CMP 9.09

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THE R20 ROUTE PITFALLS TO STEER AROUND AGENTS AT THE READY NEW TOOLS FOR GUIDING YOUR TEAM

S R E K O R B

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mortgages that fit.

CONTENTS

MARKET MATTERS 4 | Editor’s letter 6 | Letters to the editor 8 | Reading between the Lines: The ins and outs of rent-to-own deals

NEWS 10 | News analysis 16 | National pictureat-a-glance

S R E K O BR ON ERS

2014 T R O P E R L SPECIA 42 | Business development The 5 Qualities of an Analytics Expert 46 | Lead generation not all lead generation strategies are created equal

D N LE 20

54 | Investment properties Preparing for the worst

FEATURES 18 | Broker advice 38 | MCAP The two women helping lead one lender into the feature

issue

9.9

C OV E R

STORY

nders hts on s on le g Broker hare their thou aturing ss rs; fe Broker g lende e ugly in d a le h today’s he bad and t t , d o o the g

Unlocking valUe often reqUires special keys.

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MARKETING 40 | Not all referral partnerships are equal, writes Doren Aldana. The best ones result in ones for all parties involved

REGULARS 62 | Favourite Things 64 | CMP Service Directory

51 MARKETING

Leadership: The real cost of poor leadership

2 | SEPTEMBER 2014

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CONTENTS / EDITOR’S LETTER

MORTGAGEBROKERNEWS.CA

COPY & FEATURES SENIOR EDITOR Vernon Clement Jones STAFF WRITER Justin da Rosa CONTRIBUTORS Anson Martin, Doren Aldana, Anne Marie Lorriman, Karen Gately, Helen Collier-Kogtevs, Eddie Chung, Guy Lew COPY EDITOR Rachel Naud

ART & PRODUCTION SENIOR GRAPHIC DESIGNER Red Redrico

SALES & MARKETING ASSOCIATE PUBLISHER Trevor Biggs GENERAL MANAGER - SALES John Mackenzie 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.

WE – OR, SHOULD I SAY, OUR READERS – HAVE CROWNED A NEW CHAMPION A new lender has risen to the top of the heap, according to the broker sentiment captured with this year`s CMP Brokers on Lenders survey. The ballots cut a wide swath through the industry, with hundreds of mortgage professionals from across the country ranking and – in some cases – rousting their broker partners.

It was a tight race, with five different lenders averaging a score of 4/5 across several categories. How did your preferred lenders fair? Flip to page 20 to find out.

On the macro level, the results speak to growing lender responsiveness as they take on board the criticism of brokers looking for a more seamless originations process. Their attention to detail is all about retaining and, indeed, growing the number of Canadian homebuyers and owners willing to use the channel even as the big banks ramp up their competitive forces.

Check back next month as the lenders profiled in this year`s survey have their say. What have they got in store for the rest of 2014 and beyond? You’ll have to wait till October to find out.

Cheers, Vernon Clement Jones Editor

CONNECT

Contact the editor:

vernon.jones@kmimedia.ca

4 | SEPTEMBER 2014

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CONVERSATIONS / LETTERS TO THE EDITOR

MORTGAGEBROKERNEWS.CA

COMPLIMENTS TO COMMERCIAL BROKERS RE: CMP TOP 10 COMMERCIAL BROKERS (CMP 9.8)

RE: RATE SITE SURPRISE (CMP 9.8)

Commercial brokering as defined by these top player is a tough row to hoe, but it`s an increasingly rewarding one, reports CMP in its 2014 listing.

You have to hand it to RateHub.ca. It is collecting fees from brokers and then turning around to compete with the customer directly. Is business really that tough? I think that this is a lesson for brokers who use the site. Time to wake up and move on.

YAY, DAVID BECKINGHAM! Dave Beckingham clearly is doing what so many of us think we could do if we were to move over to the commercial side from residential. The numbers for his volumes, however, indicate that hard work is even more of a prerequisite.

-Jason Kemp

-Mitchell Harman

I think that brokers need to look at the volumes associated with commercial deals and see that there simply are not enough deals out there to sustain many more entrants to that portion of the business. I applaud the work of major success stories on this list. You are doing the best job with limited assets.

MOR TGA GEB ROK ERN EWS .CA ISSU E 9.8 | $6.9 5

T O P 1 0 COMM ERCIAL BROKERS

-June Leamon

I like this year’s list and the fact that CMP has not listed the exact volumes of these top 10 commercial brokers. I will contribute next year because I believe that we can show the success of brokers but we don’t have to share all of their business.

