in Grimsby and president of the Independent Mortgage Brokers Association of Ontario (IMBA); Martin Marshall, Ontario Sales Manager with Homeguard Funding in Newmarket and a director and chair of the Communications and Events committees with IMBA; Paul Bojakli, of Quantus Financial in Calgary and vice-president of the Alberta Mortgage Brokers Association (AMBA); Ron McClenaghan, a mortgage agent with Invis in Calgary and public relations director with AMBA; Mark Alltree, president of The Mortgage Centre Downtown in Vancouver and a former president of the Mortgage Brokers Association of British Columbia (MBABC); Denis Archambault, of the DMAC Group in Ottawa and chair of the Real Estate Finance Council for the Real Estate Institute of Canada (REIC). Also, Deepak Pershad, a marketing professional, with more than 30 years of experience including many in the financial services industry will be serving as a judge for the Best Branding, Best Advertising and Best Internet Presence categories. The lifetime achievement award is the only award that will not be announced until the big night on April 29 at the Liberty Grand, but as for the rest, your Canadian Mortgage Awards 2011 nominees are …

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Darick Battaglia, Dominion Lending Centres Bankfighter Inc., Barrie, Ont. Roy Deeks, The Mortgage Centre Canada, Unity Financial Services, Richmond Hill, Ont. Nicole Drummond, Dominion Lending Centres, The Mortgage Source, Ottawa, Ont. Tom Lam, Urban Mortgage, Calgary, Alta. Don MacVicar, Verico Premier Mortgage Centre, Halifax, N.S. Brian Matthey, Verico The Mortgage Professionals, Kingston, Ont. Bill Nugent, Neighbourhood Dominion Lending Centres, Newmarket, Ont. Calum Ross, The Mortgage Centre Canada, Mortgage Professionals Inc., Toronto, Ont.

Collin Bruce, Dominion Lending Centres, Mortgage Mentors, Edmonton, Alta. Gail Di Stefano, BTB Mortgage Solutions, Niagara Falls, Ont. Dan Eisner, True North Mortgage, Calgary, Alta. Luisa Hough, Exclusive Mortgage Professionals, Surrey, B.C. Dan Mass, Verico Canada First Mortgage, Calgary, Alta. Trish Pigott, Verico Primex Mortgages, Coquitlam, B.C. Diana Zitko, Meridian West Coast Mortgages, Coquitlam, B.C.

REMIC Commercial Mortgage Broker of the Year

Chris Doughty, Dominion Lending Centres Bankfighter, Barrie, Ont. Dale Bilton, Mortgage Intelligence, Kitchener, Ont. Greg Inglis, The Mortgage Group Atlantic Inglis Commercial Mortgages Inc., Moncton, N.B. Matthew Laverty, The Mortgage Centre, Mortgage Brokers Ottawa, Ottawa, Ont. Atish Thakur, Dominion Lending Centres Casa Mortgage Inc., Vancouver, B.C.

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Adam Hale, The Mortgage Centre Canada Hale | Beach & Associates, Hamilton, Ont. Gay Andrews, Caplink Financial Corp., Edmonton, Alta. Marc Moeys, Pillar Financial, Sharbot Lake, Ont. Stephen Lidsky, Ontario Wealth Management Corporation, Toronto, Ont.

Natasha Adams, Open Door Mortgage Agency, Calgary, Alta. Deepak Bansal, Verico The Mortgage Practice, Brampton, Ont. Enna Cui, TMG The Mortgage Group, Vancouver, B.C. Dave De Stefano, BTB Mortgage Solutions, Niagara Falls, Ont. Beverly English, Dominion Lending Centres Mortgages & More, St. John’s, Nfld. James Laird, True North Mortgage, Toronto, Ont. Michael Sjerven, Dominion Lending Centres smartymortgage, Vancouver, B.C.

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BTB Mortgage Solutions, Niagara Falls, Ont. Mortgage Managers Brokerage Inc., Hammonds Plains, N.S. Verico (Jessi Johnson Mortgage Team), Vancouver, B.C. Verico The Mortgage Wellness Group, Barrie, Ont. Verico Primex Mortgages, Coquitlam, B.C.

