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if the

NO. 15

guide Inside



Guide to broker compensation




February 2011, 6.2

fees trailer The future is now

Client Privacy What brokers are doing

Bankruptcy How you can help

Baldev Dhah: A head for numbers PUBLICATIONS MAIL AGREEMENT #41261516

34 A financial lifeline Owning a home after declaring personal bankruptcy may seem out of reach, but with an informed mortgage broker, there can be life after bankruptcy. Heather Li learns how you can help these B clients revive their dreams of homeownership

6. 02 issue

cover story

Guide 2 Trailer Fees Three Canadian lenders now offer the trailer fee option to brokers and more are looking at changes in compensation models. Heather Li explores how trailer fees work for your business

contents 8


Letters & comments from Some of the best stats and comments from CMP’s website

54 Profile: How a love for math led Baldev Dhah to owning his own mortgage franchise

NEWS 10 News: DLC president bends the ear of finance minister, Street Capital introduces trailer fee model for brokers, Xceed to halt mortgage origination, Government should reduce role in mortgage insurance market, and more 26 Security Breach: In the wake of client privacy breaches of mortgage brokers a few years ago, the industry has improved security measures. John Tenpenny found out what some brokerages and brokers are doing to ensure the personal information of mortgage broker clients isn’t compromised 40 Mentoring brokers: In this entrepreneurial industry, a guiding hand can be a helpful strategy for success. Heather Li explores the ways in which brokers mentor and offer one another counsel 49 Marketing – Six referral mortgage marketing mistakes: Doren Aldana explores some of the reasons why new brokers fail in the first two years of their career (Part Four)


58 Provider: As a private lender, Fisgard Capital Corporation offers more competitive and accessible mortgage products than conventional lenders

INSIDE Guide to compensation In CMP’s continuing series of guides, we look at broker compensation and what options lenders are currently offering to brokers. Whether it’s understanding the newer concept of trailer fees or what type of lender loyalty programs that are available, this guide is not to be missed.

60 Insight: Two mortgage brokers in St. John’s recently joined forces to promote the AMP designation in an advertisement. CMP spoke with one them, Mark Norman, to discuss this unique partnership 62 Guest Column: Recent changes to mortgage rules could have damaging and lasting effects on the housing market says B.C.-based broker Kristin Woolard

regulars 22 International News 24 This time last year 63 CMP Service Directory Follow us on Twitter

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in your local market.

When you join most superbrokers, you give up your local personality in favour of a faceless national brand. But at The Mortgage Centre®, we understand that your success is based on your relationship with your local market. Even though we maintain Canada’s longest-established national franchise network, we make sure all our programs and marketing tools spotlight you. To learn more about the exceptional independence we offer, contact The Mortgage Centre is a division of CIBC Mortgages Inc., a member of the CIBC group of companies. ® The Mortgage Centre is a registered trademark of CIBC Mortgages Inc.

Editor’s Letter

Healthy debate benefits everyone A sampling of recent headlines found on • • • • •

“Strong economy to offset rising mortgage rates” “CREA: housing drop will be less severe” “Canadians less optimistic about economic recovery: RBC” “Slower mortgage and personal lending growth predicted” “Rising interest rates could trigger housing market collapse”

Agree or disagree? Readers let us know their opinions and that last item drew a record amount of comments, most of it strongly opposed to the article’s main thesis put forward by Capital Economics that Canadian home prices could fall by 25 per cent over the next three years as the Bank of Canada starts to tighten its monetary policy. Some suggested we erred in even publishing the story, calling it fear mongering. Everyone is entitled to their opinion and that’s the point. People and organizations in the financial, real estate and mortgage industries constantly predict and comment on what they think will happen in the future and what’s happened in the recent past, and the media (CMP included) presents this information to its readers. No one knows for sure what will happen and most have their own ideas based on which information they conclude is most relevant. Discussion of ideas is healthy and here at CMP and we encourage dialogue amongst mortgage broker professionals. While the prediction proffered by Capital Economics is certainly a little further from the norm espoused by most real estate experts, it is no less valid just because some don’t agree. Who’s to say that this dire future event won’t happen? Let’s not forget Nouriel Roubini, the New York University professor, who in 2006 predicted the financial crisis and was roundly dismissed at the time. More than likely this prediction, like most, will turn out to be wrong or less severe. Only time will tell. I certainly agree with most of the other forecasters and our readers that housing prices in 2011 will be flat or see small decline. In other news, nominations for the 2011 Canadian Mortgage Awards closed with a record number of more than 1,300 nominations. Finalists in the 21 categories will be announced in our March issue. Tables for the event on April 29 at The Liberty Grand in Toronto are still available (, but I advise you, don’t wait too long to secure your attendance at the mortgage industry event of the year. Cheers. John Tenpenny Editor


6. 02 issue

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“I’m selling the relationship, not the rate. My job is to provide the best mortgage solution for the client. The best rate does not equal the best mortgage. I like it when people call me asking for the rate. My response is, ‘Do you want the best rate or the best mortgage?’ This gets the conversation started and by the end of it they aren’t even asking about the rate. ”

“When I met you, I took an application, I took your information, I phoned a courier service and they took that information directly downtown to the lender. So, if fraud is happening; I don’t think the lender is doing it, I know I’m not doing it. So the only other person in this equation is the courier.” - John Gabriel, director of compliance and education with Mortgage Alliance Canada, discussing how times have changed when it comes to the security of client information. Guide Page 26

- Rudy Dedic, owner/broker, DLC Casa Mortgage Inc. Guide Page 8

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


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Readers Write Web comments

that the government took a step backward when they changed the rules and it will hurt Canadians. I believe in the next two to three Every aspect of Canadian life is affected by what years, you will see a spike of bankruptcy happens south of the border. The other night on because of these new changes. Plus the CTV national news, one of their lead stories was government has given more room for the announcing Oprah had a long-lost sister. In my practice I have clients ask me directly about and I private companies to come in and charge higher rates and fees in order to make the short quote “these subprime mortgages. Why are you fall, which leads to people getting in more debt suggesting I take a mortgage from a non-bank because of higher interest second or third lender like Street Capital or First National, aren’t mortgages. I agree with Gary, the credit cards they like that Countrywide that went bankrupt in the U.S.?” Granted there were a lot of these types and the ease of getting a car loan is more of the of questions in the past couple of years; but every issue. Let’s have people qualify for the car loan and credit cards as they do for a mortgage and time there is a story about U.S. foreclosures, then you will see a big difference. But that will mortgage defaults, etc. clients have concerns. never happen because the government knows Living in an area that has seen unstable real that it needs people to get credit cards and estate prices, I have felt firsthand the impact of spend money in order to have our economy “cross-border” issues. – George in Red Deer rebound. Other industries depend on the housing industry, if you take housing out of the equation you will see a slower economy growth. DLC president bends the ear of finance minister – Vittorio Oliverio They already made a change to the credit card rules with companies not being able to increase the credit limits without the client’s consent, CAAMP says mortgage fears are exaggerated 21-day grace period, payments made to the On the surface, it appears to me that the principal first before new purchases. The problem study’s conclusions are based entirely on what with lax mortgage rules was people believed they may happen in the short term and only then were actually wealthier than they are because the without factoring in how consumers’ debt may value of their homes kept rising. This created a grow additionally between now and then. What desire to continually refinance to pay off debts, is the timeframe this study looked at anyhow? I without any regard to what would happen if house haven’t read the study so I don’t know if there is prices dropped. By limiting the refinance limit, any support provided to justify the projected consumers will have a safety cushion as prices go rate increases referred to and the projected down. How will homeowners be better off when timing of those increases. There is also no their mortgage is upside down? If consumers have mention in the article about what interest more equity, then they will have an option to rate increases for other consumer debt move lenders when their mortgage matures. No facilities are projected at and the impact there. lender would take on a mortgage when the home Flaherty et al are charged with the is worth less than the loan. Home ownership is not responsibility to address the longer term a right, it’s a privilege, not everyone deserves to challenges Canadians may face. I don’t think I’m own a home. The new rules are a way to reduce alone in thinking that the approaches Flaherty the addiction to debt that Canadians currently has taken (after getting buy-in from the have without raising the prime rate. Look how lenders) with respect to mortgages are well quickly we forgot that it wasn’t that long ago that thought out and good for Canadians now, and the max amortization was 25 years anyway. down the line. These moves he’s making, in part, – Jon also have a lot to do with helping to address his concerns around a projected underfunded CPP that we’ll face long after he’s out of office and I had a chance to read the comments on this collecting his MPP. posting and it amazes me that, while I may not agree with everything that Gary says, I do agree – Brad Balmer Are U.S. brokers giving Canadian brokers a bad name?




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News Industry

DLC president bends the ear of finance minister Dominion Lending Centres President Gary Mauris was one of 17 participants at a recent pre-budget consultation held in Regina by Finance Minister Jim Flaherty. “I articulated our views to the minister privately, at the roundtable discussions, and then wrapped up with a very passionate overview of our industry’s perspective, to the entire group. It created great discussion, feedback and support from many other participants including questions and dialogue from Minister Flaherty himself,” said Mauris Mauris spoke about a variety of issues affecting the mortgage broker industry including recent changes announced by the government to lower amortization periods and refinancing levels. “Rather than pairing back the amortization term from 35 years to 30, they should have made the borrower qualify at the payments based on a 30-year amortization, and kept the maximum amortization at 35. Qualification and purchasing power just dropped significantly, especially affecting first-time homebuyers, making it more difficult for our most valuable assets, young adults and young families, from experiencing home ownership and participating in our real estate sector,” he said.

Mauris said his most passionate message was about the government taking a very hard look at unsecured debt, specifically credit cards. “Canadian’s biggest financial struggles, their over-extension and record debt levels are not due to their mortgages. They are due to easy access to high-interest credit cards, and other unsecured debt. How is it that my very own son, who is 19, attends university, does not have a job, was issued two separate credit cards, on his own?” CMP






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News Industry

Verico sponsors CRE Investor Forum in March Verico is proud to be the official sponsor of The Mortgage Clinic during the CRE Investor Forum in Toronto. On March 25 and 26, Verico financing experts will be onsite to help homebuyers with all their mortgage and lending questions.  Verico will also be hosting a broker panel with some of the most knowledgeable mortgage

originators in Canada. Be sure to attend as the company opens the discussion about key issues in the industry, and offer a look at what’s to come in 2011. Verico looks forward to connecting with fellow brokers, real estate investors and excited about the opportunity to build future partnerships. CMP

first CMBS deal since 2007 completed Institutional Mortgage Capital Canada Inc. announced Feb. 3 it completed a private placement of commercial mortgage-backed securities (CMBS) with an aggregate principal balance of $206 million. According to the company, the transaction is the first CMBS deal issued in Canada since 2007. The deal is backed by 16 loans to two of Canada’s largest REITS, RioCan REIT and Calloway REIT. The certificates were issued by Institutional Mortgage Securities Canada Inc., an affiliate of IMC, with TD Securities as the lead placement agent. “IMC is doing its part to help re-open the Canadian CMBS market,” said IMC president and founder, John Ho. “It’s unfortunate that the Canadian market has lagged behind the U.S. when Canadian bonds performed extraordinarily well even after 2007. Where U.S. CMBS are experiencing 10 per cent defaults, Canadian CMBS has had virtually zero losses on the $24 billion of CMBS issuance over the past 13 years.” For brokers who place commercial mortgages, it was welcome news. “During the past three years, commercial lending has been very slow,” said Dale Bilton, a commercial mortgage broker with Mortgage Intelligence in Kitchener, Ont. “We have seen a more positive response from the larger established commercial lenders recently, and with this infusion of additional funds, we can expect to see this positive trend spur the growth of the commercial mortgage market in Canada.”  CMP


30% how much mortgage lending equates to Canada’s gross domestic product (C.D. Howe Institute)



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Brokers react to latest mortgage industry research

Continued on page 16


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The latest research on the broker industry from Maritz Canada for CAAMP, revealed some interesting facts about brokers and their relationships with consumers and lenders. The study entitled “Canadian Mortgage Broker Channel: Consumer and Industry Perceptions” noted, among other things, that only 35 per cent of consumers have a full or good understanding of the services provided by mortgages brokers, 17 per cent are aware of the AMP designation and that while two-thirds of those looking for a mortgage consult with a mortgage broker on first mortgages, that falls to 27 and 21 per cent respectively on early-term renegotiation and scheduled renewals. In the broker/lender relationship there is still clearly work to be done. While the vast majority of mortgage lenders (97 per cent) see the value of being involved in the broker channel for such reasons as access to wide range of customers, less costly to operate and putting different lenders on a level playing field, nearly two-thirds of banks (32 per cent) don’t believe their institution benefits from involvement in the broker channel. Lenders and banks cite four primary concerns when dealing with brokers: fraud, inconsistent or inexperienced brokers, lack of client ownership and the difficulty of cross-selling. Surprisingly, when asked what influences brokers when choosing a lender, lowest rate was just the fifth-most influential consideration. No. 1 was speediness of approval, followed by underwriter support and service provided. In terms of keeping clients, the study indicated the key is in the relationship between the broker and the client after the first mortgage has been completed. While low interest rates are one of the key drivers in attracting clients, what drives satisfaction and loyalty are things like, being proactive, suggesting strategies to improve terms and being helpful. “While these results may be eye-opening, they should not be surprising,” stated the study. “The fact is that brokers have already passed the rate test among their customers; that is why customers chose their broker in the first place. What drives true loyalty is development of meaningful relationships with customers, ones that ensure that when it comes time to deal with their mortgage, customers immediately think of their original broker.” Several mortgage industry professionals commented on the report to

How much RBC Bank is planning to increase its U.S. mortgage lending volumes for 2011

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. “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. CMP


mortgages in the press


Continued from page 14 Vince Gaetano, VP, principal broker, “The broker/lender relationship needs work. It speaks volumes when among bankers, one-third do not believe their company benefits from the involvement of the mortgage broker channel. It is apparent that “trust” needs to be established to grow market share. Without it, brokers and lenders cannot increase market share moving forward. Overall, the survey is not surprising. The industry has to come to the realization that the only way we can grow is to draw back the lenders (BMO and HSBC) that left and convince new ones to enter – you need more participation in the channel (simple math). The only way this can happen is if brokers give up something to entice them to come back or enter the market. Brokers need to start understanding the term “cross-selling” and how it will start affecting lenders’ decisions to stay in the space as we know them now. Brokers need to begin the digestion of the term clawbacks and understand how this mechanism can help the industry’s sustainability when coupled with trailers, accountability, representations and warranties to the lending partners. Trust is built when two parties are working together and being fully transparent of their respective painpoints. There is no more pie to split up.”

Gary Mauris, president Dominion Lending Centres “I believe that success leaves clues and this report provides a blueprint for moving our business forward. The first thing that jumped out at me was what mortgage broker clients find most valuable, being pro-active, suggesting strategies along with friendly after-sale contact. Consumers are looking for expertise and leadership when it comes to financing their biggest investment. Most consumers don’t even know what they don’t even know so the entire mortgage discussion is centered around rate as a consequence. By suggesting clear strategies, and dollarizing long-term savings, educating the customer on how the different products affect them and confidently recommending the best solution rather than asking the customer on what they think they want is a way to become their trusted adviser, minimize rate sensitivity and close more transactions.”  