-Heather Culmer

What brokers have to understand is that the numbers seem very low compared to the volumes that other brokers in the residential space can produce, for instance, those on the CMP Top 75. That is the reality of the game, though, and brokers should realize that the comp. on those commercial deals is superior to whatever residential brokers get off of even their B or C files.

-Gary Morton-Chang

6 | SEPTEMBER 2014

2014

MICS A BROKER’S REF

ERENCE

BANKS VS. MO NOLINES BROKERS WEIGH IN ON THE BATTL E RENT TO OWN ADD THIS REV EN

UE STREAM

PLUS

Rate site

row pg. 8

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MARKET MATTERS / READING BETWEEN THE LINES

DEVIL

IN THE DETAILS? Brokers are divided on rent-to-own strategies, as highlighted in a recent MortgageBrokerNews.ca report. But proponents say the benefits depend on the strategy. Guy Lew of HOS Financial reads between the lines

2

3

4

1

5

8 | SEPTEMBER 2014

MORTGAGEBROKERNEWS.CA

1

FILES UNDERWRITTEN WITHOUT EXIT STRATEGY Most rent-to-own deals are underwritten by non-finance people who don’t understand basic underwriting guidelines such a debt-service ratios or what a lender will want to see on exit. The ones who do, do not take into consideration the fact that the occupants have derogatory credit issues and they feel the client can exit with 5 per cent down on exit to qualify as a high-ratio mortgage in the future with previous derogs This is a pending disaster waiting to happen ...

The biggest issue is the income to house ratio is way off.

2

NON-COMPLIANT CONTRACTS We are still seeing contracts taught by American-style seminar providers that totally do not comply with current rent-to-own rules in Canada. They are instantly declined at the insurers putting the occupants at risk of not being able to exit.

The investors evict the occupants and keep 100 per cent of the down payment and any option credits. We consider this predatory action and we advise clients in programs like this to consult an attorney.

3

CREDIT ESTABLISHMENT This is often the very reason driving clients into a rent-to-own program and yet nothing is done.

We have seen deal where the debts were never paid off and there was no attempt to rebuild or establish new credit so the credit score remained as low as when the client entered the program. We consider this a fee grab and that is considered fraudulent in our opinion.

4

REALISTIC APPRECIATION RATES We constantly see rent-to-own deals with small down payments, in order to attract investors, the appreciation rates are jacked up from 4-7 per cent per annum. At the end of the term, the home will appraise for thousands less and the lender will decline the file and the investor evicts the occupants and keep all the money. This again is not fair and unethical practice when CMHC has provided guidelines in certain markets and people choose to inflate the figure so the files look like a better deal.

5

INDEPENDENT LEGAL ADVICE A good lawyer could potentially be a nightmare for bad rent-to-own deals when they pick apart the deal and inform the client that they shouldn’t sign the agreement. We have seen many clients who were told they were not allowed to seek legal advice, but that should be mandatory. We usually have to fight to get our deals approved due to so many bad programs out there. We do not want to hear any client signed up due to mental duress or was coerced into signing.

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MARKET MATTERS / NEWS ANALYSIS

MORTGAGEBROKERNEWS.CA

STATS

COLLATERAL DAMAGE

Level the playing field, Mr. Oliver. That’s the request brokers have for the federal finance minister even in the wake of new proposals to bring transparency at the bank branch in line with that of the broker channel.

“I am a strong believer that both broker channel and the lenders are in the same playing field,” says veteran Toronto broker Angela Wong-Liao. “Transparency is very important to the consumers as they can make an informed decision of whom they would like to conduct business with. Our broker channel have been bombarded with so many disclosure forms since Jan 2009 and I believe that the lenders, whether it is a bank, credit union, trust company, investment firms, etc, should have similar disclosures when they are dealing directly with consumers as it is their fiduciary duties to do so.”

She’s not alone. Brokers are raising the same concerns on the heels of Joe Oliver’s move in August to raise the transparency bar at the banks.

Canada’s eight largest banks have now agreed to provide more information about collateral mortgages; including online educational resources and better training for their employees to help them better explain the difference between collateral charge mortgages and their more-conventional counterparts.

“Our government is standing up for consumers and saving Canadians money,” Oliver says.