Kamran Daryushnejad, National Bank of Canada, Brampton, Ont. Chris Fontana, Meridian Credit Union, Toronto, Ont. Monica Gairola, Home Trust Company, Toronto, Ont. Tim Hill, Street Capital Financial, Vancouver, B.C. Becky Kim, Merix Financial, Vancouver, B.C. Szilard Kolozsvari, First National Financial, Toronto, Ont. Ken Lee, Street Capital Financial, Toronto, Ont. Marina Luu, ING Direct, Toronto, Ont. Marian Mandic, Merix Financial, Toronto, Ont. Josie Milanetti, Home Trust, Toronto, Ont. Trupti Patel, First National Financial, Calgary, Alta. Diane Roy, Macquarie Financial, Montreal, Que. Sam Samadi, First National Financial, Calgary, Alta. Sarah Singh, ING Direct, Toronto, Ont. Stacey Williams, Paradigm Quest, Vancouver, B.C.

Heather Cermak, Merix Financial, Vancouver, B.C. Sacheen Desai, ICICI Bank (formerly Resmor Trust), Vancouver, B.C. Chris Hoeppner, Street Capital, Toronto, Ont. Nina Labate, The Equitable Trust Company, Toronto, Ont. Colleen Laio, Merix Financial, Toronto, Ont. Robert Nurnber, Street Capital Financial, Halifax, N.S. Michael Plasko, FirstLine Mortgages, Toronto, Ont. Harry Singh, The Equitable Trust Company, Toronto, Ont. Rita Soni, Street Capital Financial, Vancouver, B.C. Cathy Tucker, Macquarie Financial, Vancouver, B.C. Cam Bordignon, Merix Financial, Toronto, Ont. Stephen Cheng, Merix Financial, Vancouver, B.C. Mita Desai, ING Direct, Toronto, Ont. Bryan Duncan, Merix Financial, Vancouver, B.C. Elliot Gardiner, ING Direct, Toronto, Ont. Yvonne Hristova, First National Financial, Toronto, Ont. Anne Lee, Macquarie Financial, Vancouver, B.C. Erin Patten, Street Capital Financial, Vancouver, B.C. Alan Sturrock, Home Trust Company, Burlington, Ont. Cindy Yang, ING Direct, Thornhill, Ont.

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The Mortgage Centre Canada Best Newcomer Lender BDM

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Alec Bowes, Macquarie Financial, Guelph, Ont. Dario Carpino, Street Capital Financial, Toronto, Ont. Oshan Fernando, Home Trust Company, Toronto, Ont. Trevor Gordon, ING Direct, Toronto, Ont. Rachelle Gregory-Marshall, Merix Financial, Toronto, Ont. Eden McNichol, First National Financial, Calgary, Alta. Tiffany Pedersen, Street Capital Financial, Toronto, Ont.

BTB Mortgage Solutions, Niagara Falls, Ont. Canadian Mortgage Trends, Vancouver, B.C. Dominion Lending Centres, Coquitlam, B.C. First Foundation Residential Mortgages, Edmonton, Alta. Jessi Johnson Mortgage Team, Vancouver, B.C. TMG The Mortgage Group, Toronto, Ont. True North Mortgage, Calgary, Alta.

BTB Mortgage Solutions, Niagara Falls, Ont. Dominion Lending Centres, Coquitlam, B.C. ING Direct, Toronto, Ont. Merix Financial, Toronto, Ont. Verico, Vancouver, B.C.

BTB Mortgage Solutions, Niagara Falls, Ont. CanadaLend.com, Richmond Hill, Ont. Dominion Lending Centres, Coquitlam, B.C. Jessi Johnson Mortgage Team, Vancouver, B.C. TDMP.com, Toronto, Ont. TMG The Mortgage Group, Toronto, Ont. Verico Financial Group, Vancouver, B.C.

BTB Mortgage Solutions, Niagara Falls, Ont. Dominion Lending Centres, Coquitlam, B.C. First National Financial, Toronto, Ont. Merix Financial, Toronto, Ont. Paradigm Quest, Toronto, Ont. Street Capital Financial, Toronto, Ont. The Mortgage Group, Toronto, Ont. Verico, Vancouver, B.C.

