CMP 8.09

Mortgagebrokernews.ca issue 8.9 | $6.95

BROKERS 2013 ON LENDERS Hundreds of industry professionals are sending a new message to old partners

Dream come true Broker-owned bank?

OFC_IFC_Spine.indd 2

Brokerage balance sheet Calculating your worth

Broker branding Personalizing professionalism

09/09/2013 2:17:06 PM

You just knocked down their mortgage rate...

...AND IT DIDN’T COST YOU A THING. A Loyalty program from Radius Financial that rewards both you and your clients.

TR

RA

R

OU EL V CHE AV

RS

VISA CA US R DI

DS

ISCOU N ED AT

TS

CK FOR C L BA

S NT IE

CAS H

Mix and match your rewards to obtain:

Call us today to learn more.

1.877.369.6398 sales@radiusfinancial.ca www.radiusfinancial.ca/contact © Copyright 2013 Radius Financial Inc. All Rights Reserved.

OFC_IFC_Spine.indd 3

mortgages that fit.

09/09/2013 2:17:11 PM

contents

market matters

FEATURES

6 | Letters to the Editor

34 | A step-by-step brokerage valuation guide Earlier this year, Lloyd Manning reported on why valuing a mortgage brokerage can be so maddening a process, but here is a comprehensive method for undertaking that exercise

8 | Reading between the Lines Broker opinions range from cautiously optimistic to downright excited about First Financial’s acquisition of MonCana Bank 10 | News Analysis Up-to-date analysis on Nova Scotia’s real estate boom and why you need to lose the jargon when talking to clients 14 | Broker Advice Who better to hear from on the subject of maximizing social media’s potential than one of the mortgage industry’s most prolific online personalities?

38 | Consistent followup Marketing mistakes often start where too many brokers leave off, writes Doren Aldana. Don’t overlook the followup 40 | Vetting your Private Private Lender: the Judas goat or the solution to saving your client’s home? How can you be sure you’re not leading your client to slaughter.

Rebecca Lamarche reports 44 | Accounting essentials Explanation of some of the key financial terms commercial brokers encounter daily

18 | Infographic

cover story

issue

8.9

20

34

CMP’s Brokers on Lenders Brokers have crafted a surprisingly different message with the seventh annual Brokers on Lenders survey, writes Justin da Rosa

License # 10172

Unlocking valUe often reqUires special keys.

Romspen Investment Corporation is a non-bank mortgage lender specializing in commercial real estate across Canada and the United States. With over $1 billion under administration, we offer customized mortgage solutions for term, bridge and construction financing from $4M to $100M.

september 2013 | 1

Blake Cassidy or Pierre Leonard | 800 494 0389 | www.romspen.com

01-07_Table of Contents.indd 1

09/09/2013 2:18:28 PM

contents

News

Marketing

12 | Product News A bite-sized guide to the industry’s newest products and appointments as they come down the channel

48 | Personal Branding Giving yourself a personal brand that makes you stand out

REGULARS

56 | Look before you leap You may be tempted to hold your breath and take the plunge into creating your own Mortgage Investment Corporation, but as Jane Knop writes, there are some details to master first

62 | Favourite Things 64 | CMP Service Directory

50 | Outsourcing 101 Done well, outsourcing can streamline your business

58 | Motivational Setbacks Ensuring your team stays productive when the pressure’s on 60| Broker Profile Robert Perrier helps out following the Lac-Mégantic train disaster

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

2 | september 2013

01-07_Table of Contents.indd 2

09/09/2013 2:18:31 PM

Accelerate your career with HLC With innovative programs, sales incentives and value added benefits, HLC Home Loans Canada empowers you to achieve more.

Contact a Regional Sales Director today.

Grant Bennett

Mark Buller

Dodi Kozak

• Grant.Bennett@hlcmortgages.com

• Mark.Buller@hlcmortgages.com

• Dodi.Kozak@hlcmortgages.com

• 1-866-978-9919

• 1-866-236-5765

• 1-866-443-9427

Nicole Bernier

Angelo Froudakis

Geoffrey Woodford

• Nicole.Bernier@hlcmortgages.com

• Angelo.Froudakis@hlcmortgages.com

• Geoffrey.Woodford@hlcmortgages.com

• 1-866-264-8571

• 1-866-702-4994

• 1-866-217-5159

British Columbia

Quebec

Ontario West

GTA & Ontario East

Alberta

Atlantic Canada

3877337 Canada Inc. is a subsidiary of CIBC Mortgages Inc. and carries on business as HLC Home Loans Canada (“HLC”) except in Quebec, where it carries on business as HLC Hypothèques Logis Concept and is licensed as a mortgage agency. HLC is licensed/ registered in Ontario as a mortgage brokerage under Licence #10423, in British Columbia and Nova Scotia as a mortgage broker, in Alberta as a mortgage brokerage and in New Brunswick as a credit broker. TM HLC Design is a trademark of CIBC.

01-07_Table of Contents.indd 3

TM

09/09/2013 2:18:31 PM

contents / editor’s letter

Round ‘em up!

COPY & FEATURES Editor Vernon Clement Jones staff writer Justin da Rosa contributors Donald Horne, Dustan Woodhouse, Michael Neaylon, Doren Aldana, Anne Rouse, Wayne Macartney, Scott Dawson Copy editor Rachel Naud

ART & PRODUCTION gRAPHIC dESIGNER Alicia Chin

SALES & MARKETING Associate publisher Trevor Biggs Marketing and Communications Claudine Ting PROJECT COORDINATOR Jessica Duce

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

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

Herding broker opinion is not unlike herding cats.

Actually, fiercely independent felines may be more likeminded. But if that broker opinion is about lenders, then sentiment – as varied as it usually is – breaks down along fairly predictable lines.

Well, that’s what we thought anyway before this year’s Brokers on Lenders survey. It seems tightening at the underwriting table has sent broker opinion running in all directions as mortgage professionals react and, indeed, adapt to the challenges of getting deals done. Have a look at the results for yourself, starting on page 20, and send us your reaction to that reaction.

In the meantime, don’t overlook the many other things this month’s magazine has going for it. Start with the word to the wise broker Scott Dawson offers about making the most of your social media efforts (p. 14).

And as the summer draws to an end, we look at the impact of the train derailment in Lac-Mégantic, this time through the eyes of a mortgage broker (p. 60). Prepare to put any and all stereotypes to rest.

So read on, and then drop us a note after you’re done. Look for some of those comments in October’s “Letters to the Editor.” This month’s letters, on page 6, are a hard act to follow, as is the Brokers on Lenders survey. Still your lenders will give it a whirl next issue.

Cheers, Vernon Clement Jones

connect

Contact the editor:

vernon.jones@kmimedia.ca

4 | september 2013

01-07_Table of Contents.indd 4

09/09/2013 2:18:35 PM

At CENTUM

Proud Supporter

you are

You are a member of the Charlwood Pacific Group, which has been recognized by the International Franchise Association as one of Canada’s top franchise organizations.

Secure

Successful

Stress Free You are provided with a comprehensive franchise training system to plan your success.

You have access to the industry’s most innovative products and tools that deliver maximum opportunities for financial freedom.

@CENTUM /CENTUM

Valued

Empowered Special

You enjoy the industry’s most aggressive royalty program and no monthly fees.

You work in an environment that emphasizes true collaboration and appreciates your dedication.

You receive dedicated one-on-one service to build a successful business.

Join the Network that puts you first

1.888.928.1338

www.centum.ca

Independently Owned and Operated. ®/™ Trademarks owned by Centum Financial Group Inc. © 2013 Centum Financial Group Inc. The intent of this communication is for informational purposes only, and is not intended to be a solicitation to anyone under contract with another mortgage brokerage operation.

01-07_Table of Contents.indd 5

09/09/2013 2:18:39 PM

conversations / letters to the editor

Letters

to the Editor Re: Commercial Top 10 (CMP 8.8)

Commercial congrats!

0 AL P 1 CI S TO MER ER M OK CO BR

Lyn Armbrister

Mo rt ga ge br iss ue 8.8 | $6 ok er ne ws .ca .95

Congratulations to all brokers who made the list, including David Beckingham at Dominion Lending Centres. Obviously commercial comes with considerable challenges, but as an industry we have to find a way to entice more younger brokers to take it up, not as a sideline, but as their primary line of business.

Not easy.

s

Re: 2020 Wishlist (CMP 8.6)

You missed something

brok

Michael

What this article does not address is the compression of the broker industry and a desperate need to “re-gig” the profession. The banks continue to grab market share, and the mono-lines continue to challenge brokers on renewals and some are moving towards obtaining bank status to increase their relationship with the clients. Yes there will always be broker-only lenders, but they will be fewer and more challenged.

People need to REALLY think about it… what service does a mortgage broker REALLY fill for their clients?

Letters to the editor are welcome!

Due to space considerations, priority is given to those 300 words or less. We reserve the right to edit, condense or reject submissions for accuracy, brevity, clarity, good taste and legal reasons. Writers must provide their full name, address and telephone number to verify authenticity. Please reference the article and send your letter to vernon.jones@kmimedia.ca

ers t appin g non

Keep refiniiT simple ng re ferral s OFC_IFC

_Spine.

indd

-mor tgage

argen albertTum’s age nd collu answ a er

2

s

deal s

Team stratebuilding gic su ccesse

s

08/08/20

13 12:5 5:35

Re: Diversifiers (CMP 8.8)

PM

Jack of all trades...

David Lapointe

The challenge for mortgage brokers is how can we incorporate new offerings that do not distract us from mortgage brokering. I am not convinced that that can be done effectively and keep the clients’ mortgage front and centre.

Renaissance man and woman Wally Ewacuk

Diversification shows that mortgage brokers are coming into their own as the financial services experts we truly are. We are one of the most regulated FI professionals in Ontario and that means that we have already been inculcated with the importance of due diligence in whatever service we provide consumers.

33+67 No 78%

Yes 21%

POLL

Are you more inclined to send a deal to anew “broker-owned bank” than an existing partner?

6 | september 2013

01-07_Table of Contents.indd 6

09/09/2013 2:18:46 PM

Un

stressful In the world of banking, common sense has become surprisingly uncommon. Rules are piled on top of rules, making life harder than it needs to be for everybody. Well, that’s not how we operate. We strive to do right by our broker partners in a way that simply makes sense, like our Advantage and Edge mortgage programs that offer a simple rate structure for all your customers’ needs. We’re Bridgewater Bank, and that’s just how we do things. bwballstarportal.ca

01-07_Table of Contents.indd 7

09/09/2013 2:18:48 PM

Market Matters/ reading between the lines

Reading Between

The Lines

Broker opinions range from cautiously optimistic to downright excited about Canadian First Financial’s acquisition of MonCana Bank – with those in the latter camp heralding it as Canada’s first-ever broker-owned bank. The deal brings the wider-reaching product range of a bank to a broker channel player, providing a worthy adversary for the big banks. Does this new model have what it takes to revolutionize the brokerage industry? One leading broker, Lior Hershkovitz of Mortgage Edge does some reading between the lines.

Canadian First Financial to acquire MonCana Bank of Canada

1.

Canadian First’s plan to deliver financial products and one-stop shopping for banking services, mortgages, wealth management and insurance products. A subsidiary of Canadian First Financial was granted letters patent by the Minister of Finance as a Schedule 1 bank under the Bank Act of Canada on June 26, 2013.

The transaction is expected to close in September, 2013 subject to satisfaction of certain conditions that include required regulatory approvals.

“We’re very excited about the expertise, infrastructure and relationships that MonCana brings to our Company” said Peter Vukanovich, President and CEO, Canadian First Financial. “Our organizations are stronger together and, when completed, the transaction will significantly advance our growth plan.”

1. It’s a very positive development for

Lior Hershkovitz, Mortgage Consultant with Mortgage Edge

happen.

the broker community. Mortgage brokers deliver unbiased advice to consumers and now there is an opportunity to build a bank that truly revolves around delivering sound mortgage advice.

2. Opportunity, however, should not be equated with actually making it

3. The executives behind Canadian First Financial have a

unique understanding about the value proposition that Mortgage Brokers bring to consumers and I’m confident that the product line offered by the new entity will reflect the lending flexibility and options that brokers need to service their clients best.

4. The drawback is that they are facing serious headwinds with higher tier 1 and leverage ratios, limited product offering, at least initially, and securitization limits.

5. They are also facing aggressive marketing efforts by the existing banks, who have a firm grip on their customers.

August 8, 2013 – Oakville, ON – Canadian First Financial (“Canadian First”) and MonCana Capital Corporation (“MonCana”), the parent of MonCana Bank of Canada, announced today that they have agreed in principle to the acquisition of MonCana by Canadian First. The transaction accelerates

2.

“This agreement is great news for both our companies and customers,” said James Clayton, President, MonCana Bank of Canada. “MonCana will benefit from Canadian First’s network of top-producing financial services professionals and strong capital markets relationships.”

3.

About Canadian First Financial Canadian First Financial partners with top financial service professionals by promoting independent, community-based ownership. We believe that Canadians deserve the best possible advice and the choice of dealing with their mortgage, wealth management or insurance professional for all of their banking and financial needs. We are committed to empowering our network of financial services professionals with the ability to do more for their customers while creating a more valuable and sustainable business for themselves. Canadian First has assembled an accomplished and distinguished leadership team and board of directors with extensive financial services and technology experience.

4.

About MonCana Bank of Canada MonCana Bank of Canada is 100% Canadian owned, and focused on servicing clients through its broker relationships. An independent broker adds great value to their customers by providing advice and education regarding products and services that are most suitable to each client’s unique situation. Working in partnership with a broker ensures the successful result of homeownership dreams and deposit savings.

MonCana Bank is a member of Canada Deposit Insurance Corporation (“CDIC”). For more information about CDIC deposit insurance, please visit www.cdic.ca.

For more information about our people, our vision and this exciting milestone, please visit our websites at http://www.canadianfirst.com or http://moncana.com

5.

Note to Editors This news release contains forward-looking statements that relate to Canadian First’s current expectations and view of future events.

For more information: Joe Pickerill, StrategyCorp, 416-864-7112 x2225, jpickerill@ strategycorp.com (quick response)

8 | september 2013

08-17_Market Matters.indd 8

09/09/2013 2:19:29 PM

BOR_

Succeed with Authority

To learn more, visit scotiamortgageauthority.com today

At Scotia Mortgage Authority™, we are committed to helping you maintain your success, with dedicated relationship managers who have decision making authority, consistent adjudication, and a full suite of mortgage products.

Join us and succeed.

Scotia Mortgage Authority ®

08-17_Market Matters.indd 9 BOR_AD_SMA_8.5x11_0513.indd 1

Registered trademark of The Bank of Nova Scotia. ™ Trademark of The Bank of Nova Scotia.

09/09/2013 2:19:32 PM 13-05-24 11:00 AM

Market Matters / News analysis

ship to shore

Keep it simple

$127.7

Closed mortgages, LTV, amortization, origination – the jargon brokers increasingly throw around can alienate even the savviest of clients, writes Todd Poberznick at Bridgewater Bank. It’s time to keep simple, he writes.

million

– the amount of contracts already awarded

Boom Where are you?

