CMP 7.2

SURVEY Brokers to turn challenges into opportunities

february 2012 / issue 7.2 / $6.95

PROFILED People come first for Steve Whitehead MARKETING Break through the clutter

ready for

Commercial market set to soar page 34

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Guide 12

contents / issue 7.2

INSIDE

Brokers react to FirtLine BFS cut

guide to insurance

22

cover story

cover story

34 | Ready for takeoff While residential real estate continues to slow, more and more brokers are looking to an improving and even hot commercial market as a way to build business. CMP spoke to some brokers and lenders in this space and they are 32 What does the future hold? all in agreement that commercial deals are on the upswing From the worsening economy to growing competition from big banks, the mortgage Nichehurdles brokering industry 48 has|many ahead for 2012. CMP a slowing real estate market with talked toIn various brokers and lenders and asked traditional sources drying up, them what they seereferral as some of the biggest brokers need look—for different challenges for the NewtoYear and more markets nichesthem in order grow importantly, how or to meet headtoon their business

8 | NewsIn&CMP Comments ’s continuing FEATURES • Brokers to BMO: series of guides, we 54 | Beating the Banks Thank you? look at the business of As part of its annual • Top broker: ALLand the year-end survey, Dominion insurance brokers will need to growing possibilities it Lending Centres polled its buy down presents to brokers. network in December to • Consumers toit is find out what brokers from Whether brokers: What do you across the country feel are understanding how do? mortgage insurers are their greatest challenges • Builder: Do not use for 2012. Cindy Freiman dealing with recent mortgage brokers rule changes or simply reports on what they plan • Broker: Treat new knowing what to tell to do to overcome these agents like new challenges and turn them clients about title specialists insurance, this guide is into opportunities • Mixednot reviews for to be missed.

60 | Finance strategy alternative to Realtor when credit is tight referrals In the latest feature from • Brokers react to our sister magazine FirstLine BFS cut Canadian Real Estate Wealth, Peter Mitham 24 | News Analysis: explains how you can get The Big Story: A access to finance for your compilation of the top property investment clients quotes from our weekly despite the hurdles, as multimedia broadcasts on issue lenders continue to tighten MortgageBrokerNews.ca their criteria

7.

01 7.2 issue

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contents / issue 7.2

Australian brokers to competition watchdog: ‘Get rid of mandatory memberships’

28

70

Twitter.com/ CMPmagazine Like Us on Facebook Canadian Mortgage Professional

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23/12/2011

11:37:57 AM

profiles

columnS

70 | Broker Having spent most of his career in Atlantic Canada, Steve Whitehead’s decision to help expand TMG in the region was one grounded in belief and knowledge

78 | Guest While reverse mortgages are growing in popularity, broker Dustan Woodhouse cautions that it’s important for seniors to be aware that there are other options available

72 | Insight At The Mortgage Centre Canada, long-term strategic partners are helping it to grow and, in return, it supports them through dedicated services, allowing brokers to establish themselves in their communities 74 | Provider Meridian Credit Union is rolling out the red carpet for brokers looking for a new home for their BFS clients, as other lenders have cut back on their programs

regulars 28 | International News 32 | This time last year 76 | Favourite Things 79 | CMP Service Directory

18

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.

contents / Editor’s letter

Something new You may have noticed this month’s CMP has a slick new look and we’re also working hard to bring you more tools that are useful for your business. We will also be incorporating data and features from our sister titles Canadian Real Estate Wealth and Your Mortgage.

Your feedback is always appreciated, drop me an email on the address below to let me know what you think of the new-look magazine and what else you would like to see in your favourite mortgage mag.

In this issue, we also asked some brokers and lenders what they see in the commercial space in the year ahead. Almost unanimously, they said the opportunities for growth in the commercial market in 2012 are brighter than they’ve been in years.

“My early opinion is that this is busier already than it was last year,” said Kitchener, Ont.-based broker Dale Bilton.

Scott Ede in Calgary agreed “I’m excited with what we’re seeing. Our desks are absolutely full right now and there isn’t one of us wishing we didn’t have someone else to help us.”

Optimism is espoused by others in the industry in this issue as well, as Steve Whitehead of TMG talks about his decision to join TMG and expand the company’s reach in Atlantic Canada and Tim Rye of The Mortgage Centre discusses the strengths that unique partnerships bring to their members.

Also in this issue is more news on the inaugural Mortgage Summit, presented by Home Trust (page 12). The conference program’s 27 sessions, led by top industry professionals and fellow brokers, will address the top concerns of brokers in Canada. For all the latest information visit: www. themortgagesummit.com.

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.

COPY & FEATURES Editor John Tenpenny Associate Online Editor Vernon Clement Jones SUB-EDITOR Rachel Naud

ART & PRODUCTION Design Production Manager gRAPHIC dESIGNER

SALES & MARKETING

NATIONAL SALES MANAGER Trevor Biggs SALES MANAGER, Mortgagebrokernews Scott Clarke Marketing and Communications Julia Comitale PROJECT COORDINATOR Jessica Duce

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

Editorial enquiries john.tenpenny@kmimedia.ca Advertising enquiries trevor.biggs@kmimedia.ca Subscriptions tel: 416 644 8740 • fax: 413 203 8940 subscriptions@kmimedia.ca KMI Publishing 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 mortgagebrokernews.ca Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as CMP magazine can accept no responsibility for loss.

SURVEY Brokers to turn challenges into opportunities

Cheers. february 2012 / issue 7.2 / $6.95

ready for

connect

4 | mortgagebrokernews.ca

PROFILED people come first for steve Whitehead MARKETING Break through the clutter

John Tenpenny, Editor

Contact the editor: john.tenpenny@kmimedia.ca

Angie Gillies Alicia Chin

Commercial market set to soar PAGE 34

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Quotables

“I’m excited with what we’re seeing. Our desks are absolutely full right now and there isn’t one of us wishing we didn’t have someone else to help us. Everything from hotels to convenience stores are on our plate, and you really get to pick and choose.”

Scott Ede, discussing the commercial market for mortgage brokers Page 34

“You have to give people an environment and a place where they can excel, a place where they want to belong, an opportunity for them to grow, and a place where leadership is engaged with them to help them develop.

People are always looking for opportunities, but you also have to be there to help challenge them to reach their goals.”

Steve Whitehead, on how people are the key to any mortgage business Page 70

“It’s important that seniors and those approaching retirement age are aware of the full spectrum of products available to them so they’re not blindly opting for a reverse mortgage that can quickly eat away at their equity.”

Dustan Woodhouse, cautioning seniors to consider other options when it comes to reverse mortgages Page 78 6 | mortgagebrokernews.ca

as canada’s leading alternative mortgage lender, Home trust company has been opening our doors to brokers for over 25 years. our dedicated underwriting team along with our wide range of financial products are the keys to success that can close even your most difficult deals. Whether your clients are self-employed, new to canada or recovering from bruised credit when your next opportunity knocks, Home trust will answer.

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News / industry

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

?

Brokers to BMO:

Thank you “I didn’t lose a single deal to BMO because of that rate, but it did prompt a lot of clients who were sitting on the fence with pre-approval to get off the fence and to make the purchase,” Ray McMillan, a broker with Home Mortgage Consultants Inc. in Mississauga, told MortgageBrokerNews.ca. “I stop short of thanking BMO, though.”

He’s not alone, with several brokers reporting relatively brisk demand from pre-approved and new clients following the big bank’s introduction of its no-frills five-year fixed, offered at the lowest rate in Canadian history.

Brokers have been shut out of that product, igniting fears that it would undercut sales at what is usually the slowest month for originations. That simply hasn’t happened, with the tide of media attention BMO has been receiving over the last several weeks lifting the boats of brokers and other banks, alike.

Mortgage professionals have increasingly channelled client interest into four-year terms offered at the same 2.99 per cent. Those alternatives come loaded with

8 | mortgagebrokernews.ca

Brokers are coming as close as they can to, ahem, thanking BMO for that trendsetting 2.99 per cent rate – credited for a January boom

the features that the BMO mortgage lack, say brokers, pointing to available 30-year mortgages and 20 per cent prepayment privileges, among other benefits.

McMillan hasn’t gone that route, continuing to advise clients to stick with the five-year term, even at a higher rate.

It’s worked, he said, but also has the fact that the underwriting for the BMO product has been very conservative.

“Fewer people are qualifying for that rate,” he said.

If “educating” your client is about showing them apples-to-apples comparison on interest savings, then I find it hard for any client to say no to $890 or $1,860 payments difference on a typical $300,000 mortgage with a 10 or 20 bps respective rate difference for a five-year term and 25-year amortization. Value is a thin thread to hang on to. Clients expect that brokers should already come to the table with product knowledge and advice (the value) that could be help them save the most money on their mortgage given their situation. So, if two mortgage products are the same and one has a lower rate, is Ottawa Broker saying he can steer his client away from saving money because his “value” should come at a cost to the client. Where is the education in that?

D. The BMO rate helped me snag some “on the fence” clients who simply needed a push from all of this hype and me to tell them exactly what BMO was up to. Wow my clients actually got it. Allow me to thank BMO.

Ottawa Broker

It is not about rate. I regularly have clients that stay with me even though another broker or bank can beat my rate. Why? Because I am a part of my client’s financial future and I educate my client’s so they can look at more than just rate. If Stella only sells rate, there is always another broker or bank rep that will undercut her. Sell value, not rate.

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If you’re a mortgage originator, that kind of thinking isn’t going to keep you in the business very long. Any bank branch will beat your rate any day. You need to show the long-term value. Become a trusted adviser, help them with their long-term financial future. Don’t be a mortgage cashier. Any mortgage specialist can do that.

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News / industry

CMHC agreeing with brokers?

A new report is backing up a broker beef, confirming consumer credit card debt has significantly outpaced mortgage growth.

“Consumer credit, which makes up the remainder of household debt, grew at a faster rate than mortgage debt in the last two decades,” reads the 2011 Canadian Housing Observer, a comprehensive CMHC report on the state of Canadian.

Specifically, total household credit debt increased by 5.5 per cent between 1991 and 2000 and by another 9.3 per cent in the 2001-2010 period.

That’s in stark contrast to mortgage debt, according to the government agency.

The proportion of residential mortgage debt to household debt was fairly stable during that 2001 - 2010 period, fluctuating between 69.0 per cent and 67.7 per cent.

The difference highlights the “real threat” to the economy, charge brokers suggesting the government has been too focused on tightening mortgage rules and not enough on controlling the way banks

provide and manage consumer credit debt.

The report, in fact, comes amid growing speculation that irrepressible household debt levels will encourage the federal government to further tighten those mortgage rules.

“I would say so,” Dave Larock, president of TMG The Mortgage Group Integrated Mortgage Planners, told MortgageBrokerNews.ca. “I wrote in my blog on August 22, 2011, 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.’”

Jeremy Bingo! Finally! The issue is not mortgages, it’s consumer credit and the ease at which it is obtained! Wake up Flaherty. Stop listening to the banks, they are trying to protect their golden egg – high interest credit facilities. Slowing down consumer credit will have more of an affect than slowing down mortgage borrowing. Banks are working for their shareholders and

shareholders want large profits which come off the backs of hard-working Canadians.

Kenzie MacDermid

This is all playing into the banks’ hands.

The default rate is not an issue in Canada.

This is a ploy to ensure the banks can rate surcharge the self-employed in future lending. The MQR rate is going to do enough damage all ready. Too many rule changes in such a short time will surely result in a mess. Last I checked the banks are still making record profits in a down economy. Why not wait until the economy improves before more tightening.

MortgageBrokerNews.ca Reader Poll

NO (42%)

YES (58%)

Have you bought down rate in order to retain a client?

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Join the network that looks beyond rate. Allison Taylor at 1.888.928.1338 or allison_taylor@centum.ca The CENTUM Network is Canada’s Premier Mortgage Broker Organization and one of Canada’s largest networks with over 260 locally franchised offices with more than 2,500 mortgage professionals on Centum.ca.

Independently Owned and Operated. ®/™ trademarks owned by Centum Financial Group Inc. © 2012 Centum Financial Group Inc.

News / industry

The Mortgage Summit

announces conference program The Mortgage Summit is Canada’s only independent business event committed to the development of the Canadian mortgage broker industry. Our fundamental objective is to increase industry knowledge, develop new partnerships and advance mortgage business strategy The Mortgage Summit truly brings together Canada’s mortgage business professionals.

The Mortgage Summit is a two-day conference to take place on May 31st – June 1st 2012 in Toronto. Driven by the content from CMP magazine and MortgageBrokernews.ca, the conference provides mortgage professionals a unique opportunity to hear directly from top industry executives, as well as successful industry leading and innovative brokers.

The event has been designed to support those within the mortgage industry improve, develop and build sound business strategies and, as such, is a program exclusively focused on learning.

The Mortgage Summit provides three ways for our delegates to get as much out of attending as possible; through our 27 conference sessions, through networking and through dedicated event technology solutions.

Conference Program Our 27 conference sessions, led by top industry professionals and fellow brokers, will address the top concerns of Brokers in Canada. The Mortgage Summit conducted extensive research within the industry to ascertain what those top concerns are and

12 | mortgagebrokernews.ca

these include; tools to acquire more revenue and streamlining your business to be more efficient.

opportunity to connect and create business opportunities.

Our sessions will include: • WeightWatchers for Brokers – How to make your business lean and agile • Winning over Consumers in the Internet age • Monetize Your Marketing - Case study with Canada’s leading specialist • Collateral Charge Mortgages: Is there a middle ground?

Earn up to 8 AMP CE Units For more information: www.themortgagesummit.com

Networking We believe in the importance of networking within your industry in order to improve yourself and grow your business. To this end, we have developed a dedicated on-site event networking tool: SYNCED. Synced is an online event partnering system developed by the organizers of The Mortgage Summit. It has been developed to allow all delegates and partners to network and have one-to-one business meetings at the event, providing you the

Each Mortgage Summit delegate and partner will receive a unique login. This will allow you to see and communicate electronically with others in attendance.

Meeting points and timeslots have been scheduled into the conference agenda.

Technology

The Mortgage Summit will also showcase the leading technology and IT solutions in the mortgage industry, by staging a dedicated Technology Resource Centre, allowing brokers to view and test all the new and dynamic tools available to the modern mortgage broker.

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News / industry

Top broker: ALL brokers will need to buy-down Most seasoned brokers object to buying down rate, but they, like everyone else, will soon have to get over it, says one of the industry’s most successful professionals. He has “The fact is that our products and services have been commoditized – that’s a reality,” said Jim Tourloukis, owner of Advent Mortgage Services in Unionville, Ont., and Ontario’s No. 1 broker on last year’s CMP Top 50. “We talk about value propositions and customer service, but at the end of the day everyone expects good customer service, so if you want to keep your deals, you’re going to have to also offer the lowest rates and that means buying down.”

