CMP 7.1

guide Inside Your trusted news source

NO. 17

Guide to insurance www.mortgagebrokernews.ca

what’s in a title?

The broad coverage of title insurance MORTGAGE RULES REDUX GENWORTH CEO BRIAN HURLEY DISCUSSES MORTGAGE INSURANCE

MORTGAGE PROTECTION MORTGAGE VS. LIFE INSURANCE

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INSIDE guide to insurance

Guide 12

In CMP’s continuing series of guides, we look at the business of insurance and the growing possibilities it presents to brokers.

Whether it is understanding how mortgage insurers are dealing with recent rule changes or simply knowing what to tell clients about title insurance, this guide is not to be missed.

7.

01 issue

cover story

32 What does the future hold?

From the worsening economy to growing competition from big banks, the mortgage industry has many hurdles ahead for 2012. CMP talked to various brokers and lenders and asked them what they see as some of the biggest challenges for the New Year — and more importantly, how to meet them head on

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contents

NEWS & COMMENTS 8 • Moody’s: Brokers, you were right • ING: Collateral charges are all about ‘simplicity & savings’ • New ratesheet.ca features rile brokers • Canadian housing bubble? Brokers disagree with new report • Canadian Mortgage Awards announces PwC as official auditor • Brokers and bankers square off on 30-year amortization • Brokers: there are too many of us 24 News Analysis: The Big Story: A compilation of the top quotes from our weekly multimedia broadcasts on MortgageBrokerNews.ca

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Marketing Realtor Marketing Secrets: In the fourth instalment of his latest series, Doren Aldana walks you through the first of first of seven steps for building a strong, profitable partnership with top-producing Realtors

shouldn’t take away from important time spent with family 58 Insight: Halifax-based mortgage broker Brad Compton has set out to try a new way of doing business – managing your book from outside another province 62 Guest Column: Top performers from all walks of life seek out qualified advisers who can provide them with guidance, says Doren Aldana, and mortgage brokers shouldn’t be any different

regulars 28 International News

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63 CMP Service Directory Follow us on Twitter Twitter.com/CMPmagazine

The right resources make all the difference.

Broker Team

TM

The Mortgage Centre’s longevity is directly linked to the relationships with our market lenders who have helped to competitively position our network.

By providing direct access to seven market lenders, The Mortgage Centre and its lender network demonstrate our strong committment to supporting our mortgage professionals.

To find out more, give us a call.

Contact Ryan Sadler at 1.866.938.4416 or Mike Ashe at 1.866.791.0866 The Mortgage Centre is a division of CIBC Mortgages Inc., a member of the CIBC group of companies. ÂŽ The Mortgage Centre is a registered trademark of CIBC Mortgages Inc.

Editor’s Letter

Happy New Year!

As one year turns into the next, we naturally look ahead and hope for better things. The mortgage industry is no different. Last year saw more mortgage rules imposed by the federal government, economic uncertainty abroad that was felt here as well as the constant expectation that interest rates would go up.

In 2012, things may not change all that much. Interest rates are predicted to remain at current levels for most of the year, the Euro debt crisis continues and the U.S. economy moves in starts and stops. Add to that a cooling housing market and continued competition for clients from banks and this year is shaping to be a lot like last year – uncertain.

It’s not necessarily all bad news, but it means brokers and lenders must be up to the challenges this year will bring. And those industry leaders we spoke to for our cover story (2012 Forecast, page 32) seem to be in agreement and say that 2012 can be a positive year for the broker channel.

“I think the brokerage channel will grow as more and more people learn about us, what we can offer, and as the standards of professionalism continue to improve in the industry,” says Alberta broker Gord McCallum.

Home Trust President Martin Reid is also positive, but notes brokers will have to work harder in order to move ahead. “I think mortgage brokers will continue to be a growing part of the market but at a slower pace. They will see increased competition from the big banks and their sales force and need to highlight the value-add that they bring to their clients.”

So, as always, I encourage you to contact us with any news related to the broker and mortgage industry or just to share your opinions on how we’re doing. It is exciting times for our industry and we look forward to helping you and your business navigate them.

Cheers, John Tenpenny Editor john.tenpenny@kmimedia.ca

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7.

01 issue

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Quotables

“there will most likely be the same number of brokers in the industry.

There are many across Canada who are practicing part time, and with the requirement for re-education, I believe many will allow their licences to lapse. I think those who exit will be replaced by people who choose this industry as a full-time career.”

“it’s important to consider that a purchase of a home by an individual is probably the biggest investment in their life, so to have the peace of mind that title insurance policy provides, at a low one-time premium, makes sense for the homeowner and also from the lender’s perspective, as they want additional protection for their security that they’re getting for their loan,”

Paul Therien, discussing the future of the broker channel. Page 32

Karen Decker, speaking about the benefits of title insurance. GUIDE Page 2

January 2012 Publications Mail Agreement #41261516 Postmaster: Return undeliverable addresses to KMI Publishing, 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2

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Your trusted news source

The past month has seen a lot of broker discussion of articles posted on MortgageBrokerNews.ca. Here we collect some of the most commented on stories and the reaction they garnered from the mortgage broker community.

To read the full stories or to make your own comment visit: www.mortgagebrokernews.ca

Moody’s: brokers, you were right A report from Moody’s is vindicating brokers by pointing out unsecured debt – and not secured mortgages – poses the real threat to RBC and other Canadian banks.

“It’s an uncertain world that we’re living in,” said author David Beattie, VP and senior analyst at Moody’s Investor Services in Toronto. “The macro environment is unclear as to what negative shocks may occur, and the banks that have positioned themselves a bit more aggressively against an increasingly leveraged Canadian consumer could run into problems in the event that we have some adverse economic developments.”

To be perfectly clear: that possible bump in the road is unsecured debt, says the report.

RBC, for one, had the highest exposure to all types of uninsured consumer debt among the Big Six at the end of its fiscal 2010 – some 24 per cent of its total managed assets. Scotiabank’s accounted for 21 per cent of its overall assets and CIBC’s exposure stood at 20 per cent.

Those levels are coming dangerously close to the 30 per cent of total managed assets Moody’s says would negatively impact their ratings.

The analysis jives with that of brokers who argue the government’s focus on tightening up mortgage rules has been misplaced, leaving the country exposed to more urgent problems associated with easy access to credit card debt.

“What may have been more effective as for the government to place limits on credit card interest and force the credit card companies (and banks) to do better underwriting to minimize default,” said Curtis Cannon, a sub-mortgage broker with TMG The Mortgage Group in Prince George, B.C. CMP

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I am sure the banks recognized their risks during the last three years of government-imposed “stress tests” on all asset portfolios. Which you can be sure lead to some analysis of how “the boys” could cover their collective tushes and keep those promotions and bonuses coming. RBC and BNS were in the lead of pushing collateral mortgages on their clients, with TD running fast to catch-up. And who does Moody’s suggest has the highest exposure to unsecured debt? So the banks are now taking advantage of the consumer by “forcing” collateral mortgages on them, thereby shoring up the bank’s security. And where are our elected representatives, highly paid government officials and consumer advocates? As usual, not to be seen or heard.

– David O`Gorman I agree that we have a consumer debt problem and not a mortgage problem. It has been made worse by changes in the mortgage rules for refinancing from 95 to 85 per cent LTV. A consumer could draw on equity at say three per cent and retire credit card debt which could be at 19 per cent. Yes, some people use their equity as an ATM, for non-essential expenses, and perhaps it should be controlled. However, drawing on equity to pay down more expensive debt should be allowed.

It can save many people from seeking proposals, bankruptcy or having to sell their homes to solve debt issues.

– Ad Lakhanpal I was at the Canadian Real Estate Investor Forum held in Vancouver and I heard Paul from Centum speak on this very topic. He was pretty clear that unsecured credit was the real issue, and that all the statistics backed that up. I started paying attention then, and I appreciated his very insightful thoughts about the credit environment.

– Brian I recall addressing this issue nearly one year ago. I was against the tightening of mortgage rules. Glad others are beginning to clue in as to the real financial problem facing Canadians.

– Bruce Smith

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ING: Collateral charges are all about ‘simplicity & savings’ ING’s decision to register all mortgages as collateral charge boils down to just two things, its VP of lending told MortgageBrokerNews.ca: savings and simplicity.

“We have done a fair bit of homework in terms of coming up with this decision,” Martin Beaudry said recently, after announcing the system-wide switch effective Dec. 10. “We are on the verge of introducing our HELOC – something our valued broker partners have requested– and we looked at registering them conventionally, but that simply would not have worked.”

The development of that product, due early next year, ultimately encouraged the lender to adopt the readvanceable mortgage across all of its product line, a way of ensuring clarity and “simplicity” for the client as well as ING, from its “own administrative perspective,” he said.

Another driver of the decision was the savings in legal costs for borrowers looking to refinance.

Still, ING brokers have registered concerns about the challenge collateral charges present in trying to move clients to other lenders.

While readvanceable mortgages allow clients to re-borrow the principal they’ve paid off on their mortgage and to avoid upfront legal costs, the lender registers a collateral charge on the home for 100 per cent of the value. That effectively means the mortgage must be entirely discharged in order for a borrower to transfer it to a new lender at renewal or for refinancing.

That step translates into additional legal costs.

Beaudry argues that the industry is, in fact, moving in the direction where that new lender is willing to absorb a portion of those legal costs in order to win the switch. CMP

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ING is not giving more choices, they are taking them away. Why not give the client the choice of having a regular mortgage or this collateral mortgage?

Remember, if you take the new ING mortgage, and you want to borrow more money down the road, you still have to qualify for the new funds. I don’t know any lender that will lend behind a collateral charge. If ING wants to offer a HELOC, that’s great but there is no need to register all mortgages as a collateral charge.

These are handcuffs and I wouldn’t put them on any of my clients.

– Steve The Broker from Burlington

58% of Ontarians mistakenly believe the HST is applied to the purchase price of a resale home versus 56 per cent who believed the same last fall (Ipsos Reid/OREA)

These are all the same comments that were made to Scotia and TD, yet they still get a large piece of the broker business. ING will also continue to get their large piece of the broker business. Why? Because it seems that as brokers/agents, we lack the work ethic to learn about additional lenders and use different lenders. Too many take the easy route and sell the big names. Until we as a broker community stop using lenders that we do not agree with, more and more lenders will see there are no repercussions to having collateral mortgages. Therefore, everyone will be registering collateral mortgages soon, whether there is a HELOC component or not.

– Ottawa Broker It is a way of taking our clients, pure and simple and keeping them forever without having to compensate us or giving the clients the benefit of an impartial recommendation. The sad thing is the experience of Scotia and TD show we are willing to let them. When are brokers going to smarten up and stop using lenders who trap our clients with collateral mortgages and 100 per cent charges?

– Gord B. The use of these documents to support products other than HELOCs is a very good decision – for lenders. It is a very poor position for consumers. They cannot access any equity that they have in their homes as no one will register behind these documents. I don’t believe even experienced real estate lawyers fully understand the issues that are present with lenders using these documents. The brokerage community and the industry associations should really be sounding the alarm bells on this issue.

– Kevin J. Power

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These sites come and go. Posting your lowest price on the web is a terrible and desperate way to run any business.

– George This is driving a behaviour that we need to stop. It isn’t about the best rate people. Stop selling rate!

The consumer needs to understand so much more with respect to mortgages. Any Tom, Dick or Harry can sell rate.

– Liz

new ratesheet.ca features rile brokers

It would appear that this group is acting as a financial intermediary while not registered under the MBLA Act. If “We get the lead to fill out a mortgage quote form, with credit history, property details …” said Palan, “and then we go to our database and match up those clients with the appropriate broker, based on location.” It would appear that the mortgage quote form is in fact a mortgage application and therefore regardless of who they send the application to, this group is engaged in unlicensed mortgage brokerage activity since they are soliciting clients who wish to finance real property.

– Versico Financial

The new feature of a lead generation website – where rate shoppers submit applications to site administrators, who then decide which broker to give them to – is raising eyebrows and legal questions among brokers.

“To our knowledge, this complies with provincial regulations,” Vik Palan, president of ratesheet.ca, told MortgageBrokerNews.ca.

“This is one of the avenues for mortgage brokers who really believe in generating leads online.” ratesheet.ca’s new Mortgage Rate Comparison features, trod out this fall, add a new dimension to the online lead generation process as an increasing number of Canadian brokers now rely on to bring in business.

As an alternative to just providing rate shoppers a list of interest rates and the contact information for the mortgage brokers, ratesheet.ca will now collect application details and then handpick a specific broker to give the deal to. Brokers pay an additional fee for the privilege.

“We get the lead to fill out a mortgage quote form, with credit history, property details, etc,” said Palan, “and then we go to our database and match up those clients with the appropriate broker, based on location and our feedback and assessment of individual brokers based on their high customer service abilities and the number of mortgage professionals they have to service the client.”

The new feature has already riled some brokers, telling MortgageBrokerNews.ca that the service “undervalues” what mortgage brokers do for consumers.” CMP

The broker community as a whole needs to focus on more than rate. Lenders are increasingly frustrated by the generally low funding ratio of the broker community. This dramatically impacts their profitability, and as a result means that there is less and less attraction to the broker channel. It is why TD has hired over 1,000 new road reps in 2011, and why FirstLine is priced out of the market, and why other lenders in our channel are struggling. Yet we as brokers still demand higher VB, higher finder’s fees, and faster turnaround time. When will the industry wake up and understand that lenders are our partners - we have to work with them - they need us to be successful just as we need them to be successful. If we do not pull up our socks then the broker industry in Canada is in some serious trouble.

– Steve

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In my view, the picture isn’t necessarily as rosy as some would like to believe. People think that just because Canada fared better than other countries during the last financial crisis that it would do so again should another recession hit. But they’re casually forgetting that if we’re indeed heading into another recession, we’re heading there in a position worse off than we did in 2007. Housing prices in certain areas continue to rise to the point where affordability is definitely a problem, it’s just that it’s masked by very low interest rates.

Consumers are also heading into another recession with higher levels of debt than they did four years ago. I would be more worried now than a few years ago.