July’s nine per cent drop in sales has left Nova Scotia brokers waiting for a real estate boom that’s been slow to come despite the fervor created by a $25-billion ship-building contract.

“I think there was a blip in the market when it was announced two years ago, but the ship building hasn’t begun yet so there are no workers coming in yet,” Invis broker Brad Compton tells CMP. “I think they’re predicting the building to start in 2015 and we may see a bit of an uptick then.”

Compton originally spoke with CMP in April 2012, advising investors to wait out the storm and his tune hasn’t changed.

“What will probably happen is that migrant workers will come in, do their piece of the ship and when that is done, move on,” he said. “I’m not sure how many workers will stay in the city. The contract could change and they could build fewer ships.”

When and if a real estate boom happens is still up for debate.

“If the uptick happens, great. It certainly won’t be happening in the next couple years and if it does, it will be slow and gradual,” Compton says. “First we’ll see an uptick in rentals and then maybe an increase in sales as workers feel more secure.”

Scott Bentley of Premier Mortgage Centre isn’t surprised by the slip in home sales in Nova Scotia this year.

“I think year-over-year unit sales are down significantly.

There was a lot of hype and speculation – last year’s numbers were a bit of an anomaly; they increased as a result of the announcement.”

Bentley still has hope for the future, once the building commences.

“I think what you’ll see is that once they start building in 2015, sales will go up. Right now they are doing infrastructure work but most of the design work isn’t done here; the actual building will be part of the boom. Right now there aren’t a lot of people flocking to live there.”

733

– full-time direct and indirect positions created so far

370

– the number of those positions in Nova Scotia

11,500

– the number of jobs expected to be created for Nova Scotians

$1.5 billion

– the amount the Canadian economy is expected to grow as a result

Todd Poberznick, Assistant Vice-President, B2B Solutions, Bridgewater Bank

I have found the greatest success in my career comes when I speak with people in a plain and straightforward way. Knowledge is power and sharing it shows respect. For the new homebuyer, getting a good rate and knowing the mortgage options is important. But more than anything else, homebuyers want to understand the process they are about to enter. As mortgage professionals, it’s vital we drop the industry jargon in favour of plain talk and open communication. Don’t assume your customers always understand what you’re talking about; in fact, I have met many seasoned homeowners whose mortgage professional has not helped them understand basic mortgage terminology. How can these customers understand the workings of their mortgage in order to save money and pay it off faster? Instead of glossing over seemingly minor details, we need to slow down, carefully listen to our customers and answer their questions. Nothing replaces easy, step-by-step conversation.

Most important, we need to start the conversation about responsible homeownership at an earlier stage in life. We owe it to the younger generation, the future homebuyer, to get them comfortable with probably the biggest decisions they will ever make. Many schools have taken some good first steps in teaching the basics of financial literacy, so why can’t we teach responsible home ownership? The added benefit is this discussion builds other valuable life lessons children require, such as budgeting and saving, prioritizing goals, pride in ownership and the responsibility of caring for and maintaining important items.

When we use respectful communication, we empower entire families. That, to me, is success.

10 | september 2013

08-17_Market Matters.indd 10

09/09/2013 2:19:45 PM

] [

why a Mortgage Broker?

Choice

Only mortgage Brokers can provide the range of products from various lenders to meet your specific needs.

Advice

Mortgage Brokers offer alternatives in selecting a mortgage product that are best suited for your client’s situation.

Service

Mortgage Brokers are available to meet when & where it is most convenient.

They manage the mortgage process to ensure a positive experience.

Savings

Mortgage Brokers save you money by providing, on average, lower interest rates*.

Discover the MCAP Broker Advantage.

To learn more, please visit: www.mcap.com/brokers

* According to CAAMP’s study**, those who renewed or renegotiated with a mortgage Broker reported an average rate decrease of 1.4% compared with 1.0% among all renewers. **CAAMP January 2011 study — Canadian Mortgage Channel: Industry Perceptions Consumer and Broker

mcap.com/brokers MCAP Service Corporation Ontario Mortgage Brokerage #10515 Ontario Mortgage Administrator #11692

08-17_Market Matters.indd 11

09/09/2013 2:19:45 PM

Market Matters / Product Roundup

PRODUCT NEWS

AND INDUSTRY ANNOUNCEMENTS A bite-sized guide to the industry’s newest products and appointments as they come down the channel

One-stop site

ANNOUNCEMENT:

Who: MCAP Eclipse What: Eclipse – MCAP’s alternative mortgage line of

Centum champ

business – has launched its new “85% Alternative.”

This product allows brokers to help clients stretch their financing that little bit further with an Eclipse first mortgage up to 80 per cent LTV followed by an Eclipse second mortgage up to a combined LTV of 85 per cent.

Both are underwritten and funded by MCAP, with the need for just one appraisal and the same lawyer to handle both closings.

• Starts at a low beacon score of 550, with the second mortgage rate starting at 10 per cent.

Who: Paul Therien What: The network’s director of business development for the last three years has now taken on the position of Vice-President Operations.

“I am very excited about taking this next step in my career with CENTUM and continuing to build a business that provides real value to our franchise network and the consumer,” Therien tells CMP.

The explanation: “We listened to our brokers who have been telling us they need a product like the 85% Alternative so they can help more Canadians get the right mortgage,” says Steve Lydon, national manager of business development.

Paul Therien

12 | september 2013

08-17_Market Matters.indd 12

09/09/2013 2:19:52 PM

35852

FINANCIAL LP

“Excellent

service

and unwavering

Ana Inacio, Account Manager Kathryn Kotris, AMP, Principal Broker Mortgage Architects Philippe Galea, Underwriter

dedication to the broker

community.”

“First National has always remained steadfast in their support and loyalty to our community. It’s been an immense pleasure working with them.”

At First National, we’ve spent the last 25 years proudly teaming up with brokers to help them build successful businesses. And we will continue that commitment for the next 25.

Behind the scenes

35852 FN25adMatters.indd Kathryn CMP13 Ev2.indd 1 08-17_Market

Thank you mortgage brokers for 25 years of shared success.

Ontario Mortgage Brokerage License No. 10514

2013-08-28 5:01 PM PM 09/09/2013 2:19:56

Market Matters / Broker-to-Broker Advice

How to use

social

media

effectively Who better to hear from on the subject of maximizing social media’s potential than Scott Dawson, one of the mortgage industry’s most prolific online personalities?

You’ve probably heard social media is good for your business; if approached correctly it can be. Unfortunately, many mortgage brokers don’t really understand how to use the various social media platforms effectively.

As an active social media user, I see so many mortgage brokers wasting time on Twitter, Facebook and Google+ daily. Social may be free, but your time is valuable.

Here are six ways mortgage brokers fail at Social Media:

1

Not understanding Twitter

Twitter is about building relationships and conversing with your followers; you can’t just tweet out randomly and then disappear.

Way too many mortgage brokers just Tweet things like this; Best mortgage rates as of TODAY!: 5 yr fixed – X.XX% 5 year variable – X.XX% (Prime -.XX%) Call me today!

If you only Tweet rates and don’t make an effort to actually connect with people on Twitter, you’re

14 | september 2013

08-17_Market Matters.indd 14

Y

wasting your time. Instead of only blasting one-way tweets about mortgages, follow and converse with your followers using an @’reply. People do business with and refer business to people they know, like and trust. Use Twitter to become that person.

Twitter can be a source of powerful information, if you know how and where to look. I use Twitter to find articles and follow people I can learn from. It takes time to find them, but the sleuth is worth it.

Twitter Search is amazing and underutilized by mortgage brokers.

2

Not understanding Google+

Know your audience. Google+ isn’t Facebook or Twitter. Google+ allows you to easily share with the circles you create and you shouldn’t share everything you post to the public. If you’re new to Google+ take the time to set up your circles so you can share more selectively and you’ll find that sharing content within circles that are interested in what you post will garner more comments and shares.

If you want to talk about the mortgage business exclusively, join a community! Communities are great

09/09/2013 2:19:59 PM

WHY MORTGAGE ARCHITECTS? I chose MA because I believe in raising the bar in the mortgage industry. MA & Argentum’s philosophies are very much aligned as true supporters of the broker channel and a focus on quality, strategy and leadership. Foremost on my mind was finding the best placement for the Argentum network. I am now proud to offer enhanced services and opportunity for brokers to build their business through the Pacific Mortgage Group.

As President, I am looking forward to strengthening the position of MA in the industry and with our mortgage customers. The synergies gained in growing MA will showcase the value of a company with a truly unique broker/lender structure.

That’s why,

Y

ALBERTCOLLU President, Mortgage Architects

Visit joinma.ca today to learn more.

08-17_Market Matters.indd 15

National Western Canada Central Canada Central Canada Eastern Canada

· · · · ·

albert.collu@mtgarc.ca meini.ickert@mtgarc.ca ricardo.camara@mtgarc.ca harcharan.upal@mtgarc.ca luisa.simonetti@mtgarc.ca

· · · · ·

289.466.5197 604.970.8650 416.716.1074 289.802.1541 888.961.3510

© Copyright 2013, Mor tgage Architects Inc., all rights reserved.

09/09/2013 2:20:03 PM

Market Matters / Broker-to-Broker Advice

ways to find like-minded individuals to converse with. You don’t just have to join business communities either; look around and you’ll find many others that may interest you.

Don’t start a Google+ business page. Only spend your time on Google+ building your personal account.

Facebook business pages are seen as spam to most people outside the mortgage industry since most Facebook pages are just filled with mortgage brokers blasting their rates. Google+ users don’t want to be spammed by pages like they were on Facebook so most people don’t bother to like business pages there.

Facebook users ruined business pages and now Google+ Pages have to suffer for that.

Use Hangouts . Some of the best content is shared on Google+ over Hangouts. Connect with fellow mortgage associates and learn from each other.

3

Only blogging on Facebook

Stop it! Use Facebook to link to a blog post on your personal website. You know what happens when you write an eloquent post on getting pre-approved for a mortgage on Facebook? Facebook owns it! What happens if Facebook changes its terms of service or shuts down? That amazing blog post you wrote is gone!

If you are sharing your content on social media, it should always direct back to your domain and blog, not a website your brokerage gives every agent -- not a free blog service, but one you own. That way you are always in control of your content and you’ll also be indexed by the search engines so people can find you in other ways than just on Facebook.

I recommend using self-hosted WordPress. Don’t use a cookie-cutter brokerage website. It makes you look like every other mortgage broker working for that company and if you ever change brokerages you

Scott Dawson is a broker with Verico Paragon Pacific Mortgages and a social media aficionado

A SENSE OF...

CREATIVITY Every client has a unique story to tell. At Optimum Mortgage, we specialize in Alternative Lending. Always have, always will. Our flexible lending guidelines allow our experienced team of underwriters to color outside of the lines and find a customized solution that satisfies the needs of both the client and the broker, while always confirming the affordability of each deal.

Contact your Business Development Manager for more information. 1.866.441.3775 | www.OptimumMortgage.ca

YOUR SENSIBLE LENDING PARTNER

16 | september 2013

08-17_Market Matters.indd 16

09/09/2013 2:20:07 PM

mortgagebrokernews.ca

lose what you’ve built. Own your domain name and own your content.

4

Only talking about yourself

There is nothing wrong with letting people know what you do, who you are and what you have accomplished but don’t beat it to death. If you only spend your time on social media bragging about how busy you are, what awards you’ve won and why you think you think everyone should get their mortgage through you, stop it.

Become an expert. Give people quality content and educate them about what mortgage brokers do.

Be a real person and give people a reason to be interested in you. Engage and build relationships.

Then, when you share your business content people will be more receptive. People do business with and refer business to those they know, like and trust.

(Sensing a theme here?)

5

Only sharing your content One of the best things about social media is

it allows you to easily share content… but don’t only share your own. Everything you post shouldn’t have a link back to your website; social media is about sharing content, not just broadcasting yours.

Share content you find interesting and educational more than you share your own. Always mention the source and link from your website if appropriate.

People appreciate it and will likely share your content if you have shared theirs. You’ll find your own content spreads faster on social media if you’re not the one spreading it. When creating content to share, make it so people WANT to share it.

6

You’re never there.

If you’re not willing to be present on social media, don’t bother having a profile.

However, you don’t have to be on every profile.

You also shouldn’t automate social media. Nobody wants to follow a robot. (See #5) How often do you check your email and voicemail throughout the day? Your Twitter account should get the same attention.

Enjoy fast, seamless service with FCT’s Platinum Refinance Program u Ease of communication

FCT manages all communication with the borrower and lender directly. u In-home signing service*

Allows borrowers the ease of signing all paper-work in the convenience of their homes any day, any time. u Low, fixed cost

All inclusive, competitive pricing with no hidden fees.

Platinum Service participating broker-lenders

u FCT.ca

I Platinum hotline 1.855.500.3565

Lender Services

* Not available in BC or QC. Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice. ® Registered Trademark of First American Financial Corporation.

CAAMP Platnium Ad_final.indd 1

13-08-21 5:03 PM

september 2013 | 17

08-17_Market Matters.indd 17

09/09/2013 2:20:12 PM

Market Matters / Product Roundup

M

O

R

T

G

A

G

E

PROTECTION P

L

A

®

N

Congratulations To Our Q1 & Q2

TOP PERFORMERS! Protection Rate Q1:

Billie-Jo Burke- (DLC Alliance) John Gimblett (Agents Lending Inc.) Gert Martens- (DLC HT Mortgage Group) Jeff Parsons- (DLC Mortgage Shop) Sandi Ramsdell (VERICO Crown Mortgage Services Inc.) Janet Sheobaran (Morcan Financial Inc.)

Total Applications Q1:

Collin Bruce- (DLC Mortgage Mentors Inc.) Debbie Dowhay (Mortgage FX Inc.) Geoff Lee- (DLC Drake Entrust Mortgage Services) Helen MacDougall & Marlene Gallant (MC Estate Mortgage Inc.) Gert Martens- (DLC HT Mortgage Group) Tyler Smith (MC Sky Financial Corp.)

Protection Rate Q2:

Devin Cristo (Your Mortgage Link Inc.) Gert Martens- (DLC HT Mortgage Group) Jamie Norman- (DLC Mortgage Shop) Jeff Parsons- (DLC Mortgage Shop) Sandi Ramsdell (VERICO Crown Mortgage Services Inc.) Allison Tolley (Mortgage Worx Inc.)

Total Applications Q2:

Collin Bruce- (DLC Mortgage Mentors Inc.) Debbie Dowhay (Mortgage FX Inc.) Kurt Henry (The Mortgage Centre Durhammortgage.com) Gert Martens- (DLC HT Mortgage Group) Barry Parsons- (DLC Mortgage Shop) Tyler Smith (MC Sky Financial Corp.)

Dustan’s

Bail List You brokers are an increasingly cynical bunch – yes, yes, the banks have made you that way!

But is it really harder to keep a client from bailing on you for a better rate?