He’s speaking from experience. While he did a whopping $212,927,433 in funded volume for 2010 with “almost zero” buy-downs, last year the high-volume broker opted to buy down as much as 15 per cent of his deals in order to hold onto increasingly price-sensitive “retail” clients.

Brokers unwilling to adjust their commission expectations may ultimately be left “twiddling their thumbs,” said Tourloukis, if, in fact, there remain any brokers unwilling to buy-down on at least some of their deals.

Tourloukis does have his limits, only sacrificing five to 10 bps on buy-down deals, where necessary.

Terrilyn Moore I will buy-down a rate to keep a deal that I’ve worked long and hard on, however, I will not buy- down to bring in business. I cannot believe the lenders that want our business have not followed suit with this BMO 2.99 per cent five-year product.

Den You can agree or disagree, but when a Top Gun who’s doing $200 million-plus speaks, you should listen. That’s a new reality and we have to adjust – 80 bps+VB earned on a deal is now a luxury. Not only because of buy-downs, but also because of smaller compensation on shorter terms, HELOCs etc. Most high-volume brokers will agree that last year we got less compensation for more volume.

Mortgage Adviser Any broker that loses a deal over .01 per cent, should hand in his\her licence, as that is just weak. There will always be a rogue broker willing to buy-down a rate in order to get business. I don’t like it, but it’s their business and their choice. It’s an entirely different matter for lenders to use the finder’s fees of their clients (the broker) to buy-down the rate. We as a broker community, collectively, need to be more discerning about the lenders we support. The status quo that was, is no more.

Lior I think most brokers would be more than willing to buy down rates to save deals. It’s just that once you get into this cycle of matching rates, the odds of you ultimately providing the lowest rate as stacked against you because at the end of the day, someone is always going to have a better rate than you do. And if you lost a deal over just 1 bp, then you’re not delivering a strong enough value proposition.

stats

“I don’t ever do it to attract deals, but to keep them,” he told MortgageBrokerNews.ca.

1.1%

– decrease in mortgage interest cost for November (2011) after falling 1.3% the month before (StatsCan) Source: StatsCan

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News / industry

Builder:

Do not use mortgage brokers An Ottawa broker has come up against what he calls the most overt attempt to shut mortgage professionals out of the condo development market — a builder’s email specifically demanding a commitment letter from a big bank and “NOT from a mortgage broker” “I fully believe this is an example of tied selling,” said Stephane Prevost, an agent with Dominion Lending Centres Alliance.

“Here, my client, the buyer, is being told, in writing, first, that they must produce a commitment letter with an 18-month rate hold – something brokers can’t really furnish – and, second, that the letter has to come from one of the Schedule 1 banks and not from a broker.”

Prevost has now taken that complaint to the competition bureau, which has suggested the builder’s demand is within the law, based on past precedence.

The conflict stems from an email sent to Prevost’s client in late January, with the developer laying out requirements to cement a purchase agreement.

“For the mortgage pre-approval letter, as mentioned during the contract signing, it must contain the following four pieces of information in order to be accepted,” writes the real estate agent for the developer. “1. The approval must be from a Canadian Schedule 1 Bank (NOT from a mortgage broker). 2. The approval must be valid until closing – November 2013 to be determined.”

Brokers rarely encounter that first demand in writing, said Prevost,

16 | mortgagebrokernews.ca

concerned it represents a new level of aggressive competition between banks and brokers for clients buying “off the plan.”

While banks routinely enter into formal relationships with developers granting them access to prospective buyers looking for rate holds, brokers have traditionally been shut out of the market at that point.

They instead seek to convert the client closer to construction completion. It’s a way of getting around their limited access to extended rate holds.

That might be the status quo, but it’s largely been one relegated to back room and not put to paper.

“These people are basically not allowing mortgage brokers access to the client until after the agreement to purchase has been signed and accepted,” a frustrated Prevost told MortgageBrokerNews.ca “ It’s what goes on all the time verbally, but on not in writing. And if you look at the document, it is almost as though they are telling the buyer that this is a legal requirement – not to use a mortgage broker and to have a 18-month rate hold. It’s not.”

Paul in Toronto

I really see nothing wrong with this at all. We are unable to hold a rate for that long, period.

If the rate goes up in the meantime, our commitment letter becomes worthless. I don’t

blame the builder for requiring this. I actually refer my clients back to the bank in these cases, because it is best for them to have a rate guarantee. If I can beat the rate within 120 days of the actual closing, then great.

New construction condos is not a market for brokers.

Welbanks Being a broker, this is a tough one. I can appreciate the builder’s requirement as most brokers offer this approval without an actual approval from a lender. From the builder’’s perspective, this represents risk to them that they may not want to take. I would assume they have had a bad experience in the past with this type of commitment letter and they don’t want to be burned again. The reality is that the bank commitment is really no different than that of a broker. Most Schedule 1 banks would need to re-qualify the client as registration approaches, and if the client’s situation has deteriorated, then the bank commitment is no better than that of a broker. Those calling this “tied selling” are probably seeing this from the wrong perspective. I expect it comes from experience, not their banking partners.

Although there are flaws to their reasoning, it probably gives them a better sense of security.

Mike I would agree with the builder that a letter directly from a mortgage broker would not be valid approval. I’m sure the builder would accept an approval directly from the lender on the lender letterhead arranged through the mortgage broker. Although all mortgages usually come with conditions the buyer has to adhere to and that may be defaulted on later, the buyer would be wise to at least rely on an approval directly from a lender. Let’s all remember that is what would be best for the buyer. Once the buyer gets closer to the closing date, they are still free to shop around to get the best deal.

News / industry

Spate of buy-downs to follow BMO rate: HUGH Inexperienced agents will likely move to buy-down their rates on a five-year fixed in order to compete with BMO’s wellpublicized special, says one industry veteran, cautioning them against that move.

“It’s inevitable, but it’s a mistake,” said George Hugh, president of Taurus Mortgage Capital and former head of broker services for ING. “What they need to do is educate the consumer on the limitations of that BMO mortgage and keep their rates and explain to the client that extra value.”

Hugh is among those anticipating a bump-up in the rate wars resulting from BMO’s move to introduce a 2.99 per cent interest rate on a closed five-year fixed. He’s also one of the many drawing attention to some of its restrictions – its 10 per cent annual limit on prepayments and its 25-year cap on amortization, to name just two.

Still, the rate itself garnered headlines across the country last week, with brokers fielding queries about a mortgage simply unavailable to the channel.

It’s that publicity that may lead agents

to buy-down their rates to match that offer, which expired Jan. 25. Still, other brokers are expecting to channel clients into the four-year 2.99 rate channel lender TD is now offering, rather than agree to cut their own compensation in order to match BMO’s five-year special.

But, if pressed, many agents without the know-how to re-direct clients away from the BMO no-frills mortgage will likely move to that buy-down option, says Hugh.

He, like most industry veterans, won’t be one of them.

“If you’re a single, independent mortgage broker trying to buy-down rate in order to keep a client from going over to a bank offering a better rate, you are competing with the bank, and you are not going to win that competition,” Ad Lakhanpal, with Mortgage Alliance in Oakville, Ont., tells MortgageBrokerNews. ca. “I’ve had agents agree to do it, and then they’ve gone back to the lender to get a new commitment letter to present to the client. But the process doesn’t end there: the client then goes back to the bank again, and they better that new rate. So they’ve

still lost the client. I’ve never bought down rate and I never advise it.”

David I think it is time for one of our broker lenders to step up and support mortgage brokers against a rate grab from BMO. With the bond market still offering historically low yields the opportunity is there. That lender will earn my business if they can do it.

Former Specialist Now Broker

It’s such a limited time offer that it’ll get its 15 minutes of attention and the story will end.

BMO wants to buy market share? I say go ahead. They get the ultra-rate shopper crowd that will also shop their other products aggressively if they think this is a strategy to sell them other products.

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News / industry

Consumers to brokers:

What do you do?

Mortgage brokers have yet to clear the “biggest hurdle” standing in their way, according to the latest CAAMP-Maritz consumer survey, pointing to less than 10 per cent of respondents who really understand exactly what it is they do.

“It is very difficult to sell anything if consumers don’t understand the offering and this may be the biggest hurdle standing in the way of future success for Canada’s mortgage broker channel,” reads the report, based on consumer and broker surveys.

That may be an understatement.

In fact, the poll results indicate just five per cent have a full appreciation of the function of mortgage professionals, with only about one-third of respondents indicating they have a good understanding.

“The importance of seeing these numbers increase cannot be overstated,” concludes Maritz, pointing to greater broker penetration among consumers who understand the services they bring to the table.

Broker market share is 50 per cent higher among the 40 per cent of consumers who have a full or good understanding of broker services. That translates into a market share of 32 per cent, compared with 21 per cent among those with a lesser understanding.

“When we asked non-broker customers why they did not consult with a broker, the top reason was loyalty to my bank, followed by four reasons relating to lack of awareness of broker services.”

The broker channel is expected to formally address its public awareness challenges in 2012, with growing support for a 1 bps fund.

“If every broker was to contribute one basis point that would equate to $5.5 to $6 million a year,” Merix head Boris Bozic told brokers last fall, as part of “Winning the Rate Wars,” a webinar hosted by industry trainer Greg Williamson.

That “every broker” is the more than 15,000 mortgage professionals plying their trade across both regulated and unregulated Canadian jurisdictions. That “1 bp” would come off of each and every deal a broker submits and closes.

Those collective funds would get funnelled into a marketing campaign both paid by and focused on promoting mortgage brokers. That idea continues to gain traction as the industry grapples with increased competition from the banks and a slowing real estate market.

18 | mortgagebrokernews.ca

K.C. Scherpenberg

Amen and Merry Christmas! As brokers we must promote our trade. We always better the mortgage situation for any customer. It is a no brainer! Nobody will say no to saving money!

Ad Lakhanpal

I agree that consumers need to be made aware of services a broker can provide.

However, it will be difficult to get 15,000 brokers to agree to contribute toward this initiative. Also, who will collect the money and design and administer the awareness campaign! This type of thing is best done through industry associations and it should be CAAMP who should take on the responsibility to enhance their promotional initiatives for AMP and include more elements pertaining to educating the public regarding the role of a broker.

Annoy I am all for the 1bps plan! It would be great if the monolines matched the 1bps as well. By promoting brokers they will see benefit by more volume.

Angela Wong-Liao

I agree with Ad Lakhanpal, CAAMP should take up the task for educating the general public about the role of a mortgage broker/ agent when CAAMP is promoting AMP. I do not believe in cutting our commission for promoting our role, that is why we pay fees to CAAMP.

Ottawa Broker

CAAMP should be paying to promote the broker as part of the package we get for dues that are paid. As for a 1bp pool of funds for every deal, I don’t see it working. Some brokers/agents only do $7 million a year and others do $40 million a year. Why should the larger brokers pay for more advertising than the smaller brokers? Who will manage the fund? That will require a staff which will eat into the fund with salaries and office expenses. Don’t see this coming together and honestly, I have never had an issue with my clients understanding what I do. I don’t wait for clients to call me. I have a strong referral

setup with Realtors, lawyers, financial advisers and insurance agents. When clients get to me they are fully aware of what I do.

Maybe too many brokers are sitting there waiting for the phone to ring rather than going out building their business. I would never agree to partake in a national advertising pool as I would have no control over how that money is spent. Would the small markets get as much advantage from this as the big metropolitan areas? I doubt it.

Ron Price

I am encouraged with the groundswell of ‘talk’ within our industry in the past year and look forward to the day when consumers as a whole understand what we do as well as the benefits of choosing us versus the bank, benefits which are overwhelmingly strong. We have educated the public weekly for the past 10 years via advertorials, infomercials and success stories. Much of the info we share involves the experiences our new clients have with the banks, most of it bad, and with new products, info on the economy etc. I would like to say that any ‘education’ via new advertising our industry might do, must be to address the new collateral mortgage product that all banks have adopted. Ultimately this product will hurt the mortgage brokerage industry, and for this reason, I believe that this ‘issue’ should become part of our industry advertising campaign. We should not be afraid of the banks because we don’t even need them as lenders because we have so many good (wonderful) monoline lenders who we should fully support.

stats

2.8% – predicted increase in national average home price for 2012

Source: The Royal LePage House Price Survey and Market Survey Forecast

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the latest mortgage news and talk?

Ron Butler

Reading these comments makes it clear why there will never be any national advertising fund. None of us can ever agree on anything.

If we could even agree on the fund we would never agree on the content or who should administer it. Low barrier to entry in our industry creates an environment where many non-business people can either eke out a living and sometimes make great incomes. If we had the higher barriers that exist in say the general insurance world I think we would see greater consensus.

mortgagebrokernews.ca

News / industry

Broker:

Treat new agents like new specialists A seasoned broker is advocating a seachange in the relationship between new agents and brokerages, suggesting the industry look at adopting the mortgage specialist model.

“I don’t think people come into the industry looking to work part time, but what happens is that many don’t get the training, accountability and compensation they need to take on brokering full time,” said Nolan Matthias, lead planner and owner of Mortgage Architects – Matthias Financial Inc. “I think that’s why we see a higher failure rate among new agents than among new mortgage specialists.”

Alberta mortgage professional.

A key part of that formula is “accountability,” said Matthias, arguing banks may be doing a better job of ensuring new specialists are “ making the calls and generating the business” because those road reps are being held accountable to a supervisor.

The salary itself is another incentive to make the necessary commitment to the job, he told MortgageBrokerNews.ca.

Brokerage payroll costs would be partially covered by a higher split for a probationary period following that six-month residency.

Matthias is hoping to increase the viability of full-time brokering for new entrants.

Matthias is suggesting the industry look at following the lead of the big banks and move to a sort of guaranteed income model for new agents. Brokerages would pay them a set salary during an extensive training period for as long as six months.

They would also hold onto any commissions they earn during that period, with brokerages deducting those earnings from their salaries.

The goal is to provide those new entrants a living wage at the same time they access the kind of intensive training they’ll need to make a go of it, said the

This type of thinking is exactly what kills the industry you are in. Everyone is so busy eating their own and working on newbies bringing in business - that they don’t bother to think of tomorrow. The reason new people

“Think about it,” he said. “There are far fewer mortgage specialists who fail than mortgage brokers. It can only be the result of better tools and higher expectations.”

Used to B

don’t bring in business is no one wants to have an associate that does not know what they are doing. And the only way to get experience is experience. If you do not help them bridge that gap, they will fail and any potential long-term business will be gone. A broker must open his/her eyes and understand that business must be grown and fostered. Let’s stop whining about the banks and focus on business growth in our own brokerages instead of who can bring you the most people for your mailing list. That’s just called bad business.

Jeremy Nolan, good suggestion but have you implemented it in your brokerage today? The issue is that brokerages today are about quantity not quality. New associates ask the right questions, for the most part, but the brokerages talk a good game and fall way short on follow through. Associates need to take responsibility for themselves and hold the brokerages accountable. It’s that simple.