– Lior It seems reasonable to me that the real estate market is just that: “a market”. In any market, by definition, prices do not only go up. It is also based on regions and we have seen prices in some regions of the country move down as well as up in the recent past. I think if prices in a given region have been on a steady rise that far exceeds inflation for a long time it is only rational to expect an eventual reversal. How much of a reversal I don’t know. We can cite as many reasons as we want to suggest it is the new normal for prices in key regions to double or triple every eight or nine years but I think we are just kidding ourselves.

– Ron Butler Regarding the Vancouver market, FirstLine, in its most recent update, stated the average mortgage in Vancouver is approximately $300,000. It’s been this amount for well over five years. Prices in Vancouver are rising due to net in-migration of around 50,000 per year. The geographical layout of Vancouver causes a shortage of land and means new housing is getting smaller and smaller. Having said this, the average Vancouver homeowner is not increasing their mortgage level of debt but is getting used to smaller accommodations. The debt level and therefore interest rates, while important to the market, may not have as much of an impact as it may appear on the surface. Lastly, Canada’s relatively stronger economy should allow for lower rates in comparison to other G20 countries as our currency should remain strong, especially once money ceases to flow to the US when they announce bad economic news!

– BC Brokerage Owner

Your trusted news source

canadian housing bubble? Brokers disagree with new report While most reports and forecasts maintain the Canadian housing market will remain stable for the next year, reports are still surfacing that call into question whether the country will experience a housing bubble.

A new study of global housing markets by The Economist warns that markets in Canada and some other countries still appear “uncomfortably overvalued.”

Overall, the report shows prices falling in eight of 16 countries studied in terms of a price-to-income ratio, which measures affordability, and a price-to-rent ratio.

By averaging the two readings, The Economist warns that prices are overvalued by 25 per cent or more in Canada, Australia, Belgium, France, New Zealand, Britain, the Netherlands, Sweden and the ever-unfortunate Spain.

Here’s a really troubling bit: For Canada, Australia, Belgium and France, housing “looks more overvalued than it was in America at the peak of its bubble.”

The magazine notes that some economists dismiss its measures, citing the fact that lower interest rates – Canada is such an example – can justify fatter prices because they allow heftier mortgages. The magazine responds to that just as Bank of Canada Governor Mark Carney and others have: It will not always be thus, and rates will inevitably rise.

David Larock, a mortgage planner with Integrated Mortgage Planners-TMG in Toronto, does think home prices are over-valued.

“Is Canadian housing over-valued? Probably. There is no denying that our house price appreciation has primarily been fuelled by lower interest rates over the last several years. Incomes have not kept pace with rising values, and while house price growth has historically tracked pretty closely with the rate of inflation, that has certainly not been the case for some time. I think that we will not see anywhere near the level of house price appreciation over the next 10 years that we have seen over the last 10 years. If we’re lucky, we’ll get slowing price appreciation, but if we’re not, prices could certainly correct from current levels.” CMP

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Canadian Mortgage Awards welcomes PwC as official auditor The Canadian Mortgage Awards continues to grow and evolve and has added the prestigious accounting firm PwC (PricewaterhouseCoopers) as the event’s official auditor.

“Now in its seventh year, the Canadian Mortgage Awards are bigger than ever,” said Chris Davis, Events Manager for KMI Media. “With the move to The Carlu in downtown Toronto we expect this to be the largest event we have ever hosted.

The broker community has consistently shown that being nominated as a finalist and winning a CMA award elevates them to the elite of the brokering community in Canada.

“As the nomination, finalist, and judging process grows in size and complexity we felt it was important to bring in a third party to verify the process and validate the results of this process. To that end we are happy to announce that PwC is now the official auditor of the Canadian Mortgage Awards.”

PricewaterhouseCoopers provides industryfocused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP and its related entities have more than 5,200 partners and staff in offices across the country.

Nominations for the 2012 Canadian Mortgage Awards, to be held June 1 and presented by Home Trust, are open until February 24.

To nominate or for more information, please visit, www.canadianmortgageawards.com. CMP

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brokers and bankers square off on 30-year amortization While bank economists seem increasingly resigned to the potential loss of the 30-year amortization, brokers insist that move would unfairly tie the hands of clients looking to maximize the bang for their buck.

“I would say that most clients opting for a 30-year are well able to qualify for a 25-year one,” said Peter Puzzo, a mortgage agent with Assured Mortgage in Woodbridge, Ont. “So the government removing that option would really only reduce their cash flow and force them to put money into a mortgage instead of investing in other areas. I’m not sure that would send a good message to consumers.”

The analysis comes on the heels of a recent panel discussion of Big Five economists, with several suggesting the government is most likely to drop the maximum amortization to 25 years if, in fact, rising household debt spurs another round of mortgage rule changes.

“If we see the housing market surprise on the upside and debt growth surprise on the upside, then the government will likely take action to further tighten mortgage insurance rules,” TD Bank economist Craig Alexander said. “Quite frankly, if you can’t afford a mortgage at 25 years versus 30, then you probably shouldn’t be buying a house in the first place.”

Puzzo and many other industry veterans disagree, suggesting, 30-year amortizations are largely used to free up cash each month, money often better spent paying down higher-interest debt or channelled into high-yielding investments.

“It’s not a question of whether they can afford a shorter amortization.” CMP

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$371,000

Industry

The forecast average price in Canada in 2012, a two per cent appreciation from 2011 (The Re/Max Housing Market Outlook 2012)

Your trusted news source

I find it interesting that there is so much focus on mortgage rules when the real problem seems to lie with consumer credit rules. I am just reviewing a credit card statement from one of my clients and there is a disclosure on the statement that says if you pay the minimum payment every month, it will take 112 years and 10 months to pay it off. It would seem that maybe the banks are lobbying the government to force people to have smaller mortgages that they pay off faster in order to allow them to carry bigger and much more profitable credit card balances. Maybe, if the government is really interested in the interests of Canadians, they should focus on changing some rules in the credit card business.

– James Robinson The issue is not mortgage debt, when will these idiots figure that out! The banks are skirting around the real issue and that is consumer debt, . ie. credit cards, vehicle loans, etc. Lowering the amortization will have a negative effect on both homeowners and the housing market alike.

Consumer debt will continue to rise regardless of mortgage policy. Once the government slaps tighter restrictions on consumer credit facilities, then and only then will this nonsense decline.

Consumers need to be protected from the predatory banks!

– Jeremy Reducing the amortization is definitely a move backwards. If the government and banks are serious about curbing consumer debt, change the lending practices of revolving debt, with minimum or interest-only payments. Lenders should go back to more installment-type of lending, with debt retirement practices, instead of products that keep most people in a permanent state of debt.

– Kevin J. Power Reducing the amortization on a mortgage from 30 years to 25 has minimal impact on reducing consumer borrowing. Given the average size of the mortgage in Canada, it makes a difference of approximately $150 per month. This is equal to the minimum payment on a $5,000 credit card, which we all know is primarily interest. The banks are not going to object to the further tightening of mortgage lending because it keeps the government’s eyes off of its unsecured portfolio.

Unsecured lending accounts for as much as 30 per cent of the income that the banks make, by far the largest and most profitable segment of their business. It is why, even in the credit crunch, they

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have expanded their unsecured lending products.

What our government fails to realize is that unsecured lending has a larger impact on cash flow than mortgage lending. Particularly when home ownership has already been proven to be more affordable than renting in most areas (Vancouver is currently a rare exception). What they (government) do see is the most powerful lobby group in the country saying “it’s mortgage lending that is the issue.”

– Paul Therien They just don’t get it, do they? Economics 101, says cool off a hot market by making it more difficult to borrow, heat up a cooling economy by loosening up lending. We are cooling off in many markets, that were never as hot as Toronto and Vancouver.

Canadian institutional (read bank) mortgage lending has been on a 10-year roll, like drunks on a bender, abetted by their “drinking buddy” CMHC. I agree that a 30-year amortization is too long a time in general, but maybe it should be allowed for

first-time buyers, or mortgages that start under a specific price (remember restrictions in 1992 when the first-time buyer program was implemented?

Should we look at something similar?) When “Red Ed” Clark at TD was screaming for more government controls on mortgage lending, what he was really saying was that lenders can’t police themselves. If bank A will do the deal why can’t bank B? If Johnny jumps off the bridge, would you jump off a bridge? What kind of people do we have running our banking system? The real culprit in this whole mess is the least regulated and that is credit card debt. Put some sense back in the system, put the boots to the credit card lenders, understanding that it will impact the economy significantly, especially retail goods. Gradually tighten the mortgage underwriting “standards” that have been perverted over the last 10 years.

Will there be pain? No doubt about it. But an uncomfortable pain now, beats an agonizing pain later.

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Brokers: there are too many of us Broker numbers continue to represent a challenge for the industry, that according to mortgage professionals themselves, in answering a recent survey.

While 33 per cent of brokers canvassed for the fall 2011 CAAMP-Maritz survey characterized that number as “just right,” a whopping 61 per cent said “there are too many brokers” in the Canadian industry. Some seven per cent argued that “there are not enough.”

The results speak to growing broker concerns around “part-time” mortgage professionals and any consumer perception challenges associated with those agents.

Still, 2012 is likely to see a significant number of agents opt to leave the business, argue industry veterans pointing to higher licensing standards in Ontario.

Recently, FSCO revealed that as much as 10 per cent to 15 per cent of the province’s 9,000-plus licensed agents are no longer working at a brokerage and, therefore, unauthorized to sell mortgages, IMBA Executive Director Joe Rosati told MortgageBrokerNews.ca.

Those mortgage professionals have likely abandoned the business in the more than 21 months since the 2010 renewal period or have taken up administrative or management positions within the industry, he told MortgageBrokerNews.ca.

Either way, that group’s sheer size is likely the strongest indication to date that Ontario may lose as much as 10 per cent to 15 per cent of its registered mortgage professionals. CMP

I believe the challenges in our industry is not the number of full or part-time brokers but rather the licensing and educational requirements to become a broker. An apprenticeship program may be a great solution to help increase the professionalism and experience for new brokers.

– Tony Iannetti Too many of us? How about way too many of the unregulated ones? I just looked at www. workopolis.ca, there are approximately 300 “mortgage” positions available, across Canada, listed on this one website. Ninety per cent of the

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positions are for mortgage specialists/advisers for banks or insurance companies. None of these positions will be filled by licensed individuals, having a fiduciary responsibility to the client, abiding by any code of ethics/code of professional conduct, or having any form of provincially mandated “continuing education”.

They will not have to worry about the compliance, financial and time burdens placed on licensed mortgage professionals. The reality is the barriers to entry in the mortgage brokerage industry are minimal at best. However, if both the full-timer and the parttimer are licensed and in compliance, it is the consumer who has the right to choose with whom they do business. We need stronger standards of formal education, so the barriers to entry are significant.

– David O’Gorman I think we need more in order to compete with the banks. That said, the model needs to change as well. It is our own fault as an industry that we have not provided the tools necessary for part-time agents to become productive full-time agents. Think about it. There are far less mortgage specialists who fail than mortgage brokers. It can only be the result of better tools and higher expectations.

– Nolan Matthias As a full-time mortgage agent, I get a great deal of business from the inept part-time, wanna-be mortgage agents. You blow the deal but the consumer still wants a mortgage at a great rate so they find me online where I have dedicated a great deal of time and money to show my knowledge, experience and that I get the job done. In fact I ring a bell in my office each time I do one of the deals that you blow! I know you aren’t going away, so I’ll just take advantage of your lack of knowledge and skill to make a great living as a full-time licensed mortgage professional.

– Happy to do the deals you blow In my experience the re-licensing process is excellent. Full of useful reminders. Does it go far enough? No. The current process is truly basic and minimal. It really would not scare anybody away from the mortgage business because of any elevated standard or burden.

People leave the business because there is not enough money for everybody to make a decent living. So maybe there are too many of us. Of course those that stick with it and put in a half decent effort will succeed. Starting salary is $0. That deters a lot of people.

The three- to five-year climb to self-sufficiency creates a lot of turnover. I must say though it is a great career. I agree with one commentator that the real problem now is that there are too many unlicensed mortgage “specialists” in the banks, insurance companies and investment houses. They seem to be almost unregulated, self-policed by their employers namely the banks.

Self-policing rarely works. Where is the government when we need them? The same standards and licensing process must apply to all agents selling or advising on mortgages.

– Paul P.

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Mortgage Intelligence announced that Steve Heimbecker, Marg Green, Donna Ramsay and Concierge Mortgage Group are joining the company.

Green in Mississauga, Ramsay in Orangeville and Heimbecker in Waterloo, are equal owners in Concierge Mortgage Group.

Concierge is a new boutique brokerage firm that will focus on elite and experienced brokers, offering exceptional needs-based customer service. The goal is for Concierge Mortgage Group to have offices throughout Ontario.

Concierge will operate as a network partner with Mortgage Intelligence, developing its own brand while taking advantage of Mortgage Intelligence’s key resources like compliance, payroll, exclusive mortgage products, and marketing.

“Mortgage Intelligence offers us competitive compensation and the support that Concierge needs to be successful,” said Heimbecker.

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TMG The Mortgage Group is moving three of its regional leaders up the corporate ladder, billing the move as in keeping with its philosophy of promoting from within. Effective Jan.1, 2012, Bud Jorgenson assumed the position of VP for the Prairie Region; Gord Appel, VP, Alberta Region; and Gerald Krahn, Ontario Region. “These three have already made positive changes in their respective regions,” said Mark Kerzner, president of TMG. “Their dedication to TMG agents and brokers is very important for the company’s long-term success. They are a great asset to the TMG family.” CMP

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banker: growing debt = tighter mortgage rules Irrepressible household debt has brokers and bankers more convinced that tighter mortgage rules are on the horizon.

“I would say so,” Dave Larock, president of TMG The Mortgage Group Integrated Mortgage Planners, told MortgageBrokerNews.ca. “I wrote in my blog earlier this year, that ‘if ultra-low rates continue to push consumer debt levels higher, another round of mortgage rule changes is inevitable. You can bank on it.’”

He’s not alone, with top bankers now sounding the same tune following new national debt number released recently.

Both mortgage and consumer credit debt spiked in the third quarter, increasing to $1 trillion and $448 billion, respectively, according to a StatsCan. Those individual debt levels increased even as personal disposable income remained unchanged.