Most of you will answer “yes” to that question. In fact, you’ve even come up with your own individual “bail lists,” ranking what type of client is most likely to ditch you at the 11th hour for even a paltry 10 bps. Here’s one broker’s take on it, although Dustan Woodhouse, of Dominion Lending Centres Canadian Mortgage Experts, concedes that excellent customer service goes a long way to keeping those clients, well, keeping those clients your clients.

“A referral is a transfer of trust and the level of trust a client puts into a financial planner or an accountant is exactly the kind of trust they need to put into a mortgage broker,” he says. “If they trust them, they will trust me. The longer the relationship between a client and the referral source, the better it is for the broker.”

But in a market where competition with the banks has never been greater, and the push to efficiency ratios is even bigger, brokers are understandably facing more and more client defections. So Woodhouse’s bail list – or any, in fact – has its limits. The ugly truth is that the client least likely to leave you may be the first one signing on the dotted line at the branch. Welcome to brokering 2014?

18 | september 2013 Mortgage Protection Plan® is offered by Credit Security Insurance Agency Inc. (“CSIA”), and underwritten by The Manufacturers Life Insurance Company. ®Registered trademark of Benesure Canada Inc.; used with permission.

18-19_Infograph.indd 18

09/09/2013 2:23:05 PM

RMA_Nidhi_08.26.13.pdf

1

13-08-27

11:00 AM

There are “Real Advantages” to joining RMA

mortgagebrokernews.ca

Clients who find me via the Internet

Most likely to bail

“Having worked elsewhere for many ye a rs, R M A i s t h e b est b ro ke ra g e by far to work with. Very upfront about your commissions, compliance a n d c o n s i s te n t p a y s c h e d u l e s . N o unwelcome surprises.”

Nidhi Thakkar RMA Mortgage Broker Kitchener, ON

Realtor referrals

C

M

Y

CM

MY

Lawyer referrals

CY

CMY

K

Client referrals

Referrals from my accountant and financial planner

Least likely to bail Learn more about the advantages of joining our team at

www.rmabroker.ca/join september 2013 | 19 1.877.677.7778 18-19_Infograph.indd 19

09/09/2013 2:23:10 PM

feature / Brokers on Lenders

Special Report

2013

BROKERS ON LENDERS industry professionals are sending a new message to old partners

20 | september 2013

20-33_Brokers on Lenders.indd 20

09/09/2013 2:25:01 PM

mortgagebrokernews.ca

Brokers are crafting a surprisingly different message with the seventh annual Brokers on Lenders survey, writes Justin da Rosa Our seventh annual Brokers and Lenders survey reveals how lenders are reacting to a slew of mortgage and underwriting rule changes ushered in last year.

More importantly, it reveals exactly brokers perceive that reaction -- or “overreaction.”

The results of the CMP polling point to growing concerns on both sides of the fence as banks and mononlines switch up their lending criteria to meet the new, more stringent expectations of both the federal government and OSFI. Most notably, concerns over efficiency ratios and higher volume requirements have jumped to the front of the queue for brokers.

But there’s more to the story. As with any good yarn, there are protagonists and antagonists: those lenders who lead the pack in terms of broker satisfaction and those who, ahem, don’t.

Two clear winners emerge as frontrunners this year – one a veteran of the wars, the other a newbie actively gaining traction.

Merix and Moncana finished No. 1 and 2, respectively, in both overall ratings and medal count. The former, in fact, improved upon an already formidable score in 2012, while the latter is a newcomer that

shot right up the ranks. Survey respondents applauded its performance in most of the 10 categories we track.

Overall standings for a number of lenders also improved.

Squarely in this year’s frame were the many broker concerns expressed about their lenders. That feedback – from panning to lauding and everything in between – was gathered online over the span of two months and involved hundreds of responses from across the country.

Mortgage professionals weighed in on 10 categories: approval/ loan turnaround times, underwriter support, BDM support, broker support, transparency of commission structure, IT/technology, interest rates, product range, overall service levels and overall credit policy.

Grades were given on a scale of one (very poor) to five (very good) and while the overall response was so strong for many lenders, a minimum of 50 votes was requirement for a lender to be included in the rankings to win a lender a spot in the rankings.

september 2013 | 21

20-33_Brokers on Lenders.indd 21

09/09/2013 2:25:05 PM

feature / Brokers on Lenders

2013 Total Medal Standings Lender

2013 2012 Total

Total

Merix

3

2

2

7

8

MonCana Bank

2

--

4

6

N/A

First National

1

3

2

6

3

RMG

1

1

2

4

3

B2B Bank

1

2

--

3

N/A

CMLS

1

2

--

3

N/A

National Bank

1

--

--

1

1

--

1

--

1

1

Scotia

43+2131626

MCAP

--

1

--

1

8

Home Trust

--

1

--

1

1

What is the main reason you send a deal to the banks instead of a monoline?

Client preference

27.74%

overall standings

The Average Across all categories

Rank

Bank

Score 2013

Score 2012

1

Merix

4.17

4.15

2

MonCana Bank

4.15

N/A

3

First National

4.05

3.94

4

RMG

3.99

3.88

5

CMLS

3.96

N/A

6

MCAP

3.94

4.14

7

B2B Bank

3.92

N/A

8

Scotia

3.87

3.85

9

Home Trust

3.80

3.63

10

Street Capital

3.68

3.74

11

Bridgewater Bank

3.66

3.95

12

National Bank

3.62

3.20

13

TD

2.92

2.93

* All scores out of a possible 5.00

Product offering

Underwriter/BDM service

42.07%

15.55%

Rate

12.80%

Compensation

1.83%

22 | september 2013

20-33_Brokers on Lenders.indd 22

09/09/2013 2:25:11 PM

CHIP

Sally and Jim were so moved by the CHIP Home Income Plan they fell out of their rocking chairs.

CHIP-CMP-Full_Sal & Jim-ART.indd 1 20-33_Brokers on Lenders.indd 23

12-09-19 4:08 PM 09/09/2013 2:25:14 PM

feature / Brokers on Lenders

Approval/loan turnaround times Rank

Bank

Score

Gold

MonCana Bank

4.67

Silver First National

4.35

Bronze Merix

4.11

4

MCAP

4.06

5

CMLS

4.04

6

Home Trust

3.81

7

B2B Bank

3.79

8

Scotia

3.75

9

Bridgewater Bank

3.71

10

RMG

3.69

11

Street Capital

3.51

12

National Bank

3.16

13

TD

2.16

Underwriter support Rank

Bank

Score

Gold

Merix

4.37

Silver Home Trust

4.21

Silver B2B Bank

4.21

Bronze First National

4.15

4

CMLS

4.13

5

MonCana Bank

4.00

6

Scotia

3.94

7

MCAP

3.92

8

Bridgewater Bank

3.83

9

Street Capital

3.80

10

RMG

3.79

11

National Bank

3.56

12

TD

2.36

What is the best thing a lender has done for you in the past 12 months?

How do you predict commissions/bonuses will evolve in the next one to two years?

Increase

7.32% Decrease

21.95% Stay the same

67.99% Move to a flat-fee commission

2.74%

A bank cut me off their broker channel because I complained. A simple refi turned into eight weeks. I was very upset initially, but now I am so glad that I don’t have 85 per cent of my business with that Big Bank and I am now using monolines and loving it.

I do not have anything here - my expectation is that they live up to what their sales team is “pitching” and that is becoming increasingly difficult. * All scores out of a possible 5.00

24 | september 2013

20-33_Brokers on Lenders.indd 24

09/09/2013 2:25:17 PM

FINALLY — a low beacon option Starting at 4.75% A low beacon option (500 – 575) starting at 4.75% interest.

All Eclipse 1st mortgage deals will count towards partnership status and volume bonus.

Get the light shining on your next deal.

Contact Eclipse lending at: MCAP Eclipse DEAL RUN desk: 1 866 260 D-RUN (3786) Fax 1 866 289-7390

MCAP Financial Corporation Ontario Mortgage Brokerage #10600 Ontario Mortgage Administrator #11790

20-33_Brokers on Lenders.indd 25

Steve Lydon

Manager, Business Development National

09/09/2013 2:25:20 PM

feature / Brokers on Lenders

Overall service levels Rank

Bank

Score

Gold

Merix

4.24

Silver First National

4.07

5+ years

Silver B2B Bank

4.07

Bronze MonCana Bank

4.01

68%

4

Home Trust

3.94

5

MCAP

3.92

6

Scotia

3.87

7

CMLS

3.87

8

Bridgewater Bank

3.75

9

RMG

3.73

10

Street Capital

3.59

11

National Bank

3.06

12

TD

2.24

What is the best thing a lender has done for you in the past 12 months?

How many years have you been in the business?

2-5 years

19%

First National has said “Thank You” for our business. So many lenders just don’t show their appreciation.

Just the simple thank you note means so much.

Danielle Walker at Merix Financial has supported me in so many ways that I don’t think it would have been possible for me to continue without her support. She and Sherry Hyndman (SMA) use common sense, which is so rare in the industry.

These ladies consider the deal and the client and how to make it work. I find so many lender underwriters looking for a reason to decline the deal. They are amazing! Thank you, ladies!

Making common sense exceptions to rules.

After asking my underwriter and my BDO twice, I then escalated to management, and had them make a common-sense decision to allow a rule exemption to the 10 per cent or $40,000 increase on the p.plus program.

But I am pissed it took till my fourth try and two weeks. Why did my BDO say “no” to start?

Pulled a deal together four days before closing when another lender had cancelled at the last minute due to something they had “missed” in the fully documented and straightforward application.

1-2 years

9% Less than a year

4%

interest rates Rank

Bank

Score

Gold

RMG

4.61

Silver CMLS Bronze First National 4

Street Capital

4.13 4.10 3.99

5

National Bank

3.97

6

MonCana Bank

3.89

7

MCAP

3.78

8

Merix

3.77

9

Scotia

3.75

10

TD

3.55

11

B2B Bank

3.54

12

Home Trust

3.35

13

Bridgewater Bank

3.21

* All scores out of a possible 5.00

26 | september 2013

20-33_Brokers on Lenders.indd 26

09/09/2013 4:46:57 PM

07.25

We are dedicated to you, the mortgage professional.

A partnership you can rely on.

Home Trust’s promise to you, our broker partner: • Devoted Business Development Manager • Direct access to your underwriter • Understanding and professional staff

HOME TRUST MOR TGA GES

I

VISA I

R E TA I L C R E D I T

I

DEPOSITS

hometrust.ca 07.25.2013_CMP_Pressready_CMP_8.25 20-33_Brokers on Lenders.indd 27 x 10.875_Broker support ad.indd 1

7/25/2013 5:03:35 PM 09/09/2013 2:25:26 PM

feature / Brokers on Lenders

BDM support Rank

Bank

Score

Gold

MonCana Bank

4.56

Silver RMG

4.45

Bronze Merix

4.44

4

B2B Bank

4.29

5

CMLS

4.17

6

First National

3.98

7

Home Trust

3.92

8

MCAP

3.84

9

Street Capital

3.83

10

Scotia

3.76

11

Bridgewater

3.67

12

National Bank

3.66

13

TD

3.05

product range Rank

Bank

Gold

National Bank

Score 4.32

Silver Scotia

4.19

Bronze RMG

3.99

4

Merix

3.97

5

B2B Bank

3.96

6

MCAP

3.93

7

MonCana Bank

3.88

8

Home Trust

3.81

9

First National

3.72

10

TD

3.63

11

CMLS

3.61

12

Street Capital

3.41

13

Bridgewater Bank

3.38

Broker beefs about lenders

TD really has to get their act together.

Almost cost me a deal. Very slow with their underwriting and reviewing documents, etc. Underwriters have to be realistic, understanding and really look and listen to the broker and help out the broker instead of asking for silly additional information. But a lot of them have been really good.

What do you think will be the most important issue that will affect the broker/ lender relationship in the next 6-12 months?

The move to efficiency ratio

38.41%

Higher volume requirements from individual lenders

27.74%

Lender concerns about fraud during originations

10.98% Commissions

22.87%

Guidelines have become noncommonsensical! Approvals are overconditioned. * All scores out of a possible 5.00

28 | september 2013

20-33_Brokers on Lenders.indd 28

09/09/2013 3:29:36 PM

SOLUTIONS. ADVICE. MOVE.

SMART

RMG Mortgages is a division of MCAP Financial Corporation | Ontario Mortgage Brokerage no 10600 | Ontario Mortgage Administrator no 11790

RMG mortgages

20-33_Brokers on Lenders.indd 29

Visit www.RMGmortgages.ca or contact one of our Business Development Managers to learn how RMG Mortgages can help you create homeownership opportunities.

09/09/2013 2:25:34 PM

feature / Brokers on Lenders

Satisfaction with credit policy

Broker support

Rank

Bank

Score

Rank

Bank

Score

Gold

B2B Bank

4.04

Gold

Merix

4.31

Silver Merix

4.00

Silver CMLS

4.17

Bronze MonCana Bank

3.98

Bronze RMG

4.04

4

Home Trust

3.85

4

MonCana Bank

4.01

5

CMLS

6

RMG

3.74

5

B2B Bank

4.00

3.73

6

Home Trust

3.98

6

MCAP

3.73

7

MCAP

3.89

7

Scotia

3.72

8

First National

3.86

8

Bridgewater Bank

3.71

9

Bridgewater Bank

3.79

9

National Bank

3.61

10

Street Capital

3.77

10

First National

3.46

10

Scotia

3.77

11

Street Capital

3.33

11

National Bank

3.56

12

TD

3.21

12

TD

2.69

What is the best thing a lender has done for you in the past 12 months?

What percentage of your deals are you buying down rate?

25% or more

8.4% (respondents)

More than 0 less than 25%

73.6% 0%

18%

Broker support is great as they all fight to get our business. New policies make their job very hard and they are trying to justify their rules to get our business.

I had a lender recently agree to consider an exception that none of the others would even look at - in spite of the fact that I had already gone directly to the insurer to make sure they were OK with the exception. The lender was willing to try and in the end the deal did get approved since it was a good strong common sense deal.

COMMON SENSE - Our Scotiabank and Merix underwriter/BDMs in particular go the extra mile when a deal makes sense rather than send back a decline.

Scotia is the best. Their underwriting/BDM structure is the best. Service is great and common sense lending is the norm. They obviously want the business from their trusted brokers. I will buy down rates to deal here, so I can get the best rate and service for my clients.

Increased a mortgage while client was at the lawyer’s office with one call in 15 min!

* All scores out of a possible 5.00

30 | september 2013

CMP-

20-33_Brokers on Lenders.indd 30

09/09/2013 4:48:05 PM

› Overall Service Levels › Broker Support › Underwriter Support

› I.T./ Technology › Satisfaction with Credit Policy

On behalf of our entire team at MERIX Financial we want to thank you, our partner. With your loyalty, feedback and continued support MERIX was awarded

Top Lender of choice at the CMP Brokers on Lenders Annual Survey.