If you want training, ask for it, and if it does happen within two weeks, move on. The big ‘networks/brokerage houses’ need to hold their brokerage partners more accountable too. I once had an associate approach me and our brokerage as she was unable to submit with her current brokerage due to all lenders cutting her off for fraud deals. I suggested to this person to leave our industry and go back to whatever it was they were doing prior.

Guess what? This person was brought on by another brokerage here. What does this say about our industry and more importantly, what does this say about that brokerage?

Keep your head up and continue fighting the good fight. To the ‘newbies’, go less on recommendation and pay and more on which brokerage is actually the right fit.

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Mixed reviews for alternative to Realtor referrals Brokers turning to commission-free realties as a way around the traditional Realtor referral may want to rethink that strategy, said one mortgage professional pointing to his own “mediocre” results.

“We’re now advertising on one of those websites,” Mike Maguire, co-owner of Mortgage Wise Financial in London, Ont., told MortgageBrokerNews.ca. “But we’re simply not getting the hits to our websites that would justify the costs. It’s quite expensive and the results have been mediocre also in terms of the quality of the leads themselves.”

The comments come as several real estate brokerages move to capitalize on new rules allowing them to offer flat-fee MLS listings to homeowners intent on a private sale.

This week, industry leader ComFree expanded its low-cost brokerage services in Ontario and Alberta. At the same time, it released the findings of a survey suggesting 58 per cent of Canadians would rather make a real estate purchase from someone who is not working on commission.

Brokers themselves are hearing much the same, now moving to advertise on the growing number of brokerage sites in order to connect with homebuyers operating independent or full-service real estate agents.

Many hope that the development of those sites will ultimately weaken their reliance on Realtor referrals, although those real estate agents have never been a primary lead generator for Mortgage Wise, said Maguire, conceding other brokers have found success advertising on commission-free sites.

GTA Broker

Before you jump into bed with low flat fee real estate brokerages, or FSBO companies, have a look a your referral sources. Are you getting business from conventional commission-based real estate agents and brokers? Could you afford to lose it all? A conventional real estate rep is not likely to refer business to a mortgage agent/broker/brokerage that is advertising doing business with "mere posting" style real estate firms, like it or not. If conventional real estate brokers and reps are gatekeepers to your business, it wouldn't be "career enhancing" to upset them. Think of the type of leads you might get from these websites. If the sellers are so cheap that they will only pay $199 to have their house listed on MLS, they are of the same mentality that wants to see how much you will buy-down their rate with your finder's fee. So you are paying big advertising bucks to get a questionable number of clicks that don't convert, or when they do convert you your margins are squeezed to next to nothing. It’s not really a business unless there is a potential for an acceptable recurring profit at the other end.

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News / industry

Brokers react

to FirstLine BFS cut Brokers who pooh-poohed concerns that stated-income lending was headed the way of the dodo bird are eating their words, with FirstLine sending its own segment of that business into extinction, effective Feb. 1.

“Hello everyone, FirstLine will no longer accept new applications for stated income programs effective end of today also max loan amount is $1 million,” reads a recent email penned by one of the lender’s BDMs and sent to brokers, “if you have any deals you need to send please do so by the end of today, FYI Brand-to-Brand is NOT affected.”

Many other FirstLine programs are: New Immigrant programs, non-Immigrant programs, equity programs (flex), Access low-doc programs, CMHC self-employed simplified program, Genworth Alt-A program, Canada Guaranty low-doc programs, Canada Guaranty Lifestyle Advantage and self-employed program.

It’s an extensive list and will likely affect brokers both professionally and personally, considering many themselves rely on BFS lending programs.

The FirstLine move comes on the heels of the release of documents suggesting the Office of the Superintendent of Financial Institutions is increasingly worried about BFS underwriting practices at the country’s big banks.

Mortgages often granted to the self-employed and recent immigrants “have some similarities to non-prime loans

22 | mortgagebrokernews.ca

in the U.S. retail lending market,” and banks and other lenders are becoming “increasingly liberal” with mortgages and home-equity credit lines that don’t require individuals to prove income, according to a 152-page OSFI document obtained by Bloomberg News.

Sharon

It’s likely OSFI has already brought that increased scrutiny to bear in auditing the country’s banks, said James Robinson, an agent with The Mortgage Centre Mortgage Watch Inc., pointing to recent pull backs in BFS programs at other lenders.

“It’s a sign that the government is auditing the banks and asking them to come up with something to reduce the risk on this line of business,” he told MortgageBrokerNews.ca “It appears that FirstLine has said that it is out. It may be slow and gradual, but I think we’re seeing a return to the 1980s when there was a greater distinction between A and B lending.”

Christina Horvath

The sad part of this is that much of Canada’s economic growth depends upon small business and new immigrants. We need these participants in our economy yet our government and bureaucracy are not in this case rewarding these parts of our economy.

Paul Mangion

It’s funny that FirstLine is the first to do so. I understand why brokers supported them in the past as they did quite a bit to promote the broker channel but I don’t understand why brokers continue to support them now.

I would like to know the stats on default ratios on these stated income people, I bet that they are low. One thing that has always bothered me is that people who work for self-employed people can qualify based on T4’d income but the employer can’t qualify.

Paul in Ottawa

If income is provable there should be no issue.

If the applicants are honest about what they earn and what expenses are actually incurred there should be no issue. Too often the privilege to use “stated income” is to short the rest of us on the use of our tax paid services like hospitals, schools, roads and still get a mortgage. At the same time we don’t want to overstate income either, that shorts the lenders and in the long run we pay too.

Show me the money in line 150 and maybe we have a deal. Just like a T4 applicant.

Collingwood Mortgage Broker

With secured jobs being lost and the increase of small business in all communities it is amazing that they are targeting this sector again. The BFS rules for obtaining a mortgage are a lot higher than the average person. The way the government is going with their changes no one will be able to purchase a home. Why don’t they start targeting the credit card companies for a change who can give credit to whomever they choose without qualifying them at all? I think if they bothered to look at the defaults in mortgages you will see that the majority of them are from the employed person who is “guaranteed” an income.

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News Analysis / Multimedia

The

Big Story

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 On the topic of …

The self-employed market Blair Anderson: “There is definitely more obstacles for self-employed individuals. Banks hold them to a higher standard with respect to credit scores, cost of insurance – it’s 138 per cent more expensive for them – the time on the job has to be a minimum of two years and the eligibility requirements range from not allowing any past bankruptcies, or gifted down payments to the properties must be owner-occupied. And documentation is always more onerous for self-employeds. Is this higher standard fair? Well, the banks deem them higher risk loans. They’re not getting proof of income, so they’re mitigating that risk by holding them to a higher standard. But it’s tough to have this policy applied across the board because everyone’s situation is different.”

Blair Anderson

Sabeena B ub

ber

rris Reed Ha

Sabeena Bubber: “I think it’s definitely hard for self-employed applicants these days to get financing. A lot of my self-employed clients have really struggled over the last couple years, where they didn’t have issues getting financing in the past and now the products and services they were used to getting are no longer available for them. I think it’s not over for them. I think the federal regulators are going to come in and make some further changes to the market, similar to what they did with changing amortization for lenders, refinances for borrowers, I think that’s going to change for the self-employed borrower as well and they are going to face some challenges going forward.”

Reed Harris: “I would say it’s not fair to penalize professionals and people with professional corporations for paying as little tax as they are able to. I often get clients who have very little income, but very high earnings and we have a lot of difficultly proving income for them. Often as well, what we find is that the lenders or the insurance company will give us an opinion of the income that they should have, which isn’t necessarily reflective of what is actually going on.”

On the topic of …

Challenges facing brokers in 2012 Ron Swift: “The challenges are not dissimilar to what we’ve seen the past two years. We’re not in a growth market anymore when it comes to the overall real estate activity, so for brokers it’s all around trying to get market share. How do you get market share within this marketplace competing against the banks? They’re not giving up their market share anytime soon. That’s going to be the challenge. How do we get to those consumers and gain more market share. That’s the trick going forward. We have all the products, we have all the

24 | mortgagebrokernews.ca

Kim Luxton Director, Broker Sales ING DIRECT

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News Analysis / Multimedia services, the level of professionalism has come up tremendously in the last 10 years, now what we have to do is get that message out to consumers. If as an industry we can work on raising the profile of the broker to the everyday person on the street, who is looking for financing, then we can truly grow our market share and overcome these challenges.

Andrew Moor: “One of the temptations we have is to always try and reinvent ourselves every year. The challenge for brokers is to keep on doing the things that are working for them really well, particularly on the service side. Keep on wowing the customers, getting more referral business and picking up market share that doesn’t currently come through the broker channel. A lot of that is just doing the things we all know we should do, but somehow when the spring market comes we get too busy and we don’t fulfill those service promises.

Be an absolute zealot on service and I think the challenges will seem pretty small in the overall scheme of things.

Martin Reid: “Well, 2012 is going to be a little more challenging than 2011. You’re likely to see a real estate market that’s sort of flat, maybe down five per cent and probably flat in terms of activity as well, so it’s not a growing market for mortgage brokers, but there’s still going to be a lot of business out there. We see interest rates on hold until the end of 2012, early part of 2013 and with that you may get a lot of customers switching out of variable-rate mortgages and into fixed-rate mortgages. We see that as a good opportunity for mortgage brokers. There is also good opportunity in the non-prime side of the business for the mortgage broker. The bigger banks are a bit tighter on their mortgage lending, just given the uncertainty in the real estate market and they’ve expressed some concern, so we see that as an area that offers a lot of opportunity for mortgage brokers. But they really have to focus on adding that value to their end customer

On the topic of …

Challenges facing lenders in 2012 Andrew Moor: “The biggest challenge facing us all is really the economic uncertainty that’s out there, whether it’s the U.S. recovery or what’s going on in Europe and how that could potentially blow up and derail our housing market. So that’s certainly at the top of our list in managing our risks properly. We’re feeling positive about Western Canada and the commodity story that still seems to be intact. We’re pretty positive about the year frankly, but external influences to Canada could have a negative impact and I’m sure my peers and all the other lending organizations are thinking similarly and are worrying about the credit matrixes to make sure we’re not getting over-exposed on a risk perspective.”

Martin Reid: “There are a couple of challenges for lenders. One of them is going to be on the regulatory side. OFSI, the regulator for banks and trust companies in Canada, came out with a paper at the end of October on non-income qualified lending. They may come out with regulations further down the road. We don’t see any changes from CMHC, except a rollback on the loan-to-value from 95 to 90 on purchases, but politically that’s not a very popular one, so we’re not sure that will be happening. The other challenge for lenders is going to be on arrears and soft spots in the Canadian market and I think all lenders will be focused on that. But we don’t see any broad-based weakness in the Canadian market.

Ron Swift: “I think [2012] is going to be different for different lenders. For the monoline, of which I’m one, it’s still going to continue to be getting access to capital. With all the volatility out there and what’s happening globally, that’s going to continue to ripple through the marketplace and affect access to capital and being competitive every day.

Domestically, we have economic issues such as housing starts, job losses and real estate activity. Take all those things together and the questions are numerous. Are we having a housing bubble? Is there too much consumer debt? “Are there going to be more government regulations? So we’re juggling a few different issues, but for the monolines it is primarily around making sure we have access to capital.”

26 | mortgagebrokernews.ca

Andrew Moor

Martin Rei d

Ron Swift

Al and Paula Roberts

APPOINTMENTS Mortgage brokers Paula and Al Roberts and their team have joined Dominion Lending Centres and opened The Roberts Group Dominion Lending Centres franchise based in Unionville, Ontario.

Paula Roberts has been in the brokering industry for more than two decades, and was one of the original brokers with Norlite, which later became Mortgage Intelligence. Some of The Roberts Team members have been together for more than a decade.

“After reviewing all of our options in the market, we decided that joining Dominion Lending Centres was the best possible choice for The Roberts Group,” said Paula Roberts. “DLC is leading the industry in marketing, branding, technology, training, support and funded volume.

“The move was a natural progression for our business. The caliber of people that make up DLC – from the head office staff to owners and agents – and company culture are second to none. Going forward, we want to grow our team and provide exceptional service to our existing database and all of our future clients. DLC has what it takes to help us meet and exceed all of our goals.”

DLC Canadian Mortgage Experts announced the appointment of Arlene Demars as director of Alberta and welcomed her and her team in Red Deer to the CME team. Demars brings her previous brokering experience from Invis as well as her background in Alberta’s credit union movement to her role.

Joe Tomkins also recently joined as director of Vancouver Island. Tompkins also comes from Invis and leads his team in Nanaimo while brokering.

News / International

australia

Brokers to competition watchdog: ‘Get rid of mandatory memberships’ stats

64%

– of Canadians say they feel positive about their current financial situation, a decline of 5% compared to poll results released in January 2011 Source: CIBC-Harris/Decima

that, as a credit rep for an ACL holder, he is already provided with training and compliance tools.

Australian brokers have sounded off on a review by the country’s competition watchdog into compulsory association membership, expressing their anger with third-line forcing notifications.

The Australian Competition and Consumer Commission (ACCC) is currently undertaking a review of thirdline forcing notifications submitted by companies such as Mortgage Choice and Aussie Home Loans, making membership in the Mortgage Finance Association of Australia (MFAA) mandatory for their franchisees.

According to CMP’s sister publication, Australian BrokerNews, several brokers answered the ACCC’s call for submissions into the benefits and detriments to consumers, and have rejected the idea of forcing notifications.

In a submission to the ACCC, Australian Loan Company broker Ian Dennis argued

28 | mortgagebrokernews.ca

“I have been broking for seven years and find it a difficult run to pay $500 a year for something I have not received any benefit from,” Dennis wrote.

Dennis said he had let his MFAA membership lapse due to “the high cost involved,” and contended that he would not use lenders who required association membership.

“By being a member, there is no benefit as everything they offer I can get from my licence holder, and I am already paying them a fee and a split of my commission which is enough pressure on earnings without having to deal with peaks and troughs in consumer needs and confidence and paying more to join one of these bodies,” he wrote.

Dennis urged the ACCC to consider the needs of “one-man band” brokers in its review. “We are the ones that are the backbone of the industry. We are the ones that the big players fear when it comes to their market share,” Dennis wrote.

Melinda Young of Mortgage Simplicity said there was no benefit to consumers, brokers or lenders in requiring MFAA membership.

“There are many other accredited training organizations that can satisfy training and continuing professional development programs for mortgage brokers,” Young wrote.

Young added the advent of licensing meant MFAA membership no longer served as an industry benchmark.

Aggregator Mortgage Choice put forward its own submission, defending its forcing notification. The company claimed consistency among its franchisees was behind its decision to make MFAA membership mandatory, and said it could more effectively influence an industry association to the benefit of its franchisees if franchisees were required to belong to one industry body.

“That being the case, Mortgage Choice needs to choose which industry body it believes best serves the interests of its franchisees. In Mortgage Choice’s opinion, the MFAA remains the most appropriate such body,” the company said.

News

aPPoIntments

U.S.