The government is putting a Band-Aid on the errors they authorized when they opened up their doors to 100 per cent financing and 40-year amortizations. Look at the defaults - the majority is in this category. Now they are changing their tune and making it much more difficult for Joe Blow to be happy. The government should be spending their time monitoring the credit card companies and stop dictating to us in the mortgage industry.

– S. Ont. Broker How convenient for a banker to say that consumer debt is out of control. I only have one question.

Who developed the products, combined with unrealistic credit limits, interest-only payments designed to keep consumers in a constant state of debt? Also the same lenders who use collateral charge documents to protect their debt when a homeowner can no longer handle the debt load.

Rather hypocritical position in my opinion, when the suggested course of action is to control mortgage debt.

– Kevin J. Power

That suggests yet more government intervention is needed to slow down mortgage borrowing, Ed Clark, CEO at TD told reporters.

Brokers have roundly rejected the need for the federal government to place any more speed bumps in the way of Canadians looking to buy new or refinance old. This spring saw the maximum loan to value for insured refi drop to 85 per cent at the same time maximum amortizations fell to 30 years, from 35.

The federal government is advised to introduce any new changes over time, rather than in one fell swoop, said Larock. But make no mistake those changes – like those made over the last two years – may be best for the overall health of the housing market, he said. CMP

Why the heck are the banks saying that we need more mortgage rules in order to control debt?

Where are they getting their numbers from? Client are not refinancing their house because of the new rules and the lower loan-to-value ratio has made refinancing virtually impossible. The low rates are helping individuals purchase new homes. My business has increased over 40 per cent from last year and this was due to specifically purchases and trust me, it was not because the lender has made it easier. We (the brokers) are driving business, not the banks. We are coming up with new ideas.

Nobody is doing this, and most of the applications that I see are from purchases not refinances. So the banks should stop complaining. I know that you want to drive the brokers out of business, but it is not going to happen. We are here to stay.

– Vittorio

As a seasoned mortgage professional and a former banker at a major chartered bank, I think the source of all evil in regards to Canada’s high debt ratio is greed and as a result of greed banks/ lenders have been very aggressive at unsecured Governments telling us we borrow too much? They lendings over the past decade. It is time for the banks/lenders to tighten up on their unsecured live on borrowed money. Make principal repayments tax deductible and household debt will lendings, line of credits,credit cards, overdrafts, etc.

I think our current mortgage guidelines are drop like a stone. They can help Canadians build prudent and tight enough in Canada. wealth. What a concept!

– AMP Broker – Angela Wong-Liao

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Every week, MortgageBrokerNews.ca rounds up influential figures to discuss the major issues in the mortgage industry. You can watch these videos online in the Broker News TV section of our website, but here we bring you the highlights from last month’s clips

the

big story

On the topic of …

broker continuing education Dustan Woodhouse: “I think that any opportunity a broker gets to further their own education is important. The best advice I ever received early in my career was ‘Position yourself as an expert,’ and events like [the CMP Mortgage Broker Workshop] have allowed me to do a fairly decent job of just that.

Something I learned that affects a deal I’m working on right now, in a positive way for me and the client, was the discussion on the different metrics and constant evolution with regard to calculating a client’s Beacon score.

There were a few little tricks and tips in the session that despite attending these kind of events regularly, were new and as I said, they make a material difference. After the session ended there were a dozen brokers all having the same conversation. That one tip that will get that one deal done, right there paid for the conference.”

sub-brokers. If you’re not being held accountable for the management of your business, are we asking for enhanced licensing requirements to mitigate that because we want to take away responsibility from ourselves or are we doing it because there is an actual necessity for it?”

Reed Harris: I think it’s a good idea to require new brokers to take a period of training when it comes to actually doing mortgages. The current training course to become licensed isn’t necessarily reflective of what it takes to do a proper mortgage for your client. So, similar to the way a lawyer might have to take a year of articling to learn the nitty-gritty of the law before they can go into a courtroom, for example, it just ensures a level of professionalism that will really serve the client best.”

On the topic of …

On the topic of …

graduated licensing for brokers

monolines advertising to consumers

Paul Therien: “It depends on why you want to have graduated licensing. Currently in British Columbia and Ontario there is a requirement that you have to have your sub-broker or agent’s licence for two years before you’re allowed to have your principal’s licence. Under those guidelines the principal broker is ultimately responsible for the business and the conduct of their agents or

Gino Tieri: “I think when it comes to the monolines advertising directly to the consumer to up the profile of the broker channel, from one lender’s perspective, I think it’s extremely difficult and challenging.

If we could come together as a group, with all the monolines supporting, and take some of that

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Dustan Woodhouse

Paul Therien

Reed Harris

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compensation that’s paid out there, we could come up with an effective campaign to get out to the Canadian consumer and drive the awareness and build it up even further to drive up revenues. One thing that we have to keep in mind is that as a lender the resources are not readily available from just one monline, it has to be a group effort in order to be successful and the onus on us as a lender is to provide the tools and resources in order to promote the credibility of monolines.”

Kelvin Seepersad: I think that it’s time for the monoline lenders to advertise directly to the consumer to uplift the broker channel.

Every day you hear on the radio or see on TV the chartered banks talking about their road reps and this has certainly brought awareness to the consumer. When it comes to monoline lenders, there is little or no advertising, so it’s left up to the individual broker to sell the unique values that these lenders bring to the consumer. We’re all fighting for market share, but it’s not a level playing field. Monoline advertising can help level the playing field.

buck is in terms of the time that we spend. We look at BDMs as a source of information in terms of insight into the industry in addition to the standard stuff, which is product information.”

John Bargis: “The role of the BDM is one that needs to be maintained, consistency is important. It’s all about relationship-building. The question in my mind is more related to the quality of a BDM. A BDM’s role should be more focused on the education of new agents. The better the BDM and the better the presentation on the education front, which would help the broker house itself and the agent build a career, the better for both lenders and brokers.”

code of conduct for broker recruitment Ron De Silva: “As noble as it may be to try establish rules and a code of conduct around broker recruiting, the recruiting process is shrouded in secrecy and confidentiality. You don’t know where these events are taking place, so you can’t govern what’s being said to these brokers. The best way to control this is to actually educate these brokers on the questions they should be asking these firms and then tell them how to evaluate the answers they get from these firms.

That’s the way you control this recruiting process.”

On the topic of …

Jessi Johnson: “I think it’s a lot to ask to have some sort of rule in place dictating who you can and can’t recruit. Recruiting is the nature of the beast, so it’s difficult to judge whether there should be rules in place, however, when you’re a brokerage targeting an entire brokerage and trying to poach all their brokers, that in my opinion is breaching the ethical boundaries of what we should and shouldn’t do.” CMP

Bill Mitchell: “In my opinion, the role of the BDM is a lot more than just driving in new business. For sure, there are parallels between what their role is and what our role is as brokers. Of course it’s important to try and bring in some new business, but the biggest opportunity is in maintaining the relationships you have because that is definitely where the biggest bang for your

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Kelvin Seepersad

On the topic of …

Blair Anderson: I don’t think the monlines need to be responsible for upping our profile and doing advertising. There are far too many of them and they’ll probably end up diluting the central message. The fact that we have that many great lenders to work with is but one benefit of using the broker channel. They could better serve us by providing us with good literature to give to clients, something tangible. Who needs to take ownership of this advertising is the broker community. There are enough of us and it’s been suggested that we could give up 1 bp of our commission and that would raise the necessary capital to do all sorts of effective advertising and I think that is the direction we should go.”

the role of lender BDMs

Gino Tieri

Blair Anderson

Bill Mitchell

Ron De Silva

Jessi Johnson

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U.S. housing market worse than thought The number of Americans who bought previously occupied homes rose in October. But the National Association of Realtors says it overstated more than three million sales during and after the Great Recession, showing the housing market was weaker than previously thought.

The private trade group says sales rose four per cent in October to a seasonally adjusted annual rate of 4.42 million. That’s below the roughly six million homes a year that economists say are consistent with a healthy housing market. But it’s ahead of 2008’s revised sales, now considered the worst in 13 years.

The trade group revised its sales from 2007 to 2010 down 14 per cent, from more than 20.6 million to nearly 17.7 million. Among the reasons for the lower figures, the Realtors group says: changes in the way the Census Bureau collects data, population shifts and some sales being counted twice.

The Realtors consulted with government and private housing experts, including the Federal Reserve, the Department of Housing and Urban Development, the Mortgage Bankers Association, the National Association of Home Builders, mortgage giants Fannie Mae and Freddie Mac and CoreLogic, a California-based data firm that first raised doubts about the annual numbers earlier this year.

CoreLogic has estimated that the Realtors group overstated sales in 2010 by at least 15 per cent.

The changing numbers could affect how economists view the trade group’s data. It could also affect companies that use the figures for hiring and expansion plans.

Sales are measured when buyers close on homes.

But many deals are collapsing before that point.

One-third of Realtors said they had at least one contract scuttled in October, up from 18 per cent in September.

Contracts are being cancelled for several reasons: Banks have declined mortgage applications; home

&

90.6% 52.1% Percentage of homeownership costs, including mortgage payments, utilities and property taxes that take up a typical household’s monthly pre-tax income in Vancouver and Toronto, respectively (RBC Economics Housing Trends and Affordability Report)

inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing.

More than two years after the recession officially ended, many people can’t qualify for loans or meet higher down payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling. Sales are also being hurt by a decline in first-time buyers, who are critical to reviving the housing market.

Sales have fallen in four of the five years since the housing boom went bust in 2006.

Declining prices and record-low mortgage rates haven’t been enough to boost sales.

At the same time, home construction has begun a gradual comeback and should add to the economy’s growth in 2011 for the first year since the Great Recession began in 2007. Last month, builders broke ground on an annual rate of 685,000 homes, the government said recently.

That was a 9.3 per cent jump from October and the fastest pace since April 2010.

Most economists say home prices will keep falling, by at least five per cent, through 2012.

Many forecasts don’t foresee a rebound in prices until at least 2013.

The high rate of foreclosures has made resold homes cheaper than new ones. The median price of a new home is roughly 30 per cent above the price of one that’s been occupied before – twice the normal markup. Investors are taking advantage of the discounts.

The housing market is struggling even as the broader economy has improved in recent months.

The economy grew at an annual pace of two per cent in the July-September quarter. Many economists expect slightly better growth in the October-December quarter. CMP

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News INDUSTRY

MCAP to acquire ResMor mortgage book MCAP has announced an agreement to acquire the residential mortgage operations and certain related assets of ResMor Trust Company. The transaction is expected to be completed in the first quarter of 2012 and is subject to regulatory approval and other customary closing conditions.

“This transaction is a perfect fit with the MCAP Group’s long-term growth strategy,” said Derek Norton, who was appointed president and CEO of MCAP, shortly after the acquisition was made. “The addition of nearly $6 billion to our servicing portfolio will help us fully leverage our existing servicing platform. Our current client base of serviced residential mortgages is estimated to grow to more than $31 billion, solidifying our market position. With the addition of ResMor’s professional mortgage staff, key brokers, investors and other business partners to our existing operation, we will be ideally situated to foster strong future growth.”

MCAP is not purchasing the automotive or deposit lines of business from ResMor. CMP

I hope MCAP doesn’t change a thing with ResMor. In my opinion, ResMor is a much better lender than MCAP. – Vancouver Island Broker I see MCAP as the better lender. It is amazing when you talk with other brokers how we have all have different opinions on the lenders. I wish they would stop buying each other or becoming one as they all serve their niche in the market.

ResMor is better with the rural conventional deals. This will also make MCAP probably the second largest lender behind FirstLine, even though I consider FirstLine a bank, not one of the broker monoline lenders.

– Ottawa Broker Love dealing with MCAP, just have to get the right underwriter and BDM.

– Chris

This is a very bad news for the industry. MCAP has to close ResMor operations within three months due to: a) OSFI regulations; and b) CMB/MBS issuance restrictions. MCAP already has a CMB allocation and can’t have the second allocation. Also since the ResMor already has an existing ongoing business under ResMor Trust and OSFI wouldn’t want to confuse the people. This is a very bad news for the mortgage broker industry. This is the fourth lender we have lost this year!

– Another Lender

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2011

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this time last year FSCO seeks comment on mandatory continuing education proposal for mortgage brokers The Financial Services Commission of Ontario (FSCO) has released a proposal that would see continuing education (CE) become mandatory for mortgage brokers. The proposal is out for public comment until Feb. 28. In spring 2011, FSCO plans to release its decision on its website.

Since the Mortgage Brokerages, Lenders and Administrators Act (MBLAA) came into effect in 2006, FSCO monitored and audited licensees’ compliance with the new requirements. The results provide objective evidence that there is a need for mandatory CE, according to FSCO. The proposal stated: “Despite FSCO’s year-long information and outreach campaign, and significantly improved new education standards, FSCO’s audits revealed an unacceptably high level of non-compliance.

Of particular concern, only 53 per cent of principal brokers had complied with the legal requirement to file information about their mortgage agents’ education qualifications (as of Oct. 29, 2009). In addition, only 70 per cent of mortgage brokerages met the legal requirement to maintain errors and omissions insurance.”

FSCO says the goals of mandatory CE for mortgage brokers are to improve the sector’s compliance with current legal requirements by increasing awareness of the rules and the importance of complying with those rules, and to improve consumer protection—without imposing unnecessarily onerous requirements on licensees.

“IMBA has long been a proponent of continuing education for Ontario mortgage professionals and we welcome the initiatives that FSCO has undertaken,” commented Martin Marshall, communications chair for IMBA. ”We believe that education is one of the cornerstones of professionalism and ongoing education requirements to maintain licensing will allow our members the opportunity to constantly improve their skills. As we have done since our inception, IMBA will continue to provide consistent access to relevant industry topics through various seminars and symposiums across the province. “The real winner here is the consumer who will be able to count on dealing with a mortgage professional that is continually working to improve their knowledge.”

One year later The final two providers of Ontario re-licensing courses have now revealed their own hands, with IMBA effectively matching CAAMP’s “free” offer to its members.