› BDM Support › Turnaround Times

We are proud of achievements we have created together and will continue to work hard to provide originators with the tools they need to succeed.

www.merixfinancial.com

www.lendwisemortgages.com

To see what other lenders will do tomorrow, find out what MERIX is doing today.

CMP-2013-Lenders-Response_2.indd 1

8/29/2013 2:26:42 PM

20-33_Brokers on Lenders.indd 31

09/09/2013 2:25:42 PM

feature / Brokers on Lenders

IT/technology Rank

Bank

Score

Gold

First National

4.39

Silver Merix

4.23

Silver MCAP

4.23

Bronze MonCana Bank

What is the best thing a lender has done for you in the past 12 months?

Approved a file for a first timer whose wife had no score and he had fairly new employment but within his field of expertise.

4.11

4

Scotia

3.86

5

Bridgewater Bank

3.75

6

RMG

3.66

7

Street Capital

3.47

8

B2B Bank

3.36

9

CMLS

3.35

10

Home Trust

3.23

11

National Bank

3.22

12

TD

2.47

The 120-day look-back for best rate, when obtaining another rate hold before the existing one expires, which eliminates the need to resubmit every time thereis a rate increase CMLS is following most insurer guidelines and is not overburdened with too many in-house additional restrictions.

Transparency of commission structure

Broker beefs about lenders

My choice of lender has little to do with compensation, and all to do with service. If I am getting good service/ communication/turnaround from a lender that helps me set proper expectations with my client, and it makes me do my job better.

If you are going to say “no” to a deal, don’t take a week to tell me that. And if you are going to say “no,” do it thoughtfully. I think when an underwriter is sitting in a cubicle somewhere processing deals they tend to forget this is a very important/stressful/ overwhelming experience for a buyer.

While that “file” is just numbers on a piece of paper, we need to all remember there is a real family behind those numbers.

Lenders policies are getting tougher and are going too far left. Making it very difficult to get someone approved even if they have good credit and a good job. Too many hoops that the bank branches do not make their clients go through to get approved.

One bank has tightened their guidelines and increased their status requirements.

They’ve made it more difficult to fund and are requiring more to keep status. Good luck, I expect they will lose a lot of broker support this year.

Lenders operate better when the underwriter and credit assistant are one in the same.

Rank

Bank

Score

Gold

CMLS

4.39

Silver First National

4.38

Bronze MonCana Bank

4.36

4

Merix

4.30

5

RMG

4.19

6

MCAP

4.15

7

Scotia

4.06

7

National Bank

4.06

8

Street Capital

4.04

9

B2B Bank

3.96

10

TD

3.90

10

Home Trust

3.90

11

Bridgewater Bank

3.79

The percentage of your deals going to one lender Average

48% (2013)

Average

37% (2012)

* All scores out of a possible 5.00

32 | september 2013

20-33_Brokers on Lenders.indd 32

09/09/2013 2:25:45 PM

mortgagebrokernews.ca

What lenders need to do

Broker beefs about lenders

It’s time lenders fought to get the refinance guidelines changed to give owners a chance. The problem is not the mortgage debt load but credit card ... limits. Let’s see the government put stronger guidelines and limits to what an individual can get in terms of high-interest-rate credit cards and car loans, instead of on mortgages.

Webinars, info sessions and marketing offered by lenders such as Merix are great as well as great access and response from their BDMs and underwriters; however, product line and rates are the hurdles to doing more business with them and other monolines.

We need to see clarification on guidelines and credit policies, especially with LTV/rate premiums and BFS clients.

Transparency in documentation is required. Some lenders are asking several times for different documentation and it makes us look like amateurs to our clients.

Lenders need to realize that we are a growing industry. They need to realize that we the agents have the experience. BDM support is nil with the major banks.

I want to see all lenders provide the kind of turnaround, underwriting and document review that First National has ;-) We need greater bank competitiveness; we need to offer products that the banks offer. When we are losing deals to mainline banks, it is really eroding the broker’s reputation and credibility.

september 2013 | 33

20-33_Brokers on Lenders.indd 33

09/09/2013 2:25:49 PM

feature / Method

A method to the madness A step-by-step brokerage valuation guide Earlier this year, Lloyd Manning reported on why valuing a mortgage brokerage can be a maddening process, but here is a comprehensive method guaranteed to keep you sane Valuation Methodology

Value of The Real Estate

The going-concern market value of a business always comes down to what a willing buyer will pay and a willing seller accepts. With mortgage brokerages, all evidence indicates value is more the result of a negotiating process between seller and buyer with less emphasis on the canons of appraisal practice. This makes it difficult to separate value from price. Incorporated is the willingness of each party to compromise, on book or balance sheet items and other value determinants There are two methods or approaches by which the value of a mortgage brokerage can be estimated.

In the first instance we are looking at value, in the second a mixture of value and price with no separation between the two. These are: (1) The Excess Earnings Method.

(2) The Market Comparison Approach.

Each procedure has shortcomings and due to the many variances and contingencies all that anyone can do is provide a best estimate.

The first step is to subdivide the firm into two separate entities, the real property if owned, as the first and the brokerage business itself, which includes everything else, as the second. For this purpose, consider your business as a tenant, paying the same rent and with the same lease conditions as if renting from a third party. Value the real estate by the traditional methods and add that estimate to the value of the brokerage.

V

The Excess Earnings Approach

This method is the summation process of the tangible and intangible assets. It follows the rule that the first call on capital is the amortization (return of ) and return on investment (interest) in the capital assets of the real estate if owned and part of the package and the office furniture and equipment (O.F&E). The intangible assets of goodwill and other value determinants follow. Leasehold improvements, as they would have no value on a sale are disregarded.

Office Fixtures & Equipment. (O.F&E) Where the O.F&E is of questionable value, disregard it. In the larger brokerage there could be real value here. Keith Gilmour of Edmonton’s Mortgage Makers Inc. says the the replacement cost in his brokerage would exceed $30,000. A simple valuation method: estimate the new replacement cost globally, which is one number for it all. Assume an average life of 15 years. Depreciate anything five years old or less at 33.3 per cent, if five to 10 years old at 50 per cent and anything older than 10 years at 66.7 per cent. All straight line! This will provide a ball park value as part of a going concern, not what you could sell these capital assets for on the open market, which would be considerably less.

Value of the Sales Force As abstracted from his empirical study on real estate brokerages, much of which is applicable to mortgage brokerages, Dr. Peter Chinloy, Professor or Real Estate and Finance, of American University states that the value of the commissioned sales force to the firm lays

34 | SEPTEMBER 2013

34-37_Method.indd 34

09/09/2013 2:27:38 PM

mortgagebrokernews.ca

in the net profit they produce for the firm. Its measurement is the sum of two components; the present value of the commission split and the options. Options are the potential profit to the firm that will be generated by the agents during the remainder of their career. The brokerage must form expectations and probable returns based on previous experience. According to Dr. Chinloy the maximum value of the agent comes after two years’ experience. The net value of an agent with no experience is negative. To estimate this value contributor there must be correlation between the carrying cost per agent and the net residuals that could be generated.

The Buy-In – Buy-Out and the Earn-out A mortgage brokerage could have many values, depending on how the seller extracts his/her money from it. One of these price –value determinants is the buy-in – buy-out. The term buy-in refers to the purchaser and buy-out to the seller. Both mean the same thing. This arrangement is most common when selling to an insider. With this procedure you are paid out over time, usually not less than two and seldom more than five years. You remain active until the debt is fully retired.

An earn-out bridges the gap between the price the seller wants and a buyer is willing to pay. After

closing, if reaching a certain agreed upon financial target or other milestone during a specified period the purchaser pays the seller a bonus price pursuant to a pre-agreed formula, a selling price adjustment based on future performance The seller remaining with the brokerage is optional. It protects a purchaser who does not wish to overpay and a seller who does not want to leave money on the table. It works best when selling over time to an outsider. For an employee a buy-in with a fixed price would be preferable.

Value of The Goodwill For goodwill to have a value it must be transferrable to another who can capitalize on it. If it is not transferable, its value is nil. Subject to trend lines, goodwill value is based primarily on the assumption that history will repeat itself. However, with a mortgage brokerage, “the book”, the probability that the same customers will return is a governing factor. It is therefore necessary to not only look backward but also forward to estimate anticipated customer recurrence. As discussed in Section I, placing a specific value on “the book” and projecting future cash flow is speculative.

To value the goodwill, take the annual average cash flow of your last five years income and expense state-

CUSTOM

SOLUTIONS RESIDENTIAL & COMMERCIAL LENDING

416-253-4007 SEPTEMBER 2013 | 35

www.icmbs.ca 34-37_Method.indd 35

09/09/2013 2:27:38 PM

feature / Method

ments if it has been variable, or three years if steady.

If there is a noticeable trend that you assume will continue, use the last two years. Delete anything that is unusual to the day-to-day mortgage brokerage operation. If you own the real estate, add the annual mortgage payment but subtract what you would have to pay for rent were the property owned by another.

Always assume that the real estate and the O.F.&E. to be free of debt. When you sell you will have to pay or assign the debt. When you have reached this point all financial demands should have been accounted for.

Next: discount the cash flow. The eternal problem is what that discount rate should be. Unfortunately, there is little consensus among sellers, buyers, professional appraisers, The Canada Revenue Agency and others. In my opinion, if a relatively new brokerage, or one with a minimum of anticipated customer recurrence, a discount rate of 100 per cent would probably be about right. If well established or a group with several producing agents, 33.3 per cent perhaps 25 per cent could be appropriate. All others fall somewhere in between. For total value, to the goodwill is added the in place value of all tangible assets.

The Market Comparison Approach This procedure estimates market value by comparing the subject with several other mortgage brokerages that have recently sold or are held for sale, making value adjustments for differences and the value determinants discussed in Section I. The subject’s going concern value is developed from an analysis of the brokerages sold and for sale.

In my opinion, the concept of using prices obtained or asked by others as a benchmark for establishing your firm’s value is wishy-washy to start with. There are too many contingencies that this procedure fails to consider. Frequently, attempting to make price adjustments in an attempt to rationalize the differences from one brokerage to another is guesswork.

Discussions with mortgage brokers provide a wide range of cash flow multipliers. Vans LeBlanc of Top Mortgage Lenders Inc. Of Maple Ridge, B.C. thinks that about three times cash flow would be correct but this figure must be correlated with gross revenues,

location considerations and the probable retention factor. Toronto’s Ross Taylor also thought about three times cash flow while Keith Gilmour suggested one times and one broker who asked not to be quoted also suggested a one times multiplier for many, yet up to five times for some may not be unreasonable.

If one assumes a cash flow in the range of 10 per cent to 15 per cent of gross revenues a multiplier of one to four times cash flow is suggested, a range difficult to correlate. With the larger brokerage the in-place value of the O.F&E should be added, where of insignificant value, disregarded. A non-competition agreement could provide an added value.

Different Assumptions With either method, different assumptions produce different values. This is particularly true with the goodwill discount rate and the cash flow multiplier, the determination of which is often pure speculation.

All that either procedure can ever do is produce a value estimate from which to begin negotiating.

Because it is not possible to reconcile every value contributor or detractor, the best of appraisal methods come up short.

Lloyd Manning AACI, FRI, CCRA, is semi-retired commercial real estate and business appraiser and broker who now writes articles for several trade magazines and professional journals. His most recent book, Winning With Commercial Real Estate is available online from Chapters-Indigo and Booklocker Inc.

The Last Word The valuing any business entity comes down to the interpretation of the actions of sellers, buyers, and at times, financiers. What will sellers accept? What are buyers willing to pay? Will a bank lend sufficient money to buy the business? What is the trade off between cash and terms and what concessions is either party willing to make? In the final analysis it is the actions of the seller and the buyer who establish true value. It is based on the transferable portions and the level of willingness of each party to negotiate and compromise. The traditional appraisal approaches seldom work that well.

This is a subject on which so little has been written, and this article barely scratches the surface. As the author is interested in developing it further your suggestions, criticisms, advice, and input would be welcome.

36 | SEPTEMBER 2013

34-37_Method.indd 36

09/09/2013 2:27:44 PM

The only mortgage company in Canada to create a free hockey pool as a premium lead generation tool

no purchase necessary. Contest is open to residents of Canada (excluding Quebec) who have reached the age of majority within the province or territory in which they reside. Contest begins on or about OCTOBER 1, 2013 and ends on or about June 28, 2014. see official rules at dominionhockey.ca for additional eligibility restrictions, prize descriptions/restrictions/ARVS and compete details. Void where prohibited by law

Registration opens September 1, 2013

JOIN THE COMPANY THAT IS ALWAYS FIRST TO POWER ITS MEMBERS WITH THE BEST!

facebook.com/DominionLendingCentresCanada

34-37_Method.indd 37

twitter.com/DLCCanadaInc #DLCHockeyPool 09/09/2013 2:27:49 PM

business strategy / Secret#7

Following

the

trail Marketing mistakes often start where too many brokers leave off, writes Doren Aldana. So when is the job really done?

38 | september 2013

38-39_Secret.indd 38

09/09/2013 2:28:35 PM

mortgagebrokernews.ca

Secret #7: They employ a consistent and continuous followup marketing system.

Followup marketing is the key to maximizing your client acquisition, referrals and repeat business because not everyone is ready for your services right this very moment. Not everyone needs your services at the time that you meet them, when they initially receive your marketing message. There was a study done by the International Association of Sales and Marketing Executives that said that 81 per cent of sales come on or after the fifth contact. And that has certainly proved true in my own experience. The fortune is always in the followup!

Remember: people only do business with people they know, like and trust and that high-level of relationship takes some time to cultivate.

The key to creating a successful followup marketing system is to make it consistent and relevant.

Consistency is the result of using a system. I once heard a great definition of the word “system” by internationally renowned speaker and author, Bob Burg. He said, “A system allows an ordinary person to produce extraordinary results predictably. Without a system, even an extraordinary person will produce ordinary results predictably!” I couldn’t agree more.

Systems provide long-term predictable results and these results can be repeated at will. For instance, once you implement a successful followup system in one niche market, you can easily replicate the exact same system in another niche and expect to get the same or even better results.

Your followup system also needs to be relevant.

In other words, what you are sending needs to be perceived by your target audience as valuable, meaningful and applicable to their particular situation.

For example, when their mortgage is up for renewal, you send them a mortgage renewal card. After Christ-

CMHC & Conventional Mortgages for:

Multi-Family Rental Properties Senior’s Housing Projects Commercial Properties Construction Projects

Toronto CMHC/Conventional Financing Phone: 416-368-3266 Email: toronto@peoplestrust.com

38-39_Secret.indd 39

mas, you send them a Christmas Debt Hangover card. On their mortgage • Save anniversary, you send them • Your • Self an Annual Mortgage • Time Review card. You’ve got to • Energy send the right messages to • Money the right people at the right • Stress time. If you neglect to abide by this principle, you might as well flush your hard-earned money down the toilet!

In my Mortgage Superstar Coaching Program, I provide you with a virtual war chest of followup marketing tools, including but not limited to: • Done4U Direct Mail Monthly Newsletters • Done4U Weekly Videos • Done4U Email Campaigns • Done4U Postcards and lots more!