U.S. home sales hit 11-month high appointments

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

Green in Mississauga, Ramsay in Sales of previously owned U.S.Orangeville homes rose toHeimbecker an 11-monthinhigh in and Waterloo, are ownerstumbled in December and the supply of properties on equal the market to a Mortgage Group. near seven-year low, pointing Concierge to a nascent recovery in the housing Concierge is a new boutique market. brokerage firm that will focus on elite and experienced brokers, The National Association ofoffering Realtors said existing home sales exceptional needs-based increased five per cent monthcustomer over month to an annual service. The goal rate is forof 4.61 million units.

Concierge Mortgage Group to have offices throughout Ontario.

Concierge as a November’s sales pace was revised downwill to operate a 4.39 million-unit partner with Mortgage pace, previously reported as anetwork 4.42 million-unit rate.

Intelligence, developing its own brand while taking advantage of Economists polled by Reuters had expected saleskey to rise to a 4.65 Mortgage Intelligence’s million-unit sales pace. Sales in December were up 3.6 per cent from resources like compliance, payroll, a year ago. A total of 4.26 million homes were sold in 2011, exclusive mortgage products, up 1.7 per and marketing. cent from the prior year.

“Mortgage Intelligence offers competitive The third straight month ofusgains in salescompensation added to hopes that a and the support that Concierge tentative recovery in the housing market was starting to take shape, needs to be successful,” but progress will be painfully slow given a glut of unsold properties said Heimbecker.

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that is weighing down on prices.

in keeping with its philosophy of promoting from within. Effective But the sector, responsible Jan.1, for the 2007-09 recession, remains 2012, Bud Jorgenson challenged by an oversupply of homes amid an 8.5 of perVP cent assumed the position for the unemployment rate. In addition, declining prices have Prairie Region; Gord Appel,left VP,many Alberta andtheir Gerald Krahn, Americans with homes that are worthRegion; less than mortgages.

Ontario Region. “These three have already made positive changes But there are tentative signs of improvement.

There werein2.38 their respective regions,” said Mark million unsold homes on the market in December, the fewest since Kerzner, president of TMG. “Their March 2005. That representeddedication a 6.2 months’ supply at and December’s to TMG agents sales pace, the lowest since April 2006, and compared to Top: Steve Heimbecker brokers is very important for7.2 themonths’ Middle: Marg Green supply in November.

Middle: Donna Ramsay company’s long-term success. They Middle: Gord Appel are a great asset to the TMG Bottom: Gerald Krahn family.” CMP

l a e Ownership that makes R sense.

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Mortgage Group is moving Data showed single-family TMG homeThe starts rose for a third straight three among of its regional leaders up the was month in December and optimism builders this month the highest in four-and-a-halfcorporate years. ladder, billing the move as

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

www.rmabroker.ca

News / industry

Williamson:

Don’t buydown rate If a growing number of industry leaders “concede” brokers must buy-down rate in order to compete, at least one remains focused on steering them away from the practice, with more than 600 now prepared to hear him out.

Recently, in the first of two free webinars, industry trainer and broker Greg Williamson – joined by Street Capital’s Paul Grewal –attempted to dissuade the growing number of agents and brokers from using that strategy for several reasons, among them self-preservation.

“Ultimately, following a system of buying down in order to attract and retain clients leads the industry down the path of travel agents,” he told MortgageBrokerNews.ca. “That’s not in their best interest – it’s like telling lenders that we as brokers are prepared to get paid less.”

With "Threats to The Broker Channel - And What We Can Do About It," Williamson and Grewal will address all the key challenges facing brokers in a slowing market.

Both discussions follow on the heels of a MortgageBrokerNews.ca article outlining why brokers are increasingly willing to sacrifice commission in order to close a deal with a client, most often a rate shopper from the Internet.

30 | mortgagebrokernews.ca

“The fact is that our products and services have been commoditized – that’s a reality,” said Jim Tourloukis, owner of Advent Mortgage Services in Unionville, Ont., and Ontario’s No. 1 broker on last year’s CMP Top 50. “We talk about value propositions and customer service, but at the end of the day everyone expects good customer service, so if you want to keep your deals, you’re going to have to also offer the lowest rates and that means buying down.”

The analysis comes as banks drop variable rates – 2011’s weapon of choice – and pick up increasingly competitive fixed ones in order to fight this year’s battle of the rate wars. In many cases, brokers just haven’t had access to those lowest of the low rates, many opting to buy-down their rates.

But there is another option, said Williamson.

“It’s time to make a choice,” he said, in a recent blog posting. “Will I sell rate or will I innovate and find other ways to win customers? Will I say out of one side of my mouth ‘I offer service and added value and never buy-down rates’ and then out the other side of my mouth I advertise a bought down rate that essentially says ‘I am the cheapest, buy from me.’”

Sammy Nobody wants to hear this but the New World Order is that the client expects great service, top-notch valued advice, and the lowest rate possible. If you believe otherwise, then you are fooling yourself. However, if you don't believe rate is an issue then why are we even discussing this? If you truly believe that your service and advice is enough, then you should not care what others in the industry are doing. Let them buy-down the rate and work for less money. If your clients don't care about rate then why do you care about rate?

The reality of it is that clients expect everything (as they should) and if you can't provide it then time to look for another job as you will not make it in this competitive business. My last point will be a question: when you purchased your last car, did you haggle over price or did you pay the sticker price? Why should your clients not expect the same low price?

Kathryn Buy-down is not wrong. The stronger the applicant the better (lower) the rate should be.

The problem is that the regular discounted rates are the same for 600 score applicants and 750 score applicants. That is why the higher score applicants want to feel rewarded for their good behaviour and "shop around" because they feel they deserve better then these discounted rates offered everybody. If lender/banks would use matrix in A landing we would not have to buy-down rates as often.

AB Broker

Those who buy-down rates are feeding the consumer’s own ignorance. If we all shopped based on price, we’d all be driving a Ford Feista. The path of least resistance is to buy-down rate. If you buy the rate down for the consumer today, isn't it logical to think they will expect the same come renewal? Any monkey can build a business based on rate buy-downs, it's not rocket science. A true planner takes the time to educate the consumer and provide working strategies.

Take pride in your work. But if you don't have the time to educate, I'd suggest you are transactional. Get them in and out, next.

News

News / industry

InternatIonaL

u.s.

U.S. housing market worse than thought The number of Americans who bought previously

&

90.6% 52.1%

occupied Paulhomes in Toronto game is not always won by competing rose in October. But the National

Yes AB Broker, if yousays wereit in the head to head on a particular product.

Association of but Realtors overstated more than market for a Fiesta, would and you after just pay game is won when I compete three million sales during the GreatThe Recession, showing the housing market was weaker than the sticker price?

It isn't a good analogy, strategy to no strategy. If my client Percentage of previously thought. as in the end, the client is getting the wants a five-year fixed at 3.10 because homeownership The private trade says sales exact same product atgroup one broker as herose four theyper saw it on a website, andincluding I only have costs, cent in October to a seasonally adjusted annual rate of is at another. You can tell them about 3.19 per cent then mortgage of course I payments, see the 4.42 million. That’s below the roughly six million homes your great customer service all you dilemma there. Why not show them the utilities and property a year that economists say are consistent with a healthy that up a want, butmarket. in the end, is ahead really rate that revised wisdom of buying ataxes 10-year at take 3.8 per housing But itit’s of 2008’s sales, typical counts.

If anyonethe is successfully selling cent ? This is moving them household’s from a Fiesta now considered worst in 13 years. monthly pre-tax The trade group revised its sales from 2007 to 2010 their clients on the added value so well, to a BMW. They are clearing. Paying income in Vancouver downI would 14 per love cent,tofrom 20.6 million to nearly then hearmore how. than Honestly, more and I am not cutting my and Toronto, 17.7 million.

Among the reasons for the lower fi gures, from what I see, for most people it is the commission to win. respectively (RBC the Realtors group says: changes in the way the Census lowest rate they are after.

Economics Housing

Bureau collects data, population shifts and some sales

Mtge. Broker Trends and being counted twice.

Affordability The Greg Williamson point- don't Report) Realtors consulted with governmentYou andare missing the Iprivate love this spirited conversation.

This compare the price of a Fiesta to that of a housing experts, including theisFederal Reserve, the Department of Housing and Urban what is needed, kudos to all of you for Development, BMW. The argument is to compare the the Mortgage Bankers Association, the National caring and having the passion we need. price of two BMWs. If you compare two Association of Home Builders, mortgage giants Fannie Let me be clear, I respect everyone's similar products and one can be had for Mae and Freddie Mac and CoreLogic, a California-based right to work a business model that less money, would you pay more Greg? data firm that first raised doubts about the annual serves them well. Where it is different That's the point. The major flaw in your numbers earlier this year. for me is when has I seeestimated many people argument CoreLogic that the Realtors group is that you assume that if working a model does serve15 per cent. someone is buying down the rate then overstated sales that in 2010 bynot at least numbers coulddown affectashow economists themThe andchanging then resort to buying they are not providing value-added view the trade group’s data.

It could also affectservice. companies a last resort. It is simply not true that How do you know that they are that use the fi gures for hiring and expansion plans. all customers want is lowest rate, just not providing both? The truth of the Sales are measured when buyers close on homes. like it is not true that all people buy cars matter is rate not only matters to clients But many deals are collapsing before that point. on lowest price.

Last I said looked there but contract it has an even bigger impact on One-third of Realtors they hadwas at least one ascuttled big difference in price between a BMW brokers as in your hearts you reluctant in October, up from 18 per cent in September.

7 series and a Ford Fiesta.

I encourage know that this rate war is Contracts are being cancelled for severalbrokers reasons: Banks have declined mortgage applications; home everyone to let this gel in your mind, the impacting you and you are losing deals

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 to these guys and so youfor should. officially ended, many people can’t qualify Getdown morepayment efficient or get out! loans or meet higher requirements. Even those with excellent credit and stable jobs are Fred holding off because they fear that home prices will keep falling. are also What you are allSales forgetting is that being hurt by a decline in fi rst-time buyers, whodeem the client decides what they are critical to reviving the housing market. as “value.” You don’t decide that.

Sales have fallen in four of the five years If the went clientbust values a low rate then since the housing boom in 2006. that’s what they value. How Declining prices and record-low mortgage rates arrogant to sales. think you know better haven’t been enough to boost At the same time, construction hasthey thathome the client as to what begun a gradual comeback and should add to the want? economy’s growth in 2011 for the first year since the Great Recession began in 2007. Last month,

Toronto Broker builders broke ground on an annual rate of Everyone is saying we should 685,000 homes, the government saidthat recently. rather than That was a 9.3 per sell centadded jump value from October andrate, butApril all the advice, education and the fastest pace since 2010.

Most economists sayservice home prices will keep good is already a standard falling, by at least fiexpected ve per cent, through 2012. by consumers.

After our Many forecasts don’t foresee a rebound in prices nice education conversation with until at least 2013. the customers, they will still want The high rate of foreclosures has made the best it is resold homes cheaper than rate new because ones. The something median price of a new home is“tangible.” roughly 30I am percurious if anyone has really up with cent above the price of one that’s beencome occupied before – twice the some normal markup.

Investors are tangible and measureable stats taking advantage ofadded the discounts. value ideas that can The housing market is struggling even combat this rate war? as the broader economy has improved in – number of recent months.

MLS home sales The economy grew at an annual pace of two in 2011, up 2.2 per cent in the July-September quarter. Many per cent from economists expect slightly better growth in the 2010 October-December quarter. CMP Source: CREA

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Xceed to halt mortgage origination In announcing its financial results for 2010, Xceed Mortgage stated that it will suspend origination of insured mortgages through its broker network and that its application to become a regulated financial institution will continue to remain on hold.

According to Xceed chairman Ivan Wahl, while the company was encouraged by signs of a strengthening economy earlier in the year, the tightness of credit markets, the cost of financing new mortgages through the insured mortgage broker channel became increasingly costly, particularly in the fourth quarter. Originations in the fourth quarter were down to $51.1 million from $93.1 million in the third quarter and $130.3 million in the fourth quarter of 2009.

For 2010, originations through external brokers totalled $228.4 million compared with $374.2 million in 2009.

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“As the result of the difficult market conditions, the spreads available on insured mortgage originations through the broker channel have significantly tightened and [Xceed] has seen declines in its mortgage volume.

We also have seen a reduction in the number of mortgage aggregators in the market who are willing to purchase mortgages at competitive rates,” said Wahl in a released statement.

“In view of the current market conditions, effective Jan. 14, we will suspend the origination of insured mortgages through our network of external brokers. We will continue to manage our $1.6 billion of mortgage and other assets under administration, and will continue to offer renewals and refinancing through our internal sales group.”

It was also announced that Michael Jones, president and COO was appointed president and CEO. Wahl will remain as chairman and as an officer of the company, responsible for strategic corporate development.

One year later Xceed returned to the broker channel in the fall with a new strategy focused on befriending a select number of agents and brokers.

32 | mortgagebrokernews.ca

“We never doubted that Xceed needed to partner with the mortgage broker industry,” said Gleb Ioussoufovitch, director of sales and marketing for the non-bank lender. “But we wanted to be a good partner ourselves. We are now working with mortgage agents again, what we call ‘friends of Xceed.’ They’re called friends for a reason – they had very successful relations with Xceed before and it was based on that that we approached them to re-establish those relationships.”

Xceed quietly began reaching out to those agents and brokers more than seven months after it ceased using external brokers on Jan. 14, 2011 – its chairman, Ivan Wahl, citing the cost of originating insured mortgages through the channel, among other reasons for the decision.

The timing of this latest move is directly “correlated” to the company’s $1.7 million settlement with HSBC on August 21, Xceed Mortgage disposing of the bank’s claim that it allowed borrowers to refinance when, in fact, they should have ushered them on to foreclosure.

Under the terms of the deal with HSBC, Xceed agreed to make that lump sum payment without having to admit liability or wrongdoing. HSBC had alleged Xceed as an underwriter “breached prudent standards of mortgage administration and “was inconsistent with the standards that a prudent mortgage administrator would follow when managing mortgages for his or her own account and, in several cases, breached Xceed’s revised Collection Policies and Guidelines.”

“We have just under 50 individual agents now registered with us,” said Ioussoufovitch, pointing to individual agents the company dealt with before January 2011. “We are open to other mortgage agents contacting us, but we are very interested in knowing exactly who we are partnering with.”

It means the company will review each mortgage professional at a brokerage before registering the firm for business with Xceed. That business will be entirely focused on A deals and not subprime.

Xceed is hopeful it will continue to attract brokers with competitive rates but also innovative products, like its green mortgage and new RRSP mortgage. While it offers a straight commission of 110 basis points on a five-year fixed and 90 bps on a three-year, it will not be awarding brokers volume bonuses, said Ioussoufovitch.