Dave Larock, mortgage planner with TMG The Mortgage Group (Thompson/LaRue) “Broker market share has also been affected by the drop-off in sub-prime mortgage loans. We had a disproportionate share of this market so that fact that overall broker market share is holding steady means we have pretty much replaced that lost volume with more prime business (which is no small feat). “It’s true that a few bad apples can spoil the barrel, but I find it interesting that lenders are so concerned about broker fraud, especially when the largest mortgage fraud in Canadian history was recently perpetrated at RBC and BMO – two banks who don’t accept business from mortgage brokers.” CMP


Government should reduce role in mortgage insurance market The federal government should scale back its role in the mortgage insurance market and allow private insurers to take on a larger role says a recent report from the C.D. Howe Institute. Entitled “What Government’s Should Do In Mortgage Markets” the report says the government’s role in mortgage markets, through the Canada Mortgage and Housing Corporation (CMHC) may “encourage excessive lending risks in the consumer marketplace, potentially creating unmanageably large risks in financial markets.” According to the report’s author, Finn Poschmann, vice-president of research at the institute, CMHC’s mortgage insurance book now backstops mortgage lending equivalent to more than 30 per cent of gross domestic product. While the net exposure is less than this, the arrangement subjects Canadian taxpayers to large, ill-defined risks. “There is no reason for federal taxpayers to be exposed to large mortgage insurance liabilities,” says Poschmann. “On the other hand, private insurers are able to manage such exposures, provided that they are adequately capitalized, prudently managed and regulated, and able to access liquid financial markets. Private insurers currently compete on the margins of the mortgage insurance business, which is dominated by CMHC.” The report recommends: • That federal policy should limit public exposure to mortgage lending risks, by winding back. • CMHC’s role in the provision of mortgage insurance, and allow private providers to take on a larger role. The agency’s capital and staff would be well employed in reinsurance and securitization functions that backed private market insurers. • Independent of whether Ottawa pursues the first recommendation, Parliament should adopt legislation that formally requires CMHC to comply with, and report on, compliance with OSFI guidelines, so that market participants compete on level footing. • Finally, Parliament should adopt legislation that would support covered bond issuance by domestic financial institutions and clarify creditor arrangements in the event of the bankruptcy of a federally regulated deposit-taking institution. Such legislation would allow those institutions to more readily compete for low-cost capital in the international bond market and better serve the domestic mortgage lending market. CMHC responded through Media Relations Officer Kate Munroe by providing a statement that dismissed concerns of growing risk. “The Canadian market is stable,” said the statement. “Prudent lending and mortgage insurance practices, and strong banking regulations, have helped Canada’s banking system remain healthy.” CMP



myNext Mortgage launches commercial division

Mortgage Mentor Inc. launches new TDS lender matrix Mortgage Mentor Inc. has launched a new software module called MM Pro to help brokers consistently calculate debt-service ratio for all of their deals. The new product, a lender information matrix, was designed after many brokers commented that many deals were being declined because of debt-service ratios, according to Mortgage Mentor Inc. The mortgage productivity software company decided to investigate why. “Once we had interviewed several of the major lenders in a more in-depth way, we started noticing that although those lenders’ general claim was that they use the insurer’s guidelines, they each had some little exception,” said Rick Robertson, Mortgage Mentor president. Out of the top 20 lenders, the company found there were 27 minor differences in how they looked at other payments and another 20 unique ways they each calculated income. This resulted in nearly 40 different total debt-service formulas. MM Pro aims to simplify the formulas and ensure smoother deal processing. For more information, please visit CMP

myNext Mortgage Company announced the launch of a new commercial mortgages division, which will arrange industrial, commercial and investment real estate financing. Alex Haditaghi, CEO of myNext Mortgage also announced the appointment of Tony Hili as senior VP and managing director of myNext Commercial. “We’re very excited about offering this added-value service to our broker networks across Canada,” said Haditaghi in a release. myNext Commercial will develop business through the Mortgage Architects and broker networks and through direct business development. “There is huge potential to build this new company given the need in the marketplace and the distribution available through myNext’s national network of brokers,” said Hili. “We’re thrilled to attract someone of Tony’s calibre.” The company will offer loan amounts ranging from $1 million to more than $100 million, arranged through conventional and non-conventional lenders subject to their lending criteria. They will also offer commercial banking; operating lines of credit and term loan facilities secured by business and real estate holdings. CMP


percentage of brokers that feel their U.S. counterparts are tarnishing their reputation (Real Estate and Mortgage Institute of Canada)


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1/6/2011 2:19:37 PM  

News Industry


Mortgage Architects attracts successful Nova Scotia team Mortgage Architects announces the signing of Susan Reid and Lucienne Wyatt in Amherst and Halifax, Nova Scotia, setting the stage for further expansion into Atlantic Canada. Reid and Wyatt bring three associates and have plans to build a stronger team with the help of Glen Ward, regional vice-president of Atlantic Canada and Eastern Ontario, and will grow more across Nova Scotia, Prince Edward Island and Moncton, New Brunswick. CMP

NEXSYS Financial Inc. announced the appointment of Bruce Schruder to the position of Business Development Representative. Bruce brings with him significant experience in the financial marketplace, most notably in a 16-year stay with Pacific & Western Bank of Canada where he held the position of vice-president.

DLC opens new franchise in B.C. Dominion Lending Centres Canadian Mortgage Experts is a new franchise owned by veteran mortgage broker Michael Lloyd—a top-producing mortgage broker in B.C., formerly with Invis. Michael and his team of more than 30 mortgage brokers operate within three office locations in South Surrey, Cloverdale and Fleetwood, B.C. CMP

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In the community

Right Mortgage Brokers Ottawa held its Gala and Awards Ceremony at the Hampton Conference Centre on January 15, 2011. Sponsored in part by Equitable Trust, the Vegas themed gala thrilled an audience of more than 200 guests with entertainment and poker. Left to right: Jeff Cody, Managing Partner, Mortgage Brokers Ottawa with Equitable Trust team Jadwiga Gebalska, Manager, Residential Mortgage Underwriting and Chad Miller, RBM, Ottawa Region.

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u.s. Business loan standards ease in U.S., but mortgage lending remains tight Large U.S. banks have eased standards and terms on commercial and industrial business loans over the last three months in response to increasing competition, according to a recent survey by the Federal Reserve Board. Lending in the commercial and residential real estate markets, on the other hand, has remained unchanged and tight. The report showed 18.8 per cent of large bank respondents reported easing standards on loans for large and middle-market firms on business loans. When asked the reason for eased terms on business lending, 28 of 30 banks said it was due to “more aggressive competition from other banks or non-bank lenders.” Residential home lending, however, reported little change. Some 94.4 per cent of all bank respondents said their mortgage standards had remained “basically unchanged,” compared to 3.7 per cent of banks that had tightened them somewhat, and 1.9 per cent that eased standards. Meantime, 31.5 per cent of banks said demand for prime residential mortgages was weaker, compared to just 7.4 per cent that saw stronger demand. The remainder, 61.1 per cent, saw demand as unchanged in the last three months. CMP Latest index warns of double-dip in U.S. home prices U.S. home prices not only continue to fall in most of America’s largest cities, but some still haven’t hit bottom yet, according to the latest S&P/Case-Shiller Home Price Index. The recently released 20-city home price index fell 1.6 per cent in November from October. All but one city, San Diego, recorded monthly price declines, while Atlanta, Charlotte, N.C., Las Vegas, Miami, Portland, Ore., Seattle, Tampa, Fla., and Detroit, all reached their lowest levels since home prices peaked in 2006 and 2007, meaning that average home prices in those markets have fallen even further than the lows set in the spring of 2009.. “With these numbers, more analysts will be calling for a double-dip in home prices,” said David Blitzer, chairman of S&P’s Index Committee. The index also indicated that 13 of the 20 cities have posted at least seven months of decline since the beginning of 2010. “This renewed stint of falling home prices is a constrain to the ongoing economic recovery as it slows the process of household balance sheet repair, drives more mortgages “underwater” and strains key credit markets,” said TD economist Alistair Bentley in a released statement. “While December’s uptick in existing homes sales – which is not incorporated into this month’s [index] – sent a promising signal that housing demand is firming, the backlogged supply of foreclosures will continue to exert downward pressure on home prices in the quarters ahead.”


Over the past year, prices have risen in four major metro areas. Prices rose 3.5 per cent in Washington, the largest gain. Los Angeles, San Diego and San Francisco also posted gains. Some of the worst declines have come in cities hard hit by foreclosures. As of November, average home prices in Las Vegas have fallen 57.2 per cent from their peak in August 2006 and are back to where they were in late 1999. Another foreclosure hotbed, Phoenix, is down 53.9 per cent from its June 2006 peak. Average home prices there are back to where they were in 2000. Miami has fallen 48.8 per cent from its peak in December 2006, and is selling at late 2002 levels. The 20-city index has risen 3.3 per cent from its April 2009 bottom. But it remains well below its July 2006 peak. CMP

u.k Britons to credit cards to make mortgage payments In what could be a warning of things to come for Canadians who may struggle with their mortgage payments if interest rates rise, it has been reported that more than two million people in Britain have used credit cards to pay their mortgage or rent, an increase of almost 50 per cent in a year, according to the housing and homelessness charity Shelter. Research for Shelter conducted in August found that six per cent of the 2,200 questioned had used credit cards to meet their housing costs in the previous 12 months. This compares to four per cent in November 2009, and suggests a national figure of more than two million people who are making desperate last attempts to keep a roof over their heads. With recent warnings from Bank of Canada governor Mark Carney about household debt, which saw Canadians’ debt-to-income ratio exceed their U.S. counterparts for the first time in 12 years, and indications from Federal Finance Minister Jim Flaherty that the government may consider tightening mortgage rules, this news serves as a wake-up call for what may happen down the road if unemployment and/or interest rates increase. Campbell Robb, chief executive of Shelter, told The Guardian newspaper “This research brings into sharp focus how keeping a roof over their head has become a daily struggle for millions across the country. This is a totally unsustainable situation and one which we fear could see thousands more families pushed into the spiral of debt, eviction or repossession and ultimately homelessness. Using credit cards to pay the rent or mortgage is simply robbing Peter to pay Paul.” Recent discussion on highlighted concerns from Canadian mortgage brokers that credit card and other unsecured debt are as much to blame for the increase in household debt levels. “It’s time to review payday loans, credit cards and bank loans, not mortgage rates and the mortgage qualification process. Telling someone you’ll make it harder to put a roof over their head and force them into eternal renting, but letting them fall victim to pre-approved credit cards and loans with high rates is not acceptable,” was one comment that typified the response from the broker community. CMP

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News Industry

HomEquity Street Capital introduces trailer fee reports record reverse model for brokers Street Capital Financial Corporation announced the launch of its new Street Loyalty Program to encourage renewal business with brokers by offering two compensation models, including trailer fees. “We believe that the strategic alignment with mortgage brokers on their renewing business demonstrates our commitment to our broker clients,” said Paul Grewal, Street Capital president. “It’s a great way for brokers to create enterprise value by partnering with Street Capital.” The first option is an upfront fee model: up to 110 bps for upfront compensation with 105 bps for a finder’s fee and 5 bps in Street Rewards. Then a 15-bps renewal fee starting at the renewal date and paid on every anniversary date afterward. Together this equals 185 bps over two terms. The second option is the trailer fee model: up to 75 bps in upfront compensation with 70 bps for a finder’s fee and 5 bps in Street Rewards. Then 12.5 bps is paid on each anniversary date of the initial term, and a 15-bps renewal fee starts on the renewal date and paid on every anniversary date afterward. All together, this equals 200 bps over two terms. Toronto mortgage agent Dianne Chafe of Oriana Financial Group of Canada Ltd. prefers the trailer fee model when all other lender attributes are equal for the client. “I like that trailer fees build you a book of business,” Chafe told “So at the end of the day, 10 years from now if I want to retire, I have a book of business that’s worth some money.” Street Capital started accepting applications for the new program on Mon. Jan. 31. CMP


mortgage originations

HomEquity Bank reported that it originated a record volume of reverse mortgages of $206 million. On an annual basis this is an increase of 87 per cent over 2009 and an increase of 58 per cent over the previous record of $130 million set in 2008. Mortgage originations in the fourth quarter were $47 million. As at Dec. 31, 2010, HomEquity Bank’s portfolio of reverse mortgages surpassed $1 billion and was 17 per cent higher than at Dec. 31, 2009. The news came as HomEquity Bank completed its first full year operating as a Schedule I Bank. “Our reverse mortgage offering is now widely recognized as a mainstream financial solution,” said Steven Ranson, president and CEO. “We are seeing broad market demand for reverse mortgages as the demographic wave and other macro economic factors affect retirement trends in Canada.” CMP

News subhead

FEBRUARY 2010, 5.2

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Canadians cautious with mortgages, CAAMP survey finds Canadian homeowners and lenders are increasingly cautious when it comes to borrowing and granting mortgages, according to a new CAAMP survey of its members. “This new research shows that Canadians are assessing their abilities and vulnerabilities,” said Jim Murphy, president and CEO of CAAMP. “The vast majority of Canadian mortgage borrowers are not taking on undue risks. They have factored rising interest rates into their mortgage decisions.” The survey includes data from CAAMP members who issued more than 40,000 mortgage loans last year. The findings show 86 per cent of homebuyers chose fixed-rate mortgages last year and 70 per cent of those buyers chose a term of five years or more. In addition, CAAMP said the “vast majority” of people who took out their first mortgage in 2009 borrowed less than the full amount they qualified for. One year later A new study released by CAAMP concludes that very few Canadians face unaffordable increases in mortgage costs and Canadian lending criteria are already tight. The report entitled, “Revisiting the Canadian Mortgage Market – The Risk is Minimal” states that “lenders and borrowers have been highly prudent in the mortgage market … and a vast majority of borrowers have left themselves considerable room to absorb increases in interest rates.” The study said 79 per cent of mortgages are fixed rate and mostly for terms of five years or longer, leaving 21 per cent of borrowers with variable rates and more exposure to changes in interest rates. The study was based on about 59,000 mortgage loans (excluding renewals or refinances of existing   

mortgages) totalling just less than $16 billion, which were funded during 2010, which represents about one-quarter of the total mortgage activity. The study reported that the average gross debt service (GDS) ratio was 19.6 per cent, well below typical lender standards of 32 or 35 per cent used to qualify borrowers. The average total debt service (TDS) was 28.9 per cent, still well below the 45 per cent lender standard. For fixed-rate mortgages, the GDS was 22.5 per cent and the TDS was 32.5 per cent. According to the report, a 2.5 per cent rise in interest rates for variable mortgages would see the average GDS would increase to 24.6 per cent and the average TDS would increase to 33.7 per cent. CAAMP’s research indicates that of the mortgages funded in 2010, only 800 to 950 would exceed the 45 per cent TDS ratio. For fixed-rate mortgages, a one per cent increase in interest rates would increase the average GDS to 22.5 per cent and the average TDS to 32.5 per cent and less than one per cent (1,000 to 1,350) would have TDS ratios of more than 45 per cent. The report cited job loss or reduced income as the main reason for mortgage defaults, saying that “Unaffordable premium increases are a negligible risk factor at present and in the near-to-medium term future.” A third cause is unaffordable increases in mortgage payments, something that caused difficulty in the U.S. as low introductory rates were replaced by market rates and payments that rose substantially. “But this third category of risk is the source of recent concerns about future threats. This study concludes that very few Canadians face unaffordable increases in mortgage costs,” stated the report. CMP