With my ready-made systems, all you have to do is plug and play.

By the way, if I had to recommend just one followup marketing system, it would be a direct mail, monthly newsletter delivered to your prospects, clients and referral partners every single month – like clockwork. Yes, it is an investment but the payoff can be extraordinary. For example, we’ve had dozens of clients over the years who have received 200-500 per cent return on their investment, month after month, using our Done4U Client Newsletter service!

Obviously, results may vary and are not guaranteed but where else can you get that kind of return?

In next month’s eighth secret, you’ll find out why most superstar mortgage pros never have to advertise their services. Stay tuned.

SYSTEMS STANDS FOR:

Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach and has won the “Best Industry Service Provider” award two years in a row at the 2012 and 2013 Canadian Mortgage Awards.

Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions.

For a free copy of Doren’s new CD titled, “21 Secrets of Superstar Mortgage Brokers,” visit: www.SuperstarMortgage Broker.com

S

Single Family Alternate Equity Lending: Equity Take Outs Purchases/Refinances Homeowner or Rental Flexible Income Verification

Calgary CMHC/Conventional Financing Phone: 403-237-8795 Email: calgary@peoplestrust.com

Vancouver CMHC/Conventional Financing Single Family Financing september 2013 | 39 Phone: 604-685-1068

Email: vancouver@peoplestrust.com

09/09/2013 2:28:40 PM

feature / private perfection

Pinpointing a

perfect private lender

Private Lender: the Judas goat or the solution to saving your client’s home? How can you be sure you’re not leading your client to slaughter. Rebecca Lamarche reports Private lenders often struggle with broker preconceptions.

In fact, some in the mortgage industry have been accused of predatory behaviour toward people in dire financial situations. Like most grim tales, there may be a kernel of truth to it, say critics, if only in some cases. Unfortunately there are lenders who will mortgage a home with the intent of repossessing it upon the client’s failure to comply with the contract.

They’re very much in the minority On the other side of the spectrum, there are private

lenders with client-customized mortgages drafted with the intent of repayment. This makes the minute details of the potential mortgage that much more pertinent. Emotions are high; the client is desperate.

The last thing a broker wants is to give their client a falsely cloaked “solution.”

The savvy broker is able to uncloak the private lender whose intent leans towards repossession, and recognize the lenders who focus on repayment.

Here’s how.

Successful private lenders rely on a business model based on the repayment strategy. Those plans are structured so every client has an exit strategy, or synonymously, a light at the end of the tunnel.

“The reality is most private lenders don’t do what we’re talking about, they have a laissez fair attitude,” says Peter Galli, president of PENTOR Finance, “That’s where we try to be different in the whole process.”

The immediate solution to the client’s problem is a loan, of course. But that will only help the client in the long run if they have the cash flow to support their new mortgage, coupled with the credit history and ability to exit the mortgage. Both the broker and the private lender should be assessing these two points.

It falls to the broker, when calling a private lender, to produce the exit plan.

“They have the reflex to call us for a deal, we want them to have the reflex to propose potential exit strategies,” says Galli who has originated over 2,500 alternative mortgages worth over $700 million in the past eight years.

If the broker is thinking refinance, repayment, exit strategy the client is off to a good start.

This type of solution can be offered to clients through a custom-fit mortgage. The broker can use a checklist when evaluating a private lender to see if they’re a proper match for the client’s unique needs.

This evaluation can be broken into three sections: 1) Creative structuring, 2) customizing the mortgage to fit the unique needs of the client, 3) appropriate exit strategy.

1)

Creative Structuring:

The client’s loan amount is the constant in this equation. Ideally the formula should reflect the client’s cash flow. The two options are: buying down the rate (lower monthly interest rate with higher fees), versus buying up the rate (higher monthly interest rate with lower fees).

40 | september 2013

40-43_Galli.indd 40

09/09/2013 2:29:15 PM

mortgagebrokernews.ca

Whether buying up or down it’s the same amount of money to the client. A payment structure determined by the client’s cash flow helps them afford their solution.

2)

Customizing the mortgage:

Customizing the length, or term, of the mortgage can save the client from repayment penalties.

Typically, there are penalties for fully repaying a contract before it expires. Galli suggests that brokers urge private lenders for a term which matches the client’s specific needs.

The next thing to consider is if the private lender accepts multiple collaterals. Traditional financial institutions will turn away from this option but many private lenders will use it as a tool to secure the deal.

When a private lender accepts multiple collaterals, at least one additional property is added to the equation. This might be another property of the client’s, such as a summer home or condominium, or it may be the home of a family member. The client now has more to lose but sometimes it’s their only way to

secure a new mortgage.

“We call this an emotional collateral,” Galli explains, “There’s the real collateral (the physical properties) but emotionally, are you going to want to let family members sink and lose their homes too?

At the end of the day they often don’t.”

3)

The exit strategy:

Not only should there be a way out, but an opportunity to rebuild credit.

A favourable option offered by some alternative lenders is a secured credit card in which the deposit is included in the mortgage. Some private lenders will also work with clients to pay off and leave their existing lines of credit open. By helping the client to rebuild and maintain active credit, it enables them a better chance to eventually move towards a more traditional source of financing.

Peter Galli

Underwriting the lender A full-disclosure approach, focused on repayment, is key. For instance, during Galli’s 26 years in the

MORTGAGE SOLUTIONS THAT ARE AS SMART FOR YOUR CLIENT AS THEY ARE FOR YOU

What’s in it for you? > A unique product portfolio including our award winning All-In-One Banking™. > Niche product lending allowing you to meet a variety of your client needs; including mortgage solutions for first time homebuyers, rental properties, new immigrants, non-residents and more 1. > An incentive program built on your feedback, including reward options such as: $2,0002 towards marketing, $15,0003 travel voucher towards a trip of lifetime, rate discounts up to 15 BPS, free appraisals, great cashback offers, and more!

Contact your local BDM or email mortgagebroker@nbc.ca

2 2 60 deals in the fiscal year.

Bank All-In-One is a trademark National BankofofNational Canada. 1Financing be subject1 to the credit approval

by National Bank. $2,000 marketing fee is aby one-time rewardBank. for the first National Bank All-In-One is aoftrademark Bank ofshall Canada.

Financing shall be subject to the credit approval National $2,000 marketing fee 3 3 trip paidreward for everyfor 125the deals in the65 fiscal year or up to a maximum of 2 in tripthe vouchers.

Minimum to fund ratiopaid of 60% fiscal 2013 required be eligible for either incentives payments be $15,000 trip forforevery 125 isdeals orto$40M funded in financial the fiscal year.and The fiscalwill year is$15,000 a one-time first deals $20M funded fiscal year. approve made in February 2014. The fiscal year is from November 1, 2012 to October 31, 2013. is from November 1, 2011 to October 31, 2012.

TM TM National

september 2013 | 41

Agency:

40-43_Galli.indd Title: 41

Graphiques M&H Mortgage Solution

CYAN

MAGENTA

Graphiques M&H • Cité Multimédia 80, rue Queen, bureau 403, Montréal QC H3C 2N5 Tél. : (514) 866-6736 • Téléc. : (514) 875-0401

09/09/2013 2:29:18 PM

feature / private perfection

business, based in Quebec, he’s unearthed telltale signs that suggest a lender may be more interested in repossession than repayment. Here’s his checklist for brokers, and ultimately the more questions they ask, the clearer the private lender’s position will become.

1)

Does the private lender have a credible source of funds?

All transactions must be done through the banking system (i.e. certified cheques, wire transfers). The money should be traceable; cash, for example, is not a credible source of funds.

2)

Does the private lender have the ability to fund?

The lender might have a credible source of funds but that doesn’t mean it necessarily has the volume to fund the mortgage.

“Sometimes the private lender has bigger eyes than their stomach -- when it gets to funding they don’t have the cash,” Galli says, “It’s kind of like not showing up at the altar. This is bad because the borrower is in default and en route to losing their home.”

Galli advises that the broker consult his or her network. Chances are a lender with this problem will have had issues funding in the past.

3)

Does the private lender fully disclose terms and conditions, fees and penalties?

Rebecca Lamarche is a freelance writer and multimedia journalist published across Canada and in the United States.

Follow her on Twitter @ RebeccaLamarche

A lack of transparency is a telltale sign that the lender’s leaning towards the repossession side of the spectrum.

The first question to ask is, what’s your collection policy on lates and arrears? A soft approach would be calling the client to work through the problem.

A hard approach varies from penalties, and or, an automatic increase to the interest rate; to immediately send a collector, and or, taking legal action in reclaiming the property.

Along with this, the broker should ask what will happen to his or her client if they do not repay the loan. Lenders focused on repayment will work with the client and possibly offer an extension on the term, often between one to three months in length. It is important that while the broker evaluates the lender, he or she have a clear understanding of how quickly the private lender will take legal action on a property.

Finally the private lender should provide the

broker with a breakdown of their pricing structure.

This will include all possible fees and penalties. This is where the broker must pay attention .

Does the private lender charge to issue a mortgage review, approval, and or term sheet? Sometimes there are undisclosed, non-refundable, fees that the client pays before a new mortgage is even approved.

Are there exit fees?

This can range from a fee to close the account, through to statement and penalty fees. If the client were to default, the broker should know what the penalties will be and how this will affect the interest rate. If the lender offers renewals they should also disclose how this affects the rate? Now the crucial information to bring back to the client is whether or not they would have the cash flow to support these new payments?

“Some lenders charge statement fees and penalties at the end -- even if the client has respected the contract,” says Galli. “Some lenders charge X amount or a percentage of the contract.

“Even if the clients respected the terms and conditions and are ready to pay off their mortgage, there may be hidden fees. This is a disclosure issue.”

This information should be laid out for the client upfront in the mortgage approval before being sent to a notary or lawyer.

Transparency from a lender, is an integral sign that the broker is leading his or her client towards a potential solution.

4)

Does the private lender build an exit strategy?

An exit strategy is indicative of lenders who aim for repayment when a file closes. The goal is to help the client take charge of their finances and eventually transition to a more traditional financial institution.

5)

What is the private lender’s speed of execution?

There are two components to this question: the lender’s speed in underwriting a deal, and how quickly they can fund. A mortgage approval can be same-day / next-day, or it can take days through weeks. The ability to fund ties into the lender’s funding credibility and volume, as some lenders have to wait weeks before providing the loan.

Peter Galli is president of PENTOR Finance,a Quebec-focused private lender, based in Montreal.

42 | september 2013

40-43_Galli.indd 42

09/09/2013 2:29:22 PM

YOU SEE AN OLD EYESORE.

WE SEE THE POTENTIAL VALUE.

Want to know the real value of a property before moving forward with a transaction?

Bring an AIC-designated Real Estate Appraiser on board. AACIs and CRAs are the real value experts, providing accurate, up-to-date valuations on all property types based on current and emerging market trends. You’ll thank them—and your clients will thank you.

Find a Real Estate Appraiser in your area by visiting online now.

40-43_Galli.indd 43

AICanada.ca 09/09/2013 2:29:25 PM

feature / commercial connotation

Residential brokers looking to do commercial deals have to know the lingo. Here are the key financial terms you’ll encounter Brokers, particularly in the commercial space, are commonly required to present ‘financials’ as part of loan applications. But accounting materials are not always completely intuitive, and understanding what numbers mean and what is important are not always intuitive. La Trobe Financial believes the following is a useful, concise summary of key accounting information for brokers wanting to ‘fill in some gaps’ in their knowledge:

The important documents Balance Sheet The balance sheet (or statement of financial position) is a snapshot of what the business owns at a point in time. It compares the assets of a company with its liabilities; hopefully it identifies that the company owns more assets than it owes in debts – the balance being equity of the owners.

The balance sheet also assists understanding of the liquidity profile by looking to the ‘term’ of the components. This, for example, identifies ability to pay debts in the short term by comparing the ‘current assets’ (convertible to cash within 12 months) with the ‘current liabilities’ (payable within 12 months). A three-month term deposit is a current asset; however, plant and equipment will typically be non-current. In the same way, a 30-year mortgage is a non-current liability, but

an amount owed to a trade creditor is a current liability.

Income statement The income statement (also called the profit and loss, or P&L) is a report showing how much a company has earned and spent, generally over a financial year. This is critical to understanding the capacity of a borrower to service a loan. However, the P&L is based on accounting measures that adjust timing of cash flows in the P&L. Accounting tries to allocate economic value to the time periods over which it notionally relates, to the extent this differs from the period of cash flow. The difference is taken to the balance sheet and brought back to the P&L in the appropriate period. This most commonly results in ‘accruals’ and ‘capitalisation/depreciation’.

Statement of cash flows The statement of cash flows is useful in assessing the short-term viability of a company and its true servicing capability. It is focused only on the business’s inflow and outflow of cash. Items such as depreciation or write-offs of bad debts are not taken into account. It does not necessarily give a full picture of the profitability of a business; however, as the ability to make loan repayments is directly related to cash flow, it is very important to a lender.

44 | SEPTEMBER 2013

44-47_Commercial.indd 44

09/09/2013 4:16:01 PM

W

mortgagebrokernews.ca

Liquidity There are a number of liquidity ratios, but the most common are the current ratio and the quick ratio, which both come from the balance sheet. The current ratio is simply current assets divided by current liabilities. It is important that this ratio should be higher than 1, otherwise the company may find it difficult to pay its short-term debts and bills. The quick ratio is the same but only looks to cash + marketable securities + accounts receivable for the assets.

Financial Leverage

The important measures Profitability and the bottom line Profitability of course reflects the general health of a business. There are a wide range of profitability measures. These are commonly considered in absolute levels or relative to industry benchmarks/ peers. Net profit before tax is the first figure lenders look at. Alternatively, the gross profit margin is derived from the income statement and is the gross profit divided by the sales revenue. A business such as a supermarket will have a high turnover, so the gross profit margin may be as low as two to five per cent; however, a property developer should typically have a gross profit margin above 15 per cent. The ratio of cash flow to sales measures the relative amount of cash flow generated by each dollar of sales revenue.

It is good to compare this with the profit margin.

Got Plans?

Financial leverage comes from the balance sheet.

A highly leveraged company has a large amount of debt when compared to its assets and/or equity.

A lender will consider a highly leveraged company to be riskier because of the obligation to service the debt from an increasing proportion of cash flow earnings, sustained over time. Leverage is commonly considered in terms of ‘appropriate’ levels for the given business, particularly in the economic circumstances. Borrowings above this are considered risky.

The ratio of cash flow to sales measures the relative amount of cash generated by each dollar of sales revenue. It is good to compare this with the profit margin

We should get together.

We’ve been underwriting real estate backed Construction, Bridge and Equity Financing for over 35 years.