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ready for

ta

keoff While residential real estate continues to slow, more and more brokers are looking to an improving and even hot commercial market as a way to build business. CMP spoke to some brokers and lenders in this space and they are all in agreement that commercial deals are on the upswing

COVER / COMMERCIAL MORTGAGES

Our desks are absolutely full right now and there isn’t one of us wishing we didn’t have someone else to help us.

If you’re a commercial mortgage broker right now, there’s a good chance your phone is ringing off the hook.

If you’re not, you’re probably wishing you had at least one deal in the pipeline because after finishing 2011 strong, commercial real estate continues to be a hot market across the country.

Scott Ede

“My early opinion is that this is busier already than it was last year,” says Dale Bilton, a commercial broker with DLC in Kitchener, Ont. “I’m getting steady referrals from every source, every contact and every division.”

It’s the same story for Scott Ede, managing partner at S&R Mortgage Group (Mortgage Alliance) in Calgary.

“I’m excited with what we’re seeing,” he says. “Our desks are absolutely full right now and there isn’t one of us wishing we didn’t have someone else to help us.

Everything from hotels to convenience stores are on our plate, and you really get to pick and choose.”

stats

4.9%

– overall downtown vacancy rate in Toronto, fourth quarter 2011

Source: Avison Young

36 | mortgagebrokernews.ca

After the global credit crisis hit, a lot of people in the commercial industry feared the worse, but instead what they got was only a modest slow down, capped off by a banner year in 2011. And the good news, according to Blake Cassidy, managing partner at Romspen Investment Corporation, is that “we’re anticipating another tremendous year; something that’s been building over the last five years.”

While he says that it’s always important to take a slightly pessimistic look, so that expectations aren’t inflated, “there is an abundance in the market on every sector right now,” he says, adding that Romspen is very

Romspen Investment Corporation is a non-bank mortgage lender specializing in commercial real estate across Canada. With $1 billion under administration, we offer customized mortgage solutions for term, bridge and construction financing from $2M to $60M.

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Capital injection The commercial mortgage market in Canada is lacking in lenders, which has led to an extremely underfunded mortgage sector, according to a new entry in the market.

Kevin Stones, CEO at Canadian Capital Group, says approximately $27 billion in commercial mortgages go unfunded each year, largely due to the fact that after the 2008 recession, the big banks clamped down on the commercial lending sector and revamped all of their lending guidelines.

Dale Bilton

“bullish” on Alberta and southern Ontario, in particular, and has also been fairly busy in Vancouver. The lender has even “moved a couple hundred million into hospitality,” he adds.

“The guidelines at most banks have become so stringent, that it has become next to impossible to obtain commercial financing unless the borrower has extremely high net worth, collateral security and a perfect track record,” he says.

Bilton, who works only in Ontario but is part of a commercial network with DLC that works across the country, runs through the various commercial segments: industrial buildings are “fairly strong”; apartments are difficult to find “but there is an appetite for them with lenders if they make sense”: professional buildings, such as medical or high end office buildings, “are a pretty big demand right now”; there’s a “good appetite with good, decent lenders” for retail shops with apartments above; and surprisingly, in the non-profit sector, he’s seen two church deals “in the last week alone.”

Stones says brokers who do commercial financing need to fully understand the deals that they are submitting and ensure that the deal makes sense.

Often commercial deals are declined by banks based on the way they are packaged, he says. Brokers need to realize that underwriting commercial deals is extremely time-consuming and arduous and they need ensure that they have all of the information and documentation required, so that they are not wasting the underwriter’s time.

In Calgary, Ede mentions land development deals that were stalled in 2008 are seeing a resurgence, but that the “bread and butter is in strip malls, warehouse condos and condo apartments.”

“If a broker is unsure of the deal they are working on, they should be emailing the overall parameters of the deal to the BDM or management to see if it is appealing and to get an idea of what documentation will be required to get the deal not only approved, but funded,” says Stones.

“What seems to be lacking the most is a common sense approach to lending. Lenders need to look at each deal on its own merits instead of painting them all with the same brush.”

The management group at Canadian Capital Group is made up of former commercial mortgage specialists that have structured the company to specifically meet the needs of today’s commercial brokers and their clients. “We offer a common sense approach to lending, and understand the commercial financing market,” says Stones.

The company funds all types of commercial mortgages, and has the ability to finance mortgages from $350,000 to $50 million and offers funding in B.C, Alberta, Ontario, New Brunswick, Nova Scotia and P.E.I.

stats

9.2% 8.3% 7.6% – overall Canadian office vacancy rate in 2009, 2010,2011

Source: Avison Young

As far as hard number go, across the country they’re looking good, according to CB Richard Ellis: downtown vacancy rates in Q4 of 2011 dropped to 6.1 per cent from eight per cent, mostly on the back of the financial sector; suburban office vacancy rates were at 10.7 per cent, down from 11.3 per cent a year earlier; national availability rates for industrial were 6.6 per cent, down from 7.7 per cent; and in retail, shopping centres across the country will see two to three per cent vacancy rates (more or less full occupancy), while other older buildings are continually being transformed into loft-style offices, reported The Globe and Mail in January.

And while that may just sound like a bunch of numbers to some, for commercial brokers it all adds up to endless opportunities, so it comes as no surprise that more and more residential brokers are seriously considering trying to tap into this potentially lucrative extra finance stream.

COVER / COMMERCIAL MORTGAGES

Before you take the plunge Just jumping into commercial isn’t that easy, as residential brokers will be unaccustomed to dealing with things such as environmental assessments, financial, tenancy and market analyses, proposing loan structuring and defining clear exit strategies for the lender. And of course there is the matter of financial statements.

“Every week at least once I have a request from someone who wants to join the team because they want to do commercial,” says Bilton. “They see the big deals and figure you’re making all kinds of money, but my response is if you don’t have the knowledge of a chartered accountant, that’s strike one. You need to be able to read financial statements as good as a CA if you’re going to take it to lenders.”

There are courses available, such as the ones offered at the Real Estate and Mortgage Institute of Canada (REMIC), as well as occasional seminars or talks at the various provincial broker associations. But even then it’s only scratching the surface.

In fact, the biggest mistake residential brokers make, says Ede, is “running into a commercial deal and thinking that they can do it. We think we can and we try it and we find out that we wasted time and lost business on it.”

Ad Lakhanpal, a Mortgage Alliance broker in the Greater Toronto Area, has been doing commercial deals for seven years, “and I’m still learning,” he says.

Currently, about 70 per cent of his business is residential and 30 per cent is commercial. “That 70 per cent keeps the regular cash flow going,” he says, adding that the major difference between doing residential and commercial is that with the former, the variety is in the type of borrower you work with, while in the latter the variety is with the type of lender. “And there’s a different lender for each type of property.”

And unfortunately, “there’s no simple Bible to go to for those,” says Bilton, who took five years of doing a residential/commercial split before going into commercial full time. Over his career, he’s built a “library

40 | mortgagebrokernews.ca

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COVER / COMMERCIAL MORTGAGES

of lenders, and I don’t know how anyone would figure out those sources on their own right away — it’s all self-taught,” he says.

Fortunately, lenders, especially outside of institutional ones, seem more than willing to help out.

“When you work with a co-operative lender they help you out,” says Lakhanpal. “They will tell you, ‘I need this and this’ and as your experience grows you start to anticipate what you will need.”

That’s because at the end of the day, says Mickey Baratz, principal broker and director of finance at Vector Financial Services, a private lender that’s been serving the Greater Toronto Area for almost 40 years, “the objective is to lend money. If a broker comes and he’s inexperienced, you’re not going to turn him away if the deal is good. You’re going to hold his hand.”

Romspen’s Cassidy agrees, saying that “we put ourselves in the borrower’s shoes. A residential guy will eventually come across a commercial transaction, and they can make as much on a $25-million deal as they can in a year of residential deals.”

Blake Cassidy

Some guys will dump hundreds of pages on you thinking it will be impressive. But all I need to start is a one-page executive summary, and once that is prepared, whetting the lender’s appetite, then bring on the rest.

After all, a one per cent fee, which is the average brokers charge, is $250,000.

“We don’t expect all our brokers to know everything about our products,” says Cassidy. “Just running through a deal on the phone I can tell with certainty if it will work. It’s not a waste of time.”

That said, it helps to be organized, and one common mistake, adds Baratz, is that some brokers think more paperwork equals better work.

“Some guys will dump hundreds of pages on you thinking it will be impressive. But all I need to start is a one-page executive summary, and once that is prepared, whetting the lender’s appetite, then bring on the rest.”

Not only does it save time for everyone, but it shows the lender that the broker is organized enough to compress everything into a page or two, which in turn helps sell the deal.

42 | mortgagebrokernews.ca

A helping hand There’s no doubt that learning how to write commercial mortgages is daunting. And even after putting in the time and energy to try to grasp the business, there’s still a small chance that brokers won’t see immediate success “I have never seen anybody go from residential to commercial and make a living,” says Ede. But that’s no reason to pass on a plum commercial deal when it comes across your desk. In fact, by co-brokering it with a more experienced broker, there is still a handsome fee to be made.

“More people are realizing not to do commercial and give it to a specialist,” says Bilton, who offers a co-brokering deal open to all brokers, no matter their brokerage, whereby referring brokers get 25 per cent of the commission, and continue to get 25 per cent if the same client returns for more deals.

COVER / COMMERCIAL MORTGAGES

“If they’re really enthusiastic to learn then we can maybe do some deals together — if they’re good they won’t need me down the road — but right now 75 per cent of my deals are co-brokered,” he says.

And while the option is there to watch and learn from the sidelines, seeing what lenders Bilton goes to and learning which ones have an appetite for what, “most just say, ‘You run with it and let me know’,” he says.

That way, just for passing along a deal a broker can make “good change with very low effort,” he says.

Ede offers a very similar deal — on average a 20 per cent take of the commission, depending on the deal, that is ongoing for return clients.

“We now rely on getting business not just from Mortgage Alliance but from other large brokerages that we have built relationships with over the last four or five years,” he says, stressing that even if that initial client refers someone different to him, the broker still gets another commission based on their original referral.

“We build the broker up so that they are the most important part of deal,” he says.

44 | mortgagebrokernews.ca

If they’re really enthusiastic to learn then we can maybe do some deals together — if they’re good they won’t need me down the road — but right now 75 per cent of my deals are co-brokered

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FEATURE / niche brokering

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placement In a slowing real estate market with traditional referral sources drying up, brokers need to look for different markets or niches in order to grow their business

48 | mortgagebrokernews.ca

FEATURE / niche brokering

funded volume of $130.6 million (good for seventh spot on CMP’s Top 50 Broker list), has managed to steer clear of those obstacles in large part because of his portfolio of property investor clients – one group that has successfully exploited historically low interest rates and the glut of inventory now driving down prices in key markets.

Who: Dave Butler What: VERICO Butler Mortgage Inc.

Where: Mississauga, Ont.

Property Investors With an originations slowdown sending brokers scrambling to diversify their portfolios, a top Ontario player is arguing “niche” brokering may actually be the best way forward.

“In 2011, our originations from real estate investors urpassed 50 per cent of our total volume,” Dave Butler, of Verico Butler Mortgages Inc., told CMP. “In 2010, it was roughly 40 per cent. My single best determinant regarding sales success was listening to Peter Kinch many years back and concentrating on being a niche broker. I felt that Peter was correct in his assessment that real estate investors were a very underrated and under-marketed block of potential clientele.”

The analysis presents a counter argument to the strategic advice of a number of industry veterans committed to the single-family residential market despite what CMHC calls a dwindling number of first time-homebuyers in Ontario and Eastern Canada. While new purchases have also slowed across much of the West, Vancouver brokers are also contending with the highest home prices in the country. That, coupled with the highest occupancy rates in years, is discouraging potential buyers from entering the market.

“It doesn’t take a genius to figure out that your average client might need your services for their mortgage every two to five years,” said Butler, a six-year veteran of the industry, “whereas a real estate investor may need your services for five to 10 different mortgages per year. How hard is it to close a deal for a client 10 different times in the year if you already have all his documents on file from previous deals?”

Butler maintains that tapping into the real estate investor market is a straightforward as well as lucrative process.

“Brokers break into this end of the business by doing their homework,” he says. “Scout out who the local real estate brokerages or brokers are, in your surrounding area that specialize in working with investors and attempt to build a relationship there. Make yourself extremely knowledgeable about all the different mortgage products out there for real estate investors.

Each lender is different when it comes to mortgages for investors so you need to know your stuff.”

It’s advice that even some high volume brokers might want to take to heart, he said, pointing to past conversations with industry veterans who “have no idea that some lenders will lend to 80 per cent LTV on a rental with no insurance premium” or “that for every investment property that your investor has, or is purchasing, you must show a $50,000 net worth requirement per property when doing the deal.”

Property investor clients generally demand a much higher level of expertise, says Butler, exacting standards that can end a relationship with a broker quite quickly.

Butler, who personally struck 509 deals in 2010 for a

mortgagebrokernews.ca | 49

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“If an investor senses that you might be flying by the seat of your pants and you don’t really know your stuff, they’ll drop you in a heartbeat. As much as investors can be extremely loyal once they find a good broker to work with, they are also typically willing to kill a relationship right there and then if they think you are not as good as you say you are. Also, brokers must incorporate some extra value-added services for investors that have nothing to do with the actual mortgage otherwise “ they’re perceived as no better than the local bank.”

info Learn more about the strategies employed by Dave Butler and Mark Goode by attending The Mortgage we strive to hire dedicated and service excellenceSummit, where oriented senior underwriters that understand our both brokers broker business will be speaking.

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Mortgage Experts Where: our value Vancouver, propositionB.C. for our broker partners which clearly states

underwriting and business development service standards. In addition, we introduced Express 4.3 in January 2011, in partnership with D+H that enables brokers to have real time access to deal and Bankruptcies condition statuses through Expert.

Brokers may needlessly be passing up deals involving

rehabilitated bankruptcy clients, says one agent Turnaround times servicing that niche and arranging A deals Street understands thatroutinely our broker partners have a client waiting for only two years after a financial crisis. an approval and that we directly impact their ability to look professional toremains their a challenge, but it’s not as “Certainly, there clients. We as strive to hire challenging people think it is,” says Ajit Hundal, a dedicatedassociate and service mortgage with DLC Canadian Mortgage Categories (in order of 2011 2010 excellence-oriented senior Experts in B.C. “It does require more importance) work of the broker, underwriters that understand but regularly get clients into prime rates in two years ourIbroker partner’s Turnaround times 3.96 3.56 after filing for bankruptcy.” business. We believe we’ve built the right team to provide support 3.93 3.55 a fast and personalized That timeframe may surprise evenUnderwriter some seasoned underwriting experience for and generally gun-shy brokers working the A sphere Streettaking brokeronpartners. about deals involving bankruptcy-discharged Overall service 3.99 3.75 clients.