While members of Canada’s largest provincial mortgage association, IMBA, will pay $25 for its online course, that charge will be applied to their next

mortgagebrokernews.ca

membership fee as a $25 credit, according to a recent press release.

Non-members of the association will pay the same $25 fee, IMBA applying that as a credit toward any new membership taken out within 60 days of course registration.

The tie-in is meant to grow members for the provincial organization and mirrors a similar offer CAAMP is making to non-members, although IMBA has set its threshold lower.

While CAAMP will offer its online version of Ontario’s mandatory re-licensing course free to its members, non-members are required to pay a fee.

Seneca College is also preparing to open its online course to registration, starting Nov. 7, with all students paying $45 for the instruction, arguably the priciest of the four approved programs.

“We have a quality product and we support it with technical support but also an assigned instructor to help students as they learn,” Beverley Malcolm, chair of Seneca’s mortgage programs, told MortgageBrokerNews.ca.

Industry trainer REMIC is rolling several bonuses -including a customized marketing video and a video tutorial on competing with the banks -- into its $30 online course fee.

IMBA is highlighting its modulized curriculum as one of its own key selling points, aside from pricing. It allows students, to take the course at their own pace, but tests them at the end of each of those seven units, before allowing them to move onto the next.

That reinforced learning may work to quiet broker fears about the mandatory course.

To be completed by March 31, 2012, the course will bring Ontario mortgage brokers and agents in line with counterparts in Alberta and British Columbia.

They already submit to similar education requirements as a condition for licence renewal in those Western provinces.

That new Ontario requirement may ultimately encourage as much as 15 per cent of the province’s licensed brokers and agents to quit the business rather than submit to the rigours of testing, said CAAMP President Jim Murphy and other industry veterans.

“In the last licence renewal period in March 2010, 15 per cent of Ontario licensees – agents and brokers – did not renew their licence,” Murphy told MortgageBrokerNews.ca. “In the 18 months since ….

They have made up for the 15 per cent loss. Brokers and agents in Ontario this time must also take a re-licensing course, which they did not have to do last time (and) my guess would be (the loss could be) 10 per cent to 15 per cent.” CMP

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From the worsening economy to growing competition from big banks, the mortgage industry has many hurdles ahead for 2012.

CMP talked to various brokers and lenders and asked them what they see as some of the biggest challenges for the New Year — and more importantly, how to meet them head on

F

irst and foremost on everybody’s minds was the economy, which is hardly a surprise. Global debt problems have wreaked havoc on consumer confidence levels, making something like the decision to buy a house even more daunting.

“I think the never-ending stream of opinion, doubt and fear that is permeating the news will keep a lot of people from confidently making personal financial decisions — be it purchasing a home, investing, etc.,” said Gord McCallum of First Foundation Mortgages in Alberta.

But there is always a silver lining, especially for Canadian brokers. “We’ve got this terrible economy, but we have good labour forces and a stimulus environment,” said Invis/ MI’s executive VP and CFO Cameron Strong, predicting that central banks will continue to keep rates low. “Households are taking advantage of those low rates and increasing household debt. As brokers, we’re not financial planners, but we can certainly try to help,” he said.

“ I think the never-ending stream of opinion, doubt and fear that is permeating the news will keep a lot of people from confidently making personal financial decisions ”

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the last word CMP asked various brokers and lenders for any bold predictions for what might be up ahead for the industry as a whole. Here’s what they said.

“I believe that banks will increase their push on rates and any broker that does not have a value-added proposition VAP will be dead in the water. I wouldn’t be surprised to see a significant number of brokers leave the business as a result.”

Peter Kinch, Peter Kinch Mortgage Team “Yes [the industry faces] challenges and not all brokers will make the cut, but those that apply themselves to the profession will. … We have willing and supportive lenders that believe in our industry and want us to grow. Let’s work and support them to make that happen.”

Colin Dreyer, Verico “I don’t foresee any dramatic changes in 2012. Of course as soon as this story is published there will be an announcement that two large brokerage companies have merged. That’s always a possibility, and at times there’s been serious discussion about possible mergers. But to date no one has come up with the right formula to make it work. Maybe one day they will.”

Boris Bozic, Merix “Canadians are going to continue using debt the way they are, and our brokers can help them steer through those choices whenever that correction does come.

We see the broker channel still winning, which is why we want CAAMP to do a renewed focus on strengthening that whole channel.”

Cameron Strong, Invis/MI “Despite all the fear about banks hiring mobile specialists etc, I think the brokerage channel will grow as more and more people learn about us, Continues on page 38

Top: Gord McCallum Middle: Boris Bozic Bottom: Peter Kinch

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The Year Ahead

The lending landscape But of course, it’s not just brokers who have to deal with the challenging economy.

Lenders, too, list it as one of the biggest potential issues of 2012.

“So much of what happens in the global economy is beyond our control. The question then becomes how prepared are we to face the challenges that may arise?” said Boris Bozic, president and CEO of Merix Financial, adding “prudent lending and mitigating risk will be a theme for 2012.”

In fact, from mitigating risks to a focus on efficiency ratios and encroaching regulatory involvement, lenders will continue to play a huge role in the New Year.

“Regulatory involvement will continue to grow,” said Martin Reid, president of Home Trust, citing a discussion paper from the

“ so much of what happens in the global economy is beyond our control. The question then becomes how prepared are we to face the challenges that may arise? ... prudent lending and mitigating risk will be a theme for 2012 ”

“ given the current uncertainty and volatility in global capital markets ... OSFI expects [federally regulated financial institutions] to be extra diligent in maintaining sound and prudent mortgage underwriting practices ” Office of the Superintendent of Financial Institutions that deals with changing mortgage-lending rules.

The paper, which is part of a process to strengthen global residential mortgage underwriting practices, concludes that “Given the current uncertainty and volatility in global capital markets, historically low interest rates, higher Canadian borrower debt-to-income levels, and relatively strong housing price appreciation, OSFI expects [federally regulated financial institutions] to be extra diligent in maintaining sound and prudent mortgage underwriting practices.”

Of the paper’s findings, Reid said “I don’t think there will be a material impact on the market, but this could change the

Top: Paul Therien Bottom:David O’Gorman

What will happen to broker compensation in the next 5 years?

56%

“I think broker income structure will remain relatively unchanged”

35%

“broker income will become more heavily based on trailer fees”

14%

“broker income will become more heavily based on fees charged to the consumer for services rendered.”

Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAAMP/Martiz Research Canada)

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requirements for mortgage lending. I think mortgage brokers will continue to be a growing part of the market but at a slower pace.”

Bozic echoes the paper’s concern over growing debt levels: “Warning bells are starting to ring again, and it’s an issue that the federal government will monitor closely,” he said.

But for brokers who have been in the business for a while, these are all things they’ve heard before. “Business is cyclical and there are always competitive, economic or regulatory issues affecting our market,” said Colin Dreyer, president and CEO of Verico Financial Group, stressing that the important thing, as an industry, is to “acknowledge and accommodate to those factors while we find innovative ways to connect with consumers and show our value while we meet their financial requirements.”

For brokers, having a good relationship with lenders is one of the key steps in meeting client demands. According to Bozic, there are two ways to do this. “Good efficiency ratios and good quality business would top my wish list,” he said.

“ [important to] acknowledge and accommodate to those factors while we find innovative ways to connect with consumers and show our value while we meet their financial requirements ” “I can’t speak for the other lenders, but in my world it’s about identifying those brokers who truly want to develop a strategic working relationship with us,” he added. “As much as we would like to be all things to all brokers, the reality is that it is not possible.”

But as lenders continue to worry about building relationships with quality clients, brokers have their own concerns about lenders in 2012.

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the last word Continued from page 34

what we can offer, and as the standards of professionalism continue to improve in the industry. There always seems like more turnover in our industry than I’d like to see, which is indicative of a business model problem, more than anything, but if people believe in the value we have to offer then we will attract both more brokers and more clients. “ Gord McCallum, First Foundation “I think mortgage brokers will continue to be a growing part of the market but at a slower pace. They will see increased competition from the big banks and their sales force and need to highlight the value-add that they bring to their clients.”

Martin Reid, Home Trust “There will most likely be the same number of brokers in the industry. There are many across Canada who are practicing part time, and with the requirement for re-education, I believe many will allow their licences to lapse. I think those who exit will be replaced by people who choose this industry as a full-time career.”

Paul Therien, Centum “The condo market is going to be a big issue, especially in places like Toronto and Vancouver. There are a lot of empty units that have been sold and are sitting vacant, sitting there like a phantom market. If they dumped them at the same time it would really soften the market.”

David O’Gorman, MortgageLand

Top: Colin Dreyer Middle: Cameron Strong Bottom: Martin Reid

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“ we have already seen some lenders pull out because of profitability issues. Is it possible that others might as well? ” “We have already seen some lenders pull out because of profitability issues. Is it possible that others might as well?

Yes,” said Paul Therien, director, business development, Centum Financial Group. “I believe, however, that if the broker community focuses on funding ratios, quality and efficiencies, that could change.

I do hope that we see stronger partnerships, but I believe that ultimately

are we in a housing bubble?

36% yes

mortgage industry

36% yes

Canadian consumers

Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAAMP/Martiz Research Canada)

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“ I do hope that we see stronger partnerships, but I believe that ultimately it is up to us. Yes, we represent the best interest of the client, but the lenders are our partners, and it is very important we understand that our success is tied to theirs ”

It’s one of the reasons that Invis/MI is developing its own mortgage investment corporation. “It gives our brokers another lender that is going to cater to them and offer products that the marketplace doesn’t have. Plus, if a lender does exit the market, you can go duplicate it within the MIC. That’s the idea: to become another lender for the broker chain, especially if everyone is suffering.”

it is up to us. Yes, we represent the best interest of the client, but the lenders are our partners, and it is very important we understand that our success is tied to theirs.”

It’s a sentiment shared by Invis/MI’s Strong, who said, “lenders are getting much closer to us [brokers] every week because they worry about the channel. Are we looking after our after-sales communication? They also worry about the financial viability of our firms. It is tight, after all, for most broker houses if they’re trying to survive with just the mortgages.”

“ lenders are getting much closer to us [brokers] every week because they worry about the channel ... They also worry about the financial viability of our firms. It is tight, after all, for most broker houses if they’re trying to survive with just the mortgages ”

Big banks, big competition But aside from the economy, which will affect every Canadian equally, perhaps the

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snapshot of the mortgage broker’s customer base “ if the bank has 75 per cent market share what can we do as independent originators do emulate the success of their behaviour while elevating it to a higher level of service based on our capabilities? ” biggest challenge in the New Year for brokers will be the increased competition from banks.

“As the market slows, margins continue to narrow, and … banks will naturally try to source business with the intent of increasing the profitability of each mortgage transaction,” said Therien, citing banks’ ability to cross-sell, higher funding ratios and overall lower cost per unit as advantages. “A branch-originated mortgage makes better financial sense to banks,” he said.

But as Bozic points out, the mortgage industry has always been rife with competition. “The intensity of the competition may have increased, but brokers will do what they always do — adapt. Brokers have to outperform the competition, which in large part means out-working them. If brokers are committed to do that they’ll get their share,” he said.

Dreyer agrees, adding that it’s important to keep that in perspective.

“If the bank has 75 per cent market share what can we do as independent originators do emulate the success of their behaviour while elevating it to a higher level of service based on our capabilities?” he said.

“If someone gave us a business and said you have 25 per cent market share, find ways to increase your market, wouldn’t we view that as an opportunity? Well that is where we are in this industry. … Not all brokers will make the cut but those that apply themselves to the profession will, and they can advance the public perception to

36 years old the median age of a broker customer is 36, compared with 42 among lender customers (just 35% of lender customers are 36 or younger)

…with kids 53% of broker customers live with children under 18, compared with 43% among direct-to-lender customers

Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAMMP/Martiz Research Canada) mortgagebrokernews.ca

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snapshot of the mortgage broker’s customer base “ instead of making demands for higher volume bonuses, greater commissions, lower rates and faster response times, we need to examine what we can do, what we can improve upon ” Canadian consumers that will have a positive effect on broker market share.”

Therien takes it a step further, suggesting that “instead of making demands for higher volume bonuses, greater commissions, lower rates and faster response times, we need to examine what we can do, what we can improve upon.

What can we do as an industry to better partner with the banks to help improve the profitability of the broker channel?”

Collateral damage?

The adoption of collateral mortgages from some lenders in 2011 was a growing concern for many brokers, with the difficulties in moving the mortgage to a different lender taking front and centre.

“The whole scam is that the mortgage market is going to tighten up so the only way lenders can protect their assets is to get their market,” David O’Gorman, MortgageLand president and Ontario Real Estate college teacher said. “Your clients may be saving $700 in legal fees but their feet are nailed to the floor while the house burns down around them.”

He predicts that collateral mortgages will become more widespread, and when they do, “soon enough someone dealing with consumer protection is going to take note,” he said.

While O’Gorman may not be one to mince words, he’s not alone in criticizing collateral mortgages.

“We see anything that constrains the consumer in any way as not being helpful,”

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comfortable with own financial situation 70% “I would be well-positioned to weather a potential downturn in home prices” 69% “I do not regret taking on the size of mortgage that I did” 87% “I would classify mortgages as good debt”

5 years broker customers expect to pay their mortgage off 5 years quicker than the original amortization (compared with 3 years among bank customers)

Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAMMP/Martiz Research Canada)

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snapshot of the mortgage broker’s customer base Home Trust’s Reid said. “We’re not sure that most consumers are aware of the implications of getting into a collateral mortgage.”

One thing that is debatable about them, however, is the effect it will have on the broker market.

“They will result in one or two things,” predicts McCallum. “One, less switch business for brokers; two, more unhappy bank customers who will find a way to move anyway. Client dissatisfaction is going to be a major selling point going against banks in the coming years.”

But Centum’s Therien says the reason for collateral mortgages falls on brokers.

“They’re a response from the lenders to the shortened average life of a mortgage with a lender. Also I believe in part to the increasing instances of brokers churning their books,” he said. “The average time at lender for a broker-originated mortgage is shorter than a bank-originated mortgage, and that affects profitability. The lender almost always ends up being the bad guy for charging a penalty, I am not saying that the lenders have no accountability, but we need to look to ourselves and how our own actions impact our business partners.”