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Feature Client Privacy

security breach

What brokers are doing to guard their clients’ privacy 26   


Client Privacy

In the wake of client privacy breaches of mortgage brokers a few years ago, the industry has improved security measures. John Tenpenny found out what some brokerages and brokers are doing to ensure the personal information of mortgage broker clients isn’t compromised


hings have changed in the mortgage broker business since John Gabriel was first doing mortgages nearly a quarter century ago. Especially, he says, when it comes to keeping client information out of the hands of fraudsters. “We didn’t have this thing called a fax machine,” says Gabriel, Director of Compliance and Education with Mortgage Alliance Canada. “When I met you, I took an application, I took your information, I phoned a courier service and they took that information directly downtown to the lender. So, if fraud is happening; I don’t think the lender is doing it, I know I’m not doing it. So the only other person in this equation is the courier.” In June of 2010, the Office of the Privacy Commissioner of Canada released an audit of the mortgage broker industry in the wake of data breaches in 2008 at several brokerages. The report stated that while some of the mortgage brokerages improved some privacy and security measures following the breaches, they failed to implement controls to raise the alarm about any future suspicious activity. In the space of a few months, 14 data breaches occurred, where in each case, someone impersonating an experienced mortgage agent downloaded credit reports for people who hadn’t even applied for a mortgage. As a result, the personal information of thousands of people across Canada was compromised. The audit also raised concerns about data security, haphazard storage of documents containing personal information; inadequate

“ we only hire the best of the industry in terms of wellestablished brokers,” he says. “We hire brokers by referral ”

what the OPC Audit found The audit of five mortgage brokerages by the Office of the Privacy Commissioner of Canada, released in June 2010, found that following the breaches, the five audited brokerages significantly tightened their practices for hiring agents. However, the audit found there was a lack of adequate controls to restrict agents’ access to credit reports. Specifically, the web-based tool used to obtain credit reports doesn’t allow brokers to limit the number of credit reports an agent can download. In addition, there are no technological controls to monitor for, and raise the alarm about, suspicious activity. Among the other risks to personal information highlighted in the audit: • Some brokers stacked files containing personal information on the floor or on desks within accessible offices. One had overflow storage in an unsecured parking arcade. • Brokers lacked shredders capable of securely destroying documents. One broker was re-using the reverse side of old, filled-out mortgage applications in order to print out new applications. • Credit reports were sometimes obtained prior to consent from a client being recorded and there was no ability for clients to opt out of secondary uses of their personal information, such as marketing. • There was a lack of training about privacy responsibilities and many agents did not know to whom they should turn with a privacy-related question. In one case, a broker franchisee stated that his organization’s chief privacy officer was located at the brokerage’s head office when, in fact, he was the chief privacy officer.  


Feature Client Privacy

consent by clients; and a general lack of understanding about, and accountability for, privacy issues. Gabriel, who is also a member of CAAMP’s fraud subcommittee, says Mortgage Alliance moved swiftly after the company discovered two cases of fraud perpetrated by individuals working at two satellite offices. Now there is a central hiring system in place.

“ when I met you, I took an application, I took your information, I phoned a courier service and they took that information directly downtown to the lender. So, if fraud is happening; I don’t think the lender is doing it, I know I’m not doing it. So the only other person in this equation is the courier ” “Anyone being hired has to meet with one of our regional managers or senior staff and they have to show two pieces of ID and our employee signs off on having seen the identification,” says Gabriel. There are now probationary periods in place for new hires where it may be up to 60 days until they are able to access credit bureau reports. Newly installed security measures with software such as Equifax also flag suspicious behaviour, like a high number of requests in a short period of time. Access to the system can then be shut down quickly. Gabriel also says that TMACC policies state that no credit reports are to be pulled without a signed consent form. When it comes to electronic data, Mortgage Alliance, as per the Privacy Commissioner, had proper security with regards to servers and making sure private and corporate information are securely stored.

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Feature Client Privacy

Mortgage Brokers – PIPEDA and you Since mortgage brokers and their agents regularly collect, use and disclose personal information during the course of their work, they have privacy legislation compliance obligations. For mortgage brokers and their agents, compliance with privacy legislation is not only essential, but it can help build an atmosphere of trust with clients, improve organizational reputability, and strengthen business operations. The Personal Information Protection and Electronic Documents Act (PIPEDA) is Canada’s federal privacy legislation that applies to organizations engaged in commercial activities across the country, except in provinces that have their own private sector privacy laws. Even in these provinces, PIPEDA continues to apply to the federally regulated private sector and to personal information in inter-provincial and international transactions. The Office of the Privacy Commissioner of Canada (OPC) audited a number of mortgage brokers and released the audit report in June 2010. Based on this audit, we have developed a number of best practices for brokers and their agents with respect to their information-handling practices, among these are: Have A Privacy Plan And Be Open About Your Practices: Private sector privacy legislation requires organizations to build privacy policies that outline how they collect, use and disclose their customers’ personal information. In the OPC’s Privacy Guide For Small Businesses, there are a number of tips to help you develop and build a privacy policy. Your privacy policy should be made available to your clients – make it available on your website and available in print for clients without Internet access. As well, your clients should know who in your organization they can contact if they have questions regarding their personal information. Collect Only What You Need: Your privacy plan should identify that you limit the collection of personal information for specified purposes – and your business practices should reflect that! For example, a social insurance number (SIN) should not be used as a general identifier, and its collection, use and disclosure should be limited to its legislated purposes only. Obtain Your Client’s Consent: You should obtain and document your client’s express consent before obtaining credit reports and providing information to lenders. Individuals need to know – in a meaningful way – how their personal information is going to be handled. This is especially true if their personal information is used for secondary purposes such as marketing, in which case express consent should be used with the ability for individuals to opt out. Limit Access to Personal Information on a “Need-To-Know” Basis: Having your clients’ personal information is like having their wallet – and should be protected as such. Develop policies that limit access to personal information on a “need-to-know” basis. For example, when it comes to credit reports, only those individuals who need them should have access to them. Safeguard Personal Information: A variety of physical and technological methods can be used to safeguard personal information, these include: Continued on page 32


“When the Privacy Commissioner was doing their audit, they physically visited our server site and gave us a very high rating for protection,” says Gabriel. Data is passwordprotected and the information resides on the servers, not the individual computer. And passwords are changed every three months “If you take my laptop, it doesn’t have any client information,” adds Gabriel. “The general population is becoming paranoid; ‘what kind of information do they have, how long are they keeping it, what are they doing with it?’ They are becoming more aware of the trend of identity theft,” says Suzie Smibert, senior manager and practice leader with Ernst & Young’s western Canadian security practice in Calgary. She says mortgage brokerages need a privacy policy framework and preventative controls. As well, when a privacy breach does occur, companies need to be proactive and transparent in gaining back customer trust. “They need to reach out and say, ‘There has been a privacy breach and here are the steps we are taking to protect the information.’ If the company is trying to keep the incident hush-hush, then it’s harder for the public to trust them,” says Smibert. At Mortgage Architects, ensuring private information remained private was already a priority before the 2008 industry breaches.

“ in the space of a few months, 14 data breaches occurred, where in each case, someone impersonating an experienced mortgage agent downloaded credit reports for people who hadn’t even applied for a mortgage. ” “When those issues were raised by the Privacy Commissioner in 2008, we were in good shape because we had already implemented a platform that had eliminated a lot of those issues,” says Dong Lee, VP, operations at Mortgage Architects and When Architects was created back in 2006, it was put into operation with provincial approval to go to a paperless compliance process, an in-house software system known as Workbench. adopted the same system in 2010.


Client Privacy

“ when a privacy breach does occur, companies need to be proactive and transparent in gaining back customer trust ” The biggest issue for brokers is keeping copies of their files in their possession, says Lee. “When our people complete a mortgage application, they will actually submit the file to us electronically through an internal portal at which point those files are then used for compliance. They can then shred their files because a copy of what they uploaded is always available to them at their convenience,” explains Lee. By enabling brokers to access client files anywhere from a secure server, Mortgage Architects and have eliminated the need for brokers to keep files in their office or home, which creates all sorts of customer privacy issues, says Lee. “We’ve maintained very strict security protocol related to technology. We have all of our servers hosted in a secure location and a taped backup is also stored in a secure vault. There’s also an office protocol at head office to lock away all files at the end of the day.” Marty Coubrough, co-owner of VERICO One Link Mortgage & Financial in Winnipeg, says his firm is in the process of moving to electronic Capital Direct Banner ad edited_FEB11.pdf 1 2/15/2011 11:25:37 AM secure storage of client information. Although not yet entirely paperless, VERICO One Link is moving towards this goal. 

“Filogix now has the ability to upload and store client files on a very secure platform, and we are encouraging our agents to scan and upload their client files after funding. We have contracted a shredding company who handles the interim storage, pick up and secure shredding of the files once they have been electronically processed. Our agents sign a very tight privacy policy when they join us, and we have policies in place covering the safeguarding of all client files and personal information, whether it is on the agent’s  laptop or BlackBerry  (which should be secured by passwords); or hard copy files which are to be stored in a locked and secure environment.” “I believe the best solution to the problem is electronic secure storage of documents” says Coubrough, who sits on the VERICO National Advisory Board. 

“ if the company is trying to keep the incident hush-hush, then it’s harder for the public to trust them. ” As his title implies, Gabriel is also responsible for ensuring brokers are properly trained and educated. “I’m fairly confident is saying that MAC has the best training program in the industry,” he says. “We’re training a minimum three times a week – new brokers


Top: John Gabriel Middle: Dong Lee Bottom: Marty Coubrough





Feature Client Privacy

Mortgage Brokers – PIPEDA and you Continued from page 30 locked filing cabinets, alarm systems, secured premises, computer passwords and encryption. Files stored in the open, such as in open boxes in hallways or left unattended in easily accessible areas, could be accessed by unauthorized individuals and be the cause of a data breach. As well, agents who take files home – either electronic or paper files - should ensure that they have a safe place in which to store them, otherwise, files should not be removed from the brokers’ premises. Keep Only What You Need For As Long As Is Required: You should only keep information for as long as is required and consideration must be given to any legislative requirements – federal or provincial. As well, make sure your clients are aware of your retention requirements, policies and procedures. Your policies and procedures should be periodically reviewed to ensure that your operations and practices mirror what you say you are doing. A retention policy should also demonstrate that personal information is securely disposed of in a reasonable time. For example, if mortgage applications and credit reports are no longer required and your policy includes shredding, it is recommended that a cross-cut shredder is used. Develop A Training Plan: PIPEDA requires that employees understand their role in implementing privacy policies. As such, brokers and their agents need to be aware of their privacy responsibilities and companyspecific privacy practices. Training should take place before agents are in a position to handle personal information and ideally refresher training should be given on a regular basis. Develop a Breach Response Plan: A privacy breach occurs when there is unauthorized access to, or collection, use, or disclosure of, personal information. It can happen when customer data is lost on a USB stick, stolen via a cyber attack on your IT systems, or mistakenly e-mailed, faxed or mailed to a party who is not authorized to have the information. It is important to develop a clear set of procedures with respect to handling any unauthorized access or loss of personal information – and tying this to your business continuity planning would be a good idea. Your plans and procedures should take into consideration: (1) breach containment and preliminary assessment activities; (2) evaluation of the risks associated with the breach;(3) a notification strategy; and (4) steps need to prevent future breaches. The OPC has developed a number of online resources and tools specifically to help private sector organizations subject to PIPEDA understand their privacy obligations. We encourage you to access these documents from the OPC’s Information for Private Sector Organizations web page.

Source: Canadian Association of Accredited Mortgage Professionals


“ they need to reach out and say, ‘There has been a privacy breach and here are the steps we are taking to protect the information.’ ” and experienced brokers. I send out e-mails every week reminding our people about our policies and procedures making sure they’re getting consent forms and doing their due diligence on referrals.” In terms of hiring, Lee says his company maintains strict controls. In addition to implementing RedX, Mortgage Architects also does background and credit checks on any potential new hires. “We only hire the best of the industry in terms of well-established brokers,” he says. “We hire brokers by referral. It has to come through our Lead Planner, who can recommend hiring a new agent, but that approval is only given by our regional vicepresidents. We very rarely have people who knock on our door and say ‘I’d like to be a mortgage agent.’” The company has also been ahead of the curve when it comes to client consent and privacy policy. Since 2006 they’ve had a legally vetted client consent form that is part of each file. “So even when we do our CRM, all of our customers have to sign a consent form indicating that they are willing to participate in the program,” says Lee. Education and vigilance are important in staying one step ahead of mortgage fraud says Coubrough. “It’s something that you have to bring up with your brokers right from the very beginning and it sets the stage for your expectations.” While all the measures taken by mortgage brokerages and their brokers have come a long way in improving

Joining a network shouldn’t mean losing your identity.

Canadian companies unprepared to address new technology risks: Ernst & Young Less than a third of global businesses, including Canada’s, have an IT risk management program in place capable of addressing the risks related to the use of new technologies, says Ernst & Young. Borderless security, the firm’s annual global information security survey, reveals that in spite of the rapid emergence of new technology, only one in 10 companies consider examining new and emerging IT trends as a very important activity for the information security function to perform. A significant increase in the use of external service providers and business adoption of new technologies, including cloud computing, social networking and Web 2.0, is recognized to increase risk as much as 60 per cent for respondents. Yet, in spite of this fact, less than half (46 per cent) intend to increase their annual investment in information security. “Technology advances have provided Canadian companies with seemingly endless ways to connect and interact with colleagues, customers and clients across the globe,” says Tony Ritlop, Canadian Leader of Ernst & Young’s IT Risk and Assurance practice. “While these developments represent a massive opportunity for IT to deliver significant benefits to the organization, new technology also brings significant risk.” For example, more than half of respondents state that increased workforce mobility poses a considerable challenge to the effective delivery of information security initiatives, due to widespread use of mobile computing devices, allowing individuals to access and distribute business information from anywhere at any time. For almost two-thirds (64 per cent) of respondents, employees’ level of security awareness is recognized as a considerable challenge. “It’s vital that companies not only recognize these developing risks, but take action to avoid them,” says Ritlop. According to Ritlop, in addition to implementing new technology solutions and re-engineering information flows, companies must focus on informing the workforce about risks. The delivery of effective, and regular, security awareness training is a critical success factor as companies attempt to keep pace with the changing environment. Half of respondents plan to spend more over the next year on data leakage and data loss prevention — a seven percentage point increase from last year. To address potential new risks, 39 per cent are making policy adjustments, 29 per cent are implementing encryption techniques and 28 per cent are implementing stronger identity and access management controls.

