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CONTENTS
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UPFRONT 04 Editorial
Syndicated mortgages’ fall from grace
06 Opinion
58
Regulations designed to cool mortgage lending have instead given rise to another segment of the market
08 Head to head
PEOPLE
BROKER INSIGHT
44 39
James Harrison reveals how focusing on the small things has led to big success
Technology is no longer an option for brokers – but which tools should you adopt? CMP looks at some of the industry’s most popular options
INDUSTRY ICON
Dong Lee, the newly appointed president of Mortgage Architects, offers his view on the state of the industry
14 Investment update
Is BC’s foreign buyer tax illegal? One law professor says yes
60
16 Broker/lender update
Mortgage lending is still going strong at Canada’s Big Six banks
COMMERCIAL LENDING 101
A broker’s guide for making the leap from residential to commercial mortgages
18
FEATURES 66 Engagement: the strategic way to win business
Boosting your bottom line starts with taking care of your employees
PEOPLE 71 Career path
FEATURES
64
HOW TO DEAL WITH A PRIVATE LENDER Private lending is on the rise in Canada – do you know how to tap into this option for your clients?
2
A closer look at the multi-million-dollar lawsuit against syndicated mortgages A new report makes the case against a housing bubble
FEATURES
PEOPLE
10 News analysis 12 Statistics
FEATURES
TECHNOLOGY REPORT 2016
Will BC’s new tax just drive investors to other parts of Canada?
A career as a mortgage broker was always in the cards for Dustan Woodhouse
72 Other life
In the saddle with Karen Monteiro
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UPFRONT
EDITORIAL
Boy, that escalated quickly
W
hat better way to cut the tension than to channel the spirit of everybody’s favourite reporter, Ron Burgundy? But this, of course, is no joking matter. Still, it’s apt considering the current reputation of syndicated mortgages – and how quickly they went from diversification darling to product pariah. Last month, a statement of claim was made against one of the country’s leading providers in syndicated mortgages, Fortress Real Capital (along with a number of other companies, individuals and even the Financial Services Commission of Ontario). Two investors are seeking millions in damages after the development they parked their money in, the Mady Collier Centre in Barrie, went bankrupt. Around the same time, FSCO – one of the named plaintiffs – issued a warning to consumers about the investments. “Over the past year, the Financial Services Commission of Ontario has taken considerable action in the syndicated mortgage investment [SMI] marketplace to help consumers,”
Many brokers who previously recommended syndicated mortgages to clients may now think twice FSCO wrote. “While there are many legitimate SMI opportunities, FSCO warns consumers to be wary of SMIs with advertisements promoting a high return or ‘fully secured’ investment.” But the writing was already on the wall. Mere months before, the Toronto Star featured the aforementioned Mady Collier Centre and claimed hundreds of investors could be out a total of $16.9 million. So what does this have to do with brokers? Well, many who previously recommended syndicated mortgages to clients may now think twice. Others may be unperturbed. Just how much the industry has turned on this once popular referral product remains to be seen. But it seems syndicated mortgage investments may have the same success rate as Anchorman’s favourite cologne: 60% of the time, they work every time.
www.mortgagebrokernews.ca ISSUE 11.09 EDITORIAL Editor Justin da Rosa Writers Joe Rosengarten Libby Macdonald Ephraim Vecina Kimberly Banks Executive Editor – Special Features Ryan Smith Copy Editor Clare Alexander
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UPFRONT
OPINION
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The unforeseen effects of B-20 Regulators oblivious to the changing nature of employment are likely to come at the expense of the self-employed, writes Bryan Jaskolka OVER THE past two years, Canadian regulators have imposed more stringent underwriting guidelines to minimize risk and promote stability in the residential mortgage market. By placing more pressure on financial institutions to verify borrowers’ ability to service their debt, the market will be better able to avoid an epic US-style subprime mortgage crisis – or so it’s believed. While noble in intention, these rules have unintended consequences on the selfemployed. And rather than clamp down on shoddy underwriting guidelines, these regulations have pushed more entrepreneurs and business owners into the so-called B channel and even the private channel as a result. This is just one of the unintended consequences that the B-20 regulation has had on the market. The Office of the Superintendent of Financial Institutions [OSFI] put the B-20 guidelines into writing in November 2014. Since then, there has been little evidence showing that mortgage origination is cooling or that stringent lending practices are keeping risky borrowers at bay – quite the contrary, in fact. Mortgage lending is rising amid one of the biggest housing booms in Canada’s history, and is expected to continue to do so for the foreseeable future. And while the Bank of Canada has expressed concern about escalating household debt, it continues to offer rock-bottom interest rates. This is the conundrum that Ottawa is facing. How do we stimulate a slow economy while ensuring prudent guidelines are in place to minimize dangerous risks in residential lending? It isn’t clear that B-20 is the answer. Tighter lending and underwriting stan-
6
dards are forcing many self-employed business owners to look elsewhere for mortgage financing. That’s because many of them don’t meet the new standards set out by OSFI when it comes to income verification. They don’t receive a cheque in the mail from their employers every two weeks; rather, their business remuneration varies greatly.
that are much more flexible in their terms and conditions. By pushing out the risk profile of business owners, OSFI standards are really just helping private lenders capitalize on this segment of the market. Private lending is on the rise and has become one of the hottest topics in the mortgage industry. According to CIBC, private lending currently represents about 5% of Canada’s overall mortgage market, but don’t be surprised if this figure expands in lockstep with the growing tide of entrepreneurship. Canadians who are escaping the mundane of 9-to-5 also need homes, but even those who have enough income to afford one may not be able to acquire it if their mode of income doesn’t satisfy OSFI guidelines. Clearly, there is a gap in the market. Whether this gap creates more fertile ground for private lenders depends on how regulators respond to these challenges. Canada is currently the most indebted country in the G7, but B-20 doesn’t appear to be addressing this very real issue. As
“Canadians escaping the mundane 9-to-5 also need homes, but even those with enough income to afford one may not be able to acquire it if their mode of income doesn’t satisfy OSFI guidelines” As the digital revolution continues, this is only expected to increase as fractional employment, freelancing and ‘on the side’ businesses change the very nature of what it means to be employed. Guidelines that don’t recognize this reality are bound to handicap the growing segment of the Canadian economy that’s becoming self-reliant. Another factor to consider is business owners who have incorporated their businesses and do not have any tangible assets in their name. These entrepreneurs also fall through the cracks of the rigid income verification guidelines stipulated by B-20. The amazing thing about the free market system is that there always seems to be a solution to every problem. In Canada, business owners who have been squeezed out of the residential mortgage market by B-20 have found their silver lining in private mortgage lenders
private lending continues to grow and business owners continue to redefine what job security means, policymakers will be tasked with navigating this challenging environment. While concerns about private lending are definitely valid in the aftermath of the financial crisis, US subprime mortgage lenders were focused on a high-risk segment of the market. Business owners who have been self-employed for many years do not fall under this category. For that reason, private lenders that focus on this segment of the market may have a lot of opportunity to grow their business. Bryan Jaskolka, managing partner of the CMI Group of Companies, has closed thousands of deals during his decade-long career. His areas of expertise include residential, commercial, construction and development.
www.mortgagebrokernews.ca
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8/2/2016 8:13:31 8:42:30 AM AM 8/09/2016
UPFRONT
HEAD TO HEAD
Will BC’s new foreign tax drive out investment? BC’s 15% tax on foreign buyers has some worried that international investors will jump ship to other parts of Canada
Geoff Lee
Jessi Johnson
Dr. Sherry Cooper
Mortgage broker Dominion Lending Centres GLM Mortgage Group
Mortgage broker Dominion Lending Centres Canadian Mortgage Experts
Chief economist Dominion Lending Centres
“BC’s new 15% tax on foreign buyers will drive investment to other parts of BC versus other parts of Canada. The tax applies to specific parts of the Lower Mainland, not its entirety. With these boundaries, it is quite possible that housing prices in the Fraser Valley and just beyond the Greater Vancouver area could go up as foreign buyers look at all options surrounding the Greater Vancouver area. After all, we still have amazing interest rates and good dollar value for anyone who is looking to invest in real estate in Canada.”
“In essence, the concept isn’t a bad idea and probably should have been introduced years ago. Many other cities and countries have successfully implemented similar programs. Hopefully, the majority of the proceeds actually go into creating more affordable housing. I doubt they will. The biggest issue here is the implementation. Existing contracts should be exempt, and there should have been a warning period. There wasn’t. This was a massive error by the government. At the end of the day, people who can afford these luxury homes are smart and will find a way around it.”
“There is little doubt that BC’s new 15% tax on foreign buyers will drive some investment to other parts of Canada, especially to Toronto, where foreign buying is also prevalent. How big or widespread this effect will be is uncertain, and it could be forestalled if the Ontario government were to introduce a similar tax, which it is considering. We have little idea what proportion of foreign real estate investment is locationdriven to Vancouver. Given that homes in Vancouver have been more expensive than those in Toronto for years, clearly many non-resident investors prefer Vancouver to elsewhere in the country.”
LOOKING FURTHER AFIELD The record-setting flurry of 15,000 property transfer applications filed with the BC Land Title and Survey Authority in the last two business days immediately prior to the introduction of the controversial tax seems to be only the first knock-on effect. In the days that followed, anecdotal evidence emerged of foreign buyers walking away from deposits rather than paying the new charge, while other deals collapsed as buyers stepped back in anticipation of a cooling market. “Certainly I think Toronto and potentially other markets like Montreal will start to become more attractive, because comparatively speaking, they will be less expensive,” said Brad Henderson, president and CEO of Sotheby’s International Realty Canada, shortly before the tax went into effect.
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8/09/2016 8:14:46 AM
UPFRONT
NEWS ANALYSIS
Syndicated mortgages under fire Industry players weigh in on the Fortress Real Capital controversy and the pending suit at the centre of one syndicated mortgage project
TWO SYNDICATED mortgage investors in Barrie’s Mady Collier Centre have brought forth a suit against a number of individuals and companies involved with the project after it filed for bankruptcy. According to a statement of claim issued in August, the two plaintiffs, Arlene McDowell and Saverio Aversa, are seeking general damages in the amount of $25 million, as well as exemplary, punitive and aggravated damages of $2.5 million. They’re also asking that the defendants give up all profits made, among other requests. The defendants named in the suit are
promised 8% returns. One industry veteran argues brokers may have let their clients down when offering them syndicated mortgage investment opportunities. “Although the disclosures on these types of high-risk syndicated mortgages, which investors have no control over, could have been much more in-depth, FSCO did make some efforts to put out warnings to consumers on the risks of these types of investment vehicles,” says John Bargis, a broker with Mortgage Edge. “That said, I’m of the opinion that the bigger concern is the
“I’m of the opinion that the bigger concern is the way in which these high-risk investments were aggressively promoted” John Bargis, Mortgage Edge Fortress Real Capital, Fortress Real Developments, Centro Mortgages, FFM Capital, FSCO and a number of other entities and individuals, including Fortress president Jawad Rathore. The suit has brought up questions around the disclosure offered to investors in syndicated mortgages, who, in this case, were
10
way in which these high-risk investments were not only aggressively promoted by Fortress’ Business Development reps, Centro Mortgage and FFM Capital, who are all listed as defendants, but also the way in which many other participating brokerages chose to ignore their professional responsibility to properly investigate the level of risk
this type [of syndicated mortgage] exposed their client to, all for the sake of the handsome returns offered by the defendants for investor referrals.” In that regard, Bargis says, the lawsuit doesn’t go far enough, “since it does not include all brokerage firms that were clearly negligent in their actions to protect investors, by participating, benefiting and profiting from these high-risk referrals.” For its part, FSCO, which is also named in the suit, did issue a warning to consumers in mid-August about the risks involved in syndicated mortgages. “Over the past year, the Financial Services Commission of Ontario has taken considerable action in the syndicated mortgage investment [SMI] marketplace to help consumers,” FSCO wrote in its note, entitled “Before Investing in a Syndicated Mortgage.” “While there are many legitimate SMI opportunities, FSCO warns consumers to be wary of SMIs with advertisements promoting a high return or ‘fully secured’ investment.” As for its role in the lawsuit, a representative from FSCO told CMP, “The proposed claim contains unproven allegations. FSCO
www.mortgagebrokernews.ca
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8/09/2016 8:18:50 AM
BROKERS’ THOUGHTS ON SYNDICATED MORTGAGES Controversy around the Mady Collier Centre didn’t start with this lawsuit. Earlier this year, a Toronto Star investigation delved into the problems facing the project. Following that report, CMP asked brokers for their opinion on offering syndicated mortgages.
8%
said they used to offer syndicated mortgages but no longer do
61% 19% 12%
said they never offered them said they currently offer them
said they would still consider offering them
cannot comment further on this, as the matter is before the courts.” As for the pending suit, it could have wide-ranging implications for the mortgage industry, according to one expert. “I don’t know what the tests were for investors to participate in these loans,” says David Mandel, co-founder of commercial mortgage lender and syndicator First Source Mortgage Corporation. “What’s going to
“At the end of the day, I think it’s going to come at the expense of mortgage brokers in general because my fear is we are going to be painted with this wide brushstroke,” he says. “Someone has to look at what kind of disclosure has been made available. Or are investors turning a blind eye to risk and exposure? “I do think Fortress and people who have provided investors to Fortress share some
“I think it’s going to come at the expense of mortgage brokers because we are going to be painted with a wide brushstroke” David Mandel, First Source Mortgage Corporation happen here, potentially, is if there ever is a successful claim or lawsuit, it’s going to open up the floodgates to stricter ENO insurance, so I don’t think ENO insurers are asking the right questions. I think there could be catastrophic consequences to the private lending industry.” Mandel believes the broker channel’s reputation could take a hit as a result of the suit.
responsibility in answering those questions,” he continues. “They probably have some exposure here.” As for Fortress, it was swift to respond once the suit was made public. According to a release from Fortress Real Developments, the Mady Collier Centre is now 80% complete, and occupancy is expected for
January 2017. “The substantial progress in the Collier Centre project is even more significant when you consider where the project was just over a year ago when Fortress stepped in to rescue it during CCAA proceedings,” Jawad Rathore, president and CEO of Fortress, said in a statement. “Since then, as has been widely acknowledged in the press, Fortress Collier restarted construction and committed to repay syndicated mortgage lenders.” According to Fortress, construction of the non-residential building will be complete this year, and residential units are “close to 100% sold.” “Our commitment to this project since purchasing the Mady Collier assets has never wavered,” Rathore said. “In addition to the amount paid to purchase the Collier Centre, Fortress Collier has invested, to date, an additional $5 million into the project. Fortress Collier will only realize profit on the project should the sale price exceed the amount of outstanding principal and interest owed under the mortgage given to the Mady Collier syndicated mortgage lenders.”
www.mortgagebrokernews.ca
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11
8/09/2016 8:18:55 AM
UPFRONT
STATISTICS
Bubble? What bubble?
HOUSING STARTS AT ODDS WITH PREFERENCES
Predictions of doom for Canada’s markets are nothing new, but what lies behind them? According to one recent report: nothing.