No matter where the blame falls for the emergence of collateral mortgages, one thing’s for certain — if they’re successful, they’ll be here to stay.

“In terms of it being good or bad, well, that depends on what side of the fence you are on,” Bozic said. “If the lenders who have announced that they’re moving to a collateral charge maintain or grow their market share, don’t be surprised if more lenders follow.”

“ if the lenders who have announced that they’re moving to a collateral charge maintain or grow their market share, don’t be surprised if more lenders follow ”

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household income well above average in fact, despite their younger age, broker customers report higher average household income than lender customers

smaller home budgets broker customers estimate their home’s market value at an average of $289k, 14% lower than $336k among lender customers

96% would like post-sales communication from their broker

Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAMMP/Martiz Research Canada)

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“ I think if we can be seen as voices of reason, calm and focused people who recognize the reality out there instead of trying to sell around it, then people will trust us ” Working together In terms of meeting the challenges of 2012 head on, a lot of the brokers and lenders that CMP spoke with stressed the same thing: rather than focusing only on individual numbers, the industry needs to work as one to increase overall awareness.

68% Canadians have roughly 68% equity in their home, compared with 43% in the U.S. Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAAMP/Martiz Research Canada)

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snapshot of the mortgage broker’s customer base

90% of broker customers are satisfied with their mortgage experience, higher than the overall industry average of 87%

“Our voice has to be heard by the regulators and the Ministry of Finance,” said Bozic, who, as CAAMP chair, added that it needs to continue building on its lobbying efforts.

It’s something Strong also mentions as a key to success, stressing the consumer angle. “We’ve been asking CAAMP to renew their broker channel communication,” he said, suggesting the idea that “all the firms should contribute to a pool and allow CAAMP to advertise.

All the firms should lay down their guns and put money into a pool. It’s hard to do it on our own, whether you advertise on Hockey Night in Canada or not — it’s not enough.”

It’s just one of the ways the broker channel can “cut through the hyperventilation going on out there and focus on facts,” said McCallum. “I think if we can be seen as voices of reason, calm and focused people who recognize the

“ all the firms should lay down their guns and put money into a pool. It’s hard to do it on our own, whether you advertise on Hockey Night in Canada or not — it’s not enough ”

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2.8 broker customers are more likely to shop around, collecting an average of 2.8 quotes for their mortgage (compared with 1.8 among bank customers)

Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAMMP/Martiz Research Canada)

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“This award means a lot.

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The Year Ahead

reality out there instead of trying to sell around it, then people will trust us.”

But any efforts the industry may undertake as a whole will have no effect if individual brokers don’t do their parts, which means giving clients the best value-added service, improving efficiencies and funding ratios with lenders, and of course, placing clients with the right lenders for their needs.

“Focus on the best interest of the client first and foremost,” said Therien. “We are at a crossroads: we either go back to being the person you go to when the banks say no as it was 25 years ago, or become truly trusted advisers to our customer and move up to the next level.” CMP

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71% Source: Mortgage Insights: Highlights from CAAMP’s Fall 2011 consumer and industry surveys (CAAMP/Martiz Research Canada)

of homeowners say they are in a good position to weather a potential downturn in the housing market

NO. 17

Guide to insurance www.mortgagebrokernews.ca

what’s in a title?

The broad coverage of title insurance Mortgage rules redux Genworth CEO Brian Hurley discusses mortgage insurance

Mortgage Protection Mortgage vs. life insurance

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contents cmp guide no.17

NO. 17

Guide to insurance

14 8

Mortgage rules redux Another year, more mortgage rule changes.

CMP spoke to Genworth CEO & Chariman Brian Hurley about the effect of these changes and the challenges facing the mortgage insurance industry in 2012

12

The best form of mortgage protection The best protection is neither the cheapest nor the most generous – it’s what your client buys. CMP spoke to Kelly Price of Mortgage Protection Plan about the benefits of mortgage protection versus life insurance

2 14

What’s in a title?

Title insurance protects against much more than fraud and knowing what it covers can also help brokers and their clients before a sale closes

Secrets of negotiation Customers rely on mortgage brokers to negotiate a better deal with the lender than they could on their own. But how effective are your bartering skills? Our sister publication MPA finds out

12 mortgagebrokernews.ca mortgagebrokernews.ca

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Guide

Title Insurance

what’s in a title?

Title insurance protects against much more than fraud and knowing what it covers can also help brokers and their clients before a sale closes

A

back deck or a shed usually aren’t deal breakers when it comes to buying a house, but if the purchaser doesn’t have title insurance, that beautiful backyard oasis could turn into a money pit.

If it’s discovered that the deck was built without a required permit or the land survey shows the shed is actually on the neighbour’s property, the homeowner may have to pay to have the deck rebuilt or have the shed removed – not something the homeowner probably budgeted for when they purchased the property.

“Those are the kinds of things that can cost a significant amount of money,” says Karen Decker, vice-president, underwriting and legal at Stewart Title Guaranty Company.

“It’s unexpected to a homeowner and without title insurance to provide coverage for their losses, it can really be a burden for a homeowner.”

It’s something the insurance providers are seeing more of says Ray Leclair, vice-president, public affairs with TitlePlus. “What we’re seeing more of now is building compliance issues.

“Sometimes it can be remedied if a building permit is obtained and the work passes, but we are seeing situations where the work is not in compliance with building codes and fixing it can be costly.

We’ve had to rebuild whole additions.”

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Title Insurance

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Title Insurance

“ don’t rely solely on the title insurance and forgo doing title searches. The information may be important, more important than having a right to claim, because no one wants to file an insurance claim. The buyer should discuss it with the lawyer and decide if they want to rely on title insurance or another remedy ” Leclair calls it the “lottery effect.”

There may be little risk that it will happen, but if it does, title insurance can provide protection.

Having title insurance also gives buyers choices during the purchase, says Leclair.

“Don’t rely solely on the title insurance and forgo doing title searches. The information may be important, more important than having a right to claim, because no one wants to file an insurance claim. The buyer should discuss it with the lawyer and decide if they want to rely on title insurance or another remedy.”

In the case of a non-compliant deck, for example, it can simply be removed as one solution, but if that deck is really important to them, the buyer maybe wants the vendor to fix it before closing or adjust the price.

“You can also leave the deck as is, knowing the likelihood of it being found to be not compliant is very small,” says Leclair. “Perhaps you’re willing to take that risk, but the lender isn’t. So title insurance can again provide a solution, because it will insure over the problem for the lender and then both the buyer and the lender are happy to proceed.”

While title fraud gets the most media coverage when it comes to title insurance, Decker say it’s important to keep in mind the coverage the product offers is very

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broad. “Many items are not readily discoverable at the time of purchase, but exist and surface at some date in the future.” In addition to certain building department compliance issues, this can include liens and tax arrears.

“It’s important to consider that a purchase of a home by an individual is Karen Decker probably the biggest investment in their life, so to have the peace of mind that title insurance policy provides, at a low one-time premium, makes sense for the homeowner and also from the lender’s perspective, as they want additional protection for their security that they’re getting for their loan,” says Decker.

Before title insurance was introduced in the 90s, traditionally what was done, was the buyer obtained a professional opinion from a lawyer that they had a good marketable title or a good charge as the lender. “The title insurance policy doesn’t replace the role of the lawyer,” says Leclair.

“What it does is replace that opinion. The insurance policy stands instead of the opinion. The advantage of that is that it creates a direct link between the client and the insurer.

5 benefits for a broker to know about title insurance 1. Reinforces your position as an expert in all aspects of real estate transactions including protection available for homeowners 2. Differentiates you from your competition 3. Provides more complete information to your client 4. Encourages more referrals 5. Saves your clients money and stress if they ever encounter a problem

Guide

Title Insurance

what is title insurance?

Title insurance is an insurance policy that protects you, the home owner, against challenges to the ownership of your home or from problems related to the title to your home. The policy provides coverage against losses due to title defects, even if the defects existed before you purchased your home. A title defect is a problem with the title which prevents free and clear ownership. There are many types of defects such as encroachments (from neighbouring properties), unpaid liens, etc.

Title insurance policies protect you for as long as you own the property. It protects against a number of risks that a solicitor’s opinion on title may not cover.

These risks include: • Title fraud and forgery, which results in someone claiming to own an interest in the title to your land • Encroachments that would be disclosed by a new survey (for example, a neighbour’s deck being partly on your land) • Easements (the right acquired for access to or over another person’s property for a specific purpose, such as for a driveway or public utilities. This is referred to as “servitude” in the Province of Quebec) that someone has on your land that you are unaware of • Zoning non-compliance (i.e. where the property use does not meet the local municipal by-laws) • Someone else claiming to have an interest in your land (i.e. a previous owner of the property not being discharged from title) Title insurance is generally purchased when you buy your home or when you refinance it, although it can be purchased any time after you buy your home. You will only make one premium payment when you first buy the insurance. Your lawyer can explain the coverage further and can order the policy on your behalf.

Previously, if there were a problem, you would need to prove the negligence of the lawyer to be able to claim any relief.

With a title insurance policy, it’s basically like any other insurance claim: You call the insurer, they send an adjustor and there is a direct negotiation between the

insurer and the client. You’re not restricted to matters of negligence as under the opinion, but anything that’s under the policy.

“The policy is a very specific contract; it’s not all risk. It’s an enumerated risk situation. Most policies have the same coverage. They cover title matters, but that’s actually a misnomer; title insurance covers a lot more than title matters and much more than the opinion used to cover.”

According to Leclair, a TitlePlus policy offers coverage for legal services.

“Anything the lawyer did or should have done, but didn’t do properly even if not not related to title, such as advising on taxes, or the agreement of purchase of sale. No need to sue your lawyer separately outside of the title insurance policy.”

Stewart also offers an enhancement to its policies covering lawyer negligence, which is obtained through an endorsement called a “closing protection letter.”

With virtually every residential transaction in Ontario title insured and the across the country the acceptance level is growing, particularly in B.C. and Atlantic Canada, according to Decker.

“If you’re not aware of title insurance you’re really behind in the knowledge level of how real estate is practiced.” She says the interest in title insurance has grown, both within the broker community

“ if they discover a problem and they come back to the mortgage broker and it looks like the deal might not go through, it’s always wise to at least investigate with your title insurer whether or not it’s something we can provide coverage over to allow the deal to close ” mortgagebrokernews.ca mortgagebrokernews.ca

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Guide

Title Insurance

“ the lawyer can tell you on the day of closing, at the time of registering your mortgage that you are the owner. But tomorrow, he can’t tell you what will happen, because a fraudster may come in and discharge your mortgage or transfer your property illegally.

The lawyer is not negligent in that case, but title insurance has an obligation to defend the title and the insurer will step in at that point and attempt to reverse the damage done by the fraudster and paying for any legal costs to get that done ”

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and consumers in general, which helps both parties.

“Knowledge of title insurance helps guide the client,” says Decker. “If they discover a problem and they come back to the mortgage broker and it looks like the deal might not go through, it’s always wise to at least investigate with your title insurer whether or not it’s something we can provide coverage over to allow the deal to close.”

Decker says her company frequently gets calls from buyers who have a pending transaction and have discovered a title defect and we will look at the issue and if we can determine that it’s within our comfort level in terms of risk, we can add specific coverage into the policy to provide a level of protection for that particular known item, which gives the purchaser or lender the comfort to allow the transaction to proceed.

Guide

Title Insurance

“ growth is also occurring in Western Canada where not long ago there were some cases of mortgage fraud that showed lenders that if they really want to protect their interests they need a title insurance policy underlying their security ” “The fact that we’re able to facilitate deals closing, benefits everyone involved in the transaction, including brokers.”

Title insurance gives the client protection after closing as well, says Leclair.

“The lawyer can tell you on the day of closing, at the time of registering your mortgage that you are the owner. But tomorrow, he can’t tell you what will happen, because a fraudster may come in and discharge your mortgage or transfer your property illegally. The lawyer is not negligent in that case, but title insurance has an obligation to defend the title and the insurer will step in at that point and attempt to reverse the damage done by the fraudster and paying for any legal costs to get that done.”

9 Reasons Why Your Client Wants Title Insurance 1.

Makes closings faster and more efficient.

2.

Low one-time premium.

3.

Saves more money.

4.

Covers unknown title problems.

5.

Title fraud coverage before or after the property purchase.

6.

Duty to defend.

7.

Covers many forms of lawyer negligence.

8.

An efficient no-fault claims process.

9.

Peace of mind.

Title insurance can also save time and money at closing. “If you have a short closing and you need to do an off title search, but the municipality will take six to eight weeks to get back to you, you either have to take the risk that there won’t be anything wrong or they can get title insurance, which Ray Leclair could cover the risk,” says Leclair.

Title insurance is a type of protection that is affordable, being a one-time cost, which is different than other kinds of insurance.

Homeowners pay for it when they acquire it and it remains in place as long as they have an interest in that property.

Both Decker and Leclair agree that growth in the title insurance market is coming from the commercial sector, in addition to markets outside of Ontario and that growing the use of the product is really an educational process.

“The value of the policy is starting to show,” says Decker. “Certainly people have had experience with it, they’ve seen how claims are handled and have a comfort level with the industry. Growth is also occurring in Western Canada where not long ago there were some cases of mortgage fraud that showed lenders that if they really want to protect their interests they need a title insurance policy underlying their security.”

While premiums have risen in accordance with growing home values, Leclair says a corresponding increase in claims isn’t something the industry is concerned about.

“There have been some spikes in claims on different issues from time to time, but I think that’s just like any insurance you have,” he says. “Increasing claims are due to the maturity of the product. Title insurance has only really been around since the 90s and problems don’t necessarily show up unless you transfer the property, so there’s a good reason why those claims haven’t been brought forward until now.

“More people are turning to title insurance, where in the past they may not have been aware that it covered certain types of issues.” CMP

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Guide

Mortgage Insurance

mortgage rules redux

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Guide

Mortgage Insurance

Another year, more mortgage rule changes. CMP spoke to Genworth CEO & Chariman Brian Hurley about the effect these changes and the challenges facing the mortgage insurance industry in 2012 2011 challenges Regulatory changes brought about some product restrictions that continued to be refined in 2011. Although I think they were prudent and helpful to the industry overall, they did cause a dip in the market, especially with respect to refinances which were down quite dramatically over 2010.