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safeguards for consumers, the most important factor is brokers remaining aware of their duty to protect the privacy of their clients, something Gabriel is quick to remind his staff of. “I tell them, ‘the next time you hear from me, you probably don’t want to be hearing from me.’” CMP A NATIONAL NETWORK LIKE NO OTHER

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Feature Bankruptcy

a financial


Owning a home after declaring personal bankruptcy may seem out of reach, but with an informed mortgage broker, there can be life after bankruptcy. Heather Li learns how you can help these B clients revive their dreams of homeownership


he closest I’ve ever come to bankruptcy is losing in Monopoly. It’s not fun to see the play money dry up but I imagine it’s an even worse feeling when it happens to your bank account. And some inexperienced agents likely feel the same when clients call with the real-life story, trying to figure out what they can do to obtain a mortgage. “We’ve had people tell us that the broker just hangs up the phone on them,” says Elfie Hayes, broker-owner of Durham Mortgage Solutions in Oshawa, Ont. “They don’t even want to talk to them, which is really shocking to me. If they’re a relatively new agent or new to this type of client, they hear the word ‘bankruptcy’ and may not understand that there are ways to help people.” During the recession, Hayes saw a spike in how many clients were encountering credit problems and teetering on the edge of bankruptcy. Prior to the financial crisis, 90 per cent of her business was working on ‘A’ mortgages. After the world started falling to pieces and no one could pay rent on Boardwalk anymore, she saw the ‘B’ side take up nearly 40 per cent of her clientele. Even in good times, people face personal difficulties that lead to cash running out, maxing out on credit and the general inability to pay the bills. In a profession where you help people buy homes, not even a





Feature Bankruptcy

misconceptions surrounding bankruptcy 1. You have to wait seven years after bankruptcy to obtain credit. Actually, you only have to wait till after you’re discharged, which typically runs a nine-month period. But for seven years, the bankruptcy will remain on your credit bureau and make it difficult for you to get the best rate at an A lender. Luckily, with a savvy mortgage broker, sometimes a credit union or alternative lender can still provide a competitive rate. 2. Once you’ve declared bankruptcy, your credit is clean and you can buy a new home right away. Obviously not if it takes nine months to be discharged. For the nine-month bankruptcy period, everything you own belongs to a trustee including surplus income. 3. Paying rent and my parking tickets on time contribute to an improved credit score. Wrong. Alternative bill payments are not included on the credit bureau.

bankrupted client is a lost cause. But inevitably in this service profession, you need to educate yourself first before you can guide someone to collecting money after passing GO. What is bankruptcy? And common misconceptions… Declaring personal bankruptcy in Canada allows a person to eliminate all debts and start fresh. For nine months, everything a person owns is surrendered to a trustee in bankruptcy and all surplus income is paid to that trustee during this time. After nine months (and as long as he or she has never been bankrupt before and performed all required bankruptcy duties), the client is discharged, can start building credit on Day 1 and should do so. “We have people all the time who are five years past their discharge and will say, ‘I have two years to go so I’m trying to start figuring it out now,’” says Hayes. “Then you almost break their heart when you tell them the day they got discharged, they could have already began that process.” The most important process to obtaining a mortgage after bankruptcy is restoring credit. Some people think they have to wait seven years before they can get a credit card, loan or


mortgage because a bankruptcy remains on the credit report for at least that long. But after the nine-month discharge, clients can start applying for credit again—they just need to use other avenues. The other common misconception Hayes often sees is the overly optimistic client who thinks he can get a mortgage loan as soon as bankruptcy is declared. In either case of reassuring someone it won’t take seven years to buy a new house, or giving the rude awakening that there’s still nine months to go, you can let them know what the basic plan is to restore a great credit rating. Rebuilding credit after bankruptcy When guiding your client on this path to a new mortgage and home, the first step is ensuring all the trade lines (account items) on the credit reports from Equifax and TransUnion are actually discharged. Mortgage professional Deb Callaghan, of Verico One Link Mortgage in Winnipeg, has become known in her market as an expert in ‘B’ lending. “What happens is when a client is discharged, it comes through on both bureaus and it’s usually reported correctly. But after the fact, the trade lines may be sent to another electronic tape and it rewrites the entry,” says Callaghan. “Most of the time the trade lines are noted as written off but still with an account balance remaining. So the correction for each one of those individual trade lines has to be made, otherwise it’s going to slow rebuilding the score for the client.” This is simple to do. Get your client to sign the paperwork requesting changes on their credit bureaus. Ensure you have a copy of the letter of discharge and review all the details of credit report. Mark it up as necessary and send it in. Now you are certain you are working with a clean slate. “Most lenders are looking to re-establish credit. Some ‘A’ lenders will never provide a loan as long as there is a discharge on the bureau,” says Callaghan. “But the bottom line is at CMHC (Canada Mortgage and Housing Corporation), for as little as $1,500 re-established credit for 12 months, it is possible to get as low as five per cent down after with everything else ideal,” meaning a secure job and income.

“ after the nine-month discharge, clients can start applying for credit again—they just need to use other avenues ”

Elfie Hayes



low interest-bearing guaranteed investment certificate (GIC) and hold the money for a full credit card. “It’s not like a prepaid credit card,” adds Callaghan. “It’s an actual credit card and the $1,500 is held in trust against it. So the client also has a monthly service fee and a one-time setup fee.” Callaghan feels the most important part to serving bankrupted people is instilling financial prudence. They cannot have any derogatory credit after bankruptcy because that will Another misconception is that people sometimes certainly kill any chances at mortgage financing think paying rent or parking tickets on time, or in the future. “So I really set out to educate: other such bill-collecting alternatives will help your mark it on your calendar, set it up if you bank credit score but it doesn’t because none of this is online with that payment going in every time reported to the bureau. “I advise clients to get a without missing a beat,” she says. “They can’t secured credit card as soon as they can,” says have anything slow.” Callaghan. “Something such as a Home Trust Visa It typically takes about two years of credit where the client provides a deposit to the lender— repair for a lender to consider a client after a ideally $1,500 but if they can start with $500, that’s bankruptcy discharge. It’s still not likely an A OK. The point is to get it reporting on both lender will provide the mortgage but an bureaus.” The lender will deposit the money into a understanding alternative lender or credit

“ they cannot have any derogatory credit after bankruptcy because that will certainly kill any chances at mortgage financing in the future ”

Deb Callaghan

License #11127  


Feature Bankruptcy

main steps to leading a client after bankruptcy 1. Ensure all trade lines are wiped clean on the Equifax and TransUnion credit bureaus after discharge. 2. Set your client up with a secure credit card from an alternative lender such as Home Trust. Even if the client can only afford $500, it’s important to re-establish the credit score as soon as possible. 3. Ensure that clients know they cannot miss or be late with a credit payment. This will negatively affect their scores and actually make it impossible to obtain a mortgage after. At minimum, a bankrupted client needs $1,500 in re-established credit over 12 months, a five per cent down payment and secure employment to obtain a mortgage through the Canada Mortgage and Housing Corp. (CMHC) and an understanding alternative lender.

union will listen to the story. Callaghan cites divorce as one of the most common reasons people enter into bankruptcy. Job loss is second. She always checks to see whether the story makes sense with the timeline of the trade lines. For instance, early in her career, she encountered a young woman whose husband left her and also left behind $60,000 in unsecured debt. At that time, she was making minimum wage and working three jobs. She had only done one mortgage refinance before to lessen the debt by $15,000 but when she came to Callaghan, her Beacon score was 434. To ensure the story matches, you would have to see the time her husband left her matches with when the debt started piling up. Then you are able to communicate to the lender a sensible story. “What we ended up doing was refinancing through a private lender and then doing a debt settlement rather than bankruptcy,” says Callaghan. “We arbitrated the debt then got her a secured credit card for one year with a private lender. After that, we got her a mortgage with a credit union at 0.5 per cent below the bank’s posted rate and she had a credit score of 658. That is probably the best example of how you can move somebody’s credit if they follow your instructions.” Essentially, it is almost always possible to help a first-time bankrupted client obtain a mortgage but it does take more time than the easy ‘A’ client.


Investing your time in a bankrupted client Callaghan recognizes that working with people in bankruptcy means it may be awhile before you hit the payoff. “But the thing is about this kind of client is they are very loyal,” she says. “They refer you to all their friends because you’ve actually made a difference rather than just decline them right on the surface.” Also, once you become known as a B expert, you start receiving referrals from other brokerages and banks who can’t or don’t

“ it’s still not likely an A lender will provide the mortgage but an understanding alternative lender or credit union will listen to the story ” know how to help a client in severe debt. Hayes advises if you’re inexperienced in this work to partner with a more senior agent who can help you put the deal together, correctly send it to the right resources and have it approved because firsthand learning is often the best way to learn. Bankruptcy isn’t a game but it doesn’t have to be scary either. No two deals are the same but the basic foundation of identifying the problems, collecting the right information and educating the client properly will always result in a win for you. CMP

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Broker Relationships

Finding your



In this entrepreneurial industry, a guiding hand can be a helpful strategy for success. Heather Li explores the ways in which brokers mentor and offer one another counsel


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Broker Relationships


hen Lori Snowden became an independent mortgage agent, she quickly found a mentor in her broker-owner Bill Nugent. Her employment background was in insurance at TD Canada and she spent time there as a mortgage specialist too, but in her entrepreneurial career she says she owes her success to Nugent. “In a mentor, you really need to have a lot of respect for the person,” she says. “And you have to be committed to the work and the advice because we can all give advice—it’s whether or not we take it. So when

“ in this business, mentoring is often the best continuing education to help achieve your career goals ” Bill gave the advice, I didn’t just put it away for another day. I took the advice and did something with it almost every time.” In this business, mentoring is often the best continuing education to help achieve your career goals. But how to find one and what makes a great mentor varies from person to person. Though there is no single way to acquire a mentor, there are some steps to take and a few factors to consider when looking for yours. How to find a mentor The most obvious route new mortgage agents take is looking toward their broker-owner that they become employed under. The reasoning goes: if they own a franchise, they must have experience, skill and words of wisdom to communicate. But just because they are successful, it does not necessarily mean they’ll teach you how to do the same. Snowden was fortunate to encounter Nugent but Sabeena Bubber wasn’t as lucky. “It was my understanding that when joining a firm, the person who ran it would act as my mentor,” says the British Columbia broker. “But I realized after a couple of years, that person wasn’t really providing me with the support I expected.” Eventually Bubber branched out on her own and later hired Greg Williamson, a Calgary broker and owner of 180 Degrees Coaching, as a coach.


Bubber and Williamson both graduated from the same Regina university but their careers took different turns afterward. “I identified him as a guy who went from zero to 100 and ran one of the most successful companies in Canada,” says Bubber. “I kind of went halfway but didn’t quite make it to the next step so I saw him as someone who would benefit me because we essentially came from the same roots.” After 13 months of working with Williamson, Bubber has seen tremendous improvement in efficiencies and sales. If you find yourself in a situation like Bubber’s, don’t feel limited to the firm you’re working in. You can still work there while reaching out to other contacts to find a mentor. First identify what kind of success you’re looking to achieve—whether it’s running your own local business; creating an online mortgage brokering service; spearheading a regional or national agent network; or being a top originator in the country within two years. When you have a clear idea of the kind of mentor you want, send a note to people in the industry who know you, you trust, are well connected and have a bigger look at the major players. Ask them if they have any recommendations of a mortgage professional that fits your mentor criteria. You’ll be surprised with who you end up meeting this way. A couple of years ago when Snowden was pregnant, she met what would later became her second mentor in an unknowing way. Snowden was at a mortgage conference in Las Vegas with her colleagues and met one broker who she found particularly easygoing and down-toearth. After a few days of lunching together and chatting, she asked him what exactly his

“ first identify what kind of success you’re looking to achieve—whether it’s running your own local business; creating an online mortgage brokering service; spearheading a regional or national agent network; or being a top originator in the country within two years ”

Top: Lori Snowden Middle: Sabeena Bubber Bottom: Gary Mauris


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Broker Relationships

position was at Dominion Lending Centres. “He said, ‘Actually, I’m the president.’ I looked at him and I said, ‘You’ve got to be joking me!’” she laughs, referring to DLC President Gary Mauris. Mauris is a great example of a mentor recommended to you who you may not think of based on your regular social and professional circles. When you start poking around, asking others what they think, who they know, what may be a good fit for you, lights start to turn on in rooms you always had access to. Characterizing a mentorship Above all, you need to respect your mentor professionally. Your mentor may never become your best friend but that’s not what you’re looking for anyway. “Bill and I have very different personalities,” says Snowden. “So you think your mentor is going to be somebody you have a great click with as a person but it doesn’t have to be. Interesting enough, nobody is your ideal mentor because your ideal mentor tends to be a group of different people.” Snowden believes that you need to be open-minded when you meet others. She listens to everybody and everything, filtering the information to work for her because you never know what you’ll learn. This is why Snowden ended up turning to Mauris under Nugent’s recommendation. In 2010, Mauris introduced the President’s Program at DLC where he held six conference calls with selected mortgage agents every three weeks to guide them through particular action items that were designed to significantly boost business. “I think the most important thing in mentorship is accountability,” says Mauris. “Just speaking to somebody on a regular basis, that’s booked. It’s like booking time to go to the

“ your mentor may never become your best friend but that’s not what you’re looking for anyway ”


gym or spend time with your children. It’s important for mentorship as well. Mentorship is absolutely useless unless you give a clear action list, because after they’re inspired and motivated comes the hard work and the heavy lifting.” Snowden followed the program and she found that it was easy to do but also easy not to do. The most challenging part to being mentored is hearing what you don’t want to hear. “And hearing what you know is true and you’re not doing it because you have every excuse,” she adds. When the President’s Program opportunity arose,


Broker Relationships

she just had a baby, a three-year-old, and was juggling home and work schedules. She realized the timing may never be right so to do it instead of letting the excuses pile on. “A mentorship is only as good as what you’re committed to. It was my most successful year and yet I stopped doing the action items halfway through the year. I just started again this January. Can you imagine what my year will be like now that I’m going to do it for 12 months?” Mauris advised on one conference call that the market shouldn’t affect what you earn. Instead of worrying about the economy, worry about your own economy. He constantly passes on knowledgeable, sound advice that can be

“ a mentorship is only as good as what you’re committed to ” immediately applied to how you are working. In a positive partnership, you should look at whether you feel energized after meeting or talking to your mentor—not if you feel overwhelmed. Feeling overwhelmed often happens, particularly if you’re getting lots of great advice in one sitting, but as long as you also feel inspired and invigorated, this is a clear sign that the mentor is contributing to your success. What a mentor expects from you To be successful, Mauris stresses you often have to do the opposite of what everyone else is doing, which doesn’t come easily. There is resistance to new sales approaches and an unwillingness to break from habit, but in his years of business, he has found when you go against everyone else you stand out. Many people are scared of approaching others to become a mentor because often the best mentors are those who are most busy. But if someone wants to help, he or she really will as