SINGLE-DETACHED THOSE EXPECTING the real estate ‘bubble’ to burst any minute could have quite a wait on their hands, says Will Dunning, chief economist for Mortgage Professionals Canada. In a recent report, Dunning asserts that there is no real proof that a bubble exists. According to his statistical analysis, there’s no reason to believe a “speculative mindset” besets the market, evidenced by the low influence the growth of house prices is having on market activity.
Dunning argued that a bubble requires two forms of proof: self-fulfilling expectations of price growth, and prices that are significantly divergent from what economic fundamentals might lead one to expect. The first condition was not satisfied, according to Dunning’s research; as for the second, he asserts that very low interest rates have created “affordability space” that allows for the rise of house prices.
Newfoundland and Labrador Prince Edward Island
60% 50%
Nova Scotia
62%
New Brunswick
80%
Quebec
63%
Ontario
56%
Manitoba
65%
Saskatchewan
6.4%
0.28%
Annual increase in the average resale price in Canada over the last 5 years
Mortgage arrears rate, according the Canadian Bankers Association
2.9%
Amount of principal that can be repaid in the first year at current rates
10.6%
68%
Alberta
Average per-year growth in mortgage credit
59%
British Columbia
50%
Source: “Looking for Balance in the Canadian Housing and Mortgage Markets,” Mortgage Professionals Canada, 2016
STRONG PRICE GROWTH
SUPPLY AND DEMAND IMBALANCE
Since the recession, price growth has accelerated, but the increases are largely centred in the nation’s two most vibrant markets.
Price growth across Canada is largely the product of an imbalance between supply and demand. The ratio of sales to new listings has been on an upward trend this year; anything above 60% indicates that demand is outpacing supply.
INCREASE IN AVERAGE RESALE PRICE 15%
CANADA SALES-TO-NEW-LISTINGS RATIO 80%
12% 9%
70%
6%
60% 2016
2015
2014
2013
2012
2011
2010
-3%
2009
0
2008
3%
-6%
40%
-9%
30%
-12% Source: “Looking for Balance in the Canadian Housing and Mortgage Markets,” Mortgage Professionals Canada, 2016
12
50%
2001
2004
2007
2010
2013
2016
Source: “Looking for Balance in the Canadian Housing and Mortgage Markets,” Mortgage Professionals Canada, 2016
www.mortgagebrokernews.ca
12-13_Statistics-SUBBED2.indd 12
8/09/2016 8:21:19 AM
SEMI-DETACHED OR TOWNHOUSE
CONDOMINIUMS
OTHER
Newfoundland and Labrador 33% Prince Edward Island 0% Nova Scotia 17% New Brunswick 10% Quebec 17% Ontario 23% Manitoba 4% Saskatchewan 23% Alberta 17% British Columbia 26%
Newfoundland and Labrador 7% Prince Edward Island 0% Nova Scotia 14% New Brunswick 10% Quebec 17% Ontario 19% Manitoba 26% Saskatchewan 9% Alberta 22% British Columbia 22%
Newfoundland and Labrador 0% Prince Edward Island
50%
Nova Scotia 7% New Brunswick 0% Quebec 3% Ontario 2% Manitoba 4% Saskatchewan 0% Alberta 3% British Columbia 2% Source: Survey by Bond Brand Loyalty for Mortgage Professionals Canada, Spring 2016
HOW HIGH IS TOO HIGH?
THE INTEREST RATE PIECE
The OECD issued a report in June calling for “macro-prudential changes” to slow the increase in mortgage credit, yet growth remains well below pre-recession levels. However, the strong resale market is driving it slowly upward..
Continued low interest rates are at the root of much of the market’s vibrancy.
INCREASE IN MORTGAGE CREDIT IN CANADA 15%
2007
5.7% 5.5% 4%
2009
4.6%
2010
4.2%
2011
9%
3.5%
2012 2013
6%
3%
2014 2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2015 2002
3%
TYPICAL INTEREST RATE FOR 5-YEAR FIXED MORTGAGE 2008
12%
2001
%
Across the nation, potential homebuyers still exhibit a pronounced preference for single-family housing. Among those planning to buy a home, fewer than one in five said they planned to purchase a condo – yet condos made up 51% of housing starts in urban areas over the past 12 months.
Source: “Looking for Balance in the Canadian Housing and Mortgage Markets,” Mortgage Professionals Canada, 2016
2016
3.5% 3% 2.5%
Source: “Looking for Balance in the Canadian Housing and Mortgage Markets,” Mortgage Professionals Canada, 2016
www.mortgagebrokernews.ca
12-13_Statistics-SUBBED2.indd 13
13
8/09/2016 8:21:23 AM
UPFRONT
INVESTMENT UPDATE
Academic calls BC tax illegal and prejudiced The tax is a “straightforward example of discrimination in housing,” says a York University law professor
resorting to nationality-based measures. “Some obvious ones include residency requirements, taxes on vacant property, taxes that discourage speculation and flipping, bylaws that encourage dense and diverse housing stock, and increased public investment in social housing,” he wrote. Apart from foreign would-be buyers and their agents, developers have indicated reservations about the possible impact of this new levy on cooperative ventures involving nonCanadian companies.
“We all know the aim of the legislation is [to curtail] real estate investment by Chinese investors” Weeks after the British Columbia government’s decision to impose a 15% tax on foreign buyers of homes in the province, fears of a mass exodus of consumers to other markets have intensified due to what a York University professor deems “a straightforward example of discrimination in housing.” In his analysis, published by The Globe and Mail in August, Sean Rehaag of York’s Osgoode Hall Law School said the recently launched tax is an unlawful imposition on overseas nationals. “The Charter of Rights and Freedoms
NEWS BRIEFS
forbids governments from discriminating on the basis of a list of prohibited grounds, including national origin,” Rehaag wrote, arguing that the tax does not stand on any solid legal foundation, and instead only serves to legitimize the long-running undercurrent of prejudice in BC’s housing segment. “While the new 15% BC levy applies to foreign nationals, we all know the aim of the legislation is narrower: curtailing real estate investment by Chinese foreign investors,” Rehaag wrote. He noted that other, more effective demand-side solutions exist without
Toronto susceptible to investor influx
A mad dash to avoid BC’s new tax on foreign buyers could only inflame Toronto’s situation further and place more homes out of reach of domestic buyers, warned local industry professionals. “Where are those foreign investors going to go?” pointed out Toronto-based real estate agent Derek Ladouceur. “They’re not going to want to pay that 15%, so they’re going to now dump it into the Toronto real estate market, which is already hot.” Dianne Usher, an agent with Royal LePage, agreed: “With an additional tax, [Toronto activity] will grow exponentially, in my view.”
Urban Development Institute president and CEO Anne McMullin recently expressed concerns that the tax would be fully applicable even in projects where foreigners only have minor contributions. Fitch Ratings also warned of possible reduced consumer activity. “We feel that the foreign investors have been propping up real estate in Vancouver, creating more demand, which is raising prices,” Fitch director Susan Hosterman explained. “With them potentially out of the picture, Vancouver is more susceptible to Canadian supply and demand behaviour, which is mainly driven by employment.”
Alberta rental market hit hard
The mass exit of energy sector workers – who often hail from other provinces – after the worst effects of weak oil prices in Alberta has had a massive impact on the province’s rental market, according to analysts. Just 10 months after the oil crash, approximately 56,000 workers departed from Alberta. The exodus had a noticeable impact on the vacancy rate, which saw a 10-year high of 4.3%. The number of unoccupied homes also increased dramatically to 21,000 as of April, way up from 8,300 at the same time last year.
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Q&A
Dr. Sherry Cooper
Vancouver real estate investment, post-tax
Chief economist DOMINION LENDING CENTRES
Years in the industry 39 Fast fact In addition to her role at DLC, Dr. Cooper also serves as the TMX Industry Professor of Financial Economics at McMaster University’s DeGroote School of Business
In the weeks since the implementation of the new 15% tax on foreign buyers of homes in BC, has there been a noticeable change in the volume of overseas investors into Vancouver? Apparently. I can only tell you what the Real Estate Board of Greater Vancouver has said, and they’ve stated that there has certainly been a slowdown in resale activity. How much of that has been a result of the implementation of the new tax? It’s just too soon to know, really.
In light of this tax, do you think these investors might set their sights elsewhere in Canada? It’s a possibility. Money has already been going to other places in Canada. Certainly there’s Chinese money in Toronto, so it’s definitely a possibility. Of course, the other question is, will Toronto implement a similar tax? And that’s something that definitely merits consideration.
A recent edition of the Bloomberg Nanos Index indicated that an increasing number of Canadians are more optimistic about their financial situation. In your opinion, would this impact real estate investment? Maybe, but activity has been very strong, and house prices have been rising very sharply, especially in Vancouver and, to a somewhat lesser degree, Toronto. But certainly, with low interest rates – as long as consumer confidence is picking up – yes, [there would
Building permits’ value drops sharply
A slowdown in plans for apartments and condominium complexes in British Columbia and Ontario led to a 5.5% decline in the value of Canadian permits in June, far below experts’ predictions of a 1.5% gain. According to Statistics Canada, May 2016 numbers were also revised downward to 2.1% from an initially reported 1.9% shrinkage. The June slump accompanied a 5% drop in residential building permits as intentions for multi-family buildings (including apartments and condos) in BC and Ontario fell by 15.8%.
be an impact]. I think it’s inevitable that we’ll see some slowing in housing, though, as the markets have been in such been a breakneck pace for a long time.
Based on your observations, how do foreign nationals and Canadians differ when it comes to real estate investment and activity? Most Canadians are definitely not buying houses as investments; they’re buying homes to live in. And even some foreign investors actually do plan to have temporary residences, if not full-time homes, in Canada. But the [method of] buying and basically leaving a property vacant? That doesn’t happen with local buyers. Any Canadian who’s buying real estate is doing so for personal use or for renting it out; it’s highly unlikely for the property to be just totally vacant. Also, such a vacancy tends to be disturbing to the local population, because they feel that it’s reducing the value of the neighbourhood, especially if it’s a singlefamily home.
In your view, is the current rate of growth in Vancouver sustainable? I think so, yes. Vancouver remains the strongest city in Canada, and for good reason. A lot depends on what happens to oil prices from here on out, as Alberta has been badly hit by the decline in oil, and some people have been moving from Alberta to [BC]. I believe that BC will continue to be the strongest province in the country, followed by Ontario.
More than 400 BC deals at risk
Vancouver’s real estate board raised the alarm that more than 400 deals could go south because of the newly implemented tax on foreign homebuyers. Real Estate Board of Greater Vancouver president Dan Morrison noted that at least 427 transactions, worth approximately $404 million, could be derailed. In addition, Elton Ash, regional executive vice president of Re/Max Holdings, warned that the new tax would affect not only foreign buyers, “but also Canadians who had contracts to sell and had already put offers on their next house.”
Vancouver bubble might not exist
Vancouver’s home price growth might not be indicative of the market’s actual situation, according to industry observer Myles Udland. The Business Insider analyst noted that “buyers seeking a safe place to park assets outside of China … are likely to be far less price-sensitive than traditional homebuyers.” He added that currency differentials could be another factor driving prices up. “When priced in yuan rather than Canadian dollars, home prices in the region haven’t risen nearly as aggressively over the last decade,” he said.
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UPFRONT
BROKER/LENDER UPDATE NEWS BRIEFS Home Capital responds to report about third-party sales
Home Capital has responded to a claim that it sold non-performing loans to a third party in a bid to improve its balance sheet. The investment website Seeking Alpha alleged that the lender transferred loans to a company called Re-Charge Corporation, which is allegedly partially controlled by one of Home Capital’s board members. “Home Trust, in the normal course of its business, from time to time sells loans to third parties, when loans require work-outs or restructurings,” Home Capital said in a release in mid-August, adding that it “has not sold any loans ... to any third party, including Re-Charge Corporation, since September 2015.”
Government wants mortgage lenders to take on more risk
The Canadian government is once again toying with the idea of forcing mortgage lenders to shoulder more of the risk associated with insured mortgages. As it stands, those loans are insured by CMHC and two private-sector insurers, Canadian Guaranty and Genworth. However, Ottawa is considering implementing a deductible to be paid by lenders for high-ratio mortgages. “The implications of lenders bearing a portion of losses on insured mortgages that default (lender risk-sharing) is one area, among others, where work is being done by the department,” Paul Duchesne, a Finance Canada spokesperson, told The Globe and Mail in August.
Delinquency rates growing among millennials Delinquency rates for one of Canada’s largest home-buying cohorts are on the rise, according to Equifax, which reported in August that delinquencies among
18- to 25-year-olds increased 11.7% yearover-year in Q2 to 1.8%. The average debt among millennials also increased by 2.1% and now sits at $8,203. “Young people – and really everyone – should be reminded to practice good budget and money management habits,” said Regina Malina, senior director of decision insights at Equifax Canada.
Canadians more optimistic about their financial situation
Canadians are more hopeful about their financial situation that they have been in more than a year, according to a recent Bloomberg poll. The Bloomberg Nanos Canadian Confidence Index increased to 59.9, up from 59.3. Meanwhile, the pocketbook subindex that measures personal finances and job security rose to 61.1, the highest since May 2015. In particular, optimism surged among households that earn less than $60,000. “The pattern prior to the oil shock was for low-income households to have lower expectations than higher-income households,” said Bloomberg economist Robert Lawrie. “That pattern has since reversed.”
RBC “closely monitoring” Vancouver and Toronto markets
In a conference call to discuss RBC’s third-quarter results, the bank’s CEO, David McKay, says it is “closely monitoring’’ the rapidly escalating real estate markets in Vancouver and Toronto. “We have prudent underwriting practices in place and the necessary technology to closely monitor these markets and quickly react as situations may materialize,” McKay said. Mark Hughes, RBC’s chief risk officer, pointed to the bank’s “diligent” process for verifying borrowers’ incomes and refusal to participate in the second mortgage market or offer subprime mortgage loans, as well as the fact that 48% of RBC’s loan portfolio is insured.
Banks release quarterly results A snapshot of the Big Six banks’ mortgage business paints a generally rosy picture of Canadian lending In early September, each of the big Canadian banks released their latest financial results. So how has their mortgage business performed? National Bank reported an uptick in its personal lending lines and credited its mortgage business with bolstering the bottom line. “Rising 5% from a year ago, personal lending experienced sustained growth, with the most significant increases coming from mortgage lending, and commercial lending grew 3% from a year ago,” National Bank said in its Q3 2016 report to shareholders. The bank had $47.5 billion in residential mortgages on the books as of July 31, 2016, up from last year’s Q3 total of $42.2 billion. “Since October 31, 2015, consumer loans increased by 5%, primarily due to home equity lines of credit and personal loans, and rising 9%, residential mortgages also grew, particularly mortgages purchased for securitization purposes,” the bank said. At Scotiabank, residential mortgages and consumer loans totalled $318 billion as of July 31, 2016; mortgages accounted for just under $217.5 billion of that figure. Ontario’s portfolio made up the largest share of that, with $93 billion – significantly higher than British Columbia’s total of just under $31.6 billion. TD Bank’s total residential portfolio was $188 billion at the end of Q3, up slightly from $186 billion in Q2. TD’s chief risk officer, Mark Chauvin, acknowledged that the relatively slow pace of growth is due in part to tighter underwriting, driven by rapid housing price increases.