Brokers have actively called for greater transparency around collateral-charge mortgages since several of the big banks made the move to regularize those loans, ostensibly as a way of giving clients better access to the equity they build up in their homes.

Brokers disagree, arguing the collateral mortgages effectively bind borrowers to their lender, preventing them from easily transferring mortgages at the end of the term.

The government’s latest move to hold banks more accountable is welcome news but there’s more that needs to be done, argue mortgage professionals.

“As a broker, we need to strictly follow the rules, but for those bank staff, it seems that they can do whatever they want,” comments one broker on MortgageBrokerNews.ca.

CONCERNS OVER COLLATERALS

Brokers haven’t traditional minced words come time to criticize collateral-charge mortgages, but is their bark really reflective of their bite? A new poll from MortgageBrokers. ca suggest there may be a discrepancy

HAVE YOU EVER PLACED A CLIENT IN A COLLATERALCHARGE MORTGAGE

YES: 68% NO: 32% WOULD YOU DO SO IN THE FUTURE?

YES: 52% NO: 48%

10 | SEPTEMBER 2014

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MARKET MATTERS / NEWS ANALYSIS

MORTGAGEBROKERNEWS.CA

STATS

STATS

NEW MINDSET; NEW CHALLENGE

The days of keeping up with the Joneses may increasingly be a thing of the past for broker clients, as more and more are content to stay in their current homes rather than step outside their financial comfort zone.

“I see it in my own practice and it really does mean that we’re likely to see fewer clients who are buying a new, bigger home every four or five years just because they feel they have to,” says Ernest Miller, a broker with Your Trusted Mortgage Broker. “It means we may see less repeat business and it places more emphasis on new business.”

Indeed. A recent poll from TD backs up the observations – to say nothing of the worrries – of many brokers.

Only one in seven (14 per cent) of Gen X Canadians consider themselves “House-All” buyers who go to the higher end of what they can comfortably afford when it comes to their mortgage, according to the TD survey.

“More than two thirds of Gen X Canadians have told us they don’t want their entire budget allocated to mortgage payments,” said Nupi Zubair, the associate VP for Retail Products at TD. “Buyers need to purchase a home at a price they can afford, while still budgeting for the other things on their list of priorities.”

12 | SEPTEMBER 2014

HOUSEHOLD CONSUMPTION

CANADA’S STRONG THIRD QUARTER GDP

3.8%

+3.1

Q/Q ANNUALIZED GROWTH

Q/Q ANNUALIZED GROWTH

Source: Scotiabank economics

Source: Scotiabank economics

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MARKET MATTERS / PRODUCT ROUNDUP

MORTGAGEBROKERNEWS.CA

PRODUCT NEWS AND INDUSTRY ANNOUNCEMENTS A bite-sized guide to the industry’s newest products and appointments as they come down the channel WHO: MCAP WHAT: MCAP VALUE-FLEX MORTGAGE PRODUCT

WHO: FINANCE MINISTER JOE OLIVER WHAT: CALLS FOR MORE TRANSPARENCY FROM BIG BANKS

MCAP, one of Canada’s largest monoline lenders, recently expanded its product roster with MCAP Value-Flex. It offers borrowers a low interest rate with flexible terms geared to helping them pay down their mortgage faster. Launched last month to excellent broker reviews, the five-year variable or five-year fixed mortgage includes prepayment privileges, accelerated payment options and early renewals.

Additional flexibility comes from the ability to port the mortgage at the same terms or refinance with blended rates. For homeowners looking to sell prior to the full mortgage term, there’s an early payout option if selling the property to a third-party purchaser.

A major broker gripe about a big bank mortgage policy has finally been addressed by Finance Minister Joe Oliver and more transparency about the practice is forthcoming.

Canada’s eight largest banks have promised to provide more information about collateral mortgages; including online educational resources and better training for bank employees to help them better explain the difference between collateral charge mortgages and their conventional counterparts.

“Our government is standing up for consumers and saving Canadians money,” Joe Oliver said of the voluntary policy.

WHY: “MCAP Value-Flex is the direct result of listening to what our brokers are hearing from their clients,” says Paul Bruce, managing partner, Single Family Originations. “Today’s customers are welleducated and fiscally prudent when it comes to shopping for a mortgage. Whether they are firsttime or experienced buyers, they are looking for not just that low rate but a value proposition that delivers as many non-restrictive options as possible for paying that mortgage down faster.”