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long as you give the dedication too. “It’s tough to identify who’s going to give the commitment but typically what I look for is when somebody’s driving me crazy, asking me over and over, chasing me, is sincere and genuine—that usually shows me they’ve made a decision to be all in,” says Mauris. “I get people all the time at events who say, ‘Hey Gary, can you mentor me? Here’s my card.’ I say, ‘Keep in touch. I’m not doing any right now,’ and then I never hear from them again. Then I get the odd person who’s phoning me all the time, e-mailing me, ‘What do you think? Do you have any books I can read?’ They’ve made a decision they want to make a change in their life and they’re chasing it.” So don’t worry that you are bugging or burdening them. If they don’t want to mentor you, they’ll make it known and that doesn’t mean you should stop searching either. That is just the perfect sign this person wasn’t the right mentor for you. People often want to be mentors because contrary to what many people think,

“ I get the odd person who’s phoning me all the time, e-mailing me, ‘What do you think? Do you have any books I can read?’ They’ve made a decision they want to make a change in their life and they’re chasing it ” they have an innate desire for shared success. They understand that another person’s success actually reflects positively on their own image. Whenever you are ready for a mentor, just remember to reach out to as many people as you can and keep an open mind. The relationship will build as long as you commit to it. CMP

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if the

NO. 15

Guide to broker compensation



Trailer Fees The future is now

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contents cmp guide no.15

NO. 15

Guide to Broker Compensation


8 2

The future is now Three Canadian lenders now offer the trailer fee option to brokers and more are looking at changes in compensation models. Heather Li explores how trailer fees work for your business


Partnering is more than trailer fees Merix has been a leader of trailers since its inception. CMP looks at how this compensation model benefits you and why Merix is committed to mortgage brokers beyond fees


If the model fits When it comes to compensation, mortgage brokers and lenders don’t always agree, but they do agree that finding the right deal to fit the client’s needs and building a relationship with each other is more important than the compensation model. CMP heard this and more when it spoke to some brokers and lenders from across the country

Street Capital Another lender joins the growing trailer fee trend. CMP shows how Street Capital is growing the mortgage broker partnership with a new compensation model


Relationship advice Establishing a steady flow of leads is essential to a broker’s survival. Doug Mathlin from CMP’s sister magazine MPA reveals how to establish and maintain a strong referrer relationship


Making a POINT With recent changes to its broker rewards program, FirstLine Mortgages is looking to attract new brokers and strengthen existing relationships  



Trailer Fees

fees trailer The future is now



Trailer Fees

Three Canadian lenders now offer the trailer fee option to brokers and more are looking at changes in compensation models. Heather Li explores how trailer fees work for your business


hen Merix Financial first entered the mortgage lending market more than five years ago, its trailer fee compensation model was uncommon. And with anything new, inevitable pushback occurred. “It’s because it’s a different way of doing business,” says Merix President Boris Bozic. “We originally went to see a number of senior mortgage brokers who had been in the business for a long period of time. We really felt this model was for them, that they would really gravitate toward it. The feedback was interesting and fairly common. It would go something like this: ‘Oh Boris, I wish you had launched this five years ago because I’m not sure how long I’m going to be in the industry, therefore this kind of program isn’t for me.’” To Bozic’s curiosity, he found years later these same individuals who were trying to leave the business or talked about retirement within 10 years are no closer to doing so. It’s difficult to give up the revenue stream they worked so hard to create over so many years. Merix was confident though that to support and develop the mortgage agent industry for the long term, the trailer fee option was necessary. Now after becoming firmly established and recognized as one of the most broker-friendly lenders, its proven trailer fees are not only possible but also preferable. Shortly after Merix launched, Macquarie Financial followed suit with trailer fees and has been running strong with them. Then in January, Street Capital Financial Corporation announced it was introducing its own version of the compensation model. As the industry continues to grow, more lenders and mortgage professionals will come to understand this is the natural progression of how business should be done.

“ now after becoming firmly established and recognized as one of the most brokerfriendly lenders, its proven trailer fees are not only possible but also preferrable ”  



Trailer Fees

Top: Boris Bozic Bottom: Dianne Chafe

What are trailer fees? The compensation model everyone is familiar with and most lenders use is to be paid about 105 to 120 basis points of every deal funded as soon as it’s been approved. It’s like a one-time jackpot. With a trailer fee, the basis point amount paid upfront is reduced to about 75 basis points but every year on the deal’s anniversary date, 10 to 15 basis points is deposited into your bank account. So essentially, when opting for the trailer fee, you’re not taking in as much money initially, but over time you are rewarded and often earn more in the end. It’s like Cash for Life. Trailer fees are common among similar industries, such as financial planners and insurance brokers, but because the mortgage industry is still in its youth and with the most recent financial crisis, agents had natural concerns. “I wasn’t sure if the companies would still be around and if the trailer fees would be paid out at the end of the day because it was so new and there had been no successful stories at the time for such lenders making it,” says Dianne Chafe, Toronto mortgage agent with Oriana Financial Group of Canada Ltd. “Now in the last three years, I’ve been choosing almost exclusively trailer fees if all other things are equal for the client.” Chafe stresses even though compensation is important to her, above all she does what’s best for the client, and will consider first if it’s the best rate and product then what kind of payout is available to her.

“ trailer fees are common among similar industries, such as financial planners and insurance brokers, but because the mortgage industry is still in its youth and with the most recent financial crisis, agents had natural concerns ” James Loewen, broker-owner of Loewen Group Mortgages in Burlington, Ont., spoke about his own similar apprehension of whether the lender would still be around to pay the fees.


“ when you look at that, it’s hard because we are very much a generation and an industry of upfront wants and demands ” He also acknowledged it’s difficult for most people to accept less money right away. “The hard part was being able to say, ‘I’m willing to accept 70 or 80 basis points upfront within a delayed model,’” he says. “When you look at that, it’s hard because we are very much a generation and an industry of upfront wants and demands.” What persuaded Loewen—and Chafe—to seriously consider trailer fees was looking at what his exit strategy may be. It’s the long-looking future planning that shows if a broker is committed to this work. If you’re not already opting for trailer fees, why you should Ask yourself how serious you are about the mortgage industry; is this is a career you’re committed to or a detour on the way to a much different professional destination? If you know this business is for you, trailer fees are the obvious choice. “Most people that work as a teacher, firefighter, at any corporation, they’re going to have their pension plans and stock options through the company,” says Loewen. “Or if you are a financial planner that has grown a book of business, basically every year there’s a bonus paid back to you based on your books. You’re receiving an ongoing trailer on that and because of that it has a value.” Growing your “book of business” is a term you’ll hear often with the trailer fees topic. It’s all the deals you’ve generated, the clients you’ve accumulated, the money that you’ve made and continue to make. But without an ongoing revenue stream, at retirement, all a broker has is a list of people with mortgage loan maturity dates. And that isn’t sellable in the least. “I could set up a booth at any corner downtown, hire some people to just ask passersby when their maturity dates are and I’m sure after a few days, I could come up with a few hundred people, which is all mortgage brokers really have,” says Loewen. “Really, the


Trailer Fees

relationship is gone once you retire and that’s what clients are really looking for.” With the trailer fee, now you have true value to sell to another broker.

“ if you fund $10 million a year, over 10 years that’s $100 million aside. If you are being paid a 20-basis-points trailer fee every year and the clients stay with you—which they most likely do because mortgages have a high retention rate—you are earning $200,000 a year ” If you fund $10 million a year, over 10 years that’s $100 million aside. If you are being paid a 20-basis-points trailer fee every year and the clients stay with you—which they most likely do because mortgages have a high retention rate—you are earning $200,000 a year. “And $200K a year, that’s not a horrible life,” jokes Loewen, “I think some people can try to live off that. So that’s one option where I can say I can retire or I can keep my book running; or I can try to sell that book to someone else by saying, ‘Look $200,000 based on four years? I want $800K for my book and it continues to pay out.’” The other major advantage to the trailer fee model is running a more effective and efficient business. At the time of mortgage renewal, a lender such as a big bank will fight to keep that client. The only way you can make money again on that client with a one-time compensation model is moving the mortgage to another lender. “When a client comes up for renewal and I have a 15-minute phone call to see how they’re doing, update their needs and if the lender they’re still with is the best lender, we simply tell them to sign the acceptance form and send it back,” says Loewen. “You’re done. I just made the exact same amount had I taken the time to do another full application, submit it to a lender, wait for it to come back, prepare the documents, meet face-to-face,

retain all supporting documents again, send it back to the lender for compliance, and get it either switched or through a refinance to the lawyer. It’s a lot more work that we have to do instead now I’ve made the exact same money in probably one-tenth of the time.” You are also able to do what’s best for the client instead of trying to force an unnecessary mortgage switch so you can sustain your business. No agent wants to have that awkward conversation but in reality, everyone does need to make money to continue delivering the best service. Lenders win too Bozic understands how supporting a broker with trailer fees benefits Merix and other lenders too. “A mortgage broker who’s done $10 million with us on an annual basis for the last five years, on January 1 of this year on trailer fees alone, that individual would earn $41,000,” says Bozic. “And if I’m a mortgage broker today on January 1, I know I can now take that $41,000 and reinvest it back into my company: I can use it pay salaries, for marketing purposes or my own financial benefit. If the brokers can use that money to ensure they get enough downtime to recharge their batteries, that’s good for business too.” And with better brokerage business comes more deals and loyalty for lenders. “Can you imagine an industry where an individual is not only earning $41,000 from Merix, but also earning that same dollar amount or close to it from a number of different lenders?” adds Bozic. “And how powerful that could be to reinvest back into their own business?” Though it will still take time for trailer fees to gain lender-wide acceptance, as brokers and agents, pushing for this compensation model only amounts to a win for your lenders partners, your clients and you. CMP

James Loewen  


Guide Profile


Merix Financial partnering is more than trailer fees

Merix has been a leader of trailers since its inception. CMP looks at how this compensation model benefits you and why Merix is committed to mortgage brokers beyond fees



alk to anyone at Merix and it’s clear they live and breathe trailer fees. They say it’s part of the company’s culture, its DNA. Ask any of them why, and they’ll tell you they are offering mortgage originators real value that will help them navigate their business through tough economies, and providing value that will be there for them when it comes time to slow things down and enjoy life. One company calls it Freedom 55—Merix calls it “The Great Escape.” Trailer fees have been around for a long time in other industries, and in mortgage industries in other countries, yet our industry in Canada is just waking up. Over the past five years, Merix has heard all the arguments against trailer fees but one that stands out goes something like this: experienced originators will say that they wish trailers would have been around when they started, but “it’s too late now, I plan to retire in two years.” The irony is that five years later, those originators are still working, just as hard and their dreams of retiring are still two years away.

Guide Profile

Merix’s response to these people now: $10 million funded annually with them over the past five years would have paid those same originators more than $45,000 in trailers alone in 2011. How much closer would they have been toward their “Great Escape”? Lesson: It’s never too late. In its simplest form, the Merix trailer fee model pays a significant amount of money over the life of the mortgage—from funding to discharge. Over 10 years, Merix pays 207 basis points. Take a $275,000 mortgage with a five-year adjustable rate, 30-year amortization, at current market rates as an example: *Assumes 10 per cent principal repayment in addition to normal amortization. Now, it’s true that in order to earn more you have to forgo some revenue upfront, however, most of this is made up in the first two years. And the top supporters for Merix have shown this can easily be overcome with the proper mindset: over the past five years Merix has built assets under management exceeding $10 billion and during this time paid out more than $7.3 million in trailer fees. “What’s encouraging for us is that, for the most part, the people gravitating toward trailer fees are the younger generation of mortgage brokers. They understand that their business needs to have tangible value,” says Jill Paish, Merix vice-president of originations. “They see the benefits of supporting monoline lenders and conversely see the danger in having too much market share controlled by so few lenders.” For this reason, Merix believes trailers are on the verge of a breakthrough, and their acceptance as a normal part of compensation will increase as more lenders adopt trailer fee options for their originators. All this talk of trailer fees might lead the casual observer to think Merix is all about compensation, just a trailer fee lender. However this couldn’t be further from the truth. Business at Merix is more than just trailer fees. What gets often overlooked in the trailer fee discussion are the other three pillars that Merix built its business model around: process and innovation, selective access, and enhancing the originator-customer relationship. This is what they call partnering for success, and it’s what they feel REALLY sets them apart. According to Paish, “The words ‘partnering’ and ‘partnership’ have been used by companies in this industry as a way of conveying to mortgage brokers the appearance that we’re all in this together. But are they really working with you? Does the job of being a top service

“ in its simplest form, the Merix trailer fee model pays a significant amount of money over the life of the mortgage— from funding to discharge ” provider to a mortgage broker end at the four-hour turnaround time? Or should a top service provider look beyond issuing a fast commitment and find innovative ways for mortgage originators to be competitive while working with them as the borrower moves through the mortgage life cycle? Well, that’s what we do!” For example, as part of the post-funding service, every new Merix customer is sent a welcome letter co-branded with the originator’s name and company name right in the first paragraph. This is further enhanced by the welcome call program to customers where Merix contacts the customer by phone shortly after funding to reconfirm their mortgage details, asking them if they have any questions or concerns. “It allows us to identify any potential issues with the payment date or bank account information before the customer’s first payment. And it’s just a nice way to introduce the customer to MERIX on behalf of their originator,” adds Paish. Paish is also quick to point out that this past January, Merix mailed 60,000 annual mortgage statements to borrowers that had been referred to them by their approved originators since 2005. And every one of these 60,000 statements had the following included with them: Call your mortgage originator [broker name] today for all your mortgage financing needs. Moving and want to take your mortgage and rate to a new property? Looking to refinance to consolidate your debt or renew your mortgage at Merix best rates? Your mortgage originator [broker name] and Merix can assist you with your mortgage financing decisions. Some originators may read this and it may not seem all that important to them. But Merix asks: How many times did your phone ring while reading this article? If only 10 per cent of the customers you sent to Merix read their annual statement and call you, isn’t that better than where you are now? What is that worth to you? CMP  



Broker Compensation

if the

model fits



Broker Compensation

When it comes to compensation, mortgage brokers and lenders don’t always agree, but they do agree that finding the right deal to fit the client’s needs and building a relationship with each other is more important than the compensation model. CMP heard this and more when it spoke to some brokers and lenders from across the country Rudy Dedic, owner/mortgage expert DLC Casa Mortgage, Vancouver For Dedic, partnering with non-traditional banks is the way to go, especially in light of the fact the Big Six banks currently hold a large portion of the mortgage market. “Brokers need to work more with the non-traditional lenders because the big banks are so aggressive in retaining clients at the renewal stage,” he says.

“I think it’s important to talk about loyalty programs with the non-traditional bank lenders. It would boost their business and increase our compensation as well as help build long-term relationships and loyalty.” Dedic believes in partnerships, because that way, everyone benefits. “You can’t build relationships with everyone. The best brokers build relationships with two or three A-lenders and two or three B-lenders. “If you’re loyal to the lender, you’re going to get good compensation, good service and good rates in return. If I have to choose, I will always go with the lender who rewards us for our efficiency and loyalty rather than the one who doesn’t.” He then sells that relationship to his clients. “I’m selling the relationship, not the rate. My job is to provide the best mortgage solution for the client. The best rate does not equal the best mortgage. “I like it when people call me asking for the rate. My response is, ‘Do you want the best rate or the best mortgage?’ This gets the conversation started and by the end of it they aren’t even asking about the rate anymore.”