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“We put a lot more focus on income confirmation to ensure that the mortgages that we do provide to the individual, that they can service them at the time that we provided it,” he said on the bank’s conference call. At RBC, residential mortgage volume was up 1.2% from Q2, rising from $214 billion to $216 billion, an increase of 6.4% from the previous year. The bank did, however, note “higher delinquencies across most of our retail portfolios in oil-exposed regions.”
“We put a lot more focus on income confirmation” CIBC reported strong growth in the mortgage sector; its residential mortgage portfolio soared from $169 billion in Q2 to $175 billion in Q3, and mortgage loans at the bank are up 9% over the previous year. CIBC’s David Williamson credited that increase to the bank’s initiative to strenghten its sales force. “Since we put growth as one of our two objectives, we’ve increased the sales force by 1,800-strong, and ... the productivity of that sales force has gone up sustainably each year.” Rounding out the Big Six, BMO’s portfolio of residential mortgages grew from $98 billion in Q2 to $101 billion in Q3.
Q&A
Albert Collu
Where networks are headed
President VERICO
Years in the industry 12 Inside scoop Collu was recently appointed president of VERICO. It’s the latest major appointment in a year during which the broker network landscape has changed drastically, including the acquisition of Mortgage Architects by DLC and a partnership between RMA and Broker Financial Group
There has been some consolidation among brokers, including your former employer, Mortgage Architects, being bought out by Dominion Lending Centres. Do you think that will be the norm going forward, and that the future of the industry will be only a few (or even just one) large major networks? I still think there’s room for both [large and small networks]. I do think smaller groups will look at finding ways to create synergies, whether that’s a merger or an acquisition or just strategically placing themselves within their own context to do things a little bit better and more efficiently. I certainly would not discount any more acquisitions down the road. I think that would be a naïve assumption. How do you imagine the industry growing? As far as organic growth, I think there is a place in the market to grow organically; I may use that term a little bit differently than others. I don’t mean organically simply by virtue of recruiting from other firms. I think there is another way to grow, and if we can help with productivity, I think we can collectively, as an industry, create more market share for the broker channel at large. Obviously, by de facto, we all grow organically. With your new role at VERICO, will you be based in Toronto or Vancouver? Vancouver is obviously the head office for VERICO, and it has been for many years, but at this particular point, I’m based here in Ontario. We will have an office here. As you probably know, there are already two regional managers in place here. So the quick answer is, yes, there will be an operation here in Toronto, probably within the next 10 days. Make no mistake: Ontario is not a small market for VERICO. What it does for us is not necessarily comment on whether we can attract more people from the Ontario markets or Eastern markets; it’s more a commentary of spreading out the operational load. Most of the lending, insurer and supply-side is based here, so it makes us a little bit more strategically efficient so we can conduct better meetings and create better synergies. This just gives us an added footprint. How much did the acquisition of Mortgage Architects by DLC factor into your decision to join VERICO? The truth is, when that acquisition occurred, I went into the environment with an open mind and [the idea] that I was going to give everything I had thereafter. I owed it to the staff at Mortgage Architects; I owed it to the brokers – they’re all top-shelf. The brokers are top-shelf, the staff is top-shelf, so I wanted to give everything I could to that particular group. Did it factor? No, not immediately. But time has a way of opening up opportunities and new thoughts and new endeavours. I wish MA nothing but continued success for years to come.
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PEOPLE
INDUSTRY ICON
VIEW FROM THE TOP Dong Lee was recently appointed president of Mortgage Architects. CMP spoke with the industry’s newest executive to get his view on where the broker channel is headed
DONG LEE got his start in the financial services industry back in 1996, fresh out of Queen’s University, where he earned his bachelor of commerce degree. “I went to TD to work on the Korean banking program – at the time, the bank was interested in niche, ethnic banking programs,” he says. “I created the first one in Ontario for Korean customers. They had a partnership with banks in Korea – they would send their immigrant customers, and we would be their first Canadian bank.” While at TD, Lee managed assets in excess of $5 million. But it wasn’t long before his interests took him elsewhere – specifically, to the Canada Mortgage and Housing Corporation. He credits that first role in the mortgage industry with helping him realize and appreciate what the broker channel does. “It was foreign to me,” Lee says. “At the time, nobody paid attention to brokers. The market share was so low – the only lender that had any true market share was First Line mortgages. There was a lot of attention on First Line, but not so much on brokers.” Of course, the broker industry was about to undergo quite the evolution, but prior to that, Lee headed back to the bank side. “I went to Scotia Express services [to work on] the broker channel [presence],” he says. “I looked after GTA West and the Golden Horseshoe. I did that for three years as a BDM and then
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stepped into the corporate side in Scotia.” There, he oversaw sales and strategy for the bank in the alternate channel. He helped create the bank’s broker website and enhancements to the loyalty program. But it wasn’t long before the broker channel called him back. “I maintained my relationships when I went into corporate office [at Scotia],” Lee says. “A broker at the time was starting a new mortgage brokerage [Mortgagebrokers.com], and I left the bank to pursue my entrepreneurial spirit.
resignation of Albert Collu in July. “I’ve served with some pretty amazing people in the industry – Dan Putnam, Bob Ward, Albert Collu, to name a few,” Lee says. “I’ve had an interesting perspective of the broker channel in that role. I had my hand in the creation of back-end support for Mortgage Architects. Of anybody, I think I have the most intimate knowledge of how this brokerage works, having touched many aspects of it and having been through the ups and downs with
“The question becomes: How do you make most of every customer transaction that you touch? And I think the company that can legitimately wrap other products and services in and around the mortgages in a meaningful way will emerge a winner” That was 2005, and then in 2010, we acquired Mortgage Architects and My Next Mortgages, and that’s how the affiliation with Mortgage Architects started.” He’s now been in the broker channel for the past seven years, and after serving as Mortgage Architects’ VP of operations, Lee was appointed its president following the sudden
the brokerage.” Lee’s confidence in his ability to excel in his new role is also shared by Gary Mauris, president of Dominion Lending Centres, the network that purchased Mortgage Architects in late 2015. “It was very easy for us [to choose Lee],” Mauris recently told MortgageBrokerNews.ca.
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PROFILE Name: Dong Lee Title: President Company: Mortgage Architects Years in the industry: 20 Career highlight: “I spearheaded the largest one-brand transition when Mortgagebrokers.com moved into Mortgage Architects. Three years later, I looked after the integration of Argentum into Mortgage Architects. In both transitions, we didn’t lose anybody in the process.” Career lowlight: “Back in 2012, we lost a number of significant brokers. There was a lot of change happening in the company. We lost close to $700 million in production in a few months. As much as it was a low point, it was a turning point in growth for the company. Sometimes you have to go backwards before you can grow.”
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PEOPLE
INDUSTRY ICON DONG LEE’S CAREER TIMELINE
“I think you’ll see great things with Mortgage Architects in the next few years. There was no guess in any way, shape or form who we wanted. We thought Dong could have been the number-one guy for the last five years.”
Industry evolution In Lee’s view, today’s broker channel is in a pivotal position. He argues that there’s a lot more pressure on the revenue side, as well as pressure to close transactions, than there was in the past. “We see that pressure on our brokers, and the question then becomes: How do you make
pie will emerge. A $150 referral fee, although it’s OK, it needs to grow from there.”
Embracing the future Lee believes that the pressures on brokers will only intensify going forward – but that there are opportunities for savvy brokers to get ahead. “I think the challenge is going to be fighting for the customer on renewal,” he says. “I don’t know if there is a solution in place; I think trailer fees help alleviate it, but I think there are going to be bigger battles for the renewal pie, which puts pressure on lenders and brokers.”
“If things are going to be tougher, then I think the channel needs to evolve, and I think technology will play a big part of it – finding faster and more efficient ways to process the business and make it more cost-effective for lenders as well as for brokers” most of every customer transaction that you touch?” he says. “And I think the company that can legitimately wrap other products and services in and around the mortgages in a meaningful way will emerge a winner.” Lee believes the key to success is to buck some of the current thinking around diversification of product offerings. “I think we’ve seen in the last little while that small referral fees for things like GICs, Visa products and the like just aren’t meaningful for mortgage brokers,” he says. “And I think brokerages need to look at creating meaningful ancillary products, whether it be property & casualty, life and disability – something that is going to give brokers a meaningful piece of the
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1996 Manager of Korean banking TD Bank
Financial technology (aka Fintech) is currently revolutionizing many sectors of the financial services industry, and Lee argues that the broker channel can take advantage of that – if it’s willing to learn and adapt. “If things are going to be tougher, then I think the channel needs to evolve, and I think technology will play a big part of it – finding faster and more efficient ways to process the business and make it more cost-effective for lenders as well as for brokers,” he says. “I think these Fintech companies, whatever or however they look like, will start to define how this channel evolves. I think it’ll be for the better because we’ll have to find more effective ways to do our business.”
1998 Business development manager CMHC
2001 Business development manager Scotiabank
2003 Senior manager, alternative channel delivery Scotiabank
2005 VP of operations Mortgage Architects
2016 President Mortgage Architects
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FEATURES
COVER STORY: BROKERS ON LENDERS
BROKERS ON LENDERS In Canadian Mortgage Professional’s 10th annual survey, brokers reveal which lenders have best responded to the changing marketplace – and which ones are falling behind
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BROUGHT TO YOU BY:
HAVING A great lender can make all the difference when it comes to securing the perfect product for a client. In our 10th annual Brokers on Lenders survey, mortgage brokers gave us their feedback on the great (and not-so-great) lenders out there. When we opened the polls this summer, hundreds of brokers from across Canada responded to tell us not only what mortgage lenders are doing well, but also how they’re handling tougher regulations and higher volumes of deals. Brokers rated lenders on a scale of 1 (poor) to 5 (excellent) in 10 categories: • Turnaround time • Underwriter support • Overall service levels • Interest rates
• BDM support • Product range • Satisfaction with credit policy • Broker support • IT/technology • Transparency of commission structure Most notable was the appreciation that brokers feel for lenders that go above and beyond to help them close a deal. There were some perennial favourites leading the pack, such as First National, RMG and Merix/Lendwise. But there were also some surprises, including lenders who dropped in the standings from last year. No matter how brokers may feel about individual lenders, they ultimately have faith in the industry – overall ratings improved in every category compared to last year.
AVERAGE LENDER PERFORMANCE Brokers rated their lenders higher in every single category this year. As in 2015, the area that needs the most improvement is IT/technology. On the flip side, transparency of lenders’ commission structures ranked as the highest-performing category for the third consecutive year. 4.14 4.03
Transparency of commission structure BDM support
4.04 3.99
Underwriter support
4.01 3.89
Product range
3.94 3.81
Broker support
3.92 3.85
Interest rates
3.90 3.85
Overall service levels
3.90 3.78
Turnaround time
3.87 3.71
Satisfaction with credit policy
3.84 3.80
2016 2015
IT/technology
3.73 3.63
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FEATURES
BROUGHT TO YOU BY:
COVER STORY: BROKERS ON LENDERS
TRANSPARENCY OF COMMISSION STRUCTURE ON LENDER
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2016 average score 4.14 2015 average score 4.03
This category had the highest overall ranking – 4.14 out of 5, which puts it back to its 2014 score after dipping to 4.03 in last year’s survey. And the winners – RMG, First National and CMLS – scored a whopping 4.47, 4.46, and
HOW MANY LENDERS HAVE YOU SUBMITTED DEALS TO IN THE LAST 12 MONTHS?
4.4, respectively. Given those high scores, it’s not surprising that brokers didn’t request too many improvements on lenders’ commission structures. One, however, said he would like to see lenders “provide promos that offer higher commissions,” while another commented that “consistency in commissions across the board” would be appreciated. Even though Merix/Lendwise fell to fourth place this year and their rating dropped from 4.50 to 4.30, they still have plenty of fans – one broker commented that they are “a true partner with their commission structure.”
BDM SUPPORT ON LENDER
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2016 average score 4.04 2015 average score 3.99
BDM support is one of three categories that topped 4 out of a possible 5 on this year’s survey, suggesting that lenders are really stepping up their game here. “When the lender
The vast majority of brokers are submitting deals to a variety of lenders – 85% said they partnered with five or more lenders in the past year. 84.6% 10.4% 3.2%
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is performing better, it’s usually due to the BDM,” one broker noted. Merix/Lendwise tops the chart, improving to 4.40 from last year’s score of 4.30; multiple brokers called their BDM support “amazing.” CMLS (“BDMs always there for you”) and RMG (“Best in the industry”) rounded out the top three. Despite these glowing remarks, brokers still see room for improvement, asking for the same level of support and attention from BDMs regardless of the number of deals that a broker sends to the lender.
HOW LONG HAVE YOU BEEN A BROKER?
CMY
K
77.2% 14.2%
5.3% 3.3 %
5+ years 2-5 years
1-2 years Less than a year
BANKS OR MONOLINES? When it comes to the type of lender a broker chooses, we wanted to know why a broker would send a deal to a bank rather than a monoline lender. Unsurprisingly, it largely comes down to the wide variety of products banks are able to offer.
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What is the main reason you send a deal to a bank instead of a monoline?
45.4%
28.2%
19.0%
6.5%
0.9%
Product offering
Client preference
Underwriter/ BDM service
Rate
Compensation
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CMP Ad August 2016_Final.pdf
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1:51:12 PM
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FEATURES
BROUGHT TO YOU BY:
COVER STORY: BROKERS ON LENDERS
UNDERWRITER SUPPORT ON LENDER
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S 16
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Gold First National Silver CMLS
2016 average score 4.01 2015 average score 3.89
Bronze RMG
First National bumped Merix/Lendwise from the top position this year in the underwriter support category. Underwriters at both First National and CMLS were commended for being open and willing to respond to brokers
WHO IS YOUR STRONGEST REFERRAL PARTNER?
lines,” said one. “[They’re not] able or allowed to think outside the box.” Another broker agreed, saying he’d like to see lenders give more flexibility to their underwriters. Brokers also brought up the problem of overworked underwriters, which leads to slower turnaround times, and another mentioned that document approval is a big stumbling block. “Underwriting is usually decent, but doc admins can take forever and not are communicated well,” he said. “Too much can change during doc approval, and that can require too much back and forth with the
“They’re not allowed to think outside the box” and discuss deals. One broker also praised First National for its ability to retain experienced underwriters, which improved the quality of their service. But brokers still had plenty of suggestions for ways that lenders can improve their underwriting services. “Underwriters are under incredible pressure to meet the lender’s guide-
underwriter, and the whole thing gets very inefficient.” One thing brokers did agree on was that the underwriter can make all the difference in a deal, regardless of the lending institution. “It is not the lender that performs – it is the underwriter and their experience and understanding,” one broker commented.
Past clients are the biggest source for referrals by a wide margin, although brokers also mentioned other sources, including builders, accountants, social media contacts, credit counsellors and lawyers.