Interest rates We understand the competitive Interest Rates 3.76 4.54 They needn’t be, said Hundal, who uses those more pressures our broker partners complicated deals strived to maketo up as much as 20 per cent of are facing. We’ve BDM support 3.93 4.25 offer the best rates our his overall sales eachtoyear. broker partners balancing that with service bankruptcy excellence. We Canadian laws allow for bankruptcy Product Range 3.65 4.25 believe that by offering brokers discharge in as little as nine months for first-timers, rate specials on terms that although 21- and 24-month more common. with credit may be more suitable for aterms areSatisfaction 3.89 3.50 policy client’s needs that we enable Brokers generally advise clients that they’ll need broker partners to grow their business.

Broker support another year after discharge to resurrect that failed 3.54 2.95 credit, but that rebuilding can take place during bankruptcy, says Hundal, who has developed strong IT/technology 3.40 2.87 ING Direct referral relationships with bankruptcy trustees.

Kim Luxton, Transparency of Director, ING DIRECT 4.26 4.00 The more-truncated process allows clients tostructure get commission Broker Sales back into the homeownership game sooner and also 2011 hasthat turned out tomarket be expands potential for brokers, many of OVERALL 3.83 3.28 another year in the revenue streams in a whom aredynamic grappling to maintain mortgage industry. Canadian slowing market.

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CHANGE +/-

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FEATURE / niche brokering

Servicing smaller urban centres The grocery store is not where most mortgage professionals run into clients, but when you work in a smaller community, such as Orillia, Ontario, it does happen. Just ask Mark Goode.

“We’re part of the community,” says Goode, a mortgage planner/broker with Mortgage Architects.

“We work and live here.”

This means the interaction with clients and past clients occurs more regularly. “We really have to do what’s best for the client, so we can hold our heads up high as a part of this community,” says Goode.

He says this leads to differences in how they approaches this business.

Who: Mark Goode What: Mortgage Architects Where: Orillia, Ont.

“We do a lot more marketing. “It’s a constant 24-hour a day marketing effort.” And it’s more than ads in the newspaper.

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FEATURE / niche brokering

“We’re very involved in the community,” says Goode.

“We sponsor sports teams, support our local schools and also do quite a bit of community service.”

Referrals are the lifeblood of Goode’s business and he says that’s just how it is in a small town.

“Everyone knows someone here in town that has a trade or is a professional. If I’m putting up a fence, I would have two or three people recommend someone to me. It’s all word of mouth.

“Once we do get a customer in and do a great job with them, then obviously we ask for referrals and that’s where most of our business comes from. “I think people prefer to deal with somebody that their family or friends will recommend.”

Goode says a lot of his customers have specialized fields and in turn, “We have a lot more people who are self-employed,” he says.

A lot of our clients need that expertise and extra help we provide to get that mortgage.

“A lot of our clients need that expertise and extra help we provide to get that mortgage.” That extra help includes an application process that is very hands-on, according to Goode.

“I meet with every single client. I sit down and go through the commitment with them face-to-face and have them sign in my office.”

“When you’re in a smaller town, sometimes modern technology and communication by way of e-mail simply doesn’t cut it.”

mortgagebrokernews.ca | 53

FEATURE / BROKER CHALLENGES

Beating the Banks As part of its annual year-end survey, Dominion Lending Centres polled its network in December to find out what brokers from across the country feel are their greatest challenges for 2012.

Cindy Freiman reports on what they plan to do to overcome these challenges and turn them into opportunities With challenge comes opportunity. And there’s no doubt 2012 will present its share of challenges for mortgage brokers across Canada.

Top Challenges for 2012 Clearly the No.1 challenge identified by the hundreds of brokers who participated in the survey includes competing with bank branches and bank road reps. In fact, 30 per cent of survey takers identified this as their greatest challenge for 2012.

In second spot, 13 per cent of those surveyed believe that the challenging market, economic uncertainty and the need to counter negative economic news from the mainstream media is worthy of attention this year.

Rounding out the top three concerns for brokers at 12 per cent is lead generation and the need to build their databases.

Another nine per cent are worried about further possible changes to lender guidelines spurred

by Ottawa, while eight per cent are homing in on the need for greater education of consumers on what brokers can do for them throughout the home-buying and mortgage-financing processes.

This is where educating everyone you come across in 2012 about what brokers have to offer over the banks is vital to the sustainability and growth of our industry. If borrowers don’t

54 | mortgagebrokernews.ca

FEATURE / BROKER CHALLENGES

Top Three Challenges

1 2 3

Competing with Banks/Road Reps (30 per cent) Challenging Market/Economic Uncertainty/Countering Negative Economic News (13 per cent)

Lead Generation/Database Building (12 per cent)

understand what you do, how can they be expected to consider using a mortgage broker at all?

In the latest research report from CAAMP released in January, lack of consumer awareness/understanding of the channel was the No.1 challenge identified.

“Low consumer awareness and understanding are perhaps the most important challenges facing Canada’s mortgage broker channel,” says the CAAMP report.

“Just five per cent of Canadians say they have a full understanding of the services provided by mortgage brokers.

It’s fair to say, therefore, that people often visit banks by default because they have no grasp of their options.

mortgagebrokernews.ca | 55

FEATURE / BROKER CHALLENGES

19 per cent of respondents indicating they would be leaving their offices behind more often in 2012 to build relationships and a larger presence in their communities Overcoming Challenges It seems there’s going to be a whole lot of networking, building of referral partner relationships, and attending of industry and community events this year. This was the No.1 response from the national Dominion Lending Centres survey, with 19 per cent of respondents indicating they would be leaving their offices behind more often in 2012 to build relationships and a larger presence in their communities.

56 | mortgagebrokernews.ca

This is great news, because becoming more visible in your community and expanding your sphere of influence is an essential part of continually growing and fine-tuning your database. The major benefit banks have over brokers, as everyone knows, is the hundreds of years of advertising and presence the banks have built in the eyes of consumers.

Whether you’re participating in charity or local sporting event fundraisers, the key is to get out into the community and make a presence for yourself. Simply throwing money at a cause will be more expensive and have much less of an impact than if you’re putting in the hours to support what you truly believe in.

Next, 17 per cent said they were going to become more visible through local advertising and marketing, branding and social media.

But regardless of how brokers build their presence in

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FEATURE / BROKER CHALLENGES

Once these contacts are entered into your database, it’s up to you to touch base with both existing and new entries on a consistent basis to ensure you have more than just a list of names in a spreadsheet.

Top Four Solutions

1 Networking/Referral Relationships/ Industry Events/Community Involvement (19 per cent)

2012, it’s important to also make a rule for yourself to exchange business cards/contact information with as many people as possible so that this expanded presence can translate into more database contacts.

Once these contacts are entered into your database, it’s up to you to touch base with both existing and new entries on a consistent basis to ensure you have more than just a list of names in a spreadsheet.

There are some interesting statistics contained within the latest CAAMP report about remaining top-of-mind with consumers. One figure claims that 90 per cent of existing mortgage borrowers surveyed said they would like to receive post-sales communications from their mortgage provider.

CAAMP’s research continues to show that the optimal frequency of communications is between four and six times per year. This doesn’t mean you’re covered for communications for the year by sending out a monthly newsletter. That would technically only count as one type of communication in your aim to make it to at least four and as many as six touches per year.

There was a tie for third spot as the most popular answer to this Dominion Lending Centres survey question relating to overcoming challenges. Some 15 per cent of those surveyed say they’re going to kick customer service into high gear for 2012 and offer clients better service while highlighting their expertise and showcasing the better choice brokers have to offer those requiring mortgage financing.

This sounds like a no-brainer, but it truly is the little

58 | mortgagebrokernews.ca

2 Local Advertising/Marketing/ Branding/Social Media (17 per cent)

3 Offer Clients Best Service/ Expertise/Relationship/Advice/ Choice (15 per cent)

4 Effectively Building/Working Database (15 per cent) things you do day in and day out that will make a difference to your clients. Responding to calls and emails in a timely manner, ensuring whomever answers your phone is polite and efficient, and keeping your clients in the know throughout the mortgage financing process are just a few important steps you can take to ensure you’re viewed as a true expert with whom your clients want to continue doing business.

FEATURE / BROKER CHALLENGES

It’s also back to basics for 15 per cent of survey takers who claim they’ll be much more proficient at building and working their databases in order to spur repeat and referral business this year.

Although it’s great to say you’re going to build and work your database, you need to make this part of your business plan to ensure you’re measuring the effectiveness of each touch point and trying new ways to get your message across. After all, what gets measured gets done.

Finally, 12 per cent are planning to seek out some quality training and coaching, and focus on goal-setting this year to ensure they meet or exceed their own expectations.

Regardless of what you choose to do in 2012 for the betterment of your business, the focus should be on trying something different or fine-tuning something you embarked upon in the past that may not have worked as well as you thought it could have.

Make sure you join forces with others in the industry to share best practices and ideas. Living in a bubble and being concerned about sharing ideas with peers will only ensure you spend too much time reinventing the wheel – without the benefit of discovering what worked and what didn’t work for other brokers. It’s important to remember that other brokers aren’t your competition – banks are.

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www.canadianafinancial.com mortgagebrokernews.ca | 59

FEATURE / FINANCING PROPERTY INVESTMENT

Finance strategy when credit is tight In the latest feature from our sister magazine Canadian Real Estate Wealth, Peter Mitham explains how you can get access to finance for your property investment clients despite the hurdles, as lenders continue to tighten their criteria

60 | mortgagebrokernews.ca

FEATURE / FINANCING PROPERTY INVESTMENT

C

anada’s real estate market is in the cross-hairs of a new round of global financial woes. This is a mixed blessing for investors seeking to enter the market.

On the one hand, anxieties regarding the potential for default in Europe and ongoing concern regarding the financial outlook for the U.S. means lenders have every right to be cautious. On the other hand, low interest rates give buyers an opportunity to secure cheap financing on real estate, a longstanding hedge again inflation – especially inflation driven by policies designed to stimulate the economy.

Boosting access to credit is no way for governments to eradicate mountains of debt, but for the savvy investor with some cash it could be a way to secure assets as a long-term game should inflation kick in.

“If you have a reasonable down payment and are purchasing a property with decent rents, then get in there – conventional mortgage money is really inexpensive right now,” says Hali Strandlund, president, mortgage investments with Fisgard Capital Corp. in Victoria, B.C. “Values for average single-family homes have declined in most areas but the rents have not.

Investors are still able to get really good market rents.”

But lenders are reining in credit, tightening conditions and being less flexible when it comes to discounts on rates. While variable-rate mortgages are still available at a discounted rate, the worsening economic news in August prompted many banks to bring discounts closer to prime lending rates – typically from two per cent up to the 2.5 per cent range. This led many observers to forecast a shift into fixed-rate mortgages and the greater stability they offer. Brian Moskowitz, president of Moskowitz Capital Management Inc. in Toronto, worked with one of the country’s major banks prior to launching his own mortgage company, and says banks have several options for tightening credit, all of which impact borrowers.

The federal government led the charge during the 2008 financial crisis when it nixed 40-year mortgages, reducing the maximum amortization period on government-backed mortgages to 35 years and requiring a minimum down payment of five per cent. Ottawa also required that homebuyers have a minimum credit score of 620 and service debt with no more than 45 per cent of their total gross income before it would agree to insure their mortgages. Ottawa followed those moves earlier this year with a further reduction in the amortization limit on government-backed mortgages to 30 years, and required that any refinancing of a governmentbacked mortgage tap no more than 85 per cent of the available equity.

The major banks have followed suit, quietly tightening the terms on which they’ll lend to ensure a better quality of borrower, Moskowitz says.

The non-bank options If you don’t meet all your bank’s criteria, there are other options. These include:

Mortgage funds “If they can’t get their mortgage from the bank, there’re many alternatives [like] non-institutional lenders. And there are many very credible professional mortgage funds,” Moskowitz says, urging investors who are considering an alternative lender to do the due diligence and ensure the lender is registered with the province’s financial institutions commission.

“There’s a proliferation of niche lenders in the larger markets – Toronto, Calgary, Vancouver.”

His own firm is one, examining each deal on its own merits rather than through regional lending policies that pay closer attention to broad economic factors rather than individual situations. This has given firms like Moskowitz, Fisgard and others like it more flexibility.

“We will lend up to 70 percent on a commercial building, whereas the banks will be in the range of 50–60 percent, or not at all,” Moskowitz says.

“We’ll lend into smaller towns. We’ll lend into a population of 5,000 people whereas the banks wouldn’t touch a town like that.”

One of the factors Moskowitz takes into account when it’s assessing a deal – besides the quality of the borrower’s credit rating, income and size of their down payment – is the buyer’s intentions for the property. This helps gauge the merits of the deal separate from what the rest of the market is doing, and opens up the taps for funding deals in more obscure or less favoured markets.

• increasing credit scores

“We’re very situational lenders. We’re not making decisions based on macro-economics,” he says. “I don’t really care, necessarily, if I am doing a deal in Halifax, Nova Scotia, if the market is down 480 points ... [or ] what’s happening in Vancouver.”

• reducing loan-to-value ratios on financing

Short-term financiers

These include: • reducing amortization periods

An equally flexible approach is taken by Fisgard, where Strandlund says business is booming with the tightening of credit by the major banks. While money is cheap, it’s harder for some borrowers to access financing because terms are tighter.

mortgagebrokernews.ca | 61

FEATURE / FINANCING PROPERTY INVESTMENT

01 Submit all the correct paperwork Carolyn Heaney, area manager, specialized sales with BMO Bank of Montreal in Vancouver, says banks aren’t requiring any more documentation than they did in the past, but they are taking a closer look at it to make sure it squares with their lending requirements.

02 Get a valuation before applying for a loan Areas in which home prices posted significant rebounds through 2010 are receiving particular attention at BMO because the bank wants to make sure the financing investors are seeking is appropriate to the actual – rather than the market-inflated – value of the property in question.

It’s not uncommon for investors to secure partners other than banks or lenders in order to get the best possible deal when financing is tight – say, partnering with family, entering joint ventures or getting a vendor take-back mortgage – but sometimes an alternative lending source is necessary.

Strandlund positions such financing as a short-term fix, helping see the borrower through to a point where a conventional lender will take them on – because with alternative financing rates running double what the banks are offering, the stop-gap isn’t cheap.

03 Submit all your income Statements, confirmation of income, confirmation that the borrower has the resources to make a down payment on the purchase, and past repayment history are all documentation the bank requests and reviews.

04 Keep an eye on your credit rating An investor who wants to ensure they’ll be considered favourably should request their credit history and make sure there are no anomalies that would prevent the bank from providing financing. While income may be stable, and a down payment may take time to pull together, borrowers can take steps to loosen credit by bolstering their own worthiness to receive it.

The major agencies providing credit reports in Canada are Equifax and TransUnion Canada, which provide individuals with information about their own credit rating free of charge. Should any information on the credit report be inaccurate or out of date, be sure to provide immediate written notice to the credit agency. Your side of the story will be added to the report’s history, so that potential lenders will have your explanation and rebuttal of the rating.