These changes impacted the whole mortgage origination market, not just us the mortgage insurers.

What was more impactful on us were the changes around market conduct rules. They needed more definition, so for the first half of 2011 the lenders and the mortgage insurers weren’t really sure how to interact with each other because they were still interpreting those conduct rules as part of the product restrictions.

As we refined them with customers and with Ottawa and as we got more comfortable with them ourselves, that improved in the second half of the year.

We’re a high touch company and I think it hurt our interaction with a few lenders, not being able to reach out while they were interpreting those conduct rules.

We lost some momentum because of that. It was a broad code of conduct with some strong merits, but it clouded the interaction between mortgage insurers and lenders for a while.

What’s going to happen in 2012 is that Ottawa is going to revisit this and be much more specific, which will much more clearly define it.

As far as more mortgage

refinance activity plummets 40 per cent, says CMHC Tighter mortgage rules are hurting CMHC’s default insurance business. This is most evident in insured mortgage refinances, which have plunged a remarkable 40 per cent.

That’s due in part to the government’s move on March 18, 2011 to limit insured mortgage refinances to a maximum of 85 per cent loan-to-value (instead of 90 per cent previously).

That rule continues to force thousands of Canadians to pay higher interest rates on debt that they used to be able to refinance and consolidate. The government’s hope is that this will encourage homeowners to borrow more responsibly, knowing that they can’t rely on home equity to bail themselves out.

Overall, CMHC says its insured mortgage volumes were down 13 per cent Y/Y. That’s 20 per cent below the volumes it anticipated. It attributes this to: 1.

A cut in the maximum amortization on insured high-ratio mortgages (from 35 years to 30 years);

2.

Weaker housing activity;

3.

A drop in its mortgage insurance market share.

The above statistics come from CMHC’s second quarter (Q2) financial report. The nation’s largest default insurer must now issue these quarterly reports to comply with the revised Financial Administration Act. Here are a few other tidbits from CMHC’s Q2 report: • CMHC predicts that “posted mortgage rates should remain relatively flat for most of 2011 before increasing slightly in 2012.” continued on page 11

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Mortgage Insurance

“ this year will be a solid market overall, not one of robust growth, but there are some good dynamics in place. Supply and demand is expected to remain balanced, which should be healthy for prices overall.

I don’t see a lot of home price increases, but on the other hand, stable and modest increases are just what the markets need ” rule changes, I think we’ve done as much refining as we can. The product we see is very straightforward, which is good. I don’t think they can tweak it much more without putting a damper on the market.

The economy On the mortgage market, I think the overall global economic perspective hurt consumer confidence.

Most of us know someone who has been impacted by unemployment.

It slowed homebuyers, who were saying, ‘maybe we should wait.’

People were seeing the housing corrections taking place in the U.S. and wondering if some of that was going to trickle up north.

Specifically for us, the government’s reaction to keep us moving and keeping rates low was a positive and that should bode well going into 2012.

I thought it was a smart way to handle it and keep some momentum going.

This year will be a solid market overall, not one of robust growth, but there are some good dynamics in place. Supply and demand is expected to remain balanced, which should be healthy for prices overall. I don’t see a lot of home price increases, but on the other hand, stable and modest increases are just what the markets need.

Interest rates remaining low should help the overall market, but more specifically, first-time homebuyers and the new-to-Canada market.

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2012 looks encouraging for us, especially as we are leaving the year with a little bit more momentum than typical. Usually by midNovember business starts to slow for us, but it continued nicely into the holiday season, probably driven by low rates. It’s good momentum to have heading into a hopefully strong spring market.

CMHC and private insurers Before the recession, the private sector could compete very well. The fact that it was us versus a Crown corporation was almost a non-event because the capital we have to hold against our losses is very high. But with heightened sensitivity over the last few years we have seen some customers turn the dial over to CMHC. Just because of that Crown corporation status – they felt it was less of a risk.

As far as changes, it’s been an active debate, but I don’t think anything is imminent.

The system is working well. We got through the economic downturn with both a private and a public sector paying more claims than normal just like we were supposed to over the past couple of years.

Real estate markets Delinquencies have been mostly normal, except for Calgary, and that’s strictly because they have been slower to recover prices from their pre-recession levels. Home prices are still lower there now than they were at the peak of the market a few years ago.

That started to change over the last few months of 2011, and our view is that this

“ delinquencies have been mostly normal, except for Calgary, and that’s strictly because they have been slower to recover prices from their pre-recession levels.

Home prices are still lower there now than they were at the peak of the market a few years ago ”

Brian Hurley

Guide

Mortgage Insurance

“ toronto’s condo market has seen smart building so far, with smaller more affordable units that are being absorbed very nicely by those new to Canada and first-time homebuyers. But we need to keep an eye on it.

Right now they’re being presold, but you can only keep that up for so long ” should continue to turn nicely for the spring market. We’re believers that this region will help pull Canada back toward a much better economic outlook beyond 2012.

Two areas to watch are Vancouver and the Toronto condo market.

If there is a correction in the high-end of the market, that could trickle down to the rest of the Vancouver market, but we don’t see anything on the horizon that would drive that correction.

Toronto’s condo market has seen smart building so far, with smaller more affordable units that are being absorbed very nicely by those new to Canada and first-time homebuyers. But we need to keep an eye on it. Right now they’re being pre-sold, but you can only keep that up for so long.

What gives us comfort here is the pricing. We insure a lot of those units and they’re priced at a very good entry point.

The builders have been smart and as long as they are being pre-sold at a good rate, that’s a good dynamic. But, at some point in time, we need to slow that market down.

Genworth Outlook In 2011 we were able to grab a bigger share of the market, so we need to continue to build on that. We’re going to continue to reach out to our customers and let them feel the difference of the private sector.

When you’re similarly priced or offering a similar product you need to differentiate on service and that is exactly what we do. CMP

refinance activity plummets 40 per cent, says CMHC continued from page 9

• It says “Claims volumes (on mortgage defaults) have been lower than expected.”

• The average credit score of a CMHC-insured high-ratio mortgage is 723 (vs. 720 last year).

• CMHC’s arrears rate is 0.42 per cent (near the industry average of 0.41 per cent).

• The average amortization of a CMHC-insured mortgage: 24.6 years (vs. 23.9 years in the same period of 2010).

• The ratio of CMHC-insured mortgages with 20 per cent+ equity: 72 per cent (vs. 69 per cent one year ago).

• 26.7 per cent of residential mortgages were securitized (vs. 26.2 per cent last year).

• Other notes from CMHC’s 2010 annual report: • CMHC is the only insurer serving multi-family residential (5+ units), nursing and retirement, and many rural and smaller markets. These areas comprised 44 per cent of its high ratio business in 2010.

• CMHC says it limits risk such that its probability of insolvency is less than 1 in 200 (0.5 per cent). It stress tests its portfolio with risk models that factor in 10,000 economic scenarios. Among other things, those scenarios assume both extreme unemployment and significant home price depreciation lasting “a number of years.”

• 70 per cent of CMHC-insured borrowers have Beacon scores over 700.

• CMHC earned $1.76 billion in 2010. Since 2001, it has contributed $14 billion (in taxes and profit) towards reducing the government’s annual deficit.

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Guide

Mortgage Protection Plan

the best form of

mortgage

protection The best protection is neither the least expensive, nor the most generous. It’s protection that your client actually buys

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K

elly Price has been in the business of marketing creditor insurance for almost 20 years. She can tell you all the reasons why it is a good idea to offer it to your clients and she’s also heard every possible argument against it.

“The most common reasons for not promoting mortgage protection seem to boil down to an uneasy feeling that it is not the best deal for the client,” says Price.

that the cost is fixed for the rest of their working life. Or your client could buy Mortgage Protection Plan and be assured that the coverage is locked in at a fixed cost for the entire 35-year mortgage amortization period. Other people might look at their current cash flow versus where they expect to be in 10 years, and prefer the 10-year product— even in light of the significant cost increase that’s ahead.

Is there a “best way” to protect a mortgage?

Price sees term insurance and mortgage creditor insurance as able to do the job equally well. This is particularly true of independent programs, such as Mortgage Protection Plan, that are fully portable.

This leaves the client free to take their mortgage to any lender they want and they won’t lose their protection.

“Comparing the cost of different life insurance products often is not about comparing dollars but rather it is about evaluating the trade-offs between different product features,” says Price.

For example, if a client in their mid-40s wanted to buy a $250,000 policy right now, a 10-year term would cost about $30 per month and a 20-year term would cost $45. But the 10-year term policy is not actually cheaper in the long run because when the renewal comes up in Year 11 the $30 increases to over $100 per month.

The choice of which is “better” is subjective.

Some clients would prefer to pay the $45 and know

In other words, everybody doesn’t define the “best price” in the same way But here’s the game-changer. Which client is in better shape? The one who bought mortgage protection from a broker because the offer was made at the right time and place? Or the one who has been considering a term insurance policy that might be a few bucks cheaper, or provides a benefit over and above the mortgage balance, that they just never seem to get around to buying.

“Some brokers underestimate the powerful position they are in by being in the right time and place to offer mortgage protection,” says Price.

“Chances are that a client will never be more focused on their mortgage and all it entails than when they are sitting with the broker or on the other end of the phone.” That’s the point at which the client is going to be most open to thinking about the need for mortgage protection. Once that contact is broken, life’s other chores and challenges inevitably creep in.

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Guide

Mortgage Protection Plan

Buzz Grant, owner of Axiom Mortgage Logic in Winnipeg, agrees that mortgage protection is a necessary component of taking proper care of his clients.

“When I first started out, insurance was just another product I could offer. I didn’t realize the potential impact on my business or my clients.

But since then, I’ve received several phone calls from clients asking, ‘Did we take the insurance?’

In many cases, I was pleased to be able to tell them they were protected, but there were also the more difficult phone calls when the answer was ‘no, I’m sorry ...”

“Through these experiences, my view on mortgage protection has changed. It is not ‘just another product’, but a necessary part of the mortgage transaction. Every one of my clients receives the benefit of discussing the importance of having some form of protection in place especially young people. Insurance is so important for clients that have fewer assets but big family plans. The less financial where-withall that clients have, the more likely it is that they could be thrust into a situation where they can’t afford to keep up with their obligations.

This can typically mean losing your home.

Regardless of the financial disposition of my clients I always highlight the value of mortgage protection.”

Independent mortgage broker, Yousra Jomha agrees. “Offering mortgage protection to my borrowers gives me the peace of mind that I am doing the right thing by helping them understand the importance of protecting the family home. A few years ago, one of my dear clients tragically died in a car accident. I received a call from his daughter who said ‘Please, please,

“ some brokers underestimate the powerful position they are in by being in the right time and place to offer mortgage protection.

Chances are that a client will never be more focused on their mortgage and all it entails than when they are sitting with the broker or on the other end of the phone ”

tell me that Dad had some insurance…’ It broke my heart to tell her that he opted not to take it.

He didn’t want to pay ‘that much’ although I knew he could afford it. The family ended up losing the home.”

“Today, and every day, I encourage all of my clients to make sure they protect their mortgage. I don’t do this for any other reason than for the fact that I don’t want them to experience what can happen (and will happen) when someone dies without it. Death is a fact of life. People tend to not want to talk about it, but I make sure it is addressed. Mortgage protection is an investment in ourselves, our family, to ensure that the biggest debt doesn’t force us into a situation where the family home is lost.”

“I know we are not in the insurance business, but we are in the business of ensuring our clients are not only able to attain home ownership, but retain their family home. “I don’t want my debt to burden my family when I am in my grave.”

Mortgage protection at the right opportunity If a client is not presented with the opportunity to purchase mortgage protection when they arrange their mortgage, there is a very real possibility that they will be under-insured. According to the Canadian Life & Health Insurance Association (CLHIA), there was $1.8 billion worth of individual life insurance in force in 2008. But for each of the 21.2 million Canadians between the ages of 20 and 64, that’s only about $85,000 worth of protection.

CLHIA recommends five- to seven-times salary as an adequate amount of life insurance. The average of $85,000 is only adequate if the client’s annual income is less than $20,000.

It’s true that many Canadians have group life insurance through their employer but most often that’s only one- or two-times salary. That’s less than half of what they need and it is vulnerable (if you lose your job, lose your insurance).

“Someone once said to me, ‘Well, mortgage creditor insurance is better than nothing, I suppose.’ The person’s intent was something other than complimentary, yet it is a simple statement of fact,” says Price. “While we experts can endlessly debate the merits of various types of insurance, there’s no debating the fact that bought-and-paid-for insurance protection is far better than the ‘best buy’ that was never bought.

Mortgage brokers and agents own the ‘magic moment’ that may well make the difference between a family having mortgage-free home, or losing it all together. “ CMP

Top: Buzz Grant Bottom: Yousra Jomha

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Guide

Negotiation

Secrets of

negotiation Customers rely on mortgage brokers to negotiate a better deal with the lender than they could on their own.

But how effective are your bartering skills? Our sister publication MPA finds out

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J

udging one’s ability as a negotiator is a difficult task, according to Matt Lohmeyer, who teaches the Advanced Negotiating Skills Program for trainer Scotwork Australia.

“In that regard, negotiating skill is a little like driving skill,” he explains. “You ask anyone if they are an above average driver and 80 per cent would say yes. You get the same result when asking about negotiating. Clearly, that just doesn’t add up. We all negotiate all the time, but we don’t actually have a benchmark as to how well we’re doing.”

Built just for you Together we have all the tools To ensure your clients get the most comprehensive coverage in one title insurance policy, take a look at ®

1

the TitlePLUS Program.

PROTECTION AS GOOD AS IT GETS

1-800-410-1013

titleplus.ca

1

Please refer to the policy for full details, including actual terms and conditions. The TitlePLUS policy is underwritten by Lawyers’ Professional Indemnity Company (LAWPRO®). Contact LAWPRO for brokers in Manitoba, Alberta and Québec. TitlePLUS policies issued with respect to properties in Québec and OwnerEXPRESS® policies do not include legal services coverage.