66.8%
27.6%
Past clients
5.6%
Realtors Financial planners
BROKER PREDICTIONS: COMMISSIONS Like last year, the majority of brokers expected commissions and bonuses to stay the same over the next six to 12 months, although that percentage has dipped slightly from 73% to 66%. Stay the same Increase
65.9% 20.8%
Decrease
10.4%
Move to flat-fee commission 2.9%
THE BEST APPRAISERS IN CANADA ARE LICENSED & REGULATED BY
LOOK FOR THE PROFESSIONAL DESIGNATIONS
DAR & DAC
CANADIAN NATIONAL ASSOCIATION of REAL ESTATE APPRAISERS PROFESSIONAL
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CALL 888-399-3366 or
FIND AN APPRAISER at www.cnarea.ca 26
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MCAP Fusion Mortgage is a mortgage and a line of credit… …a POWERFUL combination with flexible financing options to meet your customers’ financing needs. Ask your MCAP Business Development Manager for more details.
www.mcap.com MCAP Service Corporation Ontario Mortgage Brokerage #10515 Ontario Mortgage Administrator #11692
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2016-09-08 11:01:14 AM
FEATURES
BROUGHT TO YOU BY:
COVER STORY: BROKERS ON LENDERS
PRODUCT RANGE ON LENDER
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ON LENDER
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GOLD
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ON LENDER
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SILVER
Gold Scotiabank
2016 average score 3.94
Silver MCAP
2015 average score 3.81
Bronze Merix/ Lendwise
Since many brokers said access to more products is the main reason why they’d send deals to a bank as opposed to a monoline lender, it should come as no surprise that a bank, Scotia, tops this category with an average score of 4.31. Both MCAP and Merix/
Lendwise improved their rankings from last year, while RMG landed in fourth place with an average score of 4.02, just two hundredths of a point behind Merix/Lendwise. Although brokers were generally pleased with lenders’ overall product range and rated them higher in this category than they did last year, they would like to see even more products offered, including lines of credit and products targeted at the self-employed and construction markets. That desire isn’t universal, however. One respondent complained that there are too many products out there, “making me confused.”
ON LENDER
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SILVER
Gold RMG
2016 average score 3.93
Silver CMLS
2015 average score 3.85
Bronze First National
When it comes to the lenders who provide the best support across the board, brokers were unequivocal in their love for first-place finisher RMG, which scored a 4.30 out of 5. “RMG is absolutely mopping the f loor with service, compensation, rate, product
features and ease of dealing with them, not to mention being caring and truly vested in the craft of brokering deals,” said one respondent. “RMG [listens] to what we need, and I feel they are very supportive of the broker channel,” another commented. Rounding out the top three were CMLS with a score of 4.29, and First National, which shot up from its fourth-place position last year with a score of 4.23. Merix/ Lendwise dropped from first place in 2015 to sixth place this year, but one broker had nothing but praise for them. “Lendwise has been more responsive and provides the support I expect from a lender,” he said.
WHICH LENDERS DO BROKERS USE THE MOST? A wide range of lenders appeared on this year’s survey, including quite a few smaller lenders that aren’t as wellknown. We whittled that list down to lenders who were rated by several brokers and ended up with the following: B2B Bridgewater Bank
28
Canadiana CMLS Equitable Bank
First National Home Trust MCAP
Looking ahead to the near future, we asked brokers what issues they thought would define their relationships with lenders in the next six to 12 months. As with last year’s survey, brokers put the move to an efficiency ratio at the top of their list. The move to an efficiency ratio
38.3%
Lender concerns about fraud during originations 24.6%
Higher volume requirements from individual lenders 22.3%
Commissions
14.8%
WHAT’S THE BEST THING A LENDER HAS DONE FOR YOU IN THE PAST 12 MONTHS?
BROKER SUPPORT KE
THE MOST IMPORTANT BROKER-LENDER ISSUE
Merix/Lendwise Optimum RMG
Scotiabank Street Capital TD Canada Trust
“Sent me a thank-you card when they helped my clients get into a ‘best case’ mortgage option” “Called me to discuss a deal and explain their position” “Actually bent with some paper requirements and trusted my ability to lend money after 36 years in the business” “Given me direct access to a specific underwriter to streamline the hassle of dealing with multiple underwriters and assistants” “Contacted me with questions, rather than declining deal with no correspondence” “Catherine at MCAP set up a mentoring/ coaching program for a group of us in our office to help hold us accountable to prospect” “Pay trailer fees! Helps me grow my book of business with passive income so I can worry less in the future about what happens in the market” “Have great underwriters who spend time building relationships and spend time on every deal, which included giving exceptions where possible”
www.mortgagebrokernews.ca
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2016-09-08 11:01:21 AM
CMLS 30
Thank you for your vote of confidence. We would like to thank our broker partners for voting for us once again in this year’s CMP Brokers on Lenders Survey. At CMLS Financial, we are proud of our innovative lending solutions and fulfilment of our Customer Forward promise. But most of all, we are proud that our brokers repeatedly demonstrate satisfaction with our services by awarding us multiple CMP Awards. Thank you for your recognition and ongoing support. We are always seeking new ways to go above and beyond for our brokers.
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ON LENDER
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Competitive. Experienced. Broker Focused.
SILVER
CANADA’S MORTGAGE COMPANY ™ Over 40 years, 10,000 customers and $10 billion in assets under administration. A dedication to Customer Forward.
22-37_Brokers on Lenders-SUBBED4.indd 29 CMLS 30708 Awards Ad_V3.indd 1
1.866.426.2657 CMLS.CA
2016-09-08 11:01:24 AM 2016-09-01 3:07 PM
FEATURES
BROUGHT TO YOU BY:
COVER STORY: BROKERS ON LENDERS
INTEREST RATES ON LENDER
S 16
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ON LENDER
S 16
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S ER
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SILVER
Gold RMG Silver Merix/ Lendwise Bronze Street Capital
2016 average score 3.90 2015 average score 3.85
Low interest rates aren’t going anywhere anytime soon, so it can be hard for a lender to stay competitive in this area. Nevertheless, brokers rated lenders higher than last year in this category. RMG’s rates and specials helped propel it to the top of the
charts with a score of 4.53. Merix/Lendwise and Street Capital, ranked last year as fifth and sixth, respectively, made the top three this year with scores of 4.38 and 4.27. One broker commended Street Capital for “reward[ing] brokers for business and help[ing] us make money. Keeping rates low and products competitive keeps clients happy as well – win-win-win.” In terms of interest rates in general, however, one survey respondent asked the question that’s likely on many brokers’ minds: “As the rates continue to be so low, can lenders afford to continue to pay the same structure?”
“As the rates continue to be so low, can lenders afford to continue to pay the same structure?”
OVERALL SERVICE LEVELS ON LENDER
S 16
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Gold First National Silver CMLS Bronze MCAP
2016 average score 3.90 2015 average score 3.78
First National again ranked highest in this category – brokers said they are consistently reliable, efficient and quick to offer solutions and resolve issues. CMLS and MCAP rounded out the top three; MCAP in particular showed a marked improvement over last year’s survey, going from a score of
3.90 to 4.20 and jumping from eighth place to third. One pain point that many brokers mentioned was the unwillingness of underwriters to answer their phones or otherwise communicate with brokers, especially when it comes to exceptions or deals that aren’t straightforward. Another survey respondent insisted that consistency is the key to good service. “Lenders need to find ways to retain and manage their staff,” he said. “Consistency in the underwriting is not there with many lenders. Lenders we use the most are the ones who have staff who have been with [them] the longest.”
“Lenders we use the most are the ones who have staff who have been with them the longest” 30
WHAT’S THE BIGGEST CHALLENGE YOU’VE HAD WITH A LENDER’S SERVICE IN THE LAST 12 MONTHS? “Not asking for all documents up front. When conditions are added after we have collected everything requested, it makes us look unprofessional. This usually occurs when there is a person other than the underwriter doing the initial doc review” “None. Both Scotiabank and National Bank of Canada know how to treat high-end brokers” “Consistency. We recognize our lender partners have new restrictions and operate with tighter restrictions. Many of the front-line staff do not understand, which creates inconsistency in message” “This is more due to the industry regulations, but many lenders inherently seem like they do not trust brokers – they make deal requirements very rigid, and their policies do not allow for any flexibility or reasonableness. Many clients who have dealt with brokers and with monoline lenders are surprised by how long the process is, how much documentation they must provide, and by how unreasonable some policies are. Clients do not feel valued by these lenders, and the broker ultimately loses face when they cannot meet the client’s expectations. For the vast majority of deals that have fallen through due to rigid requirements from lenders on the broker side, these same clients have walked into their local bank branch and have been approved within 20 minutes and no hassle. Many of these clients question why they would ever waste their time with a broker again” “Documentation requirements have really increased over the past year, along with appraisal requirements. Lots of extra work”
www.mortgagebrokernews.ca
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EQB_
To our Broker Network, thanks for choosing us! Your support and partnership is greatly appreciated.
Product Range
Turnaround Times
Interest Rates
Satisfaction with Credit Policy
Underwriter Support
Overall Service Levels
BDM Support
Broker Support
IT/Technology
Transparency of Commission Structure
EQB_CMP_Ad_FullPg_11.9.indd 1 22-37_Brokers on Lenders-SUBBED4.indd 31
2016-08-26 9:33 2016-09-08 11:01:37 AMAM
FEATURES
BROUGHT TO YOU BY:
COVER STORY: BROKERS ON LENDERS
TURNAROUND TIME ON LENDER
S 16
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ON LENDER
S 16
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SILVER
Gold First National Silver CMLS Bronze MCAP
2016 average score 3.87 2015 average score 3.71
As every broker knows, time is of the essence for many deals, and so a lender’s turnaround time is of the utmost importance. Overall, turnaround times have improved since last
32
year’s survey, but as always, brokers feel there’s room for improvement – particularly when it comes to busy times. “It happens every year at the same time,” one broker noted. “Have more underwriters at that time.” Another broker said that while getting deals done quickly is great, quality still trumps speed. “I love rapid response times from underwriters, but I need the response to be tailored to the file, instead of the possible options.” One broker reported that his lender was able to turn around a deal in an impressive four hours, but another said that “exceptions
take way too long,” and the general consensus is that it’s not consistent. One broker even said he will send a deal to a bank rather than a monoline lender because they are faster. “Turnaround and service is everything.” As for individual lenders’ performance, MCAP jumped up to third place from its sixth-place finish last year. CMLS retained its second-place position from last year, and First National came away as the best lender in this category for the second consecutive year; brokers called their turnaround time “unbelievable” and “the best, hands down.”
www.mortgagebrokernews.ca
22-37_Brokers on Lenders-SUBBED4.indd 32
2016-09-08 11:01:44 AM
Read Canadian Mortgage Professional anywhere, anytime
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The CMP magazine iPad® app is designed for mortgage professionals on the go. www.kaishinlab.com Packed with all the features, insights, news and analysis from your favourite magazine, this is your opportunity to keep up-to-date wherever you are. Take a look at the current emag, or download previous issues. For all the latest news and industry developments download your free CMP iPad® app today!
WWW.MORTGAGEBROKERNEWS.CA 22-37_Brokers on Lenders-SUBBED4.indd 33
2016-09-08 11:01:47 AM
FEATURES
BROUGHT TO YOU BY:
COVER STORY: BROKERS ON LENDERS
SATISFACTION WITH CREDIT POLICY S 16
BR
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ON LENDER
20
K
S ER
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ON LENDER
S 16
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GOLD
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ON LENDER
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SILVER
Gold CMLS Silver Scotiabank Bronze RMG
2016 average score 3.84 2015 average score 3.80
Brokers’ satisfaction with lenders’ credit policies improved only marginally compared to last year. CMLS and Scotiabank remain in the top two spots here with average scores of 4.15 and 4.03, while RMG soared to third place from its eighth-place finish last year, with a score of 4.00.
BROKERS’ WISH LIST “Expanded product offerings, specifically HELOCs or all-in-one type mortgages”
Flexibility on credit policy goes a long way, judging by the number of respondents who said they value underwriters who are willing and able to take a more comprehensive look at client files. Brokers are also big fans of common sense and would like to see more of it when it comes to assessing credit and whether a client meets the requirements. “[Look] at the whole picture, not just one item,” one broker said. “Look at their credit and bill repayment history and debts versus just proof of income alone.” In that regard, one broker gave a shout-out to Servus Credit Union, “because they apply common sense to credit decisions while still following guidelines.”
“It would be good for many lenders to have ‘tick’ sheets to know exactly what documents have been accepted and what is still required “No catering to large or discount brokerages. Our industry is moving to discount-only, which is a race to the bottom. Lenders should only discount a set amount and stay there” “Better use of technology – i.e. electronic signatures” “Allowing trusted brokers to order appraisals directly from appraisers on the lender’s approved list” “Don’t just decline deals – provide alternative solutions”
PRAISE FROM BROKERS We asked brokers to tell us more about their favourite lenders and what they’re doing to set themselves apart from the crowd. ”CMLS understands that Alberta is still alive. [They’re] open to looking at a deal and income as long as it is presented correctly” “Servus Credit Union works from a ‘let’s get it done’ point of view rather than a ‘how can we decline it’ point of view” “MCAP, Merix and CMLS are clear winners this year. All are being strict with efficiency ratios, investing in technology and using data to weed out poor-performing brokers who cost them money. They are creating true partnerships with their brokers by setting clear expectations and continuous touch points and progress reports” “MCAP has been great to us lately. They have a quick response time, great service, and their technology is easy to work with”
34
“First National consistently – they provide quick turnaround, competitive rates and good service” “Scotiabank on every level: service, rates, overall satisfaction of my clients after funding” “First Source for paying attention and deal turnaround. [They] also provide an alternative suggestion if they cannot do the deal” “RMG – quick turnaround time, excellent communication. If the deal is a no-go, it is explained why and not just sent back” “Home Trust really works well with me to help get a deal done. I’m in Winnipeg, so the Home Trust team is people we’ve known over time, so it’s more of a personal relationship, which helps sometimes to get a deal done. They take the time to work through a deal and give solutions, not just a flat no”
“I cannot choose between Equitable Bank and Lendwise; both lenders are the best. BDMs Jessica and Karim are truly the best, and I cannot appreciate their hard work enough” “Bridgewater Bank invests the time needed for Alberta deals and gets the deal done. Their underwriters are some of the most experienced in the industry, and it’s obvious when you work with them” “Tribecca Finance, due to their efficiency with review of a deal and documentation, turnaround time, and ability to close a deal quickly, along with excellent communication and support” “Optimum Mortgage – they are heads and shoulders above all other alternative lenders. Their rate might not always be the most competitive, but I know my BDM and underwriter and can get a hold of them very easily when I have a tough deal”
www.mortgagebrokernews.ca
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2016-09-08 11:02:24 AM
We won’t sleep for a year trying to do it again. We’re humbled and grateful for the recognition, thank you. You have our word that we’ll keep working hard to give you our best. It’s been a great year... looking forward to what’s brewing in 2017!
BROKER SUPPORT
BDM SUPPORT
UNDERWRITER SUPPORT
OVERALL SERVICE LEVELS
INTEREST RATES
PRODUCT RANGE
SATISFACTION WITH CREDIT POLICY
TURNAROUND TIMES
TRANSPARENCY OF COMMISSION STRUCTURE
IT/ TECHNOLOGY
BwBbrokerinfo.ca
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2016-09-08 11:02:03 AM
Bank Trust Wealth Management FEATURES
BROUGHT TO YOU BY:
COVER STORY: BROKERS ON LENDERS
RS
ON LENDER
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ON LENDER
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3.42
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3.81
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Interest rates
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ON LENDER
4.18
4.38
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4.30
ON LENDER
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Transparency IT/ of commission technology structure 20
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4.38
20
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3.91
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20
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4.36
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16
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Broker Support 20
ON LENDER
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16
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4.00
20
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4.68
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16
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ON LENDER
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3.82
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4.45
20
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3.64
ON LENDER
20
When it comes to why brokers send deals to alternative lenders, most do so for self-employed clients. Other reasons included commercial and residential construction, bruised credit and vacation homes.