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Merix Financial Best Customer Service, individual office

Centract Settlement Services Inc., Toronto, Ont. Davis + Henderson (formerly Filogix), Toronto, Ont. First National Financial, Toronto, Ont. Genworth Financial Canada, Toronto, Ont. GoMax Solutions, Penticton, B.C. Home Trust Company, Toronto, Ont. ING Direct, Toronto, Ont. MCAP Service Corporation, Toronto, Ont. Merix Financial, Toronto, Ont. Paradigm Quest, Toronto, Ont. Street Capital Financial, Toronto, Ont.

Home Loans Canada Best Community Service Effort

Cindy Faulkner, Meridian Coastal Mortgages, Vancouver, B.C. Diana Zitko, Meridian West Coast Mortgages, Coquitlam, B.C. Jessi Johnson, Verico Jessi Johnston Mortgage Team, Vancouver, B.C. Averbach Mortgages, The Mortgage Group, Vancouver, B.C. BTB Mortgage Solutions, Niagara Falls, Ont.

Home Loans Canada®

Bob Goudey, TMG The Mortgage Group Goudey Paon Mortgage House, Dartmouth, N.S. Deb White, Dominion Lending Centres White House Mortgages, Vernon, B.C. Diana Zitko, Meridian West Coast Mortgages, Coquitlam, B.C. John Ribalkin, Verico Nova Financial Services Inc., North Vancouver, B.C. Kathy Gregory, Paradigm Quest, Toronto, Ont. Mike and Gail Di Stefano, BTB Mortgage Solutions, Niagara Falls, Ont. Peter House, The House Team at Dominion Lending Centres, Belleville, Ont. CMP

License #11127

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a broker

interrupted The same determination and stubbornness that helped him overcome a traumatic neck injury has helped Dwight Bakken become a successful mortgage broker. Jesse Kinos-Goodin talks to him about his path to becoming a mortgage broker

mortgage brokering thing would be a good fit and so that’s kind of where I went. In September 2003, I finished my course, got my licence and haven’t really looked back.” You could say it was another one of those life-changing years for Bakken.

Starting from scratch Paul Stapley remembers Bakken coming into his t was 1994 — the year that changed everything for office looking for a mortgage and mentioning that he Dwight Bakken, a then-carpenter by trade, avid wanted to go into real estate. dirt biker, stock car racer and all around adrenaline “Obviously, there were a few visible challenges,” junkie. It would seem that nothing could slow the says Stapley, “So I suggested brokering as something 24-year-old Campbell River, B.C. resident down, until he could do.” The next day he called and told Stapley a broken neck incurred during a dirt bike accident he signed up for the mortgage broker training course. would leave him a quadriplegic. Doctors told him he “When someone has a disability they can be the wouldn’t be able to move anything but his shoulders. ‘woe is me,’ sort of disgruntled with everybody sort His career as a carpenter and passion as an extreme of person,” says Stapley. “Dwight is the opposite. He sports fanatic, it would seem, were over. can do anything. He has this fantastic cup is “Slowly, I started moving one arm, and then half-full attitude.” another arm came back,” says Bakken, who seems to To prove his point, Stapley gives the example of revel in proving people wrong when they tell him he how Bakken, despite his handicap, still goes out and can’t do something. Now a mortgage broker with rides ATVs with his son. DLC, Bakken says the same stubbornness and “Never tell him he can’t do something – he’ll just determination that pushed him to move his arms go out and prove you wrong.” now helps when dealing with lenders. Bakken chalks that all up to a mind-over-matter “When a lender tells me ‘No’ I just chuckle inside approach to life. and figure out a way to make it work, either by “I’ve always had a real positive attitude,” he says, adding a co-signer or figuring out how to make it “so I didn’t go through the depression that a lot of work in the future,” he says. people do after they break their neck or have any But the path to becoming a mortgage broker traumatic injury.” wasn’t so straightforward. In the mid-’90s, brokers In fact, he says in some ways, his injury is weren’t very common in Campbell River, a city that “almost a good tool,” a statement that obviously today only has 35,000 people living in it. Based on requires a bit of context. his construction background, and the fact that When Bakken first broke his neck, the town was doctors told him to take up computers, Bakken went small enough that everyone knew about it. Later, into computer-assisted drafting, which he was when he became a broker the local newspaper did an employed as when he and his wife, Miranda, decided article on him, providing a brief bio, saying what had to buy a home and seek out the only broker in town, happened to him, and how he was successfully Paul Stapley. working as a mortgage broker. The experience was good enough that when, just “There was a lot of exposure because here’s this a year later, Stapley was advertising for an assistant, guy who broke his neck a few years ago, dusts Bakken recognized the number and called him up. himself off and just goes on,” he says. “We had a meeting and the next thing I knew I Plus, growing up in Campbell River, as well as was doing my licence,” says Bakken. having a father in the construction business, his “I talked to him about real estate and mortgages network was already spread pretty far. “There were because he was managing one of the local Royal numerous business people in town who associated LePage offices at the time, and he figured the with my dad, or that I had been in contact with and