®

Registered trademark of Lawyers' Professional Indemnity Company.

Guide

Negotiation

For mortgage brokers, negotiation is a key part of the job. Customers rely on mortgage brokers to not only help them secure a loan, but to get the best possible deal on their behalf. People often confuse persuasion and haggling with negotiation, but according to Lohmeyer, there is a difference.

“Persuasion is about debating, challenging and working to get the other side to accept your point of view,” he offers. “With persuasion, the other side is really not getting anything back in return.”

Haggling, on the other hand, is a contest over one thing. “What do we haggle about most? Usually price. It’s not a trade or an exchange. And the more I have, the less you get, it’s very competitive.

Negotiation differs from both persuasion and haggling in that it is a trading game. “So in order to negotiate effectively you need to understand what’s important to the other side, what their internal constraints are – and what their drivers are. The secret then is to work out how best to address those drivers and meet those needs, to make sure you really hit the spot with your proposal. If you can do that without being greedy, you will get a deal that both sides are happy with.”

According to Lohmeyer, negotiating is both an art and a science. While there’s an art to engaging with the other side and presenting your proposal effectively, he argues that there is also a strong structure to the way that negotiations work. “Like anything, negotiation can be learned. Some people are naturals, but that could be because they learned their craft in an environment where that’s the way things were done.”

Scotwork’s course on negotiating identifies eight crucial steps to a negotiation process: prepare, argue, signal, propose, package, bargain,

“ one of the tenets is that most people underestimate the power they have in a negotiation. While it may appear that the banks have all the power and the brokers are really struggling, there is something that lenders really need and want – access to clients ”

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“ persuasion is about debating, challenging and working to get the other side to accept your point of view. With persuasion, the other side is really not getting anything back in return ” close and agree. And within each step, there are several core principles and rules that make up the key aspects of any successful negotiation.

The intensive course is being taught internationally, and the skills have been adopted by large corporations worldwide.

While applicable to large organizations, the skills are equally valuable to small businesses.

Lohmeyer notes that mortgage brokers can negotiate effectively with large or small lenders.

“One of the tenets is that most people underestimate the power they have in a negotiation. While it may appear that the banks have all the power and the brokers are really struggling, there is something that lenders really need and want – access to clients. Don’t underestimate the power that you have in negotiations and it should be part of your preparation to work out with whom you have the most leverage. You have to find your power at the table.”

Common Mistakes Failing to prioritize your objectives – prior to entering a negotiation, you should define what outcomes you would like to achieve, what you must achieve and what you wish to achieve.

Arguing to win – avoid interrupting, point scoring and sarcasm, and above all be constructive in your arguments.

Missing signals – be cognizant of signals from the other side such as qualifying words, which are characterized by a change in language from absolute statements to qualified statements.

Signals are welcome, as they indicate flexibility.

Being unrealistic – A realistic proposal should be credible, address the key issues, and meet the other party’s limit of what they must achieve.

Giving not trading – the fundamental rule in negotiating is to trade. You should always have an answer to the question – what did you get in return? CMP

Security and service in the right combination

Stewart Title has become one of the largest, most reliable title insurance companies in the world.

With experienced underwriters, Stewart Title can provide unsurpassed customized policy coverage for both residential and commercial transactions. Add to that our history of paying claims in a fair, ethical and timely manner, and you’ve got the Stewart Title difference.

At Stewart Title, we know it’s our relationship with our clients that determines our success. That’s why service is the foundation of our business and integrity, the keystone in all our dealings.

1-888-667-5151 or www.stewart.ca

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Every day of every month CMP and Mortgagebrokernews.ca delivers top quality, relevant content that independent mortgage broker professionals use to improve their business – no filler – no fluff.

Maximize your marketing ROI with the leading independent voice of the mortgage brokering industry.

Contact.

Scott Clarke 416 644 8740 x 237 scott.clarke@kmimedia.ca Trevor Biggs 416 644 8740 x 236 trevor.biggs@kmimedia.ca

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Insight

the hard truth With financial literacy education still struggling to gain traction, one DLC broker is doing his best to educate one client at a time

K

evin Cochran knows about the importance of financial education from personal experience and that’s why he’s spearheaded a financial literacy program recently launched through Dominion Lending Centre brokers.

The EnRICHed Academy’s “Smart Start for Financial Genius” program is a five-DVD set and workbook, designed to educate young adults and their families on the fundamentals that build wealth.

“I was a victim of the system, as many students were, but luckily I was able to work my way through all those challenges and I’m in a much better place than I was,” Cochran, who is DLC’s regional director for Ontario, told CMP. “Unfortunately, money management is something students are going to learn one way or another, but most people learn it the hard way.

“No one is taking responsibility to fix this problem, so that’s what we wanted to do with this,” said Cochran. “The truth of the matter is that most kids can’t save money because their parents can’t save money.”

He said the videos teach families everything about money that they’re never taught, like compound interest, Beacon scores and how to buy their first investment property.

In addition to the DVDs and workbook, DLC agents will also be offered the opportunity to become certified EnRICHed Academy presenters.

“In January of 2012, we will be launching a speaker training series, where agents will be able to go into their local communities to speak Kevin Cochran about financial literacy to students and families,” said Cochran.

The reception from DLC broker and agents has been encouraging so far, according to Cochran. “I’ve never seen a response like this from DLC agents before.

They are so excited to spread the message.

We’re fortunate to have such a great network of people that we can leverage this program through. ” CMP

“ unfortunately, money management is something students are going to learn one way or another, but most people learn it the hard way ” mortgagebrokernews.ca

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Business Marketing

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Business

Marketing

In the fourth instalment of his latest series, Doren Aldana walks you through the first of seven steps for building a strong, profitable partnership with top-producing Realtors

Realtor marketing secrets I

n my last article, I talked about the eight unique advantages of working with top-producing Realtors and the six important criteria for determining if they qualify to work with you. As you might expect, this kind of relaxed, confident posturing only works if you have a powerfully compelling, unique value proposition that Realtors actually want and need. If you haven’t noticed by now, touting “great rates” and “great service” ain’t gonna cut it. As I said before, you need to position yourself as an irreplaceable, indispensable asset on their team.

Sec ret No. 4

If you don’t have a clear, concise, well-articulated unique selling proposition, you are by default, a replaceable commodity.

Today’s Realtors are looking for a mortgage professional with more than just great rates and excellent service – that’s a baseline expectation. They want someone who understands their biggest challenges and is willing to go the extra mile to deliver unique solutions.

Now, the question begging to be asked is, “What is the No. 1 biggest challenge every Realtor faces?” No, it’s not that they need better financing options, lower rates, snazzier feature sheets or a better economy. The single most important factor to their success in any market is their ability to attract quality listings and sell them fast at top dollar. Period. That’s it. As simple as that sounds, very few Realtors ever unlock this mystery. The rare few who do, become the envy of the entire industry, enjoying an income most only dream about.

What if you–the mortgage professional–could address this No. 1 challenge by providing your Realtors with a selection of highly effective tools, systems and templates, specifically designed to help them attract more quality listings and sell them fast, for top dollar?

Would that set you apart from the pack? Would that give you a greater position of strength? Would it make you irreplaceable?

You better believe it.

In fact, if you’re able to provide this kind of unique value, you’ll have Realtors banging down your door to do business with you and endorse you to all their clients.

What a refreshing change that would be.

Comp ile a

Top 10 0 Realt or list

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Business Marketing

Now, let me walk you through the first of my seven steps for building a strong, profitable partnership with top-producing Realtors.

STEP 1: Compile a “Top 100” Realtor list Instead of just prospecting a few Realtors and hoping for the best, I recommend using the Law of Large Numbers to tip the scales of fortune in your favour. For example, let’s say your goal was to attract four key Realtor partners. In that case, if all you had was a list of four Realtor prospects, the likelihood of converting 100 per cent is pretty low -- if not impossible. Not to mention the fact that these Realtors still need to be qualified to determine if they’re the right fit or not. On the other hand, you can increase your chances of success by expanding your prospect universe and compiling a Top 100 List of award-winning Realtors to market to.

Here are a few tips for compiling your “Top 100” Realtor list: First, create a Warm List of all the Realtors who already know you, like you and trust you. They might already be sending you referrals but perhaps you want to cultivate those relationships so you can attract even more referrals more often. If you have an existing database of “warm” Realtor contacts, you can export it as a CSV file in an Excel spreadsheet.

Most CRM software programs allow you to export your data in this format.

Second, compile a Cold List comprised of award-winning Realtors in your area who don’t know you yet – that’s why we call it a “cold” list.

The reason why you want to start proactively targeting “award-winning” Realtors is because top producers tend to have a lot more listings (buyer bait), more buyer clients and more client influence, all of which culminate in more capacity to send you more quality referrals. The way I see it, if you’re going to court Realtor partners, you might as well go after the “Big Dogs” who can make the biggest impact on your bottom line.

Believe it or not, it’s actually quite easy to find and compile a list of award-winning real estate agents in your area. All you have to do is search in Google using the following keyword terms: The real estate company you want to target, the word “awards,” the year they won the award and your city. For example, you might search for something like, “Re/Max Awards 2011 Vancouver.” If you do a search in Google for those keyword terms, you’ll come up with a

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whole bunch of award-winning Realtors who work for Re/Max in Vancouver and won awards in 2011. So go ahead and do this for your particular search parameters and then compile your database of those Realtors.

If you’re using an Excel spreadsheet to compile your data, be sure to organize your contact data into separate columns. For example, have a separate column for their first name, last name, company name, street address, unit number, city, province, postal code, phone number, fax number, email address, etc. Having all of this data organized into separate columns will make your life a lot easier when it comes to starting a direct mail campaign.

As you can imagine, unless you’re an administrative wizard, all of this research and data compilation is about as much fun as getting a root canal – it’s extremely timeconsuming, mind-numbing work. However, you’ll be glad to know there is an easy, costeffective alternative: delegate it to an assistant.

If you don’t have an assistant, you can easily hire someone on Elance.com to do this for you for under $50. Why subject yourself to all that unnecessary drudgery when you can hire someone in a lower-wage country to do it all for you? This is a no-brainer.

To make this even easier for you, here’s a sample Elance ad that you can customize:

Name of job: WANTED: Data Entry/List Compiler Ad text: Fast, efficient, accurate list compiler sought for a mortgage company wanting a list of award-winning real estate agents in the (insert your city) area. Based on the keyword parameters given, you will need to pull the agents’ contact info from their website and compile it into an Excel spread sheet with each data type separated into its own separate columns (i.e. Name, Last Name, Company, Address1, Address2, City, Zip, Phone, Fax, Email, etc.). This project would entail providing us with full contact information for 100 award-winning Realtors. Are you the superstar list compiler we’re looking for? We are ready to award this job immediately. Future projects available!

Job Type: fixed price Category: Admin à Data Entry Skills: Data Entry, Microsoft Excel, Typing

Business

Marketing

“ what if you–the mortgage professional–could address this No. 1 challenge by providing your Realtors with a selection of highly effective tools, systems and templates, specifically designed to help them attract more quality listings and sell them fast, for top dollar? Would that set you apart from the pack?

Would that give you a greater position of strength? Would it make you irreplaceable? ” Once you have your Top 100 Realtor List compiled, the next step is to deploy an effective, multi-step, multi-media marketing campaign that grabs the Realtors’ attention, piques their interest, and inspires them to want to meet with you. As you can imagine, this is a lot easier said than done. However, if you have the right approach with the right value proposition, you should be able to book at least 15 face-to-face meetings and attract four quality referral partners from your original list of 100 prospects.

Remember, it’s not about quantity; it’s about quality. For example, if your average commission per deal is $2,100, all you need is just four Realtors who send you an average of one measly referral per month to add an extra six figures to your annual income.

That’s why I recommend working with just a few quality, committed partners instead of spreading yourself thin trying to work with dozens of half-hearted, lukewarm prospects.

It’s all about going narrow, deep and rich instead of wide, shallow and poor.

In my next article, I’ll walk you through steps two and three of my seven-step formula for building strong, profitable partnerships with top-producing Realtors. You’ll learn how to use direct mail to stand out from the clutter and generate interest. I’ll also show you how to followup by phone with confidence and grace, which ultimately leads to booking more face-toface meetings. You’ll get the exact words to say and how to say them. Stay tuned…

About the Author: Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free online workshop on “How to Turn Your Realtors’ Listings into a Flood of Red-Hot Mortgage Leads,” visit: www.UltimateRealtorMarketingSystem.com.

CMP

mortgagebrokernews.ca mortgagebrokernews.ca

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profile PROVIDER

At Peoples Trust, every deal and every broker is treated on an individual basis, making for a relationship that benefits all parties, including the borrower

thinking outside the box L

iving with boxes can be constraining, especially if you do all thinking inside of one. That’s why at Peoples Trust Company, every deal is custom-made to meet the requirements of each customer.

“We’re not a formula lender, we look at each deal on an individual basis,” says Michael Lombard, Vice President and Regional Manager at Peoples Trust. “We don’t put them in boxes, we look at a deal on its merits and structure deals on what makes sense for us and the borrower.”

As a niche player, Peoples considers itself an adaptable and service-driven operation.

“Because we’re a small, flat organization, our approval lines and therefore approval times are very quick,” says Lombard.

The equity and commercial lender has been in business for more than 25 years and as a federally regulated lender, operates across Canada in every province and territory.

“We’re held to a higher standard because of that federal regulation,” says Lombard, adding that “it ensures the highest type of financial and operating compliance.”

On the commercial lending side, Peoples has a number of different business lines, including CMHC-insured, as well as both conventional term and construction financing. They also specialize in short-term financing, says Lombard.

“It’s something we do quite a lot of. For example, someone has a property that has to be repositioned, so we do a short-term, interest-only loan on an acquisition like that and sometimes assist with the cost of the renovations and then when the property is stabilized, the purchaser is able to get more conventional-type financing.”

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“ we’re not a formula lender, we look at each deal on an individual basis. We don’t put them in boxes, we look at a deal on its merits and structure deals on what makes sense for us and the borrower ” That type of flexibility is something that appeals to the brokers Peoples works with, says Lombard.