KE
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WHICH DEALS DO YOU SEND TO ALTERNATIVE LENDERS?
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ON LENDER
Interest BDM support rates 20
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4.45
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4.43
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Equitable Bank
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Bridgewater Bank
KE
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Optimum Mortgage
Turnaround time
LT
Think you know alternative lenders? Think again. The alternative lenders who received the most votes in our survey consistently received higher scores than their traditional counterparts. Brokers praised alt lenders for the greater flexibility that they’re able to offer. Optimum Mortgage, Bridgewater Bank and Equitable Bank lead the way among alternative lenders, receiving overall scores of 4.27, 4.23 and 4.09, respectively. Overall service levels
N AT I V E L E N
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SPOTLIGHT ON ALTERNATIVE LENDERS
Turnaround Underwriter time support
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National Bank National Bank also received a relatively small number of votes, but scored a jaw-dropping 4.72 out of 5 in product range – leaps and bounds over their score of 3.86 last year. The bank’s other improvement was enough to warrant a double-take: In 2015, National Bank ranked next to last when it came to satisfaction with credit policy; this year, they ranked the highest of any other A lender with a score of 4.11.
GOLD
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Although IT/technology garnered a higher average rating than it did last year, there’s still much progress to be made in this area – clients and brokers want easier ways to submit documents and stay informed throughout the process. The top three lenders in this category remain from last year, but this time RMG tops the field with an average
LT
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2015 average score 3.63
Bronze First National
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Silver MCAP
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20
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2016 average score 3.74
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Gold RMG
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GOLD
ICICI Bank Although ICICI Bank didn’t receive quite enough responses this year to be ranked with the top lenders, it scored above average in seven out of the 10 categories. “ICICI Bank is fantastic,” one broker wrote. “The underwriter is firm but fair, BDM is attentive, and rates are great.” Another respondent claimed that ICICI is “the total package.”
score of 4.45 out of 5. “RMG is doing a great job with the IT/communication between lender/broker,” one respondent said. Although the mortgage industry isn’t exactly known for being at the cutting edge of technology, brokers feel that lenders need to find ways to deal with the increasing demand for it. “Technology is important,” one broker said. “Lenders who do not have a broker portal to keep all parties to a deal up to date are falling behind with their service. Working harder to overcome this lack of technology will not cut it.” Another broker agreed, saying that “all lenders should have portals for submitting documents, and should update conditions regularly so that we can keep track.”
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ON LENDER
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THE DARK HORSES
BR
IT/TECHNOLOGY
Thank you brokers!
N AT I V E L E N
Transparency of commission structure
4.36 4.45 4.06
We are so proud to be recognised as one of your top alternative lenders. This means so much to us because it came from you-our brokers. We attribute our success to the strong partnerships we have with you, and that’s why we will continue to work hard and provide you with hassle free, error free, on time service. Thank you for all of your support!
Business for self Secondary/vacation home Purchase for improvement Bruised credit New to Canada 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
T. 1.866.441.3775 | F. 1.866.477.8897 | OptimumMortgage.ca |
@OptimumMtg
www.mortgagebrokernews.ca
A CWB Group Company
DI
Sensible Lending®
Bank Trust Wealth Management
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Broker support
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ON LENDER
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ON LENDER
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A
Product range
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Underwriter support
SILVER DI
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15
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N AT I V E L E N
20
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15
BDM support
A
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ON LENDER
SILVER N DI
Satisfaction with credit policy
SILVER DI
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15
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20
ON LENDER
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A
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20
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ON LENDER
15
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N AT I V E L E N
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N DI
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ON LENDER
GOLD
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Turnaround time
ON LENDER
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20
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15
15
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20
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20
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Thank you brokers!
N AT I V E L E N
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Transparency of commission structure
We are so proud to be recognised as one of your top alternative lenders. This means so much to us because it came from you-our brokers. We attribute our success to the strong partnerships we have with you, and that’s why we will continue to work hard and provide you with hassle free, error free, on time service. Thank you for all of your support! T. 1.866.441.3775 | F. 1.866.477.8897 | OptimumMortgage.ca |
A CWB Group Company
22-37_Brokers on Lenders-SUBBED4.indd 37
@OptimumMtg
Sensible Lending®
2016-09-08 11:02:13 AM
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FEATURES
TECHNOLOGY
TECHNOLOGY REPORT 2016 Investing in technology is essential for any mortgage broker who wants to compete in an increasingly digital marketplace. CMP examines some of the innovative tools currently available and how they can help brokers expand their business and improve their bottom line
AVS SYSTEMS “THE MODERN broker has to embrace technology because that’s the way the world is moving,” says Larry Mullins, president of AVS Systems. “In order for them to communicate their complex expertise to consumers, brokers simply have to leverage technology. Sixty-seven per cent of millennials are looking for mobile-first technologies when it comes to managing finance, so it’s critical for brokers to adapt. If brokers do not embrace the change, they’ll become a dying breed.” In an attempt to increase efficiency in Canada’s mortgage industry, AVS has created an integrated, web-based mortgage delivery system called SecureSign that gives brokers, borrowers and lenders easy and instant access to loan information. It is available on any device (computer, tablet or phone), is completely paperless and automatically sends an email to all stakeholders if there have been any changes or updates on the
status of the loan. Brokers also can use the system to cross-sell additional products such as credit cards, insurance or auto loans at the very beginning of the sales cycle when the deal is in flight. “AVS spent many years launching proprietary technologies in the financial services industry, primarily in the auto lending and risk management sectors, and we saw that the mortgage loan industry in Canada was lagging when it came to technology solutions,” Mullins says. “The industry was still relying on physical delivery of paper documents through multiple platforms to execute business transactions, which was creating inefficient processes, lost documents, poor customer experience and increased costs. We saw an opportunity to come in and improve the sector.” The SecureSign system also provides electronic signature capabilities, which
www.mortgagebrokernews.ca
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FEATURES
TECHNOLOGY
help maintain the integrity of documents. The system is integrated with all the necessary lending applications, cloud service storage systems and CRMs in the Canadian mortgage marketplace, including OTTO, Salesforce, Teneda and GoMax. That means a broker no longer has to enter industry provider applications separately – the system allows for a single app entry, and any data entered flows right through to the lender. “We’ve also built in security and compliance, which we think is absolutely fundamental in our online environment today,” Mullins says. “We’ve developed a user authen-
“If brokers do not embrace technological change, they’ll become a dying breed” Larry Mullins, AVS Systems tication system, which requires users to input a security code received via SMS text or email to validate themselves before any transaction occurs. Compliance and security related to transactions has become more of a factor, so we’ve put a lot of thought into how this will play a role, while being cognizant not to slow the process.” AVS also has built a renewal function into the new system, which automatically sends out an electronic mortgage renewal package to the borrower. The borrower can check the documents online, verify them with an e-signature and then send them back to the broker or lender. “Renewals are very important for customers, and right now, so many renewals are just sitting out there with very few maximizing those opportunities,” Mullins says. “We’ve streamlined many of the broker processes and put them all in one application. As a result, we’ve created a better result for brokers, lenders and customers.”
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WHY TECHNOLOGY IS CRUCIAL FOR BROKERS CMP: How important is it for the modern broker to embrace technology? John Kelly: It’s vitally important they use technology to their advantage in an effort to deliver the best possible customer experience. Mortgage brokers are in competition, not only with each other, but also with all of the other institutions that offer loans in the marketplace. Brokers should be using public utilities like LinkedIn, Twitter and Facebook, and purposebuilt technologies are becoming well-rounded and really useful. There is an endless array of technology available to brokers who want to deliver that higher level of experience. Being familiar with technology is crucial to your business. It saves time, effort and money. Brokers need to assemble the technology that is most useful to their business and their customers, but they must learn how to use it properly within regulatory guidelines. Technology is a big part of the present and the future. CMP: What is your technology strategy? JK: We follow a strategy that is different from most of our competitors. We believe that there is no substitute for the many and varied enterprise-class technologies that are being developed worldwide. We haven’t picked any proprietary technology or developed any proprietary technology that we would hope to capture our user base or brokers on. We support their use of a wide range of technologies. We believe that the market-based technologies have a real advantage and provide a faster evolution time and stay more current. Some of the technologies in our business haven’t evolved in 10 years, so we think that using the technology offered by the big players is the best strategy. These systems are robust, stable and are able to evolve and adapt more quickly to a changing market. Our view is that technology is so vitally important that our brokers should be able to choose from the best technology alternatives in the wide marketplace. CMP: So how does not having a proprietary technology impact your brokers? JK: We have a fantastic relationship with D+H, which enables us to map technologies directly into D+H using the ATI. We’ve done that with our own broker system using Mail Chimp, Google Drive, Gmail, as well as Microsoft Outlook, Salesforce and all of the specific Canadian broker-based technologies that are being used today, including Teneda, OTTO and GoMax. If one of our brokers was to use another technology and it caught on, we would also support that. We have always allowed them to choose the technology they think is most appropriate for their business and will deliver the advantages that enable them to compete and win. We will support and encourage the use of that technology. It’s a huge advantage for brokers. Not having to drop their current technology investment and use a proprietary system is truly beneficial for brokers. That approach is consistent with our identity as being a network of independently owned and John P. Kelly operated brokerage firms. We allow brokers to retain their Chief operating officer branding and autonomy within our broader network. VERICO
www.mortgagebrokernews.ca
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FEATURES
TECHNOLOGY
OTTO GEOFF WILLIS, chief enthusiasm officer at Origin Mortgages & OTTO Mortgage Systems, believes technology is the single most important thing brokers should concentrate on right now. He has no doubt that being committed to improving systems and processes is essential for brokers who want to deliver better client experiences and thrive in the mortgage business.
automatic financing conditioning alerts so that brokers are always aware of the requirements yet to be fulfilled. “The system also works seamlessly with mortgage Expert systems,” Willis says. “We start the process in OTTO, then push a validated application to D+H Expert to complete and submit to lenders. Having the two linked is extremely helpful to avoid additional data
“If you don’t have the technology to support all of the various stakeholders in a deal, you’re going to find it very difficult to keep on track” Geoff Willis, OTTO “People are now creating better experiences for their customers beyond offering good rates and service,” Willis says. “If you don’t have the technology to support all of the various stakeholders in a deal, you’re going to find it very difficult to keep on track.” OTTO has created an end-to-end automated system that organizes all of the documents and information relating to a client application. The system also sends out reminders that are specifically related to getting a mortgage deal completed, including
KEY FEATURES: OTTO Compatible with PC, tablet or smartphone Deal reminders and key client milestones are automatically pushed to the user’s daily calendar, eliminating the need for manual notes or reminders Enables users to assign tasks to other team members’ calendars, add personal appointments and sync with Google Merge contact reporting converts client data into complete client profiles Unique ‘tagging’ system customizes communication Offers customized CRM email marketing campaigns and templates together with personal workflows
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entry, and brokers have all of their client information in their client database.” For brokers using the system, the whole loan application process is simplified. A broker is able to send the application to Expert without having to do much more than pulling a credit report and hitting the submit button. “The OTTO system puts everything in one place and increases the broker’s ability to communicate with their clients on an ongoing basis,” Willis says. “There aren’t many other systems in the mortgage industry that can do that. It means that a broker never misses a completion deadline or misplaces a document. It eliminates the panic points because you’re no longer affected by the things that can get you into hot water.” Willis sees two other main benefits for brokers who embrace the latest technology: Not only do you have the ability to do more business because you suddenly have a lot more time on your hands, but you also get to enjoy more free time. “A lot of top producers are concerned about their ability to handle their client load, so they give up their personal time,” Willis says. “This system lets those brokers have more time for themselves.”
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www.mortgagebrokernews.ca
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®
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“
As a member of the VERICO Network, XEVA Mortgage is able to leverage the best-in-class technologies in the market to ensure our brokers can evolve, compete and win.
“
www.xeva.ca
Trevor Hansen XEVA Mortgage CEO
Feature Partner:
INDEPENDENCE & INNOVATION 1.866.983.7426 | info@verico.ca | www.verico.ca ® & tm : Trademark of Verico Financial Group Inc. Each VERICO Broker is an independent owner and operator.
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FEATURES
TECHNOLOGY
SCARLETT - BROKER FINANCIAL GROUP “EVERYTHING IN the mortgage industry right now is very manual, so technology is integral to becoming more efficient in tracking clients and managing the books,” says Jason Singh, president of Broker Financial Group. “The problem right now is that there are so many different types of technology in different places, and brokers are forced to constantly go in and out of different
“Terms and conditions, document storage and lawyer communications are all tracked and automated,” Singh says. “The more things we have automated, the less things we actually have to do. Even the capability of automatically notifying the Realtor that the deal is approved prevents anyone from having to pick up the phone. It saves everyone time at every stage of the mortgage process.”
“Constantly picking up the phone or going in and out of different applications and platforms takes up so much time on a daily basis. Being able to integrate all of those functions into one place creates a much higher level of efficiency” Jason Singh, Broker Financial Group programs to get something done. You need technology that puts everything in one place.” After recognizing the need for improvement in the industry, Broker Financial Group developed Scarlett, a cloud-based mortgage system that enables brokers to complete all of their mortgage functions in one place. From online applications to client communication to digital marketing, Scarlett is an all-in-one platform that encompasses a CRM tool and a deal management system.