Sebastien Kuperhause, national sales manager - business development National Bank of Canada While National Bank of Canada is comparable to the rest of the industry with its volume compensation for brokers, it’s in other areas where the company shines, according to Kuperhause. “Our line of credit products are where we are best in show in industry in terms of product flexibility, rate offerings, accessibility and compensation,” he says. “We pay out on the authorized limit at closing, unlike some of our competitors where brokers have to wait 90 days to get paid on the balance that’s drawn. The reason we are able to do this is because we know in the broker channel the  



Broker Compensation

commission before closing Advance Commission Company is a commission advance service offering advances to mortgage brokers and Realtors across Canada. Advance Commission Company has been serving customers for 15 years and is a Preferred Vendor to Centum, Dominion Lending Centres, Century 21, GMAC, HomeLife Realty and Sutton Group. Fee Structure Advance Commission will advance up to 100 per cent of earned commission amount upon broker approval. A $3,000 advance for 30 days costs as little as $120 and the reserve is pro-rated and rebated back to the broker after closing. Advance offers same-day deposist and the fees are tax-deductible. Mortgage Requirements Advance Commission will advance commissions on new purchases of resale homes, new construction, mini homes, modulars, duplexes and land. The company will also advance on refinances and leases. Required Paperwork For each commission advance, the following documents are required to accompany the application: • • • • • • •


Signed mortgage commitment Funding letter/broker complete letter Purchase and sale agreement Waivers of condition Sold MLS sheet Two-page signed commission sales agreement Void cheque for new accounts

broker level, but that it hasn’t caught on with everyone. Changes take time. “We all want to make sure we’re playing in the same sandbox. If you have a large group of lenders who end up changing policies and guidelines and if it affects business then what you see is more and more lenders following suit, but it takes a really big player to do it.” Compensation can attract brokers, but for Kuperhause, lenders have to take a holistic approach. “If your value proposition is your compensation model, then your value proposition is flawed. Someone will always come around and pay more down the road. “Your value proposition cannot be ‘I’ll pay you the most amount of money’ because you’re not necessarily doing what’s in the client’s best interest. It has to be a culmination of everything, the product, the service; client needs, how you support the client and how can lenders help the broker going forward and help them build their business.” With new brokers, they look at a new lender and want know if they offer the right products for their clients, can they work well together with the lender and build a relationship going forward. Both sides have to work at it, says Kuperhause. “You would hope a broker doesn’t pick one lender over another for five basis points in terms of compensation compared to a product that would save the client five basis points in rate.”

John Panagakos, principal broker The Mortgage Centre, Toronto

When it comes to compensation, Panagakos has different views on different models. For example, he’s not a big fan utilization rate of the line of credit is there, by paying of individual protection. up front we’re getting brokers who recognize the value “I’m a single player,” he of the product for the client and brokers know that if says “And what happens they abuse it they would lose the capability of offering it is some brokers aggregate to their clients.” the entire office as if it’s With the trailer fee model, Kuperhause says it one person.” really comes down to experience and preference. He prefers the “When you’re newer to the industry, you definitely want aggregated volume model the compensation up front; you need that to help you because he’s compensated get going. for the company’s total efforts as well as his own. “The trailer fee model really works for people who As for trailer fees, which are being discussed more have been in the industry a long time and they’re and more, it’s something that he’s leaning towards, setting themselves up for the long term. It’s similar to after 21 years in the mortgage broker industry. financial planners who build a book of business and “It would be nice that if I do so much volume over then when they’re looking to get out, sell that book of the next 10 years for a certain lender and then if I business to someone else. want to slow down, I’m still going to get paid – it’s “It’s not for everybody. We’ve spoken to brokers and my RRSP.” even some of the big brokers aren’t interested in [trailer Panagakos feels trailer fees may become more fees].” National Bank has reviewed offering trailer fees common because it makes lenders look better on the but has elected not to proceed at this time due to all the balance sheet. “They don’t care if you bring them one technological requirements it would take at this time. It deal or 50 deals,” he says. “I think that might attract is on their radar but not in the foreseeable future. more brokers like me to their ‘trough.’” In addition to trailer fees, Kuperhause says some When it comes to the role that compensation plays lenders have moved the volume bonus down to the when a broker is choosing a lender, Panagakos says it’s   


Broker Compensation

only one of my many reasons and certainly not No. 1. “I’m a consumer advocate. I don’t even look at compensation when I’m doing a deal with a customer. What I’m looking at is making sure the client is a fit with the particular lender. Does the product fit the client? Making sure there are no onerous obligations in the contract. Looking after the client is paramount.” As margins shrink and competition increases, Panagakos is hoping that lenders don’t look to cut broker fees. “I don’t want to see banks reduce our compensation across the board like they did recently in Australia, but I don’t think that will happen.”

Todd Poberznick, assistant VP, B2B Solutions Bridgewater Bank Bridgewater offers a two-tier model that compensates brokers through finder’s fees and also on their funding ratio. According to Poberznick, this model also enables brokers to fund as little as a million a month to achieve a volume bonus. Funding ratios are becoming more important he says. “The more inefficiencies that occur in the underwriting stage, the more costly it is for the lender. Successful brokers make sure to cover all the basics early in the process, helping to make sure the deal funds reducing the lenders’ cost. The more deals that close, more savings can then be shared. “That’s why we want to improve our funding ratios, tighten our turn-around times, and reduce the number of touch points. The compensation is obviously better if we meet these criteria and we have a good working relationship with the broker.” Bridgewater Bank’s two-tier model serves both small brokers and large broker networks. “We started out needing to find a niche in the market and we have evolved over the years to the point where we now work with super brokers,” adds Poberznick. “We still have many opportunities to work with smaller brokers and we will keep striving to find ways to give them both a competitive edge in the marketplace.” Poberznick says he knows brokers are struggling with competition from the big banks so they work closely with their brokers to provide the level of service they need to compete, along with a compensation fee that is comparable in the marketplace. “We know margins are getting smaller and smaller and so it comes down to building strong relationships and making deals that fit the broker’s needs,” says Poberznick. “It’s not only monetary compensation,” he says. “When they’re successful, we’re successful and we work hard to find ways to help them build their business.”

For Poberznick, the trailer fee model can work, but only for some brokers. It really does depend on how the broker’s business is set up. “In tougher times, brokers need upfront fees. They don’t have the luxury of spreading it out over time. If the business can support giving up the upfront fee, the trailer fee program is fitting, as it helps to build security and keep the deals flowing. The question is: does the business need the money upfront, or can it afford to spread it out over time?” Creating loyalty with brokers is important, but for Poberznick, it’s a two-way street. “Lenders are starting to say, ‘Look, if you want me to provide you with this rate, this kind of compensation, and this kind of service, then I need you to commit to achieving your volume numbers and reducing our costs by improving your efficiency. “The days of brokers dealing with every lender are over.”

Paula Roberts, mortgage broker The Roberts Group of Mortgage Intelligence For Roberts, it’s more about who and what, rather than how much when it comes choosing a lender. “It’s more the lender, not the compensation that dictates where we send the deal,” she says. Having options is the key she says. “All the lenders offer the same rate, but it depends on what compensation model your office is supporting. There are certainly enough options out there for brokers. “It really comes down to your relationship with your underwriter. That is the person that’s approving your deal.” Once the best deal for the client is found, comfort with a lender and their practices come into play. “You can become a creature of habit,” says Roberts. “If everything is perfect for the client, you’re always going to go to the lender that you’re most comfortable with because you’re going to get the service you require. And the compensation just follows.” Competition amongst the lenders over brokers is good says Roberts because it only helps brokers and ultimately helps the consumer as well. For Roberts, trailer fees do have advantages, such as preventing what she refers to as “the game of brokers who move clients from one lender to another in order to get paid.” “We’re not that kind of broker, but I think if a broker is negotiating to keep a client with a lender, the broker should be compensated. Not 75 basis points, but if you get 15 every year to make sure that  



Broker Compensation

client is happy with that particular lender, than that’s a good thing.” To Roberts, it’s about reinforcing that relationship between the lender and the client. “Right now we have some clients who don’t want to do anything come renewal time, but we’ll still negotiate the best rate for them with the lender. “Being compensated to facilitate the renewal would be a win-win for everyone involved.”

In summary, Tieri says, “Our decision to move to an individual-based compensation model in 2010 was a bold move in an industry where little has changed from a compensation perspective, but has paid off for us...and the brokers who support us.”

Gino Tieri, VP, sales

ResMor has different status levels that offer loyal mortgage brokers additional finder’s fees for their business as well as additional discounts off the rates on some products. According to Valko, brokers can earn up to 130 bps on a five-year fixed-rate mortgage, 120 on a variable, and up to 110 bps on a three-year fixed.  The additional finder’s fees allows the mortgage broker the opportunity to buy down the already competitive interest rates when in competition to save a deal or when advertising or trying to attract additional business. “It gives brokers a competitive edge in their marketplace if someone is shopping them around or they’re looking to attract business at an even more competitive rate” he says. ResMor’s base commission is 110 bps (five-year), with volume incentives that can add an additional 5 bps (Elite) or 15 bps (Super Elite). They have also incorporated a five bps efficiency bonus, based on $5 million funded volume with a 60 per cent funding ratio. “This is an excellent tool to allow our loyal mortgage brokers and agents the ability to grow their business and differentiate themselves in their marketplace,” says Valko. “For 2011 we are also working on a client referral program for our top mortgage brokers, which would refer clients to them as an appreciation for their business and to strengthen the relationship going forward.” Eventually, by the end of the year, ResMor would like to pay brokers in one lump sum by way of E.F.T (Electronic Funds Transfer) – the commission and the incentive combined – within a week after closing. “We think that’s going to be a differentiating factor to get some additional business, not only will we pay well, we’ll pay quickly!” Valko says. Valko is also excited about the company’s existing lender program, which encourages brokers to bring deals back to ResMor. “If they refinance and bring the deal back to us, we pay them full finder’s fees plus incentives if applicable. Even on an early renewal, before maturity, where the client is paying the penalty and they have the option to go anywhere and the broker keeps it with us, we’ll pay them half their finders fees and incentives.” CMP

MCAP MCAP offers a compensation model with traditional upfront finder’s fees paid upon deal funding. In 2010, MCAP introduced volume bonus and performance incentive bonus based on individual performance. MCAP’s Broker Loyalty Program (M-Points) consists of three levels - Associate, Partner and Ambassador. “The goal of our program is to reward quality, efficiency and volume contribution” says Tieri, “It’s simple...good quality deals that close create a win/win for the brokers and MCAP. It reduces our time and costs to process deals which translates into higher service levels and higher compensation, and reduces approval turnaround times when brokers are most susceptible to losing the customer to a bank, or another competitor. “Timeliness of mortgage approvals is critical and that is why our performance bonus focuses on funding ratios. “MCAP does not currently offer trailer fees to brokers,” (MCAP’s HELOC product does have a trailer fee component) Tieri explains. “They’re not for everyone. I don’t know what the appetite [for trailer fees] is going to be. I think it’s mixed depending on who you talk to. The court is out on the profitability of the trailer fee model, and broker acceptance of reduced upfront compensation for residual trailer fee payments.” Things can change however, “The compensation model addresses today’s needs, but we look to the needs and demands of the marketplace and profitability down the road. That’’ always going to drive what the compensation models are going to look like.” says Tieri. “For instance, if margins and profitability continue to tighten, then compensation models may have to change accordingly.” That’s why lenders like MCAP are looking for ancillary products and services. “We continually ask ourselves, ‘What other offerings can we build onto a mortgage that are profitable and allow us to compensate brokers for some other element of the deal?’”


Bruno Valko, director of national sales Resmor Trust Company

Guide Profile

Street Capital introduces trailer fees Another lender joins the growing trailer fee trend. CMP shows how Street Capital is growing the mortgage broker partnership with a new compensation model


treet Capital believes in giving its broker partners lots of choice. In January of this year the lending company lived up to that promise by introducing another compensation model choice in addition to its current traditional model. Its new Street Loyalty Program is designed to compensate brokers for renewal business. The Street Loyalty Program is seen as a strategic fit for brokers who want to build a portfolio of clients with a long-term reoccurring revenue stream. It demonstrates Street Capital’s commitment to partner with brokers and jointly maintain client relationships while that client has a need for a mortgage. The company views renewal compensation models as an increasing trend. They aren’t for everyone but Street Capital believes many brokers are thinking about their business models and how they generate revenue, and that the appeal of this compensation model is growing. Some brokers are frankly tired of fighting their lender at renewal. They want a lending partner that works with them, not against them. The truth is that the majority of their clients are staying with their current lender as reported in the 2010 Canada Mortgage and Housing Corporation (CMHC) Consumer Survey: “Loyalty to a lender is most common among the renewer and refinance segments: 88 per cent of renewers and 70 per cent of refinancers did not change lenders when obtaining their current mortgage. These levels have remained relatively consistent over the past few years.” Street Capital sees this renewal compensation program has many advantages: • You can get paid upfront and during the renewal—so it is the best of both worlds • They provide more revenue stability for the broker over the long term • The client is a joint client over the borrowing lifecycle, and the broker and lender are working together The Street Loyalty Program has lots of choice for a broker interested in this type of compensation model. It has designed two renewal compensation models that allow brokers the choice to earn revenue over the life of their client’s mortgage.

Two Renewal Compensation Choices Compensation example with a five-year fixed terms that renews into another five-year fixed term: Option A – UPFRONT FEE MODEL • Up to 110 bps upfront compensation • 105 bps Finder Fee • 5 bps Street Rewards (> 65% Fund Rate) • 15 bps Renewal Fee* starting with the first scheduled renewal and paid thereafter on each anniversary date. Total: Up to 185 bps compensation. Option B – TRAILER FEE MODEL • Up to 75 bps upfront compensation • 70 bps Finder Fee • 5 bps Street Rewards (> 65% Fund Rate) • 12.5 bps Trailer Fee paid at each anniversary date of the initial term. • 15 bps Renewal Fee* starting with the first scheduled renewal and paid thereafter on each anniversary date. Total: Up to 200 bps compensation. *Paid on all renewal terms Additional Features: • Two broker compensation models: an upfront or a trailer fee model • Competitive rates • Street Status Levels • CEO and President Status Pricing Credits and enhanced Street Rewards • Access to CMHC and Genworth Available Products: • Street Loyalty Fixed (1-5 & 10-year terms) • Street Loyalty ARM (3 & 5-year terms) • An owner-occupied program (fully qualified only) The Street Loyalty Program complements Street Capital’s traditional compensation program by giving their broker partners more choice. Brokers can choose on a deal by deal basis whether they want to submit under the traditional model or one of the renewal model choices. The lender believes that by offering such a wide choice of compensation models it is again demonstrating that the company works in partnership with brokers to build business value the way the broker wants to. CMP  



Lead Generation

relationship advice Establishing a steady flow of leads is essential to a broker’s survival. Doug Mathlin from CMP’s sister magazine MPA reveals how to establish and maintain a strong referrer relationship



ost brokers that I’ve worked with over the years have one or two very profitable business relationships with a referring business. These referrers are often in closely related fields, such as accounting, real estate, legal or financial planning. The importance of these relationships is clear: they commonly provide the initial source of business for a broker to get started in business, and they provide a steady flow of business leads once that business is established. I am regularly told that prospecting for referral relationships is frustrating, difficult, time-consuming and often leads to no result. I couldn’t agree more. Too many people expect relationships to happen naturally, without substantial effort, and for both businesses to flourish almost magically. On rare occasions successful referral relationships seem to be built effortlessly, but the chances of that happening are remote. If you want to build an effective relationship with a referrer, you will need to go through some reasonably simple steps to get there. Firstly, you need to target the right referrers and then you must engage them. Next, you need to plan for a successful relationship before building trust and agreeing on the execution. Finally, you need to review and measure the productivity of the relationship on a regular basis.   