“We have a number of brokers with whom we’ve had long-term relationships with and that’s because of the service level we provide and the fact that we respect the broker relationship with the customer and don’t interfere with that. Brokers appreciate that.”

The level of service provided also strengthens the relationship with brokers.

“Because we do commercial deals, the broker approach to us is not electronic,” explains Lombard.

profile

PROVIDER

“ there’s nothing that slows down the process more than not having as much information as you can possibly have or not having a clear understanding of the deal or the borrower ” “Most of our brokers pick up the phone and say, ‘This is the deal I’ve got. Does it make sense and can I send you some information?’ It’s not a situation where your deal is sent through a channel and reviewed by an analyst, at Peoples you’re dealing directly with the underwriters.”

With predictions swirling around about the future of the economy in 2012, Lombard believes Peoples Trust is well-positioned.

“Our business model hasn’t really changed from last year. We expect the real estate market to remain strong and we expect to continue to operate in our main spheres of CMHC-insured and conventional business. We also expect pricing to remain competitive and we’re up-to-date with current market pricing and where we need to be to be competitive, but we don’t see any major changes to the market next year.”

Expectations of the brokers Peoples deals with are rather straightforward, according to Lombard: understand the deal.

“There’s nothing that slows down the process more than not having as much information as you can possibly have or not having a clear understanding of the deal or the borrower.” CMP

Michael Lombard

License #11127

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Profile Brokers

Building a successful brokerage takes time and effort, but for Darick Battaglia, it shouldn’t take away from important time spent with family

The

family guy S

ome would say a good brokerage is like a family. Darick Battaglia would agree, but for him, his real family always comes first.

The owner/broker of Dominion Lending Centres-YBM Group in Barrie, Ont. says spending time with family, which includes three children, is his first priority and while finding that balance between his work and home life isn’t always easy, it’s definitely worth it.

“I spend a lot of time nurturing family,” he says describing how the family attend karate classes together. Battaglia and his eldest son have earned their black belts, while his other son will soon and his daughter also studies. Add to that hockey, soccer, dance and skating and it’s no wonder he and his family don’t take as much vacation time as some others.

“We maybe don’t take as many holidays as some families, but we find the time to be together,” he says. “We participate in everything as a family. We’re trying to find that balance and so far it’s been working pretty well.

“You have to find those kinds of activities that promote that balance, like karate, where we are all together and can participate as a family, which is a bonus.”

Battaglia, in addition to being a licensed mortgage broker also balances other designations such as a real estate broker, certified Canadian Residential Appraiser and has completed the Canadian Securities Course. He is also a founding branch member

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“ have a long history of real estate education and construction knowledge that I bring to each deal,” he says. “And that knowledge is shared with each client ”

of Canadian First Financial Centres, which provides financial planning and insurance products through a network of top mortgage brokers. To ensure that he is kept up-to-date on industry changes, Battaglia says each professional designation requires its own ongoing continuing education requirements.

“I have a long history of real estate education and construction knowledge that I bring to each deal,” he says. “And that knowledge is shared with each client.

“My passion for knowledge and ensuring my agents and clients receive the most I can offer is paramount. My last 10 years as a mortgage broker have been very satisfying and I have enjoyed being on the leading edge of creating new and innovative ways to add value to both my agents and their clients.”

Diversification is definitely the way to go in Battaglia’s opinion and he practices what he preaches.

“We’re going to be getting into real estate in a big way in 2012. I’ll be leveraging that real estate broker’s licence to be able to obtain mortgage leads.”

Battaglia also leverages marketing in unique ways to increase his brand and his business in southern Ontario, namely the “Great Mortgage Giveaway.”

“The response has been good and it helps to drive new originations for our agents.”

The sweepstakes, sees YBM give away one prize valued at up to $1,000 per month

Profile Brokers

for a period of 12 months or one year. The contest is largely open to customers who apply for and get their residential mortgages approved during a five-month period when the contest is open.

The initiative is similar to an increasing number of broker giveaway campaigns meant to capture new originations in a slowing market. The contest helps to better market the brokerage in their community, while at the same time, giving YBM Group’s agents a tool to create dialogue with leads.

Quantifying the success of those campaigns can be hard, say marketing analysts, often skeptical of the benefits of giveaways tied to big-ticket purchases – homes and cars. Their ambivalence hasn’t necessarily quelled Battaglia’s interest, although a more extensive campaign – capitalizing recently on DLC’s use of Don Cherry as spokesman and open to anyone – is also part of his strategy.

No purchase was necessary under the “Where’s Don Campaign,” he said, and a random winner was selected from entries submitted online. Participants, in fact, went on the web to report the location of life-size cut-outs of Cherry scattered across Barrie by YBM. Each was then eligible to win a pair of high-end hockey skates or reimbursement for the cost of registering a child in a sports/ athletic program up to $650.

It was relatively small prize with a potentially big payoff for the YBM brand, said Battaglia. It also piggybacked on of the buzz created by DLC’s national campaign.

“It helps to create goodwill for the brokerage in their community,” he says.

Building the relationships with clients and building up the referral side is key, says Battaglia but making sure people are aware you’re out there is also important,” so you still need to advertise.

“I don’t find a lot of business comes from advertising in the media, but it does get your brand recognition, which is important.”

Recognition is great, but you have to have substance to fall back on. With more than 60 agents and still growing, Battaglia is serious about ensuring his new agents have the right tools and training.

“Ultimately, they have to be a sales person, but we provide a strong mentorship

“ it was very easy to get business back then and the last year or two has been very humbling.

We’ve had to go back to basics and re-embrace marketing and technology and come out with a stronger model that includes more services such as financial planning and real estate ”

program as well as central underwriting.”

YBM Group has three designated senior mentors in the office who are assigned to new agents.

Battaglia’s brokerage also creates a culture of family, where ideas are shared at monthly sales meetings.

“We want everyone to be able to put food on the table for their families and have a good life,” he says. “But it’s also making sure they’re available when needed. We’re in sales – you have to answer your phone.”

In business since 2001, Battaglia recalls how the business has changed since the recession.

“Three or four years into the business, I can tell you that the phone was ringing off the hook. The banks weren’t discounting their rates, they were basically offering their clients posted rates and we were usually one per cent lower.

“It was very easy to get business back then and the last year or two has been very humbling. We’ve had to go back to basics and re-embrace marketing and technology and come out with a stronger model that includes more services such as financial planning and real estate.”

That model doesn’t include competing on rate, says Battaglia. His multi-faceted operation gives him the opportunity to create a situation where clients see the benefits and savings of using his services.

“You have to start at the top of the food chain and control the client from the start so they won’t leave. If you’re giving them more services and added value there is no reason for them to go anywhere for 20 bps if you can show them that you can save them more money by staying with your group of products.”

Battaglia can pool commissions together from the different products he offers and save clients money by offering discounts as they use more of his services. It’s a direction he sees the industry heading.

“You can’t just get your licence and expect people are going to come to you anymore,” he says. “You have to spend a certain amount of time and money to get your business off the ground and continue to invest as you move forward. CMP

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Profile Insight

Halifax-based mortgage broker Brad Compton has set out to try a new way of doing business – managing your book from another province

Testing the waters A

n aggressive agent is now embarking on an experiment, which, if it works, could inspire a sea-change in the way brokers position themselves in – or rather, outside – of their markets.

“I moved to Halifax a couple of months ago, but all of my business is in Toronto and it will continue to be my primary market,” Brad Compton, an Invis agent and principal at YourLowMortgage.ca, told CMP. “My thinking was that as long as you’ve built up a solid business and reputation in a market and can continue to service those clients and referral sources then it Brad Compton should work. It has so far.”

The former financial analyst spent the last five years building a solid book of business now paying dividends in renewals, referrals, and switches.

Almost all of that business is now 1,792.6 km away from Compton’s current address. He returned home to Halifax this fall after 12 years in Toronto.

While brokers are increasingly working expanding markets using the Internet, Compton is one of the first to work his primary portfolio from a different province.

He is now relying on online lead generation through his own website as well as Skype and other Internet communication technologies to manage and, indeed, grow his Toronto portfolio. Still, he hasn’t entirely abandoned his on-the-ground presence in that market.

“I will be go back to Toronto each quarter to meet face-to-face with clients where necessary and I also maintain offices there and have colleagues to meet with clients also when necessary,” he said. “But I will be doing most of communication with Toronto clients and referral sources from here in Halifax.

Compton will also focus on building a portfolio of business in his new market, although a price differential between the two markets means growing his Toronto business will remain a priority.

Regardless of the outcome of his experiment, brokers are already moving to capitalize on an internal trade agreement making it easier for brokers to get licensed in another province. Nova Scotia is not part of that agreement, although Compton is dually licensed.

Still, most Ontario brokers now seeking additional licensing outside the province are looking to Alberta, not Atlantic Canada. And unlike Compton, they’re looking to stay put in the GTA physically and figuratively, according to numbers from Ontario’s regulator.

That might change if more are prepared to harness Internet tools to gain mobility, said Compton. CMP

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Profile

Favourite Things

Brian Marling, AMP + Mortgage Agent, Neighbourhood Dominion Lending Centres + Newmarket, Ont.

Sport Hockey

Favourite Things Drink Perrier

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Book The Bible Vacation Spot: Italy

Movie The Shawshank Redemption

Food Indian/Pakistani

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Guest Column

Work smarter, not harder Top performers from all walks of life seek out qualified advisers who can provide them with guidance, says Doren Aldana, and mortgage brokers shouldn’t be any different

A

fter coaching hundreds of mortgage professionals over the past seven years, my coaching philosophy has evolved dramatically.

I’ve come to realize that success doesn’t have to be complicated. In fact, it can be – and often is – quite simple. Not easy, but simple. Essentially, you can boil success down to this simple four-step formula: Vision + Plan - Constraints + Massive Action = Success.

The first step to achieving anything significant in life is to know exactly what you want and why you want it. Reasons come first, answers come second. In other words, you’ve got to have a fire in your belly to accomplish something meaningful in your life. I call that vision. But just having vision, in and of itself, isn’t enough. You also need a strategic plan for achieving your vision with the least amount of time, energy and money.

But that’s still not enough to ensure success.

You also need to reduce or remove the constraints that are holding you back. For example, let’s say you needed to get to the airport to catch a flight.

It’s not enough just to know where you’re going and what route to take on the map; you also need an efficient vehicle to get you there. If your vehicle is too slow or broken down, chances are you’re going to miss your flight.

Likewise, when it comes to achieving your goals, you need to develop a plan that takes into account the specific constraints that are slowing you down or holding you back. For example, a constraint could be a lack of clarity, lack of focus, lack of systems, lack of confidence, lack of leverage, etc. Allowing any one of these constraints to persist unchallenged is like leaving the emergency brake on in your car – it helps if you want to stay stuck, it hinders if you want to succeed. That’s why it’s so critical to diagnose these issues early and often, so you can quickly

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remove the resistance and therefore accelerate your speed to success.

Once you uncover your powerful vision, develop a solid plan, identify and eliminate – or at least reduce – your constraints, then there’s only one more step between you and success: massive action.

The more action you take – provided it’s the Doren Aldana right action – the more results you’ll get.

The reason I believe coaching is so important to the mortgage industry – now more than ever – is because it’s very difficult, if not impossible, to navigate through these four steps effectively on your own. The nature of being human is such that we can’t see our own blind spots. We’re too close to the action. That’s why top performers from all walks of life – from professional athletes, to celebrity entertainers, to business moguls – intentionally seek out qualified mentors, coaches and advisers who can provide them with the added guidance, insight and accountability necessary for competitive greatness.

As the mortgage industry awakens to the compelling advantages of coaching, there seems to be an increasing demand, not only for competent coaches, but also for done-for-you marketing solutions. This may be due to the fact that astute mortgage professionals are always looking for proven systems so they don’t have to waste their valuable time and money trying to reinvent the wheel. One of my favourite mottos is, “Never invent, always improve.” If someone else has already invested the blood, sweat and tears to develop a proven system, why bother trying to create one from scratch? After all, when you go to the bank to cash your cheques, the bank doesn’t give out extra brownie points for the effort expended. So you might as well work smarter, not harder. CMP

service directory

Banks

MCAP www.MCAPBROKER.com Ph: 1 866 289 7389 Page 27

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

Mortgage Protection Plan www.mppbroker.com Ph: 1 866 677 4677 Guide Inside Front Cover

Stewart Title Guaranty Company www.stewart.ca Ph: 1 888 667 5151 Guide Inside Back Cover

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

HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 31

National Bank www.nbc.ca Ph: 1 888 483 5628 Page 39

Title Plus www.titleplus.ca Ph: 1 800 410 1013 Guide Page 15

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

Non-Bank Lenders

Capital Direct www.capitaldirect.ca Ph: 780 868-0550 Page 12

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

The Money Source www.mymoneysource.ca Ph: 416 699 2274 Page 55 Commercial Lenders

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

Equitable Trust Company www.equitabletrust.com Ph: 1 866 407 0004 Page 23

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

Insurance

Firm Capital www.FirmCapital.com Ph: 416 635 0221 Page 14

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

Home Trust www.hometrust.ca Ph: 1 877 903 2133 Page 7

Canada Guaranty Mortgage Insurance Company www.canadaguaranty.ca Ph: 1 866 414 9109 Page 25

Canada Mortgage and Housing Corporation www.cmhc.ca Ph: 1 888 463 6454 Page 35

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

Home Loans Canada®

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

Mortgage Architects www.mortgagearchitects.ca • Ph: 1 877 802 9100 Page 37

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

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service directory

RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 21

Teranet www.teranet.ca Ph: 1 866 237 5937 Page 45

The Lions Share Group www.lionssharegroup.com Ph: 1 866 726 5159 Page 29

Real Estate

Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 28

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

Technology & Software

HV Mortgages www.gregmartelcoaching.com Ph: 250 477 7555 Page 17

Services

Best Points Travel www.bestpointstravel.com Ph: 1 800 551 8786 Page 48

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

Reach your target market with affordable advertising solutions

For service directory listing please contact Trevor Biggs: trevor.biggs@kmimedia.ca

Please contact Trevor Biggs at 416-644-8740 x236 trevor.biggs@kmimedia.ca

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