KEY FEATURES: SCARLETT Customer relationship management [CRM] tool Deal management system Compliance and payroll system Digital email and print marketing platform
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Mortgage application system Key performance metrics/dashboard Website template Content management system Daily planner
The system also manages compliance and payroll and enables brokers to use modern website templates and content management systems. The key performance metrics tools allow broker/owners to closely monitor how each member of their team is progressing. If there are any inefficiencies or problems that need addressing, the system will flag the issue. “How many deals are the brokers getting? Do they need coaching? The Scarlett tool lets you ask these questions and get the answers,” Singh says. Singh believes that using the platform will help brokers achieve a level of worklife balance that can often be hard to find. “Constantly picking up the phone or going in and out of different applications and platforms takes up so much time on a daily basis,” Singh says. “Being able to integrate all of those functions into one place creates a much higher level of efficiency and helps brokers to have a balanced life where they can actually spend time with their families.”
www.mortgagebrokernews.ca
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FEATURES
TECHNOLOGY
LENDESK MORTGAGE SOFTWARE developer Lendesk is currently in the process of building an impressive and ambitious platform for Canada’s lending professionals. The company’s new application encompasses a CRM tool,
tion right through to the point of submitting the file. “We think the system gives brokers the opportunity to improve efficiency and add to their client offering,” Noble says. “We’re trying to build the system that
“We don’t want a broker be in a position where they have to use our systems. We make it easy to export data, and if you don’t think we’re providing value, then you can leave” Lee Noble, Lendesk a loan origination system and a document management system. “What differentiates our system is user experience,” says Lee Noble, VP of business development at Lendesk. “Throughout the loan application process, the system makes it as easy as possible for brokers to get the information they need from their borrowers in order to create an application.” Lendesk’s new application also helps with all aspects of document generation and storage, audit history, and application preparation, from the beginning of an applica-
KEY FEATURES: LENDESK Performance Dashboard • Real-time analytics let users know exactly where their files are in the pipeline • Referral source metrics help brokers track their best sources • Portfolio management enables users to track volume funded over any period of time Document Management • Delivers borrower information and supporting documentation efficiently through a variety of channels
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• Helps brokers create commitment letters and other standard docs • Secure storage for all files, stored in renowned Canadian data centres E-signature • Integration with eSign Live by Vasco offers safe and secure document signing from within Lendesk • Borrowers are able to receive docs and sign documents on any device • Widely accepted by all banks and most lenders
will bring the whole Canadian mortgage industry forward so that it can compete with the technology investments currently being made by the banks.” Noble can see why certain brokers are reluctant to invest in technology, but he feels that ultimately it’s a no-brainer. “Investments are all about pain now for gain later – delayed gratification,” he says. “We’ve tried to take away as much of the initial pain as possible as well as maximizing the benefits down the road. It’s also really easy to get started on the new system.” Lendesk has refrained from inserting a lock-in clause into its technology licensing agreement. That allows a broker to try the system, and if it doesn’t meet their needs, they can stop using the software without repercussions. “Not having a lock-in is a big part of our company philosophy and differentiates us quite drastically from other systems,” Noble says. “We don’t want a broker be in a position where they have to use our systems. We make it easy to export data, and if you don’t think we’re providing value, then you can leave. Our tools are designed to make managing your business easy, so you can focus on what you do best: delivering exceptional service to your clients.”
www.mortgagebrokernews.ca
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8/09/2016 8:37:24 AM
MOVING MORTGAGES FORWARD LENDESK IS THE SMARTEST CRM FOR BROKERS
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8/09/2016 8:37:35 AM
Another day at the office – courtesy of OTTO.
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2016-09-07 11:27 AM 8/09/2016 8:37:59 AM
FEATURES
TECHNOLOGY
portal where brokers can order a variety of important documents, such as notice of assessments, T4s, and title and corporate registry searches. “Brokers can now order all of these items with one login ID from any device,” Henneberry says. “Their dedicated, on-demand admin assistant will gather the
“Brokers are working harder for their money, and we believe the solution lies in a more process-oriented and streamlined approach” Jason Henneberry, DocAssist items for them at nearly the same cost as ordering from the individual registries.” DocAssist differentiates itself by combining cutting-edge technology and real human admin support. “Our document management system is a big hit with brokers,” Henneberry says. “They get the documents they need in a timely manner, and their clients receive email notifications for all of the items that were delivered to the broker. It’s a really nice touch point for the client to know that their documents were received, and for the broker, it’s easy and gives a real peace of mind.”
KEY FEATURES: DOCASSIST Basic membership provides access to on-demand admin support for a variety of services, including: CRA notice of assessment retrieval
Unlimited CRA notice of assessment retrievals
Title and corporate registry searches
Closing package preparation (cost of borrowing disclosures, lender forms, etc.)
Client document management (sorting and labelling all inbound documentation and delivery of receipt notifications to clients and referral sources) Post-funding marketing support (personally signed thank-you cards, preparation and delivery of closing gifts, welcome packages, renewal letters, and other custom client marketing)
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Professional support includes everything in the basic membership, plus:
Lender fulfillment and file completion (managing appraisals and working directly with lenders to satisfy conditions and complete the file for instruction) Brokers can enhance the service with initial file reviews, appraisal management and vacation support
FUNDEVER WHEN FUNDEVER’S leaders – frustrated by the process brokers had to endure when sending out client information to lenders – saw an opportunity to improve connectivity between brokers and commercial lenders, they decided to step up and make it happen. “Lenders are chosen by the broker through that individual’s frame of reference, and that
“It allows lenders to quickly determine if they have an appetite for your deal and allows the broker to market the application to all of the lenders in Canada” Brad James, Fundever is based upon what that particular lender has done in the past,” says Fundever’s Brad James. “If a broker knows that a lender has lent on a certain type of asset class or location previously, they’re going to be likely to then send them an application based on that historical propensity to fund.” By making decisions in that way, the broker may be running a risk for their client and wasting their own time, because what lenders have done in the past is not necessarily indicative of what they’re going to do in the future. The Fundever system acts an electronic marketplace where brokers can submit simple, concise borrower applications for lenders to consider. Only lenders with genuine interest in that loan will contact the broker. “It allows lenders to quickly determine if they have an appetite for your deal and allows the broker to market the application to all of
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FEATURES
TECHNOLOGY
KEY FEATURES: FUNDEVER Brokers can submit a simple mortgage application for to the vast majority of lenders in Canada to consider. The standardized application system allows lenders to quickly determine if they have an appetite for the deal Brokers receive feedback from interested lenders only Free to use Eliminates the chance of getting shopped. When brokers take their offer of funding to a client, they can explain that the application has been seen by the entire market. This showcases their fiduciary duty and adds value to the broker’s services Available exclusively to licensed mortgage brokers New lenders are being added to the system all the time
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the lenders in Canada,” James says. “It’s a great marketing tool and helps brokers increase efficiency on a day-to-day basis.” The Fundever system also mitigates every broker’s biggest fear: getting shopped on a deal by a client. When a broker comes back with approval options, they are from a diverse array of lenders, some of which do not get an opportunity to view the respective deal in the current marketplace. “That increases the value to the end client, it increases speed, and for brokers, it eliminates the possibility of being shopped because who are they going to go to?” James says. “Brokers are able to provide faster approvals with a better interest rate.”
www.mortgagebrokernews.ca
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securesign ad CMP Sept.pdf
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2016-08-31
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.... for anything SecureSign Declare Yourelse, Independence. SECURE ELECTRONIC SIGNATURES ON ALL YOUR MORTGAGE DOCUMENTS.
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2016-09-08 10:05:33 AM
SPECIAL PROMOTIONAL FEATURE
E-SIGNATURES
Empowered consumers and electronic signatures A new partnership between VERICO and e-signature provider SecureSign is making it easier than ever for brokers to deliver this in-demand technology to consumers
“EARLY ELECTRONIC signature providers focused strictly on the nuts and bolts of getting the legal contract e-signed, sealed and delivered,” says Larry Mullins, president of SecureSign Systems, a new Fintech company in the mortgage space. “Today, the e-signature industry is becoming more specialized, and companies such as SecureSign.ca have developed special expertise in credit processes for financial institutions and mortgage advisors. The basics are now just par for the course.” SecureSign is engineering new innovations in electronic document processes that recognize the enormous value in mechanizing the sales process as well as the paperwork chain. This means developing client-facing processes that reduce both the hassle and cost factors for businesses and their customers, but also positively impact the branding, cross-selling and closing objectives of banks and brokers. “It is no surprise that modern technology, particularly the internet, has empowered consumers,” Mullins says. “The question is, what does this mean for our industry and mortgage brokers’ businesses? This newfound control enables consumers to access information to shop more intelligently.” A recent study by PwC confirms the growing trend of consumers taking control of their shopping experience. According to the PwC report, consumers tend to do the
“Technology is a key ingredient to success in our modern and highly competitive marketplace. Developing meaningful points of differentiation enhances a broker’s competitive advantage” John Kelly, VERICO Canada rational thing and shop by price first. In the case of home loans, this means shopping interest rates. But price is not the only factor impacting a consumer’s eventual decision on what, or who, to choose. “Competitive pricing is just the ‘ante in,’ and once shoppers are satisfied that the price
issue is covered, they then start making decisions based on process and features – in that order,” Mullins says. The process offered by the lender or broker has become a very important part of the buying decision, second only to price. Those lenders that meet the ante-in on price and can
www.mortgagebrokernews.ca
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2016-09-08 10:05:43 AM
SPECIAL PROMOTIONAL FEATURE
E-SIGNATURES offer a better and more hassle-free experience for their customers will win the day. But the terms ‘better’ and ‘hassle-free’ are tricky things to define in the digital age. They can mean different things to different people – including features such as faster, slower, easier, sooner, later, online, at home, by phone, in person or even person-free. The definition of service or process excellence has been turned on its head. Traditional selling points, such as a mobile bank rep willing to visit a customer at home, remain a compelling advantage for some types of consumers, but an intrusive disadvantage to other types. For some consumers, the notion of having to physically ‘meet’ in person, on their time, at their home, may sound more like a hassle than a benefit. Imagine a Ford Motors campaign that promises you that your dealer rep will meet you in your home just after dinner. Most empowered consumers would now ask, “Isn’t there another way?” – and then find it online, from someone else.
wet signature stage. This breaks the straightthrough electronic transaction, allowing time-consuming and unsecure processes back into the paper chain. All this is changing rapidly as consumers and the industry alike adopt electronic signatures to complete the paperless process. In an effort to promote the competitive modernization of commercial practices in Canada, the government has been an early adopter. A variety of statutes have become law in the US, Canada and many other countries. The Personal Information Protection and Electronic Documents Act [PIPEDA] is a key piece of legislation. The result: electronic signatures are now as legally binding and defensible as wet ink.
Automating and compressing the paper-trail process If you’ve bought or sold a home lately, you’ve probably experienced the benefits of electronic signatures firsthand. It is now common
“Competitive pricing is just the ‘ante in,’ and once shoppers are satisfied that the price issue is covered, they then start making decisions based on process and features” Larry Mullins, SecureSign Systems Not too long ago, it was a huge advantage to offer extended branch banking hours. Now even 24/7 hours wouldn’t satisfy today’s consumers, who simply don’t want to go to the branch at all. What most consumers really want is to get it done now with as little imposition on their busy lives as possible. No matter what your customers’ definition of ‘better’ or ‘hassle-free’ is, it is a pretty safe bet that less paperwork ranks high. “That’s where electronic signatures play a critical role,” Mullins says. A paperless process holds out the promise of minimizing the hassles related to filling out, sorting, submitting and storing a stream of time-consuming documents. But paperless workflows that start out digital often come apart and revert back to paper at the
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practice for buyers and sellers to formally ink the Contract of Purchase and Sale with electronic signatures. It’s legal, binding and acceptable to the land title office. This has not only reduced the paperwork hassle for consumers, but has also greatly reduced hassles and man-hours for Realtors, who deal with many such contracts on a daily basis. The benefits of automation are not just enjoyed by consumers. In fact, much of the motivation for change is coming from the industry. Companies want to invest in securing competitive advantages while locking in cost savings related to more efficient and less labour-intensive internal processes. Financial institutions in particular can realize significant cost savings by streamlining compliance processes in line with the
customer application, processing, fulfillment and onboarding workflow. “Our industry is poised for rapid change and innovation in the coming years,” Mullins says. “Today we are seeing many new and exciting technology firms entering the market that will contribute greatly to the advancement of our industry.” SecureSign has aligned with many lenders and broker firms who share a common desire to innovate. Recently, the company announced a national preferred vendor relationship with VERICO Canada, and other similar announcements are soon to follow. “This clearly demonstrates that our industry is committed to competing and winning the innovation challenges to ensure brokers are at the cutting edge when serving Canadian consumers,” Mullins says. “VERICO has always been at the forefront of innovation in the Canadian mortgage broker market,” adds John Kelly, chief operating officer of VERICO Canada. “Our core philosophy has always been conducive to enabling our members to leverage any best of breed technology in the market that they decide fits their business objectives best. Technology is a key ingredient to success in our modern and highly competitive marketplace. A broker firm’s technology choices are important, and developing meaningful points of differentiation enhances their competitive advantage.” VERICO Canada supports a wide range of technology for its members to choose from, including D+H Expert, OTTO, GoMax and Teneda, as well as data interfaces with Salesforce.com, Microsoft Dynamics, Dropbox, Google Drive and One Drive. The network’s objective is to enable its members to leverage the best technology in the market – not to sell them proprietary technology that pins them down and leads to eventual obsolescence. “In keeping with our commitment to innovation, VERICO is the first national organization to formally adopt e-signatures to begin the process of significantly modernizing and improving the customer experience our members deliver,” Kelly says. “We have partnered with SecureSign Systems to help us reach this promised land and worked closely to ensure a close integration with our network’s other technology partners.”
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www.mortgagebrokernews.ca
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®
2016-09-08 10:05:54 AM
INDEPENDENCE & INNOVATION
1.866.983.7426 | info@verico.ca | www.verico.ca ® & tm : Trademark of Verico Financial Group Inc. Each VERICO Broker is an independent owner and operator.
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2016-09-08 10:06:00 AM
PEOPLE
BROKER INSIGHT
The importance of building long-term relationships CMP caught up with James Harrison, mortgage broker at DLC Home Capital and president of Mortgages.ca, to find out what brokers should be doing to set themselves apart from the crowd
CMP: How did you get into mortgage brokering? James Harrison: After five years working with National Bank, I decided to switch to the broker side so that I could offer more options to my clients. With all the mortgage rule changes, I simply had to have more options for my clients, Realtors and referrals sources. My brother and I opened our own office on Front Street in Toronto, and we joined Sarah Makhomet’s team, DLC Home Capital. We’ve been with them since October 2012.
CMP: How would you describe your time in the industry? JH: It’s been constantly changing. This is not a job to do part-time; you really have to be on top of everything. With all of the changes in mortgage rules and rates, you need to keep on top of things on a daily basis. I do love it, though. For my Realtors, I really want to be a source of information; I want to help them grow. I work with over 200 Realtors in Toronto, and they know they can count on me 24/7 to answer calls. It’s all about customer service, not just getting the deal done. I want to build long-term relationships.
CMP: How has the mortgage business changed since you first entered the industry?
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JH: All of the mortgage rule changes that the government has made have been good. However, certain changes, like the slidingscale increase of the down payment, are silly. I don’t think that will change anything. Also, the $1 million insurance limit is a little low, especially for major cities – that should be at least $1.2 million. I also think that first-time homebuyers should be able to have longer amortization periods – they should be allowed 30 or even 35 years. Lenders should bring back longer amortization, in my opinion.
why is Canada not doing the same?
CMP: What’s your opinion on the 15% tax that has been introduced for foreign real estate investors in BC? JH: I think it’s great, and I highly encourage
CMP: What’s the most challenging part of the business? JH: Handling the growth. But I’ve got a good
it to happen in Toronto. I don’t want a ton of foreign investors inflating the values and not even moving into properties – that’s only going to hurt us. Many other countries have large restrictions on non-resident buyers, so
CMP: What’s the secret behind your success? JH: Networking with Realtors has been my main source of business. I also pay attention to being honest with my clients and going above and beyond with customer service. It may sound like common sense, but I always respond quickly to calls. Being consistent and staying in touch with people – doing all the little things consistently – has helped me build a really good business.
team around me that I can maintain a high level of customer service for both my referral sources and, most importantly, my clients.
CMP: Do you feel that there’s anything more that brokers should be doing?
HARRISON ON THE TORONTO REAL ESTATE MARKET “This year, I’ve had a ton of clients who’ve had pre-approvals and wanted to buy for under $1 million, but haven’t been able to find anything. I have clients who have been in a lot of bidding wars, and after you lose five or six, you get discouraged. The lack of supply is making it hard for clients to find properties under that $1 million mark in Toronto. I don’t see any slowdown whatsoever in home values in Toronto; the demand is so high, and there’s so little supply – it’s simple economics.