“Of course, it’s going to be more expensive. Our private rates start at 5.99 per cent,” she says, noting that the typical term is a year or two.

“We’re hoping that by the end of one or two years, they’ve either fixed their credit or have a more stable job, and they can go back to a conventional lender.

Contacting banks or other organizations that may have identified issues with your credit worthiness is also important, as the resolution of credit issues lies with creditors’ perception of your creditworthiness. So, if you can come to terms with your creditors and get on good terms with them, the improved relationship will be reflected in your credit record.

If they’ve been paying us, we’ll just renew, but generally we try and get them into something cheaper.”

Gradually restoring lenders’ faith in one’s ability to manage debt is critical. “If someone has a bankruptcy and has fallen onto bad times but has made steps to restore their credit and has started with, say, some small credit cards or perhaps some department store cards and they’re operating satisfactorily, then yes, we are more willing to help that individual out,” Heaney says.

How to get around the tight lending criteria Here are some tips to get the funding, you need:

62 | mortgagebrokernews.ca

05 Build a strong credit record

Take steps to improve your credit history and financial reputation. Heaney recommends doing simple things such as applying for a department store credit card, making a few purchases, and paying it off.

“Sometimes it may require that they do put down more of a down payment. But we’re not talking exorbitant amounts.”

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FEATURE / FINANCING PROPERTY INVESTMENT Your trusted news source

Industry

Borrowing on damaged credit Nationally, consumer bankruptcies and insolvencies have been rising since 2006, with bankruptcies alone up a remarkable 11.2 per cent in the 12 months ended June 30, 2011. This means more people are likely facing the pinch from tighter bank policies. While investing in real estate sounds like a route to riches, it’s difficult for those whose own circumstances make lenders shy away. first-time buyers, or mortgages that start under a have expanded their unsecured lending products. specific price (remember restrictions in 1992 when What our government fails to realize is that “If they’ve had a has history of never paying have outstanding on thewas bureau, it does make it difficult for any lending first-time buyerdebt program implemented? unsecured lending a larger impact on and cashthey stillthe institution to walk around that,” says Heaney.

“Bad credit is very hard to mitigate.”

Should we look at something similar?) When “Red flow than mortgage lending. Particularly when Ed” Clark at TD was screaming for more home ownership has already been proven to be government controls on mortgage lending, what more affordable than rentingThis in most areas is an ideal option for short-term Strandlund says that an investor with damaged credit he was really saying was that lenders can’t police (Vancouver is currently a rarefinancing, exception).

What and can help boost the and maxed-out options with their first mortgage may themselves. If bank A will do the dealseek why can’t mortgage, albeit at a higher rate. they (government) do see is the powerful downmost payment you put down without a second bank B? If Johnny jumps off the bridge, would you lobby group in the country saying “it’s mortgage interfering one way or another with Fisgard won’t ask questions if borrowers provide jump off a bridge? What kind of people do we have lending that is the issue.” your credit rating. Ensure you have a enough down because the property will be sufficient culprit in – Paul Therien running our banking system? The real plan for repaying the loan and commit security, but the this whole mess is the least regulated and that is financing costs will typically be to itEconomics in writing, so 101, that family inversely credit card debt. Put some sense back in theproportional to the number of questions They just don’t get it, do they? says have put the boots to the credit card lenders, cool off a hot market by making more difficult to system, someitrecourse if you disappoint them. asked – the less documentation required, the higher understanding that it will impact thethe economy borrow, heat up a cooling economy by loosening interest rate. significantly, especially retail goods. Gradually up lending. We are cooling off in many markets, tighten the mortgage underwriting “standards” that were never as hot as Toronto and Vancouver.

“If we’re 50 per cent on our loan-to-value, we’re probably going to ask less questions,” she says. “If [it’s] a higher loan-to-value, that have been perverted over the last 10 years.

Canadian institutional (read bank) mortgage [lenders] arebeen probably to ask questions the ability to make payments.”

Will there be pain?

No doubt about it. But an lending has on agoing 10-year roll,more like drunks on aregarding bender, abetted by their “drinking buddy” CMHC. I uncomfortable pain now, beats an agonizing pain Second possible that are long both alow-keylater. and effective at meeting investors’ short-term financial needs. They’re used by agree thatmortgages a 30-year are amortization is too time in general, but maybe should be allowed for investors to enter the market and establish– aGTA Broker for future success. If your experienced investors and a it way for less-advantaged foundation difficulties are short term, and you can manage a property investment over the long haul, then the credit you’ve lost stands a good

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chance of being restored by virtue of your success.

The investor is a partner with the lead partner, a fact reflected in the greater financial commitment.

While far from being investors with poor credit, But participation can be from as little as $16,000 for Todd and Danielle Miller, the husband-and-wife team With predictions swirling around about second mortgages that make the investments work. The behind Edmonton-based Glenn Simon Inc., frequently “ the future of the economy in 2012, Lombard sums are just enough to reduce the loan-to-value ratio use second mortgages to cover short-term financing believes Peoples Trust is well-positioned. there’s nothing that slows to a point where conventional lenders will provide requirements.

“Our business model hasn’t really down the process more financing at ratesreal that work. changed from last year. We expect the than not havingGlenn as much estate Simon was established nine yearsmarket ago andto remain strong and we to continue in our “With the main second mortgage people, they don’t finds dealscan in which it invites othersexpect to participate.

It to operate information as you possibly spheres of CMHC-insured and conventional generally go on title,” Danielle Miller explains. effectively manages the investments – primarily have or not having a clear business. We also expect pricing to remain residential properties in Alberta suitable for tenants, but understanding of the deal or competitive and we’re up-to-date with “Basically, you just draw up another document saying often ones in which the owner was motivated to sell (for current market pricing and where we the borrower stats they amount invested against the property, and any number of reasons) – while others provide the need to be to be competitive,have but this we don’t ” that’s usually fine.” funding for the ventures. The Millers play a lead role in see any major changes to the market Michael Lombard coordinating the joint ventures, getting know the nexttoyear.”

– maximum “Most of our brokers pick upthey the bring onboard and knowing Expectations Peoples Her one caution is that investors who secure a investors what their of the brokers amount phone and say, ‘This is the deal I’ve and investment goals dealsare. with are rather straightforward, second and subsequent mortgages pay attention to the financial positions of equity got.

Does it make sense and can I according to Lombard: understand deal. math, just asthe a bank would. thatyou cansome be information?’ It’s not a send “There’s nothing that slows down the Glenn Simon typically seeks investments of $50,000– refinanced situation where your deal is sent process more than not having as much “You just have in its joint is higher with through a channel $150,000 and reviewed by ventures. The amount information as you can possibly have or to notmake sure that your first mortgage governmentpayment and your mortgage payment still allow than many syndicates, the Millers explain, because an analyst, at Peoples you’re dealing having a clear understanding of the deal second or back the property to cash flow,” she says. investors are sharing not only in an investment but in directly with the underwriters.” the borrower.” CMP mortgage the direct liabilities of the project.

85%

License #11127

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Business / marketing

Realtor

marketing secrets In the fifth instalment of his latest series, Doren Aldana explains how to break through the clutter and make a big splash with your Realtor mailings 66 | mortgagebrokernews.ca

Business / Marketing

In my last article, I walked you through the first of my seven steps for building a strong, profitable partnership with top-producing Realtors. More specifically, I showed you how to compile a “Top 100” list of award-winning Realtors in your area so you can start attracting them as referral partners. So, now that you’ve got your hit list of top dog Realtors compiled, it’s time to move on to the next step in the formula.

STEP 2: Send a Personalized Intro Card or Letter If you want to stand out from the clutter, using direct mail is one of the best ways to do it. Essentially, you have two options. One option is to send a low-cost, full-colour postcard. The other option is to send a multi-page letter, providing a more detailed, comprehensive overview of the unique value proposition you are offering.

You may recall from last month’s article that I recommended compiling two different lists: a warm contact list and a cold contact list. For your warm contacts, all you need to do is send them a simple postcard – nothing fancy.

If they’re on your warm list they should already know you, like you and trust you, and perhaps they’re already sending you some business. Now your goal should be to take those relationships to the next level. The purpose of the postcard is to pique their interest so they’ll want to learn more about how you can help them grow their business.

As you can see in the sample above, the front of the postcard uses red handwriting font for the headline that says, “I’ve got some amazing new tools to help you attract more hot listings and sell ‘em faster.” And then it has a handwritten arrow pointing to some “eye candy” with a visual depiction of some of the tools you’re offering. The main objective of the card is to grab their attention, create interest and build desire for what you have to offer so they’ll be open to meeting with you to learn more.

Now let’s talk about what you should send to your cold list. Remember, these are top-producing Realtors who don’t know you from a hole in the wall – so getting their interest is not going to be easy. In order to get on their radar screen you’re going to have to break through the clutter and make a big splash.

That’s why I recommend pulling out the “big guns” with some unique and outrageous 3D or “lumpy” mail – otherwise known as a “shock ‘n’ awe” package.

mortgagebrokernews.ca | 67

Business / marketing All you have to do is take the exact same letter, customize the headline and then slip it into a fake dynamite stick (which is just cardboard tube painted red with a fake wick stuck on a white plastic lid). The headline of the letter says, “Ralph, here’s how I can help you explode your sales!” Again, we’re using the headline to tie in with the overall theme of the package.

Here’s how it works. The first letter in my three-step shock ‘n’ awe campaign is called the Pill Bottle Letter (above). And as you can see in the image above, the Pill Bottle Letter has an RX at the top so it kind of looks like a prescription from the doctor. Then you take this four-page letter and you literally cram it into a prescription pill bottle and drop it in your Realtor’s slot at their office.

The headline of the letter would say something like, “Ralph, here’s your prescription for what ails you (including a proven cure for stagnated sales, slow-to-sell listings, and that nagging guilt associated with not spending enough quality time with your loved ones).” And then it goes on to talk about how you aren’t going to just chase them around with rate sheets and doughnuts and tout your “great rates” and “great service,” but instead, you’re offering a proven cure for what ails them, namely a lack of quality listings and/or buyer leads.

And again, you don’t have to send this through the mail. You can simply go to their office and pop it in their slot, which of course, saves you money on postage. Plus, it also gives you a great opportunity to mix and mingle with the Realtors in the office with a built-in talking point: your outrageous Pill Bottle Letter.

However, no matter how effective your letter is, there will always be a certain percentage of recipients who don’t respond. No problem.

Persistence beats resistance – just send them another letter! For best results, I recommend following up by phone about a week after you deliver the letter (more on that in step 3). If you are not able to reach them and if they don’t respond to your voice mail messages, send them the next package in the three-step campaign: the Dynamite Letter (above right).

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At this point some people might say, “Doren, aren’t you going a bit too far? Won’t this scare people off?” To which I would respond, “If you don’t risk going too far, you’ll never know how far you can go.” I also like to think of it as a good screening device to weed out the whiners and complainers. If someone doesn’t have enough of a sense of humour to appreciate your creativity and unique approach, they’re probably not the kind of person you want to work with anyhow.

If someone still doesn’t respond to the Dynamite Letter, then I would load another bullet into the barrel with the final letter in the campaign: the Garbage Can Letter. This letter is virtually the same as the first two letters (with some slightly alterations) and it’s literally crumpled into a little mini garbage can and the headline says, “Since you’ve thrown away my previous two letters, I thought I would save you the effort.” If nothing else you’ll get the Realtor smiling. :) If you hadn’t noticed by now, all three of these

Business / Marketing

packages are designed to “stand out” from the clutter, thereby increasing your chances of getting them opened, read and responded to. Since most of your competitors continue to follow the herd, using the same old boring marketing methods, it doesn’t take much to rise above the crowd. All you need is a little audacity, creativity, persistence and you’ll be well on your way to partnering with some of the highest-producing Realtors in your area.

In my next article, I’ll walk you through step three of my seven-step formula for building strong, profitable partnerships with top-producing Realtors. You’ll learn exactly what to say and how to say it when it comes to following up by phone after you deliver your shock ‘n’ awe packages. This is perhaps the most important step for booking face-to-face meetings with top-producing Realtors. Stay tuned…

info

About the Author:

Learn more from Doren at The Mortgage Summit.

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.

www.TheMortgage Summit.com

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

mortgagebrokernews.ca | 69

Profile / broker

People

person

Having spent most of his career in Atlantic Canada, Steve Whitehead’s decision to help expand TMG The Mortgage Group in the region was one grounded in belief and knowledge Steve Whitehead knows a thing or two about working with people and doing so successfully.

Before joining TMG The Mortgage Group Canada in May 2010 as executive vice-president, Atlantic Canada, he was president of Home Loans Canada (HLC) for five years, capping a 32-year run in various capacities at CIBC. In addition to growing that business into one of the largest national mortgage origination companies in Canada, HLC was also chosen as the Employer of Choice in 2007 and 2008 at the Canadian Mortgage Awards.

“You have to give people an environment and a place where they can excel, a place where they want to belong, an opportunity for them to grow, and a place where leadership is engaged with them to help them develop,” he says. “People are always looking for opportunities, but you also have to be there to help challenge them to reach their goals.

“When I was with HLC that was one of the key things for me – it was about the people. The people are the most important aspect of any part of the business. If you have good people and you look after those people, things will look after themselves.”

After retiring from the bank in 2009, Whitehead, who spent most of his career based in Halifax, was looking to start a business and considered numerous opportunities before meeting with TMG co-founder Grant Thomas and president Mark Kerzner.

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Steve Whitehead

People are always looking for opportunities, but you also have to be there to help challenge them to reach their goals

profile / broker “We developed a program for Atlantic Canada at TMG, called TMG Atlantic Canada,” says Whitehead of the business, which currently has 43 brokers in all four provinces in the region. “We’ve built it into a very strong, dynamic group of good quality mortgage professionals.”

mortgage for our client today, it’s building a long-term relationship with the client.”

Whitehead says they have created something of a boutique-type brokerage. “We’re very focused on what the client’s needs are. We’ve built the business with a team of people that are trusted and respected in the industry and who act with integrity.”

“You have a good work-lifestyle balance here and there are a lot of opportunities to grow. It’s about individuals finding within themselves how they want to grow and what kind of lifestyle they want to lead.

Personally, professionally, financially you can enjoy a very good lifestyle in Atlantic Canada and certainly I’ve been able to do that for many, many years.”

Less than two years in, Whitehead expects the business to continue to grow and he expects to see substantial growth throughout the balance of 2012 and into 2013. “We continue to look for talented mortgage professionals for our team.”

That growth will come in a market that is very different from other parts of the country, where the average mortgage is considerably smaller than urban centres such as Toronto and Vancouver.

“Atlantic Canada has a lot of niche, rural markets,” says Whitehead. “That lends itself to smaller valuation of real estate and smaller mortgages. That said, there are also larger mortgages in the urban centres, around $200,000 at the entry level, so we are starting to catch up other parts of the country.