Targeting the right referrers It’s great to have people agree to refer business to you, but if they don’t do much business you can’t expect many leads from them. Ideally, your target referrers will be at the top of their game in your geographical area or will be on their way to that level. The referrer needs to have the same business values as you: putting the client first, focusing on quality and ensuring that much of their work is repeat business from existing clients. Your referrer needs to embrace the concept of business relationships as enthusiastically as you do. The saying goes that losers will always say yes to an appointment because they have nothing else to do. Target successful people and work hard to build a strong referral relationship with them. Rules of engagement At the end of the engagement process, your referrer will be able to recite who you are, what you do, your background and importantly, your value proposition — what you provide and why people should do business with you. The engagement process involves meeting with the referrer at their office and yours to determine whether you have a basis for a relationship. This is


Lead Generation

relationship, it would be a good idea for you and your referrer to put a plan in place for your relationship. This should be a brief document that outlines each person’s responsibilities, a measure for success and how frequently you will review the progress you are making. The most important thing about any plan is implementation. Implementation keeps the plan alive, so holding each other accountable for key actions is paramount to success.

top referral tips • Be visible – get in front of your referrer as often as possible, especially in the early stages of the relationship. Out of sight is out of mind at this time • Reward the referrer for the first deal or lead – give them something of value to show your sincere thanks • Seek feedback from the referrer on each client transaction referred by them • Provide feedback from your clients about your referrer’s business (good or bad) this will show you how serious they are about growing their business and caring for the relationship with you • Celebrate the success of your business relationship from time to time. When you both achieve a significant milestone, go to lunch or do something that you both enjoy to mark the occasion

your opportunity to ask questions of each other to fully understand their motivations and values. Your referrer needs to like and trust you and be willing to endorse the services that you provide. They need to be able to speak positively about you and pre-sell your services effectively. At the end of the engagement stage you should draw up an agreement to formalize the relationship. This shouldn’t be a contract or need legal sign-off, but rather a simple document that confirms what has been agreed (one page will do). Plan for a successful relationship You probably already have a business plan with strategies for success. At the engagement of a new

Building trust You will know that you have a good relationship when your referrer chooses you to do their loan. It’s a much more credible endorsement when someone says: “He/she is my broker, I was very happy with the service — that’s why I recommend them.” To achieve this, you will need to build enough trust and be in the right place at the right time. If the referrer is not a borrower of yours, that’s still OK — as long as they would choose you if they were to borrow. If the referrer can tell their clients that many of their other clients have used you, and the feedback they give is overwhelmingly positive, it helps to create better credibility for your business. However, this is not the end of the process. You will need to work with your referrer on a regular basis to ensure that you both sell each other well. You will naturally develop a script to promote each other’s businesses. You will need to check this script from time to time to ensure that the information is accurate, compliant and beneficial. Review and measure You will need to agree to review the success of your relationship on a regular basis. My advice is to do this monthly. That way you have enough time to focus on your own business and regular meetings to keep the referrer at the top of your mind. Designing a business scorecard for the relationship is a good idea as you can manage your relationship by efficiency measures rather than comparing the total number of converted leads. A good measure for this type of arrangement would be the leads-to-total-appointments ratio. There is no benchmark number to chase here because some referrer businesses are irrelevant to some client needs. However, a good practice would be to identify the current ratio and set an improvement goal. Finally, when your referrer depends on you to enhance their business, you know that the relationship is really established. But don’t let a financial arrangement between you and the referrer be the basis for the relationship. CMP  


Guide Profile

With recent changes to its broker rewards program, FirstLine Mortgages is looking to attract new brokers and strengthen existing relationships

making a POINT


eing constantly vigilant about your business model and looking for ways to improve is one way to ensure you stay ahead of your competition. With recent changes to its broker rewards program, FirstLine Mortgages is doing just that. “The program hadn’t been revisited in a few years and you always have to challenge your own assumptions,” says Neil Todd, Director, Product at FirstLine Mortgages, one of Canada’s largest broker-channel lenders. “With changes in the competitive landscape, we identified certain gaps in the program that we thought could be converted into potential opportunities and provide us with a competitive advantage.” Among the changes, FirstLine has added a new status level (Silver) to its POINTS Rewards Program, earned by funding $5 million or earning 25,000 POINTS. Previously, the first level was reached at 100,000 POINTS. Brokers receive POINTS with every FirstLine mortgage they close. For example, a five-year fixed mortgage pays 750 POINTS. That averages out to about two deals per month to reach Silver status. Brokers earning Silver status will get 5 bps off FirstLine’s floor rate on their next eligible deal. FirstLine POINTS Rewards Program


Status Level






Silver (New)















Targets have been adjusted at all levels, anywhere from 17 to 50 per cent. Gold status is now earned with 50,000 POINTS (or $10 million), down from 100,000, Platinum is now 125,000 ($25 million) instead of 200,000, Emerald is 250,000 ($50 million) instead of 300,000, while Diamond status is earned at 400,000 ($100 million) instead of 500,000. “The program is designed to cater to various levels of performance and provides motivational triggers at various performance tiers,” says Todd. “It provides a reason for high performance brokers to continue to stay loyal to FirstLine with additional rewards and benefits as they continue to increase their business with us and it caters to new brokers who want to start building their business with FirstLine. “Reaching Emerald status for example, is now more achievable,” he says. “So you have a lot of high volume brokers who previously might have reached the Platinum tier and would not have even aspired to achieving Emerald because of the large gap between the two levels, now have this next level well within reach.” The reason for lowering the entry-level threshold for status in the program says Todd was to open FirstLine to attracting new and upcoming talent into their network. “It’s about bringing in new talent, recognizing new talent and building a relationship,” he says. “We figured there are a growing number of new up and coming brokers in the market that have the potential to grow over a period of time and that we needed to attract these resources to start working with FirstLine at an earlier phase than at the $10 million mark.” The feedback from brokers, according to Todd, has been positive. CMP

Neil Todd

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six referral mortgage marketing mistakes that make you work harder, not smarter : 4 # e k Mis t a le l y o s g n i Re l y f o d r o on w mo u t h  


Business Marketing

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


tudies show referrals are less price-conscious, more loyal, and more likely to send referrals than clients generated via other marketing methods. And here’s the best part: they’re free. It’s no wonder why referrals tend to be the No. 1 source of new business for most mortgage professionals – it’s the single most profitable, easiest way to grow your business – bar none. There are only three ways to get referrals: 1. Through word of mouth (WOM) – when your clients and/or referral partners endorse you as their recommended mortgage adviser. 2. By simply asking for them – yes, the old saying “Ask and you will receive” still holds true (the secret is asking effectively without begging). 3. Through referral systems – that automatically generate referrals on autopilot while you sleep. All three are legitimate methods of receiving referrals. However, they all deliver a varying amount of referrals. WOM. This method delivers the least amount of referrals and is very inconsistent because it relies on your clients and referral partners remembering to talk about you at the perfect time and moment. Asking for them. Even though this method can sometimes feel uncomfortable, it gets you a moderate amount of referrals because you are proactively requesting for a list of people that may want to do business with you. Referral systems. This method generates the highest amount of referrals because the referral-

“ there’s not a bell that goes “ding” to remind you to ask for a referral every time you’re with a client ”


generating process is based on an “event-based system” and it’s not reliant on your memory, mood or motivation level. As a mortgage professional, you should move beyond relying on sporadic word of mouth and start investing most of your referral marketing time setting up referral-generating systems that bring you client prospects without any manual intervention on your behalf. Why referral systems? Let’s just suppose for a moment that you do ask for referrals. Do you ask all your clients? Do you ask them every time you see them? Probably not. Why? Because it’s not a systematic process for you. There’s not a bell that goes “ding” to remind you to ask for a referral every time you’re with a client. But if you really want a lot of referrals – I mean an avalanche of referrals – you need to have a systematic process for getting them. Systems are business processes that have predictable results and outcomes because they happen the same way every time, day in and day out – like clockwork. I like to think of systems using this acronym: S-ave Y-ou S-tress T-ime E-nergy and M-oney If you want to get more referrals, you need to implement referral s-y-s-t-e-m-s. And the referral system needs to be “event-based” and not “relationship-based.” Note: I’m about to ruffle a lot of feathers with this one. It goes against everything you’ve been taught about getting referrals. Event-based referral systems - The secret to getting a steady, predictable stream of quality referrals A lot of people who teach you about getting referrals will tell you that if you nourish your relationship with your client, they’ll give you referrals. That’s not necessarily true. I’ll bet some of the clients you’ve gone the extra mile for to provide excellent service haven’t given you one single referral. Am I right? Why is that? Because they’re crazy busy with a thousand other things on their mind and life just gets in

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their way. Can you relate? If you rely on just your relationships to get you referrals, you’ll be sadly disappointed (if you’re not already). The secret to getting a steady stream of referrals is to build the referral process into the transaction. That’s right, you need to build your referral system into the event. Here are three great examples of event-based referral systems: After you take an application: Send your client a thank you card (with a surprise gift). Nothing attracts referrals more powerfully than a “wow” experience – even before the deal closes. Start sending all of your applicants a thank you card that thanks them for “entrusting you with their mortgage.” Enclose a surprise gift (i.e. Tim Hortons card, Starbucks card, movie tickets, etc.), and watch as your closing rate and referrals skyrocket. After you close a deal: Send your client a thank you card (with a surprise gift). Like the previous card, this one says “thank you for entrusting me with your mortgage,” except this time it is sent with an even nicer surprise gift (such as a box of brownies, a gift basket, a restaurant certificate, etc.). The key is to send them something that has them saying, “wow.’ The more wow factor you have, the more they’ll naturally be motivated to refer you – especially if you remind them how important referrals are to your business. After each purchase transaction: Send a thank you card (with a surprise gift) to the listing agent and buyer agent. Simply thank them for their professionalism and include a small gift as a token of their appreciation (i.e. Tim Hortons card, Starbucks card, movie tickets, etc.). Then follow up by phone and see if they’d be open to meeting with you to discuss how you can help them grow their business. You’ll be surprised how warm and receptive they are, just because you give them a surprise gift. Can you see how just implementing these three simple referral systems can have a dramatic impact on your referrals? If you’ll take the time to test them in your business for 90 days, you’ll find they’re like little hinges that open big doors to big breakthroughs in your referrals. Now, if you really want to supercharge your results, you’ll want to find as many different events or transactions as possible to integrate referral systems.


“ the secret to getting a steady stream of referrals is to build the referral process into the transaction. That’s right, you need to build your referral system into the event ”



Here are five additional events or transactions where you could integrate referral systems to boost your repeat and referral business: When you receive a referral – send a thank you card. When your referrals turn into a closed transaction – send a thank you card with a surprise gift (if you’re not allowed to reward referrals, just don’t mention the name of the client or the fact that you’re thanking them for the referral). Your client’s and/or referral partner’s birthday – for best results, follow up with a phone call. Don’t mention anything about referrals – the referrals will follow. Annual mortgage review – once per year (ideally in January or February), send your clients an “Annual Mortgage Review” card and then follow up via telephone. At your seminars – ask for referrals on your seminar feedback forms. You see, when one of the above “events” or “transactions” occurs, you ask for a referral or you

“wow” someone into naturally wanting to refer you. There’s no face-to-face asking. You don’t wait until it’s the “right time.” It happens every time there’s an event or transaction. By doing this, you will get a steady consistent stream of quality referrals. In fact, you can predict with some accuracy that if you deploy X amount of referral systems, you will get back Y amount of referrals. The results are (1) predictable, (2) consistent and (3) repeatable. About the author: Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. Aldana is also the author of a new 3-disc DVD/CD set titled, “7 Secrets to Attract More Referrals on Autopilot.” To pick up your free copy, visit:  


Profile Brokers


Profile Brokers

How a love for math led Baldev Dhah to owning his own mortgage franchise. Heather Li explores one man’s journey through school and business

a passage from India W

hen Baldev S. Dhah, MA, CFA first arrived in Calgary from India with his family, he was 16, had only $20 to his name and spoke little English. It was 1981. He decided math was a more enjoyable school subject because it didn’t require as much English. Little did he know that his penchant for numbers over language would lead to opening his own mortgage broker franchise almost 30 years later with The Mortgage Centre Canada. Dhah and his brother Gurmit started as entrepreneurs in their late teens by opening their own cleaning business. “He was in university; I was in university so we had to find a way to pay for it,” says Dhah. “We did all kinds of jobs we could think of so we started a cleaning company. We would go in the evenings or weekends because that’s the only time we could go. We did that for almost three to four years while I was putting myself through undergrad.” Because Dhah excelled at math in high school, he ended up pursuing a double major degree in actuarial science and economics at the University of Calgary. After graduation, he began a master’s in economics at the University of Alberta in Edmonton and married his wife, a nurse. It was the early 1990s during Ralph Klein’s provincial premiership. The Alberta economy was doing poorly and shedding a lot of jobs, including in the medical service fields. Dhah’s wife was under-employed in Canada but a university medical centre in Dallas, Texas was recruiting talent north of the border. “She got an offer where they’ll pay for all your travel and expenses and everything so I said, ‘Let’s go! An opportunity,’” he laughs. “So she worked there for a couple of years and I finished my master’s degree at Southern Methodist University in Dallas.” In 1996, Dhah and his wife felt it was time to start a family and home beckoned. “I moved back to Calgary,” says Dhah. “Calgary is home. I like this place. I always come back here even if I go somewhere else.” The employment prospects were much better upon return and Dhah started his financial career at a Scotiabank branch. He worked there for five years, first as a personal banking officer then as an account officer, but he longed to get into investment banking. He became skilled in many financial services, including loans, investments and mortgages. “While I was at Scotia, I used to do a lot of mortgages and they used to call me a ‘Mortgage Machine,’” says Dhah. Gurmit was in real estate at the time and took notice of his brother’s mortgage talent. He suggested brokering. “My brother knew it was a very good opportunity around that time in 2000. Markets were picking up here in Calgary at the time,” adds Dhah. “He said, ‘How much are you making? Why don’t you go out and work as a mortgage broker,  