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FAST FACTS: JAMES HARRISON
Won DLC’s Master Sales Award in 2015 for being in the top 1% of brokers in Canada
Named to CMP ’s Top 75 Broker list for the last four years
Number four in Canada within DLC for funded volume in May 2015
“Being consistent and staying in touch with people – doing all the little things consistently – has helped me build a really good business” JH: Yes – I don’t think brokers should be in a race to the bottom in terms of rate; I think that only hurts the industry. I think you should have a competitive rate, but also educate your clients on all of the terms and conditions of the mortgages. Brokers as whole need to work together instead of against each other. Our main competition is the banks, who are consistently dropping the ball in terms of service and education. We can really raise our market share by educating our clients on what brokers
do and how it’s beneficial for a client to work with a mortgage broker.
CMP: How can brokers keep up with the rapidly changing industry? JH: You have to be constantly reading articles and paying attention to each individual lender’s guidelines. If you’re not on top of all of the changes on a daily basis, you are doing a huge disservice to your clients and potentially getting yourself in a lot of trouble.
Repeatedly named a Top 50 Broker for DLC in 2013 and 2014 based on total mortgage volume
Won National Bank’s Diamond Sales Award in 2011 and 2012 and Platinum Sales Award in 2010
Named MDM of the Year (GTA Central) at National Bank from 2010 to 2012
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SPECIAL PROMOTIONAL FEATURE
COMMERCIAL LENDING
Commercial lending 101 Want to break into commercial mortgages but aren’t sure where to begin? First Source Mortgage Corporation’s Steven Walters and Lisa Collis offer a quick guide to the ins and outs of commercial lending SO YOU’RE a mortgage broker specializing in residential mortgages – and a pretty successful one. You’ve worked hard to develop your network. You’re getting repeat business from your clients; you’re even getting word-ofmouth referrals. You’ve established relationships with your institutional lenders, and they know you by your first name. You’ve done well and love what you do, but you want to branch out into commercial mortgages. But where do you start? Who can show you the ropes? Since you already have a base of clients, let them know you can help them finance commercial properties, too. Maybe one of your existing clients owns or is looking to purchase a small income-producing property. For example, let’s say a client has called you, seeking a mortgage for the acquisition of a six-plex apartment building that has three units vacant. The purchase price is $2 million. You’ll start by looking at the numbers for this deal. As with a residential mortgage, you’d begin by calculating the loan-to-value [LTV]. Therefore, you need to ascertain how much equity or cash the purchaser is putting toward the mortgage. For this example, let’s assume $750,000; therefore, $1.25 million of financing is required (62.5% LTV). Now, here’s where residential and commercial mortgages differ. In a residential mortgage, you would have calculated GDS and TDS based on the borrower’s income to determine if they can carry the yearly mortgage payments. For an income-producing property, however, you want to examine the income and expenses
from the property alone to determine if the net operating income [NOI] from the property can support the mortgage payments. The current NOI (all revenue from the property minus all operating expenses and
industry-standard adjustments) is $38,680 (see the cash flow analysis below). Now, let’s take this one step further. The property is currently 50% vacant – what would the NOI be if it were fully occupied?
CASH FLOW ANALYSIS CURRENT
STABILIZED
Revenue Less vacancy and bad debt (3%) Gross effective income
$72,000 Included $72,000
$144,000 $4,320 $139,680
Expenses Property taxes Insurance Utilities Management (3%) Maintenance (3%) Total expenses
$25,000 $3,000 $1,000 $2,160 $2,160 $33,320
$25,000 $3,000 $1,000 $4,190 $4,190 $37,380
Net operating income
$38,680
$102,300
$1,250,000 $100,000 0.38x
$1,250,000 $100,000 1.02x
$78,900
$78,900
0.49x
1.30x
Debt service coverage calculations Loan amount Private loan yearly payment @ 8% interest only Debt service coverage ratio Institutional loan yearly payment @ 4% / 25-year amortization Debt service coverage ratio
Note: All amounts are for illustration purposes only and may not be accurate
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When the property is 100% occupied, the NOI is $102,300. Now that you have all this information at hand, it’s time to decide which lender to send the deal to. You know from your residential experience that there are private lenders and institutional lenders, but which one fits this deal? Given that three units are vacant and the property doesn’t debt service, or has negative debt service (i.e. the current NOI does not cover the mortgage payment), a private lender is probably your best bet. A private lender is a non-bank lender that traditionally lends on the strength and quality of the real estate by paying close attention to the real estate and its potential. It’s very doubtful that an institutional lender will lend 63% LTV to a first-time real estate investor on an asset that has negative debt service and is 50% vacant. Meet directly with the lender and go
over the deal. This is the best opportunity to further your education on commercial mortgages – ask a lot of questions! It’s likely the lender will suggest an interest-only loan. Although the rate will be higher with a private lender (in this case, approximately 8% versus
The private lender may increase the loan to build in an interest reserve for possibly six to eight months to allow the borrower time to fill the three vacant units to fully cover the loan payment and make way for a less expensive institutional take-out mortgage. This interest
Take the time to learn your lenders’ preferences so you can best assist your commercial clients 4%), this solves the immediate hurdle of negative cash flow by lowering the monthly payments until the building is fully occupied and can support positive debt service on an amortized loan. Remember, one purpose of a private mortgage is for short-term financing while a property is in transition – in this case, until the new borrower can fully tenant the building and create positive debt servicing.
reserve is held back on closing to pay the monthly interest so the borrower doesn’t need to support the shortfall of the loan payment from their own resources. The one-year term gives the borrower time to make any repairs or modernize any units if required, lease the three vacant units, and reduce expenses where possible. For example, by separately metering the hydro, that cost
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SPECIAL PROMOTIONAL FEATURE
COMMERCIAL LENDING COMMERCIAL LENDING GLOSSARY In residential financing, the buzzwords are TDS and GDS, but commercial mortgages have their own buzzwords. Here are a few that you’re likely to run across. (These definitions are to be used as a quick reference only.) Debt service coverage ratio: The debt service coverage ratio [DSCR] is a measure of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligations due within one year. A DSCR greater than 1 means the entity – whether a person or company – has sufficient income to pay its current debt obligations. A DSCR of less than 1 means it does not. Net operating income: Net operating income [NOI] is a calculation used to analyze real estate investments that generate income. NOI is all revenue from the property minus all reasonably necessary operating expenses. Draft plan approval: When a landowner proposes to divide a parcel of land into more than three separate parcels, the Planning Act requires that the owner submit a Draft Plan of Subdivision Application. Subdivision approval ensures that the land is suitable for the proposed new use; that the proposal conforms to the official plan and provincial, regional, and city policies; and that the existing and future residents of the community are protected from developments that are inappropriate or may place an undue strain on community services, facilities or finances. Site plan approval: Site Plan Control is a specialized authority granted under Section 41 of the Planning Act that authorizes municipalities to review and approve the technical and design details of individual development proposals in a comprehensive and coordinated manner. The approval of a Site Plan Application is required for the construction, development and redevelopment of all lands within the corporate boundaries of a town. Bridge loan: A bridge loan is a short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term (up to two years) with relatively high interest rates and are backed by some form of collateral real estate or inventory. Long-term financing: Funding obtained for a time frame greater than two years in duration. This usually includes making payments on an amortized basis. Construction draw: A draw is the method by which funds are approved and funded, based on lender-approved costs set out in a construction budget, to pay for materials, trades and contractors. Each lender may have different requirements for processing a draw. A quantity surveyor is usually expected to sign off on every draw request, thereby ensuring that the loan proceeds are actually used for the construction and that the construction process is moving forward smoothly to completion. Capitalization rate: The capitalization rate is the rate of return on a real estate investment property, derived from the income that the property is expected to generate and an expected rate of return. The capitalization rate is used to estimate the investor’s potential return on his or her investment. The capitalization rate can be calculated by dividing the NOI by the current market value of the property.
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becomes a tenant expense and not the landlord’s if built into the rental lease. Once these items are completed and the income is ‘stabilized’ and showing positive debt servicing, then you as the broker can take your client to an institutional lender for a take-out mortgage. The reduction in rate is simply based on the lower risk associated with the property now that it is fully leased – the property at full occupancy provides necessary debt servicing. The private lender who took on the initial higher risk for a higher interest rate may now be refinanced with another lender at a lower rate due to available debt service and reduced risk. All lenders, private or institutional, will want to know the property is environmentally clean and may want to see a building condition report. The borrower will likely have to give his personal guarantee and show some capacity to carry the property if necessary, as well as any cost overruns if there are planned improvements. Now you and your client, with the help of a private lender, have done the ‘heavy lifting’ and the property is stabilized, and you have refinanced the property with an institutional loan. Perhaps you helped your client not only refinance the property, but also take out some equity due to an increase in value. If so, you can now assist your client in purchasing and financing their next commercial property and mortgage. Help your client grow their portfolio, and help yourself to increasing commercial mortgage opportunities. The more commercial lending you’re exposed to, the more experienced you will become. Any residential mortgage broker who really wants to take the plunge and broker a commercial loan should meet with a number of commercial lenders – private and institutional – to understand their appetite for different products and develop a relationship. Commercial lenders aren’t that different from residential lenders, in that they have preferences for types of product and locations. Take the time to learn your lenders’ preferences so you can best assist your commercial mortgage clients. Steven ‘Skip’ Walters is VP of business development at First Source Mortgage Corporation. Lisa Collis is a commercial mortgage underwriter at First Source.
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Vector...The Value of Experience. Contact us at (416) 483-8025 www.vectorfinancialservices.com
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Brokerage Licence #10160, Administrator Licence #11205
8/09/2016 8:46:16 AM
SPECIAL PROMOTIONAL FEATURE
PRIVATE LENDING
How to deal with a private lender As the big banks continue to tighten their lending regulations and practices, increasing numbers of Canadians are seeking private financing. Here’s what brokers need to know about fostering relationships with private lenders
MORE NIMBLE and flexible than traditional financial institutions, albeit no less diligent, private lenders are playing an important role in stimulating the economy by making profitable projects and ventures a reality. For any broker looking to partner with a private lender they haven’t previously worked with, setting up a face-to-face meeting should be the top priority. But what should the broker’s objectives be for that initial meeting? “For a broker, the aim of that first meeting is find out how to speed up the financing process, how to make it more efficient,” says Mickey Baratz, director of finance at Vector Financial Services. “If a lender restricts itself to working in Ontario and a broker has the hottest deal in Alberta, they will be wasting their time speaking to that private lender. This is the sort of thing a broker should be finding out.” After that initial meeting, the broker should have a good understanding of how a private lender operates and what types of deals they’re interested in. Baratz believes a broker should maintain relationships with numerous private lenders. “The broker should interview the private lender and spend the time to get to know them,” he says. “A good lender will make time even if you don’t approach them with a specific deal. That lender will sit with the broker and explain how their business model works, with the hope that one day soon the broker will run across a deal that will be funded by the lender.” In addition to geographic limitations, private lenders usually have other restric-
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tions that apply to the product and type of deal they’re willing to fund. A lender who works in the hotel and motel space may not necessarily have experience working with land or construction deals, and vice versa. “By finding out what the private lender’s lending criteria are, what their risk assessment thinking is, what type of risk they undertake and tolerate, and what type of security they look for, brokers can make the whole financing process easier,” Baratz says.
reduce their clients’ stress levels. It can be the difference between a file that’s funded promptly versus one that sits at the bottom of a lender’s to-do list. “This industry is all about achieving good results, and you can only do that with efficiency,” Baratz says. “If a lender is dancing around for months without producing results, that’s not good for anyone involved. The idea is to source and originate a file, take it to a lender, and within a reasonable
“This industry is all about achieving good results, and you can only do that with efficiency. If a lender is dancing around for months without producing results, that’s not good for anyone involved” Mickey Baratz, Vector Financial Services “If I was a broker, I would go to FSCO, get a list of all of the lenders in Canada and start with lenders in my area. Make some calls and arrange to meet with the principal broker. Say you’d like to know a little more about their lending criteria so that you can bring them some business.” Brokers should coach their clients through the private lending process and explain the potential risk factors at each step. Doing business with a private lender whose processes are streamlined and proven to be effective is one way that brokers can help
amount of time, convert it from a concept to actual cash. That’s what it’s all about.”
The next step Once a broker has identified a handful of specialty lenders, taking the time and effort to make sure that every submission is complete should be the next priority. Some brokers dump information on lenders and turn them off right away. “Private lenders will not look at your submissions unless they are clear, concise, organized and substantiated,” explains
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Frank Laurie, president of Vector Financial Services. “By doing due diligence and providing adequate information to the lender, your application will go to the head of the line and likely be accepted ahead of others. That will help you become a valued member of the lender’s team.” But what information does a private lender need to make an informed decision? “Brokers need to explain the core business aim of the deal, along with a description of what make it special or doable,” Laurie says. “Also, brokers need to immediately point out if the project is unique in any way, because that may deter the lender from getting involved. Many lenders, both private and corporate, will not finance single-purpose or unusual projects.” Along with detailed descriptions, the broker should also provide photographs, zoning details and information about the potential borrower’s history and experience. “The private lender will also expect to receive information related to the projected cost and feasibility of the project,” Laurie says. “Providing all of this information upfront will help everyone involved – the broker, borrower and lender – work out whether this venture is a waste of their time.” It also often falls to the broker to give the potential borrower a reality check with regard to the timing of the project. Does
“Everyone wants to complete deals, but the broker has to understand whether or not the project is viable. Unsubstantiated submissions do not create goodwill with lenders” Frank Laurie, Vector Financial Services the borrower truly understand the planning process and the time it takes to obtain permits and put plans into action? Also, when preparing a deal with a private lender, the mortgage broker should be in a position to deliver a thorough explanation of the developer’s financial situation, including an examination of whether the borrower will have the financial strength to both finish the project and put aside funds for contingencies, as well as for sales and marketing. “The more information that’s obtained and verified, the easier it is for the lender to assess and determine their interest in the deal,” Laurie says. “Everyone wants to complete deals, but the broker has to understand whether the project is viable. Unsubstantiated submissions do not create goodwill with lenders – they do not want 100 meaningless sheets of paper in an application.”
Endless opportunity As a consequence of tightening mortgage regulations and bank rules, Baratz believes the private lending space will only grow in importance. And as long as Canada continues to be viewed as politically stable and a good place to live, there will be greater demand for private lenders, simply because the banks are not going to suddenly relax their rules – if anything, they will become more rigid. “We are so much more flexible than banks without compromising quality,” Baratz says. “Our due diligence is so much tighter and more direct – it’s not a broken phone with communications happening up the chain. As a private lender and as principal broker, I will visit each project, shake hands with the borrower and structure the loan. There’s not a multitude of reporting levels.”