44-47_Commercial.indd 45

Loans from $1,000,000 to $15,000,000+ Financing for projects in southern Ontario Only

Contact Mickey Baratz Lic.# M08000714 (416) 483-8018 ext 233 or mickey@vectormanagement.com

SEPTEMBER 2013 | 45

Brokerage # 10160 09/09/2013 4:16:09 PM

CG_O

feature / commercial connotation

Interest Coverage Coverage comes from the income statement and indicates a business’s capacity to meet its financial leverage. ‘Interest cover’ measures whether income is sufficient to cover interest payments. Typically, a company’s loans will not be due to be repaid in full in the short term; however, interest payments due on the debt certainly will be. Interest coverage compares available income (net income + interest income + interest paid) to the amount of interest to be paid. This ratio must be greater than 1:1, and many lenders prefer a ratio of greater than 3, or 4:1, depending on the business type and loan profile.

Cash Flow Many companies have a cash flow statement that details cash flow movement over a year. However, a good indicator of cash movement is to add back the depreciation of depreciating assets to the income statement. Some businesses have little difference between accounting earnings and cash flow earnings, while for others this is substantial. Again, this is critical for a lender to understand the ability to service and repay debts is ultimately a cash flow issue.

Assessing financials Consistency Brokers should look for consistency from one year’s figures to the next (typically flat or growth). Many lenders take the lower of the last two years. Any major changes or reductions could be a concern, and

Got Plans?

We should get together.

We’ve been underwriting real estate backed Construction, Bridge and 46 | SEPTEMBER 2013 Equity Financing for over 35 years.

44-47_Commercial.indd 46

clients need to be able to explain the year-to- year differences. At La Trobe Financial we make our assessment on 120 per cent of the lowest of the last two years’ results to allow for a reasonable level of improvement.

Group Position This will help a lender understand the client’s financial viability. A hierarchical business diagram helps lenders understand the group position; this will provide the analyst with an understanding of how the funds flow within the group and between each business entity. La Trobe Financial seeks such diagrams to guard against reviewing financials in isolation, which sometimes may not provide an accurate assessment of a borrower’s position.

Interim Financials Interim financials are never a lender’s preferred document because they can be distorted by seasonal variations in the client’s business and should only be relied upon when assessing multiple periods.

Business equity Understanding the business equity is an important element of understanding the financial strength of an applicant. Equity provides the opposite of financial leverage: a low leverage ratio means high equity levels and the ability to withstand hard conditions. Lenders will usually consider how strong the equity position is of the borrower.

Loans from $1,000,000 to $15,000,000+ Financing for projects in southern Ontario Only

Contact Mickey Baratz Lic.# M08000714 (416) 483-8018 ext 233 or mickey@vectormanagement.com

Brokerage # 10160 09/09/2013 4:16:32 PM

+

CG_Ontario_sales_team_CMP_fnl_CG_Ontario_sales_team_CMP_fnl 7/23/13 5:46 PM Page 1

Mary Putnam, AMP

David Napoleone, AMP Account Executive, GTA & Eastern Ontario

Account Executive, GTA & Western Ontario

Account Executive, GTA & Western Ontario

416.640.8936 1.866.414.9109 ext. 8936

647.287.8545 1.866.414.9109 ext. 7086

416.671.2844 1.866.414.9109 ext. 7052

647.278.3536 1.866.414.9109 ext. 7070

Vice President, Sales & Marketing

Michelle Newton

Selma Granger, AMP

Elizabeth Sanchez

Account Executive, GTA & Southwestern Ontario

Marco De Paolis, AMP

Account Executive, GTA & Northern Ontario

Andrea Haines, AMP

416.671.8369 1.866.414.9109 ext. 7097

416.543.1669 1.866.414.9109 ext. 7054

613.697.7079 1.866.414.9109 ext. 7081

Account Executive, Ottawa Region

COAST TO COAST WITH CANADA GUARANTY. INTRODUCING OUR ONTARIO SALES TEAM, AT YOUR SERVICE WITH SOLUTIONS TO HELP YOU SUCCEED. Canada Guaranty's National Sales Team offers local market expertise with regional Account Executives dedicated to ensuring you receive the personalized service and support you require to succeed with your clients. As a knowledgeable resource with a wealth of industry experience, our Ontario team is committed to helping you achieve your goals.

Contact your regional Account Executive to learn more about:

From application to approval, let us help you find the right solutions for your borrowers’ unique needs.

For more information about these and other solutions available, please visit canadaguaranty.ca.

■

Mobile Tools

■

Continuing Education and Training

■

The Homeownership Solutions Program

■

Our Comprehensive Product Suite

4

Canada Guaranty Mortgage Insurance Company 877.244.8422 I www.canadaguaranty.ca

0 44-47_Commercial.indd 47

09/09/2013 2:30:10 PM

business strategy / branding

l a n Persnoding: bra ndout a t s o t w k c ho a p e h from t

that the cut and style of your clothes, your promptness, your emotional and social intelligence, the car you drive, and your grooming.

Now add to that your online presence: your website and your social media profiles. They all tell a story. The more they align with who you are and the value you bring face-to-face, the more “on brand” your digital channels are, the better they serve you. If any of these don’t match, however, you’ve just spent a lot of time and effort putting out mixed messages that could cost you business.

Everything we do and say, display, drive and wear, tweet, blog or video – even the company we keep – impacts on our personal brand. That has a direct impact on our bottom line. Here is the one biggest mistake I see people make with their personal brand.

It’s all about them

Giving yourself a personal brand that makes you stand out from the rest of the pack entails far more than wearing a snazzy suit. Michael Neaylon explains how to get it right, and the fatal mistakes to avoid As a mortgage broker, you are constantly influencing others. A personal brand can sometimes be seen as lightweight, but it’s not just about your image – as important as that is. Personal branding is also about how you manage who you are, how you lead your clients, and how effectively you partner with your associates.

Truly effective personal branding is about how you’re perceived, because all brands exist in the minds of their market.

Judgment day Let’s say you’re a real estate agent. You’re judged by your vendors, prospects, and associates on the way you manage the sales process, the value you add to your vendor through expert advice and superior negotiation skills, the integrity you bring to the sales process, and how you handle expectations. Add to

Yes, your social media, marketing material, website, personal appearance, character, reputation and style all play a huge part in your personal brand. But is it all about you? One place I see this in spades with clients who come to me is in their marketing copy.

If your current marketing is all about you and not enough about how you can benefit your clients, here are some simple ways to remedy the situation.

1

Know your values and vision

2

What does that mean for your clients?

The more aligned with these you are, the easier it is to attract your ideal clients. Is it integrity, wealth creation, reliability, or perhaps a combination of all three?

Three is a number I often ask people to give, as one is rarely enough, and any more than three dilutes our impact and focus. Some people say “courage, clarity and integrity.” For others it’s “joy, responsiveness and detail.” There’s no right or wrong three. They must be yours – something you believe in and something you know you can deliver on.

Now you’re even clearer on what you stand for, that’s just the tip of the iceberg. No matter how clear you are, if those values aren’t “valued” by your clients or colleagues, then you’ll be stranded on your own personal branding island.

So now picture your ideal client and ask yourself these questions: • What specifically do they gain from doing

G

L

C

48 | SEPTEMBER 2013

M

48-49_Personal Branding.indd 48

09/09/2013 2:30:46 PM

M

mortgagebrokernews.ca

Top three social networks

LinkedIn is a powerful search engine that connects you to a global community of professionals and has ever-increasing functions. One function we’ve begun using more and more in one of our businesses, presentability, is a private (closed) forum. Just like hosting your own mastermind group can be good for your reputation as a serious player who’s also a seriously good connector, the same impression can be made in an online forum, as long as you give value.

If you have a blog, post it to the forum, or simply contribute articles and questions for your audience, further establishing your ‘go-to’ value, with the added benefit of being a connector.

Twitter is more than just about tweeting about the incidental moments in your life, or for self-promotion. One of the most underutlized aspects of Twitter is its use for research.

By staying focused in terms of who you follow and how ‘on-brand’ you are with what you post, you gain much more credibility here too. Always leave enough room for your followers to have an opinion when they retweet (say 10-20 characters). If you’re retweeting an article yourself, have an opinion of your own.

YouTube is owned by Google. That means it’s powered by the singularly most powerful search engine in the world. If you’re not already putting video content up, consider it. As a service professional we want to know about you. Clients gain so much more traction by allowing people in to see who they are and the passion behind what they do, not to mention their own personal style.

business with me?

• Is it less stress? More money in their pockets?

More time with their family?

• Can you be even more specific than that?

The more you know these benefits, the easier it is to capitalize on them in your marketing copy, on your website, and on social media. You can even work them into your business conversations.

It makes you much easier to recommend because people know what they’re getting by doing business with you – and they know whether it’s something that matters to them or not. It’s easier to become known as the go-to person in your industry.

It’s also healthy to remind yourself of these statements as much as you can, because the first sale is often made to ourselves.

3

Michael Neaylon is a speaker, author, and consultant specializing in sales, marketing, and branding for service professionals who want more business, greater profits, working with more of their better clients. He is the author of True Brand Toolkit: How to Bring in Big Money for Your Small Business.

Ask your clients or colleagues why they like working with you

You’re often so close to your own work or appearance that you can’t see how you’re being perceived. Ask your clients why they keep coming back. You can do this casually or formally: over the phone, at the end of a meeting… wherever. Asking them to do this will also help your clients remind themselves why they keep coming back to you.

Re-read your referrals and testimonials. There will undoubtedly be words and phrases that keep coming up again and again. Highlight the words that reinforce your brand and the benefits it brings to your clients.

4

Leverage social media to amplify your brand

If you’re not already using social media to leverage your brand, I highly recommend you do. But as with any branding, you’re better off going deep into two or three channels than diluting your efforts across multiple networks and not gaining traction.

Geared to Handle EXCEPTIONS SOLUTION BASED LENDER:

EXPERTS IN FINANCING FOR:

• Refinancing for debt consolidation • Experts in exceptions other lenders can’t handle

• Builders and renovators • Land developers • Real estate buyers

Let us solve your exceptions: 613 282-1242

Mortgage Administrator Licence #11209 Mortgage Administrator Licence #11209

48-49_Personal Branding.indd 49

cam@pillarfinancial.ca

SEPTEMBER 2013 | 49 MORE THAN 30 YEARS EXPERIENCE

E

PILLARFINANCIAL.CA

AC

PILLARFINANCIAL.CA 09/09/2013 2:30:39 PM

CA

Cam Delli-Pizzi

feature / smart business

1 0 outsourcing 1 You may not even have asked, but Wayne Macartney answers questions about outsourcing mortgage processing to the Philippines

How much of a mortgage broker’s processes can they realistically outsource to a country like the Philippines?

Generally you start with the most routine tasks such as straight data entry, then once you’re comfortable you can build on that, for example chasing up supporting documentation and following up the loan with the lender. Appointment setting is another example; with IP telephony, location is irrelevant, so phone calls and emails can also be managed, whether as a personal assistant up to a fully fledged call centre.

We can train people to underwrite, so there’s theoretically nothing they cannot do, subject to the broker’s comfort levels.

The advantage is that you get a skilled, motivated workforce at a lower cost base. The broker can then focus on growing his or her business, meeting and

genuinely helping clients and closing deals, rather than getting tied up in administrative matters.

How can brokers monitor their overseas staff?

Our staff report directly to the broker and use his or her software. We can also provide our Loanworks software platform which is cloud-based in an Australian data centre so that a broker can track activities across a team of processing staff.

We work with the broker to further automate workflow so that email and SMS notifications and followups can be sent both to the client and back to the broker, either as confirmation of progress or if something needs escalation. This approach also helps ensure consistency of service. Our local operations team can assist in tracking performance against SLAs [service level agreements] or KPIs. We also supply regular attendance reporting and support monthly performance reviews.

What is the pool of talent like in the Philippines?

The range of skill sets is no different to Canada; and we use our local in-house HR to ensure that we attract the best talent. Most of the large US banks are in the Philippines, as are a range of Australian banks, non-bank lenders, mortgage managers and broker companies, so there’s a pool of

50 | SEPTEMBER 2013

50-53_Outsourcing 101.indd 50

09/09/2013 2:31:32 PM

mortgagebrokernews.ca

Manila

experienced staff there already.

There are approximately 12 million people in metro Manila. English is an official language. Our staff actually can work to Canadian time zones as they can beat the Manila peak-hour traffic, which has to be experienced to be believed.

accountability; our clients find this is not an issue as.

What are the main risks involved with outsourcing to support staff overseas?

The main risk is in selecting the right outsource partner. For example, an “ex-pat” management model will give you ongoing headaches.

We have a local general manager, HR manager and operations manager, which effectively bypasses most of the cultural issues.

Many BPO (business process outsourcing)-style offerings provide cookie-cutter, least-cost service, or are only interested in large accounts. By contrast, we align dedicated staff to the broker’s policies and procedures.

The remote location also raises the issue of

What are the common mistakes that companies make when outsourcing to overseas territories?

I think the industry has already learned that if you subscribe to a full BPO model where you hand over a loan to be “processed” and then walk away from it, you’re likely to get a poor outcome as there’s no buy-in. Another common mistake is if you go somewhere with what I call a “colonial attitude”, then this will have a hugely negative impact. People are people, no better or worse, and no one likes being condescended to.

Finally, if you want take the “do it yourself” path, then don’t underestimate the cost and the time

How much should a broker expect to pay to a staff member in the Philippines?

We can provide a full-time, dedicated, experienced resource for a little over $480.

The broker’s resource for

Real Equity Lending for Homeowners

British Columbia

Alberta North

Alberta South

Ontario

Ontario

Atlantic

gkakuno@capitaldirect.ca

dadams@capitaldirect.ca

phutton@capitaldirect.ca

sfoster@capitaldirect.ca

hdoggett@capitaldirect.ca

tbowie@capitaldirect.ca

Greg Kakuno 604.329.6067

50-53_Outsourcing 101.indd 51

Donna Adams 780.426.2145

Paula Hutton 403.278.6200

Sue Foster 905.299.6971

Hugh Doggett 905.299.6951

Trevor Bowie SEPTEMBER 2013 | 51 902.894.7700

09/09/2013 2:31:35 PM

feature / smart business

Filipino HR practices

involved, both in terms of startup and then bedding down the model – there’s a steep learning curve and a lot of government departments to liaise with.

What is the ideal structure to put in place in a Filipino office?

The organizational culture in the Philippines is more hierarchical than in Canada, so team leaders are important even in a small team – it should be clear who is in charge. Be prepared to add additional layers as the organization grows. A local office manager or operations manager is essential; we now have a full organizational structure, for example general manager, HR manager, office manager and operations manager, albeit we’ve been in Manila for some time now. You will also need to source reliable external local advice on HR and other legal matters.

Give some thought to how the offshore structure aligns to the your organizational structure as this will influence lines of reporting and day-to-day interactions. There’s no one “ideal” structure – the “ideal” structure is the one that best fits your organization, and this may change over time.

Why are brokers going down the outsourcing route?

I have had many conversations with mortgage providers, all complaining how difficult it is to recruit and retain reliable staff. I also talk to companies who are delighted with the business outcomes of their decision to outsource. As the model becomes more prevalent, many financial services companies are becoming aware that if their competitors are doing it, then they’re effectively competing against a company with a much lower cost base.