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going to see since I was five or six years old. So I had a lot of contacts,” including the manager of the local Re/Max office, who he says was a longtime friend of the family. Plus, word travels fast in small communities, so when other people found out what he was doing, it was just a matter of time. “It was almost an unfair advantage,” he says. The first challenge, of course, was to turn his connections into a client database. For that, Bakken sat down and wrote out a list of absolutely everybody he could think of and sent out letters introducing himself as a broker. After that, he says, it was just keeping in contact with people, which he likes to do anyways. So far, that approach has lead him to the point where 99 per cent of his business (Bakken funded over $12-million in mortgages for 2010) is referral-based. The best part about brokering for Bakken, and the aspect that makes it so much better than computer-assisted drafting, is the interaction with the clients. “I needed something where I was talking to people during the day,” he says. “Not just sitting in front of the computer, going point and click, point and click, drawing house plans.” Educating his clients and helping them sort out their finances allows Bakken the opportunity to do that. “It’s really sad how uneducated people are when it comes to the whole banking system, buying a house and how the banks really take advantage of people,” he says, admitting that some deals can get pretty frustrating. “But there’s nothing more satisfying than sorting out a young couple’s finances that think there’s no way out.” Which is why credit counselling is a big part of Bakken’s business. He recalls one couple, in particular, that had built a house and gotten in over their heads, spending more than they had planned. The husband was making good money but was injured, significantly cutting back their income. Selling the house wasn’t an option because the market was so depressed. “We refinanced their home in such a way that it was basically a Band-Aid to get them through till the market improved,” he says. When the market did improve in another year, the couple was able to sell their house, buy an older one that needed some work, renovate it, as well as pay off all their high credit card debt.

‘No, it’s not so bad. Let’s just move on. Keep it going.’” But Bakken also has other inspirations that helped him get through the struggles he has had to deal with, and often mentions his youngest son, Axel, wife, Miranda, and his oldest son, Colton, who he says served as the catalyst to turn his post-recovery life around. Although he also mentions Brad Jacobson, his old roommate at one of the hospitals he was rehabilitating at, who broke his neck on the same day, but was one level higher in terms of its severity. “I remember he would tell me ‘Disabled? Ninety per cent of the people I know walking around are more disabled than you are.’ And I kind of thought about it afterward and realized, yeah he’s kind of right. We’re all limited by our own limitations we set on ourselves. I do whatever I can and if I can’t do it, I’ll find a way of doing it.” A perfect motto for the successful mortgage broker, although it doesn’t always hold true in his personal life, he says. “My wife always says, ‘It’s amazing you can go rebuild that carburetor in your shop but you can’t do the dishes. I find that quite convenient.’ ” CMP

True Inspiration In 2010 Bakken was awarded the DLC Inspiration Award, which wasn’t something he was expecting. “It was overwhelming,” he says. “For myself, I just think I’m doing my job but obviously I’m a big inspiration to a lot of people out there or for some of my co-workers. I didn’t realize.” The award, in turn, actually helped inspire Bakken. “It was nice, because now when I’m sitting back, having a frustrating day or getting discouraged because a couple of deals have got declined, I think,

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get an education National Homeownership Education Week 2011 is a great opportunity for you to share resources that help your clients make better-informed decisions about their home purchase

enworth Financial Canada’s second annual National Homeownership Education Week kicks off on April 11th, and they’ve scheduled a lineup of events that will engage and educate homebuyers. As a leader in mortgage education, Genworth is committed to helping homebuyers elevate their financial understanding. Together with the Canadian Association of Credit Counselling Services (CACCS), they will conduct a series of seminars for Canadians teaching the basics of financial fitness and how to develop a strategy that will help them attain their goals. Genworth’s partnership with CACCS and their Homeownership Education activities support the federal government’s recent report published by Canada’s Task Force on Financial Literacy, recommending urgent action be taken on a national level to strengthen Canadians’ financial literacy. “We agree with the task force’s report, and as the Homeownership Company, we are proud to provide financial literacy tools and support to all Canadians,” said Peter Vukanovich, president and chief operating officer of Genworth Financial Canada. “Just as a home needs a proper foundation, every new homebuyer should make sure they’ve done their financial homework.” Each day of National Homeownership Education Week focuses on a different topic. Homeowners can participate in daily webinars or attend live seminars across Canada. The campaign will feature a variety of well-known experts and provide valuable insights into homeownership topics. Here’s how the week will unfold:

April 12: Credit Reports TransUnion and Equifax will host a webinar on the importance of a good credit rating, also providing valuable information on how to read a credit report. April 13: New to Canada When people first arrive in Canada, they may not know where to turn to find out how the housing market works. Nick Noorani, founder of Canadian Immigrant magazine and Immigrant Networks and author of the bestselling book Arrival Survival Canada, will explain to new immigrants to Canada exactly what they need to know about buying a home in their new country. April 14: Hear from Toronto Star Experts Hear from two regular contributors for the Toronto Star: Mark Weisleder, a real estate lawyer, and Stephen Dupuis, CEO of the Building Industry and Land Development Association. Both will provide an online learning webinar to provide important information on the homebuying process. April 15: Wrap up the Week The week will wrap with all of the earlier webinars recorded and posted online so people who missed one or more can watch them at their leisure.

Get your clients involved National Homeownership Education Week 2011 is a great opportunity for you to share resources that help your clients make better-informed decisions about their home purchase. The webinars will provide an interactive way to learn April 11: Financial Fitness the essential information about buying a home. Genworth and the Canadian Association of Credit The end result is a more confident client equipped Counselling Services (CACCS) accredited with the knowledge they need to make the professionals will be on hand to discuss a range of mortgage-related choices that work for them. topics at locations across Canada. As the national Learn more about National Homeownership voice for not-for-profit credit counselling in Canada, the CACCS has extensive experience with financial Education Week 2011 – and then encourage all of your clients to find Genworth on Facebook for a counselling education and has developed a chance to win cash and prizes. Visit compelling series of subjects for National Homeownership.ca for registration details. CMP Homeownership Education Week 2011.

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Mortgage Architects is poised for growth with expansion into franchising

Best of both worlds M

ortgage Architects has announced they are expanding their full-service broker business model to include franchising in the Canadian marketplace. “We recognize the market has changed and that some top-performing brokers want to own and run their own businesses while still accessing a myriad of services that will help them efficiently run and grow their volumes,” says Bob Ord, president and CEO of Mortgage Architects. “Our goal is to provide franchise owners vision and leadership along with the best and most comprehensive self-serve e-business solutions in the industry.” Mortgage brokers who prefer franchising can now benefit from one of the strongest management teams in the industry. “Franchising really comes down to brand recognition, quality of offering, direction and vision, and the expertise of management to make it happen,” says vice-president of national sales Meini Ickert. “Mortgage Architects is one of the best service companies in all categories, and received the 2010 CAAMP AMP Corporate Excellence Award, the first national mortgage brokerage to win this recognition. It’s time we leveraged this excellence.” MA Franchise will offer brokers the ability to own their own franchise while plugging into the company’s intranet and extensive technology-based solutions for marketing, CRM, training, and Bob Ord reporting. MA

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“ we’ve got the industry’s best-of-the-best brokers; the elite in the industry ” Franchise Plus will become the only mortgage franchise offering in Canada to provide payroll and paperless compliance services. Franchise owners require their own broker licence and will sign a contract for three years for MA Franchise Plus, and five years for MA Franchise. Mortgage Architects Full-Service Broker model, which built the company’s reputation and the businesses of its best-in-class brokers, offers a wider breadth of business solutions, including licensure, advanced product support, customized marketing, business planning, team recruiting and training, state-of-the-art technology-based programs for CRM, mortgage planning, and reporting, dedicated regional support, and access to unique product offerings and benefits with a number of key lenders through the company’s streaming desk. Brokers in this model sign the current 30-day contract. Mortgage Architects will continue with its very selective recruiting practices, including minimum volume targets of $25 million for lead planners and franchises. myNext Mortgage Company, the brokerage’s exclusive lender, will be available to all three business models. “We’ve got the industry’s best-of-the-best brokers; the elite in the industry,” said Ord. “Now we look to further strengthen our broker base with those high-producing brokers who prefer the franchise model.” CMP

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Favourite Things

Food Italian

Louise Williams + DLC Trillium Accessible + Powell River, B.C.