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FEATURES
ENGAGEMENT
Engagement: the strategic way to win in business Happy staff and front-line customer service representatives translate into happy customers. Richard Maloney reveals how to boost staff morale to increase referrals and improve the bottom line CANADIAN BUSINESSES are the life blood of our economy, but as more and more companies move offshore to remain competitive, those that remain face specific, ever-increasing challenges. Without a doubt, one of the greatest of these challenges is the attraction and retention of talent. Intelligent, honest, hard-working employees are critical to an organization’s ongoing success, but now more than ever, good people are hard to find – and hold on to – and the most prominent influence on employee performance, loyalty (both employee and customer) and return on investment is engagement. In a 2013 Gallup poll, it was revealed that around 70% of people feel disengaged at work, and most disengaged employees would change employers right now for as little as a 5% pay increase. There is no denying that disengaged employees have a direct – and negative – impact on your business’s bottom line. Employee discontent doesn’t stop at the front lines of business, either. Customers sense and respond to unhappy employees. Excellent customer service drives repeat business and brand loyalty. An engaged employee creates new bonds with customers and fosters recurrent business. Their enthusiasm and pride in their work increases customer satisfaction.
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At the other end of the scale, disengaged employees put themselves before the customer. They lack the desire to delight customers, and they often lack an under standing of the organization’s desired customer experience. There are two fundamental requirements
when building a thriving organization: 1 Quality leadership, engagement and culture, which I call the ‘heart’ of the organization 2 Quality systems, processes and game plans, which I call the ‘brain’ of the organization
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Mortgage Architects Development Events
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FEATURES
ENGAGEMENT WHAT MOTIVATES REFERRALS? According to customer research firm Saguity, the top five reasons why your customers will refer your business are:
68% Friendly service They are always polite when they speak to us, they greet us with a smile and a friendly hello when we enter, we have built up a strong rapport with the staff here, and they’re happy to chat about both business and other things.
66% Sharing and updating new knowledge They can answer any question we ask them, they give us lots of information, they have firsthand knowledge and experience with the products, and they offer lots of useful advice.
65% Helpful service They’re obliging and always ready to lend a hand, they bend over backwards for us, they can help out in any way we need them to, and nothing is ever a problem for them.
31% Quality product Their products are durable and last for years, we never have any issues using them, their products are very reliable, and their products are easy to operate and never give us any grief.
30% Efficient and prompt They can get us in and out of the store very quickly, we’re never left standing around waiting for them, they are quick to make orders and receive deliveries, they come up to serve us as soon as we walk through the door, and they are fast operators and don’t waste time. heart motivated
brain motivated
It’s clear from the above data that your customers’ behaviours are driven by their hearts and by positive human interaction above all else. It’s also clear that they will only be satisfied to the point of referral when your people transact with them in a heartfelt way. This won’t project onto your customers unless it is a critical part of your internal culture. The people in your organization should interact with each other in a heartfelt manner with all dealings. Everyone must live
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and breathe this ethos. Once you get that right, it will naturally flow to your customers. So, how do we ensure employee engagement and a positive effect on our customers? It starts from the top. Poor leadership contributes heavily to employee disengagement, and it’s the number-one reason why employees leave a business and go elsewhere. It’s up to our leaders to turn their attention to their people, getting them actively engaged regularly through new, innovative and inclusive methods, thus creating shared vision and buy-in.
approach is one of the most effective ways to drive an employee out.
Practice habitual leadership Habitual leadership is ongoing, and it’s all about actions. Trustworthiness does not happen overnight. Leaders earn it over time based on their positive personal attitudes and behaviours towards others. Leaders who are deserving of trust are dependable, reliable, forthright, truthful and ethical. They care for and recognize their
“A dictatorial approach is one of the most effective ways to drive an employee out” Show how much you care To attract and retain the best and brightest, leaders need to embrace their people and take steps to ensure they feel they are their organization’s most valuable asset. Most leaders know less about their own people than their people know about them. Do you know what your employees are missing? Do you know what they need to feel engaged and happy? What we feel is influenced by what we truly value, and we are all motivated differ ently. Take the time to learn more about your people’s wants and needs. Take the time to understand who they are and what drives them. By adjusting your approach accordingly, peak performance will follow.
Empower your people The traditional hierarchical structure is not the most effective option for businesses these days. Instead, successful companies are moving to a more flexible organizational structure that empowers, allowing employees to make more of their own decisions and avoid the rigidity of traditional models. Employees thrive when they are given a sense of ownership to accomplish their work with fewer approvals and checkpoints, and with a smaller degree of intervention. Challenge them to take on more responsibility, let them set their own key accountabilities, and hold them accountable for the results. Equality promotes unity and trust, encouraging your employees to share their honest opinions and ideas. A dictatorial
people, exhibiting openness and transparency. Employees are drawn to leaders who are genuine and honourable. These managers are valued and admired. Conversely, employees flee when managers are unfair, lie, cheat, offend and deceive.
Introduce a collective engagement strategy The first step toward ensuring collective engagement, group buy-in and a winning culture is to introduce a structured, all-action weekly program that focuses on the growth and development of the individual and the organization as a whole. It must incorporate activities that trigger the seven neurological motivators that are key when it comes to creating change and achieving rapid success: Pain Pleasure Reward Recognition Self-improvement Self-direction Transcendent purpose For an organization to accelerate ahead of its competitors, engagement must come first. In today’s competitive world, your people are your edge. Richard Maloney is the author of The Minds of Winning Teams: Creating Team Success Through Engagement & Culture. He specializes in the development of high-performance teams, individuals and organizations.
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PEOPLE
CAREER PATH
ALWAYS A BROKER
Dustan Woodhouse has always had the heart of a broker, even if it took him awhile to realize it Woodhouse credits much of his success to his job as a waiter, which taught him to talk to strangers; he says he’s found that many topperforming brokers have previously worked as waiters “That job teaches you the value of making a connection and having a conversation with people. From that behaviour, you can’t help but wind LEARNS TO TALK up doing a ton of business. If it’s not genuine, it doesn’t work. Actually TO STRANGERS being interested in others is the key”
1986
2004
IS SAVED BY REAL ESTATE Woodhouse’s auto business, which dealt in three different currencies (euros, US dollars and Canadian dollars) experienced an abrupt wake-up call when currencies moved against him “We had to sell our four investment properties; the equity built up in those is what protected our home and paid outstanding debts. The real estate investments were the smartest we ever made”
2008
GETS HIS BROKER LICENCE Woodhouse finally took the plunge after meeting Gord Dahlen, then VP of Invis, at a party in late 2007 “Within five minutes he said, ‘You should be a broker!’ In 2008, they gave me the rising star award; I’d only been brokering six months. I worked 80-hour weeks. I had no safety net; I’d jumped out of the plane and was making a parachute on the way down”
2011
MOVES TO DLC After a breakout 2009 that saw him tie for the spot of Invis’ numberone producer in the province, followed by a company reorganization, Woodhouse made the decision to move to Dominion Lending Centres. A high point at his new company: being selected to present to more than 1,400 brokers on a speaking tour of eight cities across Canada “I made the decision to leave rationally, but ultimately emotion played a role – there are great people at [DLC Canadian Mortgage Experts], and that was a major draw”
1989
TAPS INTO ENTREPRENEURIAL SPIRIT At age 18, while enrolled in college, car-obsessed Woodhouse started a business tuning VWs and Audis out of his parents’ garage. The enterprise thrived – Woodhouse incorporated his business at age 19 and used his earnings to buy his first piece of commercial real estate by the time he was 21 “I earned more money that first year than I would have had I completed the program I was enrolled in; I followed the money”
2007
IGNORES THE SIGNS Woodhouse often found himself dispensing advice to other property owners – yet he never considered a career in real estate for himself
“I had years of talking over the benefits of investing in real estate in casual conversations with friends and clients and never made the connection [that I should pursue it professionally]. There were all these signs on the highway of life saying that I should be a mortgage broker, and I just did not notice them” 2015
BECOMES A PUBLISHED AUTHOR The 75-minute presentation Woodhouse put together for the DLC speaking tour became the foundation for a book, Be the Better Broker, which has sold 3,000 copies. He has three more volumes in the works, two of which are scheduled to be released later this year “The best thing about giving presentations was realizing many of my own deficiencies; the benefits from addressing them contributed to 30% growth in 2015”
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PEOPLE
OTHER LIFE
TELL US ABOUT YOUR OTHER LIFE Email mortgagebrokernews@kmimedia.ca
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The number of rescued ponies on site at the foundation right now
PONYING UP Her work with the Wind Dancer Pony Rescue Foundation allows Karen Monteiro to care for the animals she loved as a child
KAREN MONTEIRO was a city kid transplanted to the country, where having a pony was the norm. “They are definitely an animal near and dear to my heart,” the Kitchener-area broker says, despite the fact that her steed once walked 10-year-old Monteiro up to a manure pile and dumped her off. “Ponies are very mischievous,” she laughs. “They have minds of their own – they can be stubborn. This is why we needed a rescue for ponies.” In addition to cantankerous ponies that wear out their welcome, the animals can live to be 30 years old, thus often outlasting a child’s interest
$35,000
The approximate amount per year it takes to support the ponies
20
The number of fundraising events the foundation has hosted
in riding. Others are rescued from neglect, surrendered by overwhelmed families or entrusted to the foundation by the OSPCA. It’s a demanding pastime, and one rooted in devotion. Monteiro founded the Wind Dancer Pony Rescue Foundation with her childhood friend, Paula Dupuy, as the legacy of Paula’s daughter Isabel, who was killed in a car accident in 2011. Since then, Monteiro has done everything from shovelling paddocks and decorating halls to flipping pink and blue pancakes and dressing up the ponies for a fundraising fashion parade.
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16-13
YEARS
1991 FCT 2016
Borrowers want: Insight
Savings
Advice
Convenience
Choice
Experienced partners
Peace of mind
Service excellence
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To learn how you can outshine the competition and for a list of participating lenders, visit u FCT.ca
I 1.855.500.3565
ÂŽ Registered Trademark of First American Financial Corporation. Services by First Canadian Title Company Limited.
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Are Are some some of of your your clients clients just just a a few few dollars dollars short? short?
Affirm Financial has an important opportunity Affirm Financial has an important Affirm has an near-prime important opportunity opportunity for yourFinancial sub-prime and clients. for your sub-prime and near-prime for your sub-prime and near-prime clients. clients.
Sometimes a whole deal can ride on finding just a few more dollars. But not everyone qualifies with Sometimes a whole ride lenders. on finding just a few more dollars. But not everyone qualifies with today’s traditional or deal evencan private Sometimes a whole deal can ride on finding just a few more dollars. But not everyone qualifies with today’s traditional or even private lenders. today’s traditional or even private lenders. An Affirm Term Loan can be the ideal solution for your clients who need that last bit of financing to An Affirm Loan can thethe ideal solution your clients need that last bit of financing to get a deal Term completed. We be offer flexibility notfor usually seen inwho sub-prime financing. An Affirm Term Loan can be the ideal solution for your clients who need that last bit of financing to get a deal completed. We offer the flexibility not usually seen in sub-prime financing. get a deal completed. We offer the flexibility not usually seen in sub-prime financing.
Affirm Term Loan Features Affirm Affirm Term Term Loan Loan Features Features
No payments for the first 45 days No payments for the first 45 days No payments for the first 45 days Repayment terms of 6 to 60 months Repayment terms of 6 to 60 months Repayment terms of 6 to 60 months Fixed monthly payments Fixed payments monthly payments Fixed monthly
No penalties for early repayment No penalties for early repayment No penalties for early repayment Reports to the credit bureau* Reports to the credit bureau* Reports to the credit bureau* Interest rates from 29.9%-39.9% rates from 29.9%-39.9% Interest rates from 29.9%-39.9% Interest
Want to learn about our Referral Program? Want to learn about Program? Wantfor tomore learn about our ourWeReferral Referral Program? Call or email today information. look forward to working with you! Call Call or or email email today today for for more more information. information. We We look look forward forward to to working working with with you! you! Who is Affirm Financial? Who is Affirm Financial? Who Affirm Financial? Affirmishas served over 45,000 Canadians Affirm has served 45,000ofCanadians and ishas a served leadingover provider financial Affirm over 45,000 Canadians and is a leading provider of financial solutions for people who can’t obtain loans and is a leading provider of financial solutions for people who can’t obtain loans or credit for cards from traditional financial solutions people who can’t obtain loans or credit cards from traditional financial institutions. They also serve people in or credit cards from traditional financial institutions. They also serve people in bankruptcy situations whoserve are still working institutions. They also people in bankruptcy situations who are still working toward completing the process. bankruptcy situations who are still working toward completing the process. toward completing the process.
Affirm also offers the Affirm MasterCard® Affirm also offers the Affirm MasterCard®® alsocredit offerscard the –Affirm MasterCard •Affirm A true no security • deposit A true credit card – no security required • A true credit card – no security deposit required • deposit Reports required to the credit bureaus* •• Reports to the credit bureaus* ® credit Use it anywhere MasterCard • Reports to the credit bureaus* ® • Use it anywhere MasterCard ® credit cards are accepted • Use it anywhere MasterCard credit cards areadvance accepted • No cash cards are accepted • No cash advance • No cash advance
For more information contact Peter Young For more contact For more information information contact Peter Peter Young Young 1-844-266-4401 | peter.young@affirmfinancial.ca
1-844-266-4401 || peter.young@affirmfinancial.ca peter.young@affirmfinancial.ca You1-844-266-4401 can also visit our website at AffirmFinancial.ca/CMP. You can also visit our website You can also visit our website at at AffirmFinancial.ca/CMP. AffirmFinancial.ca/CMP. Affirm Financial products are not currently available to residents of Quebec. Subject to identity authentication and mustavailable meet Affirm Financial’s current credit standards. Note: In order to complete the authentication process, Affirm Financial must access credit file and will need Affirm Financial products are not currently to residents of Quebec. consent toidentity do so.products Total credit Affirm Financial, including any of existing credit, cannot exceed a maximum $10,000.the authentication process, Affirm Financial must access credit file and will need Affirm are with not currently available to residents Quebec. SubjectFinancial to authentication and must meet Affirm Financial’s current credit standards. Note: In order toofcomplete Affirm MasterCard®. This cardwith is issued by Peoples TrustFinancial’s Company undercredit, licence from MasterCard Incorporated. ‘MasterCard’process, and theAffirm MasterCard Brand Mark are registered trademarks Subject to authentication and must meet Affirm current credit standards. Note: InInternational order toofcomplete the authentication Financial must access credit file and will needof consent toidentity do so. Total credit Affirm Financial, including any existing cannot exceed a maximum $10,000. MasterCard International Incorporated. consent to do so. Total credit Affirmby Financial, any existing cannot exceed a maximum of $10,000. Affirm MasterCard®. This cardwith is issued Peoplesincluding Trust Company undercredit, licence from MasterCard International Incorporated. ‘MasterCard’ and the MasterCard Brand Mark are registered trademarks of *Affirm Financial reports payments to TransUnion Canada and licence Equifaxfrom Canada, and termInternational loan payments to TransUnion Canada. and the MasterCard Brand Mark are registered trademarks of Affirm MasterCard®. Thiscredit card iscard issued by Peoples Trust Company under MasterCard Incorporated. ‘MasterCard’ MasterCard International Incorporated. MasterCard International Incorporated. *Affirm Financial reports credit card payments to TransUnion Canada and Equifax Canada, and term loan payments to TransUnion Canada. *Affirm Financial reports credit card payments to TransUnion Canada and Equifax Canada, and term loan payments to TransUnion Canada. 72-OBC_Other Life-SUBBED3.indd 74
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