‘The advantage is that you get a skilled, motivated workforce at a lower cost base’ How can brokers train overseas staff in essential systems and processes?

We use a combination of onsite training, webinars and regular trips to Australia. Flying staff to Australia is particularly effective for induction, as it helps cement the new staff member into the organization and provides context and an

Standard work day is eight hours with overtime for extra time worked Minimum five days “annual” leave; up to 10 days is common. At least 15 public holidays through the year Five days sick leave per year; private medical insurance is a common benefit Unfair dismissal laws broadly similar to Australia All laws are strictly enforced by the Department of Labor and Employment, with an active legal body working on behalf of employees Source: Loanworks

opportunity for social interaction. It can also be seen as a motivational “perk”. We also encourage our customers to spend time with us in Manila; they come away with absolute faith in our outsourcing model and our staff.

How can brokers make sure their compliance practices are up to scratch when outsourcing?

We monitor that for them, but it does raise the point that if the broker’s processes are deficient then this will potentially reflect in the success or otherwise of the outsource experience. We can provide software so that the broker can fully track and audit activity. There is also the option for staff to operate under the broker’s ACL. How much should a broker expect to pay in startup costs?

Nothing. We charge a small onboarding fee per staff member, which covers our recruitment effort, etc. Allow two to three weeks for the recruitment process, plus another 28 days if the new recruit is currently employed as they will need to give notice to their current employee.

Other options are available, including dedicated, secure office space if our customer wants a self-contained team.

As a comparison, if you wanted to start from scratch establishing a presence, be prepared to spend considerably more, some of which you’ll only discover as you go. Factor in around two years to get over the learning curve and be fully up and running.

52 | SEPTEMBER 2013

50-53_Outsourcing 101.indd 52

09/09/2013 2:31:36 PM

Cover

The Year ahead

{ 975,000

mortgage holders increased their monthly payments by an average of $300.

2 THINGS YOU DIDN’T KNOW

}

+$22.5K

875,000

mortgage holders made an average lump sum payment of $22,500.

2 things you need to know about the Canadian Mortgage Market

lump sum payment of $22,500.

2 SOME OF US DON’T QUALIFY FOR A MORTGAGE ANYMORE of home buyers are affected by new mortgage rules

Extra money needed for mortgage

$25,000

It takes the average buyer 3.5 years to save that much money.

To qualify, these buyers will have to save, on average, an additional $25,000 for their down payment.

$300.

=

2017 2016 2015 2014

{

+$300

}

71%

of home buyers are affected by new mortgage rules

875,000

975,000

mortgage holders increased their monthly payments by an average of $300.

975,000

{

2 SOME OF US DON’T QUALIFY FOR A MORTGAGE ANYMORE

2 SOME OF US DON’T QUALIFY FOR A MORTGAGE ANYMORE

mortgage holders made an average lump sum payment of $22,500.

875,000

}

+$22.5K

5 YRS

K NoW

1 WE HUSTLE TO PAY DOWN OUR MORTGAGES

1 WE HUSTLE TO PAY DOWN OUR MORTGAGES

2 THINGS YOU DIDN’T KNOW

ABOUT THE CANADIAN MORTGAGE MARKET

reality out there instead of trying A B O U T T H E C A N A D I A N M O R T G A G E M A R K E T to sell around it, then people will trust us.”

But any efforts the industry may undertake as a whole will have no effect if individual brokers don’t do their parts, which means giving clients the best value-added service, improving efficiencies and funding ratios with lenders, and of course, of homeowners say they placing clients with the right lenders of home for their needs. buyers are are in a good position to affected by “Focus on the best interest of the new mortgage To qualify, these buyers have to save, on average, an client first and foremost,” said weather awillpotential downrules Sources: additional $25,000 for their down payment.

CAAMP Annual“We Stateare of the Therien. at a crossroads: we 5 YRS It takes the average buyer 3.5 years to save that much turn in the housing market Residential Mortgage Market money. either go back to being the person you Source: Mortgage Insights: in Canada, TransUnion, Capital go to when the banks say no as it was $25,000 Direct, Canoe Money, Globe Highlights from CAAMP’s Fall 20112014 2015 2016 2017 25 years ago,Living, or become truly+$300 trusted +$22.5K Investor, Canadian consumer and industry surveys RateHub.ca advisers to our customer and move up (CAAMP/Martiz Research Canada) = mortgage holders increased their mortgage holders made an average to the next level.” CMP monthly payments by an average of Extra money needed for mortgage

Sources: CAAMP Annual State of the Residential Mortgage Market in Canada, TransUnion, Capital Direct, Canoe Money, Globe Investor, Canadian Living, RateHub.ca

2

+$300

5 YRS mortgagebrokernews.ca

Sources: CAAMP Annual State of the Residential Mortgage Market in Canada, TransUnion, Capital Direct, Canoe Money, Globe Investor, Canadian Living, RateHub.ca

To qualify, these buyers will have to save, on average, an additional $25,000 for their down payment.

It takes the average buyer 3.5 years to save that much money.

2014

2015

2016

2017

$25,000

= Extra money needed for mortgage

Sources: CAAMP Annual State of the Residential Mortgage Market in Canada, TransUnion, Capital Direct, Canoe Money, Globe Investor, Canadian Living, RateHub.ca

48

morTgagebrokernews.ca

7.1_CoverStory.indd 48 50-53_Outsourcing 101.indd 53

SEPTEMBER 2013 | 53

12-01-18 10:59 PM 09/09/2013 2:32:37 PM

feature / smart business

Making

outsourcing work

Done well, outsourcing can streamline your broker business significantly. Anne Rouse explains the pros and cons

Some of the most important choices facing businesses today are which services to outsource and how to manage outsourced services. Note that I didn’t say “whether to outsource.” Sourcing decisions are becoming core to all firms, even small ones. Industries in which outsourcing has had the greatest impact are those dealing in informational products – IT, finance, business services and design. In these industries there are increasingly rich marketplaces of service providers, accessible, in some cases, only over the Internet.

Stories about outsourcing told in the press, and even in MBA textbooks, can be misleading. Many oversell the benefits of outsourcing, and while those that discuss risks are usually accurate, they are often vague about how to manage these.

Outsourcing is different from using contract staff; it is when a firm contracts with another business to provide specified services to an agreed standard, for an agreed price. While most successful managers know how to direct and manage staff, fewer know how to manage an outsourcing arrangement

successfully. That calls on new skills in specifying requirements; negotiating trade-offs and oftencomplex price schedules; and working cooperatively with another firm.

It is more difficult now because firms usually deal with several outsourcing vendors, supplying a range of services that often interact in surprising ways. So what can you do when approaching an outsourcing challenge?

Trade-offs Outsourcing is all about trade-offs. As with projects, you can get fast access to services, reduced costs, and customized services from outsourcing, but not all three at once. Many firms turn to outsourcing because they have an immediate need. Amazon, for example, took advantage of many outsourced services in its early startup. But over time Amazon realized that outsourcing all its warehousing (and other services) had downsides, and the firm brought inhouse several of the services initially outsourced.

Some firms certainly do save money by outsourcing,

54 | SEPTEMBER 2013

54-55_Making Outsourcing Work.indd 54

09/09/2013 2:32:07 PM

mortgagebrokernews.ca

but normally only when the vendor provides a range of standard services to a large customer base, thus reaping economies of scale. Much successful outsourcing also occurs when firms have no capacity to deliver the services in-house in the short term – there is no choice but to outsource. In this situation, keeping requirements “vanilla” ensures the lowest costs.

With all outsourcing, costs saved have to be offset against the additional costs of negotiating with and choosing the vendor, specifying service requirements, and managing the arrangement. These costs are usually substantially under-estimated. Many firms find they unexpectedly need to call upon outside consultants (more costs!) to help them in specifying, negotiating and contracting with their vendors, particularly when things go wrong.

Fixed term An outsourcing arrangement is not for life but for a fixed term, at the end of which many additional costs will be incurred. A truism is that you should plan for the divorce when you “marry” your vendor, but a better analogy is that your vendor is your “date” – likely to be replaced eventually. It is best to choose services with a ready market of alternative vendors, and those that are modularized, so that it is easy to move from one vendor to another.

And plan for the “dating” (transaction) costs.

Many firms hope their vendor will be responsive.

Most vendors are customer-focused, but there are limits. Highly responsive, customised reactions are expensive to provide. Your firm is likely to have most success when your response expectations are typical

of other customers; the force of numbers will encourage vendors to provide increasing levels of typical service to their customer base.

Purchasers of outsourced services need a clear understanding of the services and standards required, plus the capacity to articulate these well to the vendor.

This results in an unambiguous contract, with fewer misunderstandings down the track. This is a tough challenge, even when you currently have a deep understanding within your firm about these services.

Even then, the meaning of terms will vary in organizations with different cultures and histories, leading to misunderstandings.

Contingency plans Outsourcing of even well-understood services lasts for some time, and few firms seem able to forecast their future requirements in detail adequately.

The best strategy is to recognize that even the most well-thought-through business case will have very high levels of uncertainty. So firms need to plan for substantial contingency costs, and for the costs of changing vendors if things don’t work out.

The most successful outsourcing arrangements I have seen have recognized, and factored in, these inherent costs.

Finally, outsourcing means sending data outside your firm, making it more vulnerable, particularly if sent offshore. Your firm still holds responsibility for protecting all outsourced data; neither customers nor governments forgive if sensitive data is breached in a vendor’s hands. You must ensure that data cannot be stolen or damaged – don’t just rely on contractual terms.

Dr Anne Rouse is an associate professor at the Deakin Graduate School of Business, where she teaches innovation management and business consulting.

She has been researching outsourcing since the late 1990s, and is author of the book ‘Negotiating and Managing a Successful Outsourcing Arrangement.’

The Mortgage Group

SEPTEMBER 2013 | 55

54-55_Making Outsourcing Work.indd 55

09/09/2013 2:32:11 PM

feature / MIC master

T

Look before you

leap

You may be tempted to hold your breath and take the plunge into creating your own Mortgage Investment Corporation, but as Jane Knop writes, there are some details to master first

The last few years have seen a growth spurt in mortgage investment corporations, driven by investors’ desire for yield and a rising real estate market which results in more deals being available. The MICs out there range in size from a few hundred thousand dollars to ones that have $1 billion-plus, with a few recently going public.

The private lending market through brokers in Canada has been around for a long time and many mortgage brokers match investors to mortgage investment opportunities. So it is natural these brokers would evaluate the opportunity of starting a MIC, which allows them to group investors in a fund and have improved funding mechanism for their deals.

It is important, however, to understand the complexities that surround starting and operating a MIC. First off, mortgage brokers are not licensed to sell shares in a MIC. This makes fundraising a big challenge and costly, says Jane Knop, managing director of First Swiss Asset Management. Unlike transacting on a specific mortgage, MIC shares are equity securities (stock) and as such any marketing and distribution of them must be done through an entity licensed with the provincial securities regulator. For instance in Ontario, MIC shares can be sold only by an Exempt Market Dealer or an Investment Dealer both governed by the Ontario Securities Commission.

Many MICs originate in Alberta and British Columbia because the securities regulations there can be a little easier to navigate and they can market to smaller investors, while in Ontario MICs can only work with accredited investors or those who invest a minimum of $150,000 unless they issue a prospectus.

Startup costs and ongoing operating expenses for a MIC are very substantial and sufficient resources should be set aside until the MIC becomes profitable.

One should be prepared for upfront legal and other administrative costs beginning at $200,000 at a minimum without considering prospectus related costs. Unless the MIC is being launched with a minimum of $20 million-plus in asset and has an immediate pipeline of deals, it is likely the first few years may not be profitable, resulting in additional funds required until reaching break-even.

In addition to startup costs, the MIC has to provide audited annual financial statements from the first year of operation. This provides investors with a level of transparency into the MIC’s performance as the audit will note default ratios, historical performance,

56 | SEPTEMBER 2013

56-57_Swiss.indd 56

09/09/2013 2:32:55 PM

mortgagebrokernews.ca

It is important, however, to understand the complexities that surround starting and operating a MIC. First off, mortgage brokers are not licensed to sell shares in a MIC assets under management, board members and management team bios, and many more details.

While initially it may seem that running a MIC may be an easy task, the management of the MIC certainly is a lot more burdensome administratively than brokering deals.

Some other rules surrounding MICs are: A MIC must have at least 20 investors; No shareholder of the MIC can own more than 25 per cent of the company;

The MIC must invest at least 50 per cent of its assets in residential mortgages and/or CDIC insured deposits; The MIC must pay out 100 per cent of its net income every year; No more than 25 per cent of the MIC’s portfolio can be invested in real estate assets and a MIC is not allowed to engage in construction or land development.

MIC-fact

100% of its net income must be paid out every year

Desperate for Agents!

We’re not lenders looking for brokers. We’re not Super Brokers looking to get rich on your 20%.

We’re not motivational speakers trying to turn you on…That’s what we’re not.

We are just a very busy mortgage brokerage that takes what we’re doing seriously.

We adjust to rate and industry changes and we don’t complain about it.

We believe that we are the best in Canada and lament that so many in this business are clearly unqualified.

We are so busy.

We need a few good agents fast.

We provide the work you earn upwards of $100,000 or more.

You’ll work hard but so you should for $100,000.

We do everything properly.

We’re actually mortgage professionals.

Interested? Send resume to: info@mortgagestogo.ca (no phone calls)

SEPTEMBER 2013 | 57

56-57_Swiss.indd 57

09/09/2013 2:32:59 PM

profile / insight

motivating

yourself when a deal falls through

Seven inspirational ideas for your bottom drawer to help you cope with that rare occasion when a major deal falls through

01|

Take heart

First of all, take heart. Oprah was told she wasn’t fit for television. Steve Jobs was fired from the company he founded. Michael Jordan was cut from his high-school basketball team. Walt Disney lost his job because of a lack of original ideas.

Failing now can make you greater later. Failing now says nothing about how successful you may be in the future – quite the opposite.

02|

Remember it’s not personal

Cindy Tonkin is the consultants’ consultant. She is the author of seven books, including the bestseller Setting up your Consultancy Business Profitably and Painlessly.

Failure is not personal. Donald Bradman had a 99.94 batting average. Graeme Pollock comes second with 60.97. Even if you are the king of mortgage brokering, you will get one deal in 200 wrong.

It’s the law of averages. If you are the second greatest batsman in the world, you will get it wrong three times in 10. Deals don’t fall through because of you as a person. You are loved and lovable, and you don’t deserve to fail. Stuff just happens, and things going wrong is the price you pay for having the guts to be out in the world.

03|

List the things that went right

When Edison invented the light bulb, he failed more than 1,000 times. The story is that he considered none of this as failure, only as feedback.

He said each failure was a success, because he had found one more way to not make a light bulb. In every

deal, even the bad ones, there are things that go right.

Take a leaf out of the positive psychology book and go ask yourself what worked.

04|

What would you never do again?

As a child I loved tomato sauce. One night when I was about five years old my auntie Nette told me I wouldn’t like it on ice cream. I tried it. I would never do that again. Make a list of what you will never do again after this deal. Perhaps it’s about how you finance deals. Maybe it’s to do with a particular individual or style of customer; maybe a product or agent. Write it down and share it with the team.