“Economically, there have been some great things happening in Atlantic Canada, such as the recent announcement of the shipbuilding contract, which will be good for the region for a long time. St. John’s (Newfoundland & Labrador) has also been a very hot and robust market, but the balance of the market in Atlantic Canada has been very steady. It doesn’t have the highs and lows that you get in the major urban centres in other parts of the country.”

Building business in the region also requires a different tact, according to Whitehead.

“Atlantic Canada is a very relationship-focused environment. Customers tend to be very loyal and committed to people that they trust. Our clients tend to become our advocates. They promote our business and our value proposition for us. We just have to ensure that our people understand what the value proposition is that we’re putting out there for our clients and that’s something that we’re very careful with.

Differences also extend to the lifestyle that living in region offers, one that Whitehead said revolves around family.

Having spent five years in Toronto while president of HLC, Whitehead says running a national business from Toronto was a very good opportunity. “It allowed me to see things from a national perspective versus a regional perspective.

“After running a national business and then to come “back home” to run a regional business, you have a whole different perspective on how a business should manage itself and the strategies that you have to have in place to make sure it is successful and that people that are part of it can excel within it.”

That theme of success and the role relationships play in that success carried over to Whitehead’s decision to join TMG. He saw a solid company with programs and processes that were adaptable and that cared about its people.

“What I like about TMG is that it is very well run, with good quality people from ownership to leadership.

I also found that many of their mortgage professionals have been with them a long time and that speaks to how an organization looks after its people. To me that was really important.

“TMG also have strong lender relationships. I did some research and they enjoy really good relationships with many of the lenders, and a lot of people had a lot of good things to say about TMG. “I simply found the right fit with TMG. The quality of people, broker and back-end support and the TMG culture are well aligned with my own values and the opportunity for continued success with TMG in Atlantic Canada, is very significant and I am excited to be a part of it. I’m very proud of our team of professionals and we look forward to continued success.”

“And that value proposition has to be there now for the client and in the future. It’s not just doing a

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Profile / insight

We are

family At The Mortgage Centre Canada, long-term strategic partners are helping it to grow and, in return, it supports them through dedicated services, allowing brokers to establish themselves in their communities

Tim Rye

CMP recently spoke with Tim Rye, chief operating officer for Mortgage Centre Canada about what’s happening at the brokerage, in the industry and what the future holds for both.

“The industry is going through significant and rapid change due to significant innovations in technology, increased information being readily available and increasingly competitive environments at both the broker and lender levels” Rye says. “Whether it be new entrants or aggressive bank sales force growth, uncertainty and change are here with us for a while.”

For this and many reasons, Rye says being part of a larger institution is a wonderful advantage for MCC because “not only does our team have access to exclusive products and support services, we also have the full backing of one of the largest lenders in Canada.

What could be better? Our members get their own identity and community presence with the backing of a National Brand.”

In his first few months on the job, Rye has found a very well-established network of professionals who are focused not only on growing their business, but the industry as a whole. “We pride ourselves on being the

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profile / insight

The future at MCC

best at what we do, and we work closely with all of the industry partners, regulators and technology sources to demonstrate our commitment to excellence,” he says.

MCC’s strategic deliverables are focused on giving the network choices when it comes to tools and business solutions that they can decide if they fit their business model, says Rye. “We don’t want to get caught investing heavily in proprietary solutions that become dependent on recouping costs from our network whom don’t necessarily agree on its effectiveness. We are hearing that those companies that have invested heavily in tools now have to go outside its network to sell its solution to help recoup costs and boost profits or worse – increasing fees for existing members … not a good long-term business process in our opinion.”

“We have the luxury to grow strategically with the right people whom have demonstrated success not only in this industry but in whatever business they are in. It’s important that we grow via new entrants to the industry, not only preying on each other. This year we were able to bring in franchise owners that are real estate professionals, bank employees and from other related industries. This guarantees we are growing the industry at large. Look, if someone is unhappy with their current broker they will do their homework and chances are we will get the call … unfortunately our criteria to own a franchise is quite difficult so we don’t have room for everyone.”

The strength of MCC also bodes well for the future, according to Rye. “Capabilities to work with the industry-leading service providers as a result of our ownership mean that there are many other great and innovative things that will be available to our network in the near future. With the notion of economies of scale that the bank brings to the table this equals better service and cheaper prices … that’s good business”

Rye says the MCC motto is “We’re not growing for the sake of growing. We’re growing with the right people, in the right location, at the right times.” And that’s key to its long-term strategic plan of sustainable, profitable growth. MCC, argues Rye, has the highest funding and efficiency ratio in the industry. This doesn’t happen by accident, he says, and in its experience the lenders supporting the industry are putting more and more focus on this.

One thing MCC neglected in the past, according to Rye, which it is now starting to market is the value of the MCC model to agents. “Sure, everyone would love to own a franchise, but it’s a lot of work and investment so why not learn from our existing owners and get the opportunity to earn equity.

“We want long-term strategic partners of ours who will work with us, help us grow and in return we will support them through a dedicated territory model and top-tier income and support services, allowing them to have complete penetration in the communities they choose to establish themselves in,” says Rye. “One of the benefits of having a long-term network of partners – is that we foster a very supportive environment for everything from the training of new agents to sharing significant best practices and tools amongst our network coast-to-coast.

“Because we have a long-term committed team of people, it really is like a family and we share with each other. I could not be happier joining the winning team.

My ‘New Guy Rye’ tag didn’t last too long, and we have been busy adding new family members throughout the past few months.”

“Many of our existing owners are looking to partner via ownership or are looking for good entrepreneurial agents to take on sub franchises, etc… we know how to groom agents into owners … we do it all the time. We believe in succession planning and many of our agents are now owners of their own businesses growing their own teams and offices.”

stats

100 – approx. number of Mortgage Centre Canada owners

When asked about what the future holds for the broker industry as a whole, Rye says times are certainly changing for all players. “Whether it be lenders, brokers or supporting services, everyone is going through significant change and I’d expect we will see more focus on partnerships, efficiencies and long-term sustainable growth. Those not working for the greater good of all partners and continuously having their hand out will be left behind. We are already starting to see it happen.”

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Profile / provider

Comfort from

the storm

Robert Leaker

Meridian Credit Union is rolling out the red carpet for brokers looking for a new home for their BFS clients, as other lenders have cut back on their programs Credit unions like Meridian – Ontario’s largest player – are actively reaching out to brokers seeking a new home for BFS clients.

“This really is an opportunity for brokers to take a look at other lenders,” Robert Leaker, VP of emerging markets for Meridian Credit Union, told CMP. “And quite frankly we are that other lender, with the products, the services and the common-sense lending guidelines to accommodate that business.”

That message is increasingly getting through to Ontario brokers, who helped Meridian add $450 million to its mortgage book in 2011. The credit union expects to better that by 10 per cent to 15 per cent this year.

options still open to them.

Those choices will likely get further eroded following the CMHC’s warning earlier this month, the Crown corp. telling lenders that they will face increasingly limited access to bulk insurance for their conventional loans as the CMHC’s $600 billion fund comes within 10 per cent of its government-set ceiling.

Non-deposit taking institutions are most likely to be affected because they rely on that insurance to facilitate the securitization and sale of those mortgages – a way of taking them off their books and freeing up cash for more lending.

Meridian, with more than 263,000 members – or, more importantly, depositors – isn’t in the same boat.

If Leaker gets his way some of that growth will come directly from self-employed borrower deals brokers would otherwise have taken to FirstLine, Merix or Street – all of which made major adjustments to their programs in the last two weeks.

Last year and Meridian Credit Union Desjardins Credit Union amalgamated their respective organizations.

Meridian’s self-employed terms are increasingly hard to come by: no automatic interest rate premium for clients with beacon scores above 600 and there’s no mortgage insurance requirement.

The amalgamation included all 19 Desjardins Credit Union branches, Central Loans Unit and Head Office.

However, it excludes Desjardins Credit Union’s six agencies which would be maintained and operated by Desjardins Group through the Fédération des caisses populaires de l’Ontario.

“We don’t do high ratio,” Chris Fontana, manager of Meridian’s broker Unit, “and we may or may not bulk insure a loan ourselves, but the member doesn’t pay it.”

While FirstLine has axed BFS lending altogether, Merix and, on a case by case basis, Street will do those deals only if the client is willing to take out default insurance on what is nonetheless a conventional loan.

That may rub both clients and brokers the wrong way as they parse through the dwindling number of

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“This is good news for members of both Meridian and Desjardins Credit Union as well as the credit union movement in Ontario,” said Don Ariss, Chair of Meridian’s Board of Directors at the time.

“We will have additional resources to improve products and services to our members and offer Ontarians an increasingly competitive, co-operative option for mortgages, loans, wealth management and other financial services.”

Keep your home buyers informed.

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Profile / favourite things

Favourite things‌

Darlene Hanley Mortgage Agent, Oriana Financial Group of Canada Ltd., Toronto, Ont. Movie: City of Angels Celebrity: John Howard, the best politician ever

Hobby: Long walks with my husband and Portuguese Water dog

%) @ +1(

Drink: Food: Any kind of fish Music: New country Book: Girl with the Dragon Tattoo trilogy

Sport:Â TennisÂ

76 | mortgagebrokernews.ca

Place: Home Vacation spot: Casa Dorada Los Cabos, MexicoÂ

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GUEST / column

Beyond the reverse mortgage While reverse mortgages are growing in popularity, broker Dustan Woodhouse cautions that it’s important for seniors to be aware that there are other options available

While I have never suggested that a client opt for a reverse mortgage, I have helped some get out of this product.

property’s equity if they have no other liquid assets or significant income. This is one of the few true equity lending programs for clients with excellent credit. In a five-year HELOC with a loan amount of $100,000 at a 3.5 per cent interest rate (floating at Prime +.5 interestonly), with monthly payments of $371.53, the balance due after five years is $122,291.80.

Reverse mortgages sound great on TV commercials – receive some of your home equity to do with whatever you want while you stay in your home and you don’t have to make any payments. And many recent newspaper articles have stated that HomEquity Bank – the only Canadian supplier of reverse mortgages – is seeing continual increases in its CHIP reverse mortgages.

So, although clients must make monthly payments using a HELOC (interest-only), looking at the examples above, a senior would owe $7,096.20 less at the end of a five-year HELOC term compared to a reverse mortgage assuming the full amount was initially advanced and not accounting for movement in Prime. This option is more about flexibility.

It appears that seniors are unaware of what their options actually are, and also tend to be uninformed on the positives and negatives of the various options that are currently available.

Another option to the CHIP reverse mortgage is a straightforward ETO mirroring that of the reverse mortgage product. This scenario would also apply in the case of a HELOC taken out with a total limit of say $200,000 but only 50 per cent utilized. Then the client can exercise the option of locking the funds into a much lower rate than is typically offered in a reverse mortgage scenario.

I often wonder why seniors would take on a reverse mortgage product when there are several options that would serve them better and save them money.

Dustan Woodhouse

According to HomEquity Bank, the average dollar amount of a reverse mortgage is $100,000 and the average amount of time a senior stays in a reverse mortgage is 10-12 years.

But, if you look at just a five-year term on a reverse mortgage, a $100,000 loan amount at a five-year rate of 5.95 per cent with no monthly payments, turns into a balance due after five years of $129,388.

HELOC option

info Learn more from Dustan at The Mortgage Summit.

www.TheMortgage Summit.com

A HELOC is a potential alternative to a reverse mortgage. The client can advance what they need when they need it, and only pay interest on the portion they use. Also, depending on the HELOC lender, the client can lock this product into multiple fixed-rate and/or variable-rate mortgage products. In fact, with National Bank for instance, clients can create up to 99 individually titled and tracked accounts, which allows them to better track investment funds and ‘life expense’ funds for their tax accountant.

National Bank also offers an equity program that allows clients to access up to 40 per cent of their

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In this example, you’ll notice that the initial loan amount is higher. This is for the purpose of setting aside 60 months worth of payments so that we truly have a comparable solution where the effective monthly payment is zero. With a loan amount of $112,136 at 3.19 per cent (30-year amortization) and monthly payments of $483.05, the balance due in five years is $100,000.94.

It’s important that seniors and those approaching retirement age are aware of the full spectrum of products available to them so they’re not blindly opting for a reverse mortgage that can quickly eat away at their equity.

Compounding interest is a battle each borrower fights to pay off the home in the first place, and having it quietly work against them for 20 or more years can really make that initial reverse mortgage of $100,000 look like a questionable move.

service / directory

Banks

Commercial Lenders

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

Fisgard Captial Corporation www.fisgardmortgage.com Ph: 1 866 382 9255 Page 10

HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 33

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

National Bank www.nbc.ca Ph: 1 888 483 5628 Page 69

ROMSPEN Investment Corporation www.romspen.com Ph: 1 800 494 0389 Page 1 and 37

ING Direct www.ingdirectbrokerteam.ca Ph: 1 800 574 5629 Page 51

Non-Bank Lenders

Vector Financial Services www.vectorfinancialservices.com Ph: 1 866 483 8018 Page 17 Insurance

Canadiana Financial Corp

The Canadian Capital Group www.canadiancapitalgroup.com Ph: 705 503 7788 Page 41

Canadiana Financial Corp. www.canadianafinancial.com Ph: 1 877 672 7219 Page 59

Capital Direct www.capitaldirect.ca Ph: 780 868-0550 Page 20

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

Merix Financial www.merixfinancial.com Ph: 1 877 637 4911 Page 63

Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 64

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

Broker Networks

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

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

FirstLine Mortgages www.firstline.com Ph: 1 877 658 3660 Inside Back Cover

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

Radius Financial www.radiusfinancial.ca Ph: 1 877 369 6398 Page 57

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

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

The Money Source www.mymoneysource.ca Ph: 416 699 2274 Page 65

TM

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

mortgagebrokernews.ca | 79

service / directory

Mortgage Alliance Company of Canada www.mortgagealliance.com Ph: 1 877 366 3487 Page 43

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

Technology & Software

Real Estate Institute of Canada www.reic.ca Ph: 1 800 542 7342 Page 52

Services

Financial Consumer Agency of Canada www.itpaystoknow.gc.ca Ph: 1 866 461 3222 Page 75

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

Mortgage Architects www.mortgagearchitects.ca • Ph: 1 877 802 9100 Page 39

Teranet www.teranet.ca Ph: 1 866 237 5937 Page 53

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

The Lions Share Group www.lionssharegroup.com Ph: 1 866 726 5159 Page 27

Real Estate

RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 29

Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 31

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

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80 | mortgagebrokernews.ca

The hands on support of our Regional Business Managers is just one of the tools you’ll get as a FirstLine registered broker.

Call us today to get started.

Vesna Vasic

Shane Lapointe

1.877.658.3660

1.866.683.8072

Vice President of Sales Ontario and Eastern Canada

Vice President of Sales Western Canada

FirstLine Mortgages is a division of CIBC Mortgages Inc. ÂŽ FirstLine is a registered trademark of CIBC Mortgages Inc.

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