Profile Brokers

because you do so many mortgages sitting here.’ He said I could make a lot more money and become financially secure and that later I could get into the investment field or whatever my heart desired.” A mortgage recruiter with CIBC at the time named Rob Anderson knew Gurmit and started chasing Dhah to switch employers. “Gurmit told me a little bit about Baldev so I knew he was very diligent in the way he works and he had a lot of respect in the marketplace,” says Anderson. “So with knowing that, I worked with him a little bit and I just knew he would be a good fit because he was aggressive but wasn’t overbearing. I felt customers would be comfortable with him.” But Dhah was hesitant at first. According to Anderson, it took six months to convince Dhah to become a mortgage specialist with CIBC. Dhah was worried about moving from a steady paycheque to commission work. “I thought I might not make any money,” says Dhah. “Moreover, my plan was to get into the investment field and getting into mortgages would take me away from that. Also, I was starting a new family at the time and didn’t want income uncertainty, but I never looked back. It was so good; the market was picking up. I knew a lot of people in the community and I met a lot of Realtors so I was kind of a success from Day 1. I provided honest advice and good customer service and a lot of people just came. I got so busy.” Within six months, Dhah became the No.1 player on Anderson’s team and was consistently the strongest member for five years running, says his former manager. “At the time, even in 2000, a lot of mortgage brokers used to do a lot of B deals, not A, but I was working with CIBC so there was reputation and credibility, the strength of a bank behind it so that really helped me,” adds Dhah. Early on at CIBC, the mortgage specialist group transformed to Home Loans Canada, which is when Dhah became a licensed agent. He preferred the transition because it allowed him access to more lenders, which meant more choices for his customers, and as a result, more customers. During this time, Dhah was also attending school to earn his Chartered Financial Analyst (CFA) designation, which requires three intense high-level exams. “I worked 12 to 14 hours a day and after that I would go to university to study,” says Dhah. “It was not easy; it was very hard work, with many long days. It was 2007 when the Calgary housing market was red hot. I had my busiest year, doing more than $120 million.So this kind of challenge was how much do you want to work? How much time do you want to spend with your family? How much do you want to enjoy leisure time? I’m pretty thankful to my wife and kids who understood.” Dhah says this is when he decided that the only way for him to maintain his


“ I always wanted to get into the investment field and being an independent Mortgage Centre franchise owner allows me to offer investments and other financial services and I believe the future of mortgage brokering is offering a multitude of financial products ”

level of service and do that kind of volume was for him to open his own shop and hire mortgage agents to assist him. Now holding his CFA designation, Dhah felt the time was right to start his own broker business. Choosing The Mortgage Centre, a division of CIBC, was the natural next step considering how much support he received from the bank during his employment as an HLC specialist. He also wanted to branch out on his own because he is now able to attract investment clients. “Because of all this background that I have in finance and economics, I was able to understand and therefore able to explain things in a simple language, they’re always asking, ‘Do you do investments?’” says Dhah. “I said, ‘No, I can’t. I can only do mortgages.’ So there was a need and a demand for investment consulting.” Remembering his brother’s advice about reaching financial security and being able to follow his heart, Dhah says he is exactly where he wants to be. “I always wanted to get into the investment field and being an independent Mortgage Centre franchise owner allows me to offer investments and other financial services and I believe the future of mortgage brokering is offering a multitude of financial products. For the future, Dhah intends to turn his Mortgage Centre into a one-stop shop for mortgages, investments and insurance, where he will have three separate business teams in each field. So though Dhah first arrived in Canada knowing little English, it carved out the beginnings of a finance-focused career and has now led to a business of his own, poised for continued success. CMP

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The future looks bright As a private lender, Fisgard Capital Corporation offers more competitive and accessible mortgage products than conventional lenders. CMP spoke to Hali Strandlund, President, Mortgage Investments about Fisgard’s model and its future

Hali Strandlund


What type of lending does Fisgard offer brokers? in front of a decision maker immediately. Our Fisgard mortgage products range from residential loan approval process includes an residential first and second mortgage financings for immediate response back to the broker that borrowers who do not fit into today’s conventional includes the name of the underwriter the financing box to multi-million dollar commercial application has been assigned to and a list of any and construction loans. information that may be missing, but necessary One of Fisgard’s strengths is its innovative to make a prompt decision. Most approvals are approach to difficult or unusual mortgage made within a few hours of receiving the deal.      situations. This is a result of over forty years • Concentrated team Brokers can easily build of successfully providing alternative solutions to relationships with our underwriters and staff as Canadian mortgage consumers.  they will work with the same team on all of their deals. How does a private lender such as Fisgard differ • There is no ‘box’ We can be flexible and from banks? creative. We do not impose strict requirements Fisgard’s philosophy of “full-spectrum financing” on what the borrower needs to prove in order considers a wide range of mortgage situations and to qualify. Our main concern is the value and is a one-stop shop for mortgage brokers and marketability of the real estate security.   borrowers. Fisgard is a true balance sheet lender, lending our own money, not securitizing or How has private lending and Fisgard come out of the recession? leveraging our portfolio.  High interest rates and appreciating real estate What is different for brokers when dealing with a values that have driven private mortgage lending private lender like Fisgard? returns for almost 20 years are not sustainable in Brokers turn to Fisgard when looking for the current economic climate. Fisgard is a competitive, flexible and creative short-term conservative Mortgage Investment Corporation solutions for their clients. There are a few key (MIC) with established lending channels. We invite factors to consider when dealing with Fisgard: brokers to speak with our underwriting team. We   want the opportunity to earn their business. • Equity Lender Our primary concern is the value Fisgard is here to stay. of the real estate security. The borrower must be able to show a reasonable ability to pay, but as What does the future hold for Fisgard and private long as the real estate is good the rest is flexible. lending? • Private means private We are a private The future is bright for Fisgard. As company with experienced and conventional mortgage requirements and knowledgeable staff and have total confidence in regulations tighten, Fisgard will continue offering our underwriting decisions. We offer products mortgage products to borrowers on terms that are that are accessible, with terms that are flexible no longer available in the prime markets. and easy to understand. Not easy to find in Fisgard offers shorter terms, longer today’s conventional mortgage marketplace. amortizations, flexible qualification and reasonable You won’t find any costly and complicated IRD’s and fair prepayment terms. Fisgard fills the voids at Fisgard.   left open by conventional lenders. • Rates are not tied to the bond market We The use of private lenders will continue to are not subject to the same rate fluctuations or increase in the coming years as mortgage rules rely on a spread to make our profits as most tighten and the institutional lending ‘box’ shrinks. conventional lenders. We set our rates and terms We are seeing more and more clients who were based on the level of risk we are taking, what a hurt financially due to the recent recession and are borrower is reasonably able to pay and the trying to get back on their feet. Our clients are not expectations of our investors. Common sense people who don’t pay their bills or mortgage lending at its finest. payments. They are simply people who need a • Faster turnaround time All decisions are short-term solution and a bit of time to recover and made ‘in house’ and brokers get their deals not lose their home.  CMP

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Profile Insight

Two mortgage brokers in St. John’s – Verico-ACME Mortgage Specialists and The Mortgage Centre-Advantage Financial Services – recently joined forces to promote the AMP designation in an advertisement. CMP spoke with one of them, Mark Norman, to discuss this unique partnership

two heads are better than one Where did the idea come from for this ad campaign? It started as a brainchild of mine back in August of 2009. When our team would attend local CMHC and Genworth functions, I kept noticing that the number of new brokers entering our local Mark Norman marketplace was astounding. I felt we needed to distance ourselves from the inexperienced brokers (and, of course, the banks’ mobile sales force) and set the precedent on positioning our firms on more than just rate, but rather expertise and experience. How were you able to convince a fellow broker to come on board with the idea? There are members of the Verico ACME Mortgage Specialists and The Mortgage Centre teams that have had personal relationships that date back over 30 years. While they might be our competition and us theirs, if we find out a client is already dealing with the other firm, we back off and tell the client they’re in good hands. It’s that sort of professional courtesy that has existed between the two firms for years. Both companies are very well established in our marketplace and our ideologies have always been very similar, which is to not fight over the same piece of pie, but work together to make that pie bigger for us all. So, really there was no convincing involved, we both knew it was just the right time to take the lead and stand out.


Why do think this issue is important? We truly feel that anyone that offers mortgage services to a client in this day and age should carry the AMP designation as it shows the commitment to being in our industry and it ensures our clients are provided with the best possible solutions. You’ll notice none of our names are mentioned in the ad as it was to strictly promote AMP awareness and ensure that if someone was going to do business with a broker to look for the designation. What has been the reaction? So far we’ve heard the reaction has been intense, and surprisingly, not from the public, but from other brokers looking to get their AMP designation. An insider with one of the insurers stated he’d received over a dozen calls from panicked brokers wondering how they too could become CAAMP members and AMP-designated brokers. We’re actually elated that it’s had this sort of effect as the public will ultimately benefit in the long run from this, and we just want to lead the way in our local market on making sure our entire broker community has the training and know how to service the needs of clients. We all know that perception is reality, and we’d rather compete with other highly skilled professionals and win on service and satisfaction, than fight the stigma that all brokers face, which, of course, is that we are a tool of last resort. We want to change it to the first call they would make and that it’s absurd to deal with anyone other than an AMP. Any way you slice it, we hope it creates an army of highly skilled professionals that are all working to change the stigmas that brokers have faced for years, and again, make that piece of the pie much larger.  If we all work together and do a great job for our clients, I feel the tipping point of changing the perceptions about brokers will come sooner than later. CMP


Favourite Things

Matthew Berven, AMP + One Link Mortgage Inc. + Winnipeg, Man.

Drink Water

Favourite Things Place to be The golf course

Book The boy who harnessed the wind by William Kamkwamba

Sport Football “Go Bombers!”

Food Spicy Curry

Music/band The Shouting Ground

vacation spot Riding Mountain National Park, Manitoba

Hobby Playing Ultimate

Movie Animal House

Celebrity Mother Teresa  


Guest Column

missing the mark Recent changes to mortgage rules announced by the feds could have damaging and lasting effects on the housing market says B.C.-based broker Kristin Woolard



he Minister of Finance, Jim Flaherty announced three new changes to mortgage rules citing the need to address the increasing consumer debt-toincome ratio. I feel the recent changes have completely missed the mark of their intention. The changes come into force on March 18, 2011, and will reduce the maximum amortization from the existing 35 years down to 30 years. As well, the maximum amount that a consumer can refinance their home will be 85 per cent of the value as opposed to the current 90 per cent. A final change is as of April 18, 2011, there is no option for a Home Equity Line of Credit (HELOC) past the 80 per cent of value level. The change to secured lines of credit, in my opinion, will have little impact. While the mortgage insurers, such as CMHC, offered an insurance product on secured credit lines, there were very few lenders who offered such a product. The other two changes, however, are cause for concern. A reduction in maximum allowable amortization for mortgages means that homebuyers now have to qualify based on a higher payment – about $35 for every $100,000 in mortgage amount. That’s almost $160 per month for a purchase of $450,000 – a low price for a home in the greater Vancouver area. Combine that with last year’s regulation that Canadians have to qualify on the Bank of Canada five-year benchmark rate (currently 5.19 per cent for variable mortgages and any term shorter than five years) and Canadians’ options are extremely limited. One of the driving factors to our country’s housing market recovery is the first-time homebuyer. With the new 30-year maximum amortization, many young Canadians will be out of luck as they won’t be able to meet the debt-to-income ratio policies of the lenders. Thank goodness the minimum down payment requirement was not increased from five to 10 per cent down at the same time. At least we   

dodged a bullet there. And so we come to the issue that is causing me the most confusion – the reduction of the maximum level for refinance from 90 down to 85 per cent. If consumer debt is the problem, how is reducing the amount of equity Canadians can tap into to pay out high-interest Kristin Woolard consumer debt possibly going to help? Turning consumer debt into a lower interest, lower payment obligation through refinancing and eliminating credit payments is wise given the near historical low mortgage rates still being offered. And seeing that Canadian mortgage defaults are among the lowest in the world, shouldn’t we be encouraging the switch from unsecured credit debt to secured mortgages where we have a proven responsibility? I shudder to think that many people could be forced to sell their family home if it becomes necessary due to unforeseen circumstances to use the equity they have built up in their home now that refinancing is restricted to 85 per cent. Discussion in the office has also touched on what effect having fewer qualified buyers due to the recent changes will have on the housing market, let alone the Canadian economy. Fewer buyers qualifying, fewer homes sold, housing surpluses in the market, devaluation of home prices to try and encourage sales, a stoppage of new home construction, loss of jobs… and so on. I’m sure I’m not alone in hoping that no further changes to mortgage legislation are on their way. CMP

service directory


Broker Networks

HomEquity Bank Ph: 1 866 522 2447 Page 41

Macquarie Financial Ph: 1 877 462 3788 Page 43

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

Merix Financial Ph: 1 877 637 4911 Inside Back Cover Guide

Canadian Mortgages Inc. Ph: 1 877 385 7005 Page 28

Centum Financial Group Inc. Ph: 1 604 257 3940 Page 9

Non-Bank Lenders

Peoples Trust Ph: 1 800 663 0324 Page 19

Capital Direct Ph: 780 868-0550 Page 31

Equitable Trust Company Ph: 1 866 407 0004 Page 25

Resmor Trust Company Ph: 866 809 5800 Page 29

FirstLine Mortgages Ph: 1 800 387 2020 ext. 6044 Inside Back Cover & Outside Back Cover Guide

Street Capital Ph: 877 416 7873 Page 5 and Inside Front Cover Guide

Firm Capital Ph: 416 635 0221 Page 22

The Money Source Ph: 416 699 2274 Page 37

Dominion Lending Centres Ph: 1 888 806 8080 Page 23

MORCAN Financial Inc Ph: 1 877 732 2801 Page 48

Mortgage Architects • Ph: 1 877 802 9100 Page 21 Ph: 647 680 9384 Page 39


Fisgard Capital Corporation Ph: 1 866 382 9255 Page 17

Canada Guaranty Mortgage Insurance Company Ph: 1 866 414 9109 Page 47

The Mortgage Centre Canada Ph: 1 800 423 0107 Page 3

Home Trust Ph: 1 877 903 2133 Page 15

Genworth Financial Canada Ph: 1 800 511 8888 Outside Back Cover

RMAI Financial Group Ph: 1 866 955 7624 Page 33  


service directory

Commercial Lenders

ROMSPEN investment corporation Ph: 1 800 494 0389 Page 1

The Mortgage Group Ph: 877 899 1024 Page 18

Real Estate Institute of Canada Ph: 1 800 542 7342 Page 46


Verico The Mortgage Practice Inc Ph: 905 458 4222 Page 12

Best Points Travel Ph: 1 800 551 8786 Page 53

Vector Financial Services Ph: 1 866 483 8018 Page 45 Technology/Software

VERICO Ph: 1 866 983 7426 Page 13

Vanguard Law Group Ph: 1 866 420 4714 Page 11

D+H Limited Partnership Ph: 1 866 345 6449 Page 2 Real Estate

Home Loans Canada Ph: 1 866 452 1821 Inside Front Cover

Canadian National Association of Real Estate Appraisers Ph: 1 888 399 3366 Page 10

For service directory listing please contact Trevor Biggs:

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CMP 6.2  

The magazine for Canadian mortgage professionals