Favourite Things Place to be My cabin on Powell Lake

Movie The Notebook

Celebrity Billy Crystal

Book Clan of the Cave Bear by Jean Auel

vacation spot Lanikai, Hawaii

Hobby Home decorating

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Drink Brahma beer

service directory

Banks

Bridgewater Bank www.bridgewaterbank.ca Ph: 1 888 837 2326 Pages 20 & 21

HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 27

Firm Capital www.FirmCapital.com Ph: 416 635 0221 Page 69

www.tdfinancingservices.com Ph: 866 694 4392 Page 59

Home Trust www.hometrust.ca Ph: 1 877 903 2133 Page 55

The Money Source www.mymoneysource.ca Ph: 416 699 2274 Page 71 Insurance

ICICI Bank Canada www.icicibank.ca Ph: 1 800 ICICI CA or (1 888 424 2422) Page 7

MCAP www.MCAPBROKER.com Ph: 1 866 289 7389 Page 57

Canada Guaranty Mortgage Insurance Company www.canadaguaranty.ca Ph: 1 866 414 9109 Page 23

National Bank www.nbc.ca Ph: 1 888 483 5628 Page 9

Merix Financial www.merixfinancial.com Ph: 1 877 637 4911 Page 25

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

Non-Bank Lenders

Broker Networks

Capital Direct www.capitaldirect.ca Ph: 780 868-0550 Page 30

Equitable Trust Company www.equitabletrust.com Ph: 1 866 407 0004 Pages 5 & 47

ING Direct www.ingdirectbrokerteam.ca Ph: 1-800-574-5629 Page 29

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

Optimum Mortgage A Division of Canadian Western Trust www.OptimumMortgage.ca Ph: 866 441 3775 Page 64

Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 19

Resmor Trust Company www.resmor.com Ph: 866 809 5800 Page 41

Street Capital www.streetcapital.ca Ph: 877 416 7873 Pages 16 & 17

Canadian Mortgages Inc. www.canadianmortgagesinc.ca Ph: 1 877 385 7005 Page 32

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

Dominion Lending Centres www.DominionLending.ca Ph: 1 888 806 8080 Page 39

MORCAN Financial Inc www.morcanfinancial.ca Ph: 1 877 732 2801 Page 61

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ROMSPEN investment corporation www.romspen.com Ph: 1 800 494 0389 Pages 1 & 53

The Mortgage Group www.mortgagegrp.com Ph: 877 899 1024 Page 68

Mortgage Architects www.mortgagearchitects.ca • Ph: 1 877 802 9100 Page 15

Technology/Software

Verico The Mortgage Practice Inc careers@vtmp.ca Ph: 905 458 4222 Pages 12, 42 & 43

MortgageBrokers.com www.mortgagebrokers.com Ph: 647 680 9384 Page 31

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

Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 63

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

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

Services

The Mortgage Wellness Group www.mortgagewellness.ca Ph: 1 888 930 1050 Page 8

Home Loans Canada®

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

Advance Commission Company of Canada www.advance-commissions.ca • Ph: 1 866 933 2277 Page 33

Commercial Lenders

RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 65

Mortgage Intelligence – Dale Bilton dale@teambilton.com Ph: 519 571 6464 x 1 Page 48

Best Points Travel www.bestpointstravel.com Ph: 1 800 551 8786 Page 37

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Do you hav have a e news to share? r Hav Have ave you you heldd a recent event v or made d a new w appointment? pp If so,, CMP W WANTS ANTS to hear ffr from om you. Send us your newsworthy submissions and photos, and you may find your story printed in a future issue of CMP. Send your news to: john.tenpenny@kmimedia.ca

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Shopping for a home can be this easyâ&#x20AC;Ś Genworth Financial Canada understands the importance of providing your clients with the information they need to make smart homeownership choices. Our promise is to help them with homebuying basics such as down payment options, maintaining good credit and staying on budget. Encourage your clients to find us on Facebook. Visit Genworthsmartshopper.ca

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