14 | SEPTEMBER 2014

HOME TRUST

STATISTICS / PROJECTED RESIDENTIAL SALES ACTIVITY

NATIONAL PICTURE AT-A-GLANCE Sponsored by TM

RBC forecasts decelerating home-price growth and a cooling market next year – but how does each province measure up?

“We expect that rising interest rates and increasingly strained affordability will cool Canada’s housing market during the next year and cause home prices to decelerate substantially in 2015,” writes the Royal Bank in its most recent Canadian Housing Forecast report. “We forecast home resales to edge slightly lower by 0.9 per cent to 463,100 units nationwide in 2015 following an increase of 2.1 per cent to 467,200 units in 2014; and home price gains to moderate to just 1.1 per cent next year from 4.3 per cent this year.”

RBC’s latest forecast joins a chorus of economists , including the Conference Board of Canada, predicting a soft landing next year.

“The apartment condominium market enjoys a reasonable outlook; after considerable angst about prospects of a general housing market crash, most analysts, including us, now believe the Canadian market is not a bubble about to burst, but will land softly,” the conference board’s latest report, commissioned by Genworth Canada states. “There are pockets of higher risk, like potentially overbuilt condominium markets in several eastern cities, notably Toronto, and the possibility that slowing offshore demand could derail market recovery in Vancouver.”

For its part, RBC believes 2016 may see more drastic declines.

“The bigger test could well await after 2015 should interest rates normalize fully over the medium term,” the report states. “In this case, we could see outright price declines in the 2016 or later timeframe because we believe that prices will be the principal adjustment mechanism preventing affordability from reaching dangerously poor levels in the face of a substantial cumulative rise in interest rates— growing household incomes would provide only partial offset.”

16 | SEPTEMBER 2014

2014

2014

+9.5

+3.0

2015

-0.7

2015

-2.3

Saskatchewan

British Columbia 2014

+6.7 2015

+0.7

2014

+1.5

2015

-0.7

Alberta Manitoba

HOME RESALES FORECAST August Sales Activity (year-over-year percentage change)

MORTGAGEBROKERNEWS.CA

Source: CREA

HOME PRICE FORECAST 2014

2015

British Columbia

467,200

463,100

+2.1%

547,300 4.4%

-0.9%

551,900 0.8%

Alberta 375,500 6.4%

390,100 3.9%

Saskatchewan

Canada Forecasted number of sales for 2014

362,700 2.1%

Canada Forecasted number of sales for 2015

Manitoba 308,500 2.9%

2014

-3.8 2015

2014

+0.5

-1.5

2014

2015

-0.3

-0.3

2015

Atlantic Canada

-1.3

Quebec Ontario

314,500 1.9%

Ontario 416,000 5.7%

421,300 1.3%

Quebec 265,700 2.3%

265,400 -0.1%

Atlantic Canada 228,900 0.5%

D+H CMT Mortgage ad final.pdf

368,100 1.5%

1

4/16/2014

10:53:44 AM

230,700 0.8%

Source: Royal LePage, Statistics Canada, RBC Economics Research

SEPTEMBER 2014 | 17

MARKET MATTERS / BROKER ADVICE

PRIVATE LENDING

A VALUABLE TOOL IN YOUR BROKER TOOLBOX

It’s not for everybody, writes Anson Martin of Verico Fair Mortgage Solutions, but private money can provide the financing your client needs if you’re willing to do the work Since getting into the mortgage-brokering business I’ve been heavily involved on the private lending side. I’ve seen the worst of the worst and it’s a very different scene from your typical “AAA” client.

While rule changes in the mortgage world over the past few years − from the B-20 guidelines to the latest news from CMHC, only a few months ago − have certainly made it more of a struggle for some to obtain an approval, many of these types of clients would not have been approved by an “A” lender even before these latest revisions to lending policies, and so they have always needed options.

18 | SEPTEMBER 2014

Putting together a private deal is not for everyone. Many brokers prefer to concentrate on “A” work and that’s fine, everyone has their own type of business they focus on. Personally, I like the challenge these situations present, and more often than not, a client is far more appreciative of you helping them out of a bind and so they become clients for life, not to mention they’re more apt to tell all their friends about how you helped them when their bank wouldn’t. Still, it takes a lot of work to figure out how to place these deals and having the right connections with lenders thatwill actually finance them. After all, not every client has a home in the GTA with lots of equity.