In every deal, even the bad ones, there are things that go right.

Take a leaf out of the positive psychology book and go ask yourself what worked

58 | SEPTEMBER 2013

58-63_Profile_Favourite Things.indd 58

09/09/2013 2:33:39 PM

mortgagebrokernews.ca

05|

Look for patterns

My experience with the tomato sauce and ice cream taught me something else. My aunt Nette had previously suggested a few other outlandish things: wearing pyjamas all day; eating dinner hanging upside down from the swing set in the backyard. When I looked at the patterns, I learnt never to take my aunt’s suggestions seriously. Take a look at other deals that have failed across your career and your practice. Look for patterns. Perhaps a certain type of customer demographic just doesn’t work for you. Examine whether timeframes make a difference. Look for what characterized the failures and how they compared to the successes. Learn from the patterns and share what you learn with your team.

06|

Salvage what you can

of them used this ‘failed’ glue to stick page holders in his choir notes. That was the beginning of the Post-it note. Now it’s hard to imagine an office without them. In the spirit of the Post-it note, list what you can salvage from this deal. Remember relationships or contacts you made. Perhaps they would be useful in other contexts. Work out if the marketing collateral is reusable, recyclable or can be developed as a new template. It’s not a total failure if you can learn something or salvage something.

07|

Do yourself a favour

So the deal went south. Use this failed deal to supercharge your next successful deal; snatch victory from the jaws of defeat. Do yourself a favour: let yourself off the hook. As Scarlett O’Hara said in Gone With The Wind, “Tomorrow is another day.”

The Post-it note was a failed invention. 3M engineers developed a glue that would not stick. One

SEPTEMBER 2013 | 59

58-63_Profile_Favourite Things.indd 59

09/09/2013 2:33:42 PM

profile / Broker

Broker in

O

action We all watched the horror of Lac- Mégantic, but DLC’s Robert Perrier sprung into action On July 6, 2013, one small Canadian town would be changed forever by a disaster shaking it to the core.

At 1:15 p.m., a 72-car train pulling tankers of crude oil derailed, causing a massive explosion that killed a confirmed 47 people and wiped out a large portion of the town of Lac- Mégantic, Que.– including 30 buildings. In what Prime Minister Stephen Harper

likened to a “war zone,” residents were left with the task of piecing back together the town they loved, but not without the help of countless caring citizens from all over Canada. Among those volunteers was one of the mortgage channel’s own.

Robert Perrier, Dominion Lending Centres’ Quebec Sales Manager, worked tirelessly to help the devastated tourist town.

Perrier, a resident of St Zenon, Que., made the three-and-a-half hour trek from his home to Lac-Mégantic. He decided to answer an urgent request from the Canadian Red Cross for donations but also volunteers. Perrier is, in fact, trained as a Red Cross

60 | SEPTEMBER 2013

58-63_Profile_Favourite Things.indd 60

09/09/2013 2:33:45 PM

News

InternatIonaL

u.s.

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

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

The trade group revised its sales from 2007 to 2010 down 14 per cent, from more than 20.6 million to nearly 17.7 million. Among the reasons for the lower figures, the Realtors group says: changes in the way the Census volunteer.

Thedata, organization’s is to “improve Bureau collects populationmission shifts and some sales the lives of vulnerable being counted twice. people by mobilizing the power of humanity in Canada and around the world.”

The Realtors consulted with government and private including theCross, Federalwhen Reserve, “As ahousing part ofexperts, the Canadian Red you the Department of Housing and Urban Development, receive a call, you don’t question yourself in this the Mortgage Bankers Association, the National situation: You just go,” Perrier told CMP Magazine.

Association of Home Builders, mortgage giants Fannie “I just wanted to help.”

Mae and Freddie Mac and CoreLogic, a California-based For two full weeks, worked data firm that first raisedPerrier doubts about thediligently annual to do his part in helping the citizens of the town – typnumbers earlier this year. ically putting in 12 hours a day, and sometimes 16 or CoreLogic has estimated that the Realtors group overstated sales in 2010 by at least 15 per cent. more.

Thejob changing could affect–how economists His at the numbers emergency centre headquartered view the trade group’s data. It could also affect companies in a school, Polyvalente Montignac – included that use the figures for hiring and expansion plans. meeting with disaster victims to ensure their basic Sales are measured when buyers close on homes. needs were metare in terms of food, clothing and shelter.

But many deals collapsing before that point.

These Lac-Mégantic residents been One-third of Realtors said they had had at least oneblocked contract from returning toup their in “the zone,” and scuttled in October, fromhomes 18 per cent in September.

Contracts are being several many will be unable to cancelled return forfor some timereasons: to come.

Banks have declined mortgage applications; home Perhaps more importantly, Perrier also undertook

&

mortgagebrokernews.ca

90.6% 52.1%

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

More than two years after the recession officially ended, many people can’t qualify for loans or meet higher down payment requirements. Even those with excellent credit and stable jobs are holding off because they fear Percentage of that home prices will keep falling. Sales are also homeownership being hurt by a decline in first-time buyers, who costs, including are critical to reviving the housing market. mortgage payments, Sales have fallen in four of the five years utilities and property since the housing boom went bust in 2006. taxes that take up a Declining prices and record-low mortgage rates typical household’s haven’t been enough to boost sales. monthly pre-tax At the same time, home construction has income in Vancouver begun a gradual comeback and should add to the and Toronto, economy’s growth in 2011 for the first year since respectively (RBC the Great Recession began in 2007. Last month, Housing the Economics task of meeting with and consoling victims whoon an annual rate of builders broke ground Trendsand andother relatives, lost children as well as friends 685,000 homes, the government said recently. andAffordability neighboursReport) in this train disaster. undertakThat wasThe a 9.3 per cent jump from October and the fastest since ing proved difficult but the reward was pace worth it. April 2010.

Most economists say home prices will keep “These tasks were crazy demanding, especially falling, by at least five per cent, through 2012. on an emotional level,” says Perrier. “But I got so Many forecasts don’t foresee a rebound in prices much in return. I will never forget the time I spent until at least 2013. helping people who at first had no hope.”

The high rate of foreclosures has made It will be months before the physical resold homesdamage cheaperisthan new ones. The median price of a new repaired to the town and, most assuredly, the emo-home is roughly 30 per tional damage will linger on. cent above the price of one that’s been occupied before – time twice he thespent normal markup. Investors are For his part, Perrier is proud of the taking advantage of the discounts. in Lac- Mégantic.

The housing market is struggling even “Those people lost everything; daughters, sons, as the broader economy has improved in friends. I listened to them, let them and let them recenttalk months. cry and it felt good to be there forThe them.” economy grew at an annual pace of two perthe cent in the July-September quarter. Many Those wishing to donate to relief effort can economists expect slightly better growth in the do so via the website of the Canadian Red Cross.

October-December quarter. CMP

For two full weeks, Perrier worked diligently to do his part in helping the citizens of the town – typically putting in 12 hours a day, and sometimes 16 or more

THE BEST APPRAISERS IN CANADA ARE CERTIFIED AND REGULATED BY

LOOK FOR THE PROFESSIONAL DESIGNATIONS

DAR & DAC

THE CANADIAN NATIONAL ASSOCIATION of REAL ESTATE APPRAISERS CALL 888-399-3366 or FIND AN APPRAISER at WWW.CNAREA.CA

28

mortgagebrokernews.ca

7.1_News.indd 28 58-63_Profile_Favourite Things.indd 61

SEPTEMBER 2013 | 61

12-01-18 10:51 PM 09/09/2013 2:33:51 PM

profile / Favourite Things

Shaun Serafini

I have been in the mortgage industry for six years and joined DLC in 2010. My wife, Pam, and I had our first child, a baby girl (Amia Rose) on June 5 of this year and we are loving our new lives as parents.

Favourite things Shaun Serafini, Mortgage Professional – DLC Mortgage Excellence, Lethbridge, Alta.

Favourite Mortgage Product: Not an easy question- whichever aligns best with my customer’s needs. I’ve carved out a pretty good niche specializing in rent offset programs with specific lenders however. With this product I can help people acquire a revenue property while at the same time only needing five per cent downpayment for their new (owner/ occupied) purchase.

Works great for those people who are flat or upside down on their current home but in need of buying a new home to live in (expanding family / relocation etc.).

62 | SEPTEMBER 2013

58-63_Profile_Favourite Things.indd 62

09/09/2013 2:33:56 PM

mortgagebrokernews.ca

Favourite Sport: Hockey & NFL football - Can’t wait for both of these seasons to start up again. Summer is far too long to go without quality sports entertainment (especially with the Jays bailing in about April this year). I’m excited to watch a Saints game live at the Superdome during the DLC annual conference in New Orleans!

Favourite Book: Fear & Loathing in Las Vegas (Yes this is also a book) Favourite Movie: Snatch - I probably watched this movie once a week when I was in university. Come to think of it, it’s about time I watched it again. Classic!

Favourite Music: Country & Rap. Logical combo right?

Favourite Celebrity: Roberto Luongo aka @strombone1. Has been my favourite player since being traded to the Canucks. It’s been an interesting last few years but I hope he helps to lead Canada to gold again in the Olympics and finally silences the critics.

Favourite Vacation Spot: Jamaica - where I spent my honeymoon. Have been to Negril and Montego Bay and both trips were amazing.

Favourite thing about working in the Mortgage Industry: Meeting and working with new people every day and helping them achieve their personal and financial goals in addition to simply being approved for a mortgage.

Favourite Drink: Weekdays - coffee; weekends - Scotch w/ splash of water Favourite Place: Fernie B.C. – where I grew up. A close second would be just unwinding in my hot tub after a grinding day in the mortgage biz.

THE POWER OF MORE MORE Information

MORE Deals

Visit PURVIEW.CA/BROKERS or

MORE Referrals

call 1.855.787.8439 for more information

SEPTEMBER 2013 | 63

58-63_Profile_Favourite Things.indd 63

09/09/2013 2:34:01 PM

service/ directory

Banks

RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 19

Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 39

B2B Bank b2bbank.com/mortgages Ph: 1 800 263 8349 Inside Back Cover Bridgewater Bank www.bridgewaterbank.ca Ph: 1 888 837 2326 Page 7

Pillar Financial Services www.pillarfinancial.ca Ph: 613 282 1242 Page 49

HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 23

MortgageToGo.ca www.mortgagetogo.ca Page 57

Radius Financial www.radiusfinancial.ca Ph: 1 877 369 6398 Inside Front Cover

The Mortgage Group www.mortgagegrp.com Ph: 877 899 1024 Page 55 Commercial Lenders

RMG Mortgages www.RMGmortgages.ca Ph: 866 809 5800 Page 29

National Bank www.nbc.ca Ph: 1 888 483 5628 Page 41

Vector Financial Services www.vectorfinancialservices.com Ph: 1 866 483 8018 Page 45, 46

Tribecca Finance Corporation www.tribecca.ca Ph: 416 225 6900 Page 59

Scotiabank www scotiamortgageauthority.com Ph: 416 350 7400 Page 9

Technology & Software

Insurance

Credit Union

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

IC Savings www.icmbs.ca Ph: 416 253 4007 Page 35

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

Canada Guaranty Mortgage Insurance Company

www.canadaguaranty.ca Ph: 1 866 414 9109 Page 47

Non-Bank Lenders

Marlborough Stirling Canada www.morweb.ca Ph: 1 877 626 2022 Page 33

First Canadian Title www.fct.ca Ph: 1 800 307 0370 Page 17

Capital Direct www.capitaldirect.ca Ph: 1 800 959 9290 Page 51

Teranet www.teranet.ca Ph: 1 866 237 5937 Page 63

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

Eclipse Ph: 1 866 260 3786 Page 25

Real Estate

Mortgage Protection Plan www.mppbroker.com Ph: 1 866 677 4677 Page 16

First National Financial LP www.firstnational.ca Ph: 416 593 1100 Page 13 Broker Networks

Centum Financial Group Inc. www.centum.ca Ph: 1 604 257 3940 Page 5 Dominion Lending Centres www.DominionLending.ca Ph: 1 888 806 8080 Page 37

MCAP www.mcap.com/brokers Page 11

Optimum Mortgage A Division of Canadian Western Trust www.OptimumMortgage.ca Ph: 866 441 3775 Page 16

www.cnarea.ca Ph: 1 888 399 3366 Page 61 Services

Home Trust www.hometrust.ca Ph: 1 877 903 2133 Page 27

Merix Financial www.merixfinancial.com Ph: 1 877 637 4911 Page 31

Canadian National Association of Real Estate Appraisers

TM

Appraisal Institute of Canada www.AICanada.ca Ph: 613 234 6533 Page 43 Best Points Travel info@bestpointstravel.com Ph: 1 800 551 8786 Ph: 416 251 9944 Page 53

Home Loans Canada www.hlcmortgages.com Ph: 1 866 452 1821 Page 3

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

64 | JULY 2013

64-Directory_OBC.indd 64

09/09/2013 2:34:33 PM

Help your clients get more out of tHeir Homes.

[ Like a genie granting wishes, but without the whole lamp thing.[

the B2B Bank Homeowner’s Kit is a flexible financing solution that helps brokers build their business.

By combining mortgages and home equity lines of credit (Helocs), the Homeowner’s Kit provides access to up to 80% ltV1 with a single collateral mortgage charge, giving your clients more financial freedom. plus: •

Register for the full appraised value of the home, not the original credit limit

•

Customize the Homeowner’s Kit to your clients’ needs with 6 flexible options via a single, one-time application

•

Enable access to a larger credit line as the mortgage portion gets paid down

•

Deliver well-structured, well-priced deals for your clients with the help of our dedicated team of underwriters

b2bbank.com/mortgages

1.800.263.8349

for BroKers ™

1 65% LTV HELOC and 15% amortizing portion. Mortgages and lines of credit are subject to credit approval by B2B Bank. Some conditions apply. All mortgages are funded by, and registered in the name of, B2B Bank, and administered and serviced by B2B Bank. ®B2B BANK is a registered trademark of B2B Bank. TMBANKING THAT WORKS FOR BROKERS is a trademark of B2B Bank. ®HOMEOWNER'S KIT is a registered trademark of Laurentian Bank of Canada.

64-Directory_OBC.indd 65

09/09/2013 2:34:31 PM

GEN_MMS_CMP_Layout 1 2013-07-04 8:38 PM Page 1

The NEW My Marketing Source. Get WAAAAYY ahead.

Stay ahead of the competition with the help of Genworth Canada’s enhanced My Marketing Source custom branding site. With new features, easier navigation and a faster user experience, creating your own branded marketing materials has never been so easy. You’ll also find product overviews, homebuyer tips, rate sheets and more—all for free.

Visit MyMarketingSource.ca today and increase your competitive advantage.

The HOMEOWNERSHIP Company © 2013 Genworth MI Canada Inc.

64-Directory_OBC.indd 66

09/09/2013 2:35:10 PM