Often times a broker can turn to a “B-type” lender when there are certain issues such as client in a credit rebuilding phase or a self-employed borrower who is unable to verify income through traditional means. While in some cases a solution can be found, it’s certainly not a catch-all for bank declines. Even some of these types of lenders have tightened up and aren’t quite as flexible as they once were. Depending on factors such as location and the extent of the credit issues they may scale back on the LTV, leaving a shortfall the client is unable to cover.

When a client approaches me for help with mortgage financing and has already been declined by their bank, my approach has always been looking at the situation in three ways: First, is there any product offered by an “A” lender that fits their situation, perhaps by adding a co-signer or some other way of re-structuring it to make it more appealing to the lender or insurer.

Second, if it cannot work as an A deal, it may

MORTGAGEBROKERNEWS.CA

work as an “Alt-A” deal. A few lenders have alternative lending divisions, which are still more competitive than a full on B lender. Although not quite as flexible, sometimes it can work this way, resulting in the client still getting a decent rate, all things considered. Failing this, it may end up being a B deal.

Third, if there are no other options, it will have to be a private deal. Even then I try to split it between a B lender holding a first mortgage followed by a private second mortgage as this usually ends up being cheaper for the client vs. an entire private mortgage.

A critical step is to have the right lenders to work with. Part of that is knowing when a mortgage investment corporation can be helpful and when you need a true private lender. There are a growing number of MICs across Canada that cater to clients in difficult situations, but most will cap financing at 75 per cent and are property location focused. While that may work in some cases, there are always situations where you need another option and that’s when an individual private lender becomes invaluable. There are a few private lenders that deal exclusively with my brokerage due to the amount of business we send them. However, I make it a point to network and actively search out new lenders. While many don’t work out, some do and it’s important to have relationships with those various lending sources because just like with a bank, not all see it the same way and some have more of an appetite for risk than others. While we do our best to see the full picture, perform our due diligence and work out an exit strategy, at the end of the day the lender

knows the risks involved and makes their own decision to lend or not.

Cost is a big factor with private lending as it’s far more expensive than a bank mortgage, both in terms of the interest rate and the setup costs. As a result, communication with the client has to be paramount so they know what to expect. Many clients in these situations have been through a rough patch in life and the last thing they need is a broker who doesn’t explain things clearly, leaving room for more unwelcome surprises.

Getting the mortgage funded is just the first step. A client needs to be guided back to becoming an A client, which for some will take longer than others. Many do not understand the importance of rebuilding credit, especially if they’ve just come out of a bankruptcy or proposal and it’s up to you to help them understand not only why they need to get back on track but how. Neither the client nor the lender wants to renew a private mortgage year after year; the client wants to be paying a lower rate and the lender wants their funds back to reinvest in another deal. Private mortgages should always be viewed as short-term solutions to allow time to address the reasons causing the client to need private funds in the first place.

Private lending makes up an important part of the overall mortgage financing pie. Not every client needs it, but there will always be those who do. It’s in those tough situations where a client needs a true mortgage professional helping them through it. If arranging a private mortgage isn’t something you do on a regular basis, consider partnering with someone who does. Together you can help the client, which is what it’s all about.

®

SEPTEMBER 2014 | 19

FEATURE /CMP CMP BROKERS ON LENDERS 2014

S R E K O BR N O ERS

4 1 0 2 T R O P E R L A SPECI

D N E L

vey r u s l a r annu ers u o n i ated artn p i p c r i t e r d a n ers p out their le k o r b e rtgag e to say ab o m f o ds hav Hundre is what they s and thi

20 | SEPTEMBER 2014

MORTGAGEBROKERNEWS.CA

PROUDLY SPONSORED BY

O

ur eighth annual Brokers on Lenders survey reveals how well some of the industry’s most popular lenders have reacted to and, more importantly, adapted to the 2012 mortgage rule changes. Still, the varying results reveal that certain partners have flourished while others continue to play catch-up in some key areas.

When it comes to the most important lender attributes – turnaround times, underwriter support, interest rates, among a few others – there were three lenders who have risen to the top of the lending pack. Lendwise, CMLS and First National each received glowing reviews from brokers, though their past results couldn’t be more divergent.

Lendwise is a complete newcomer to the survey, making its overall total score all the more impressive.

CMLS, meanwhile, has been in the middle of the pack in the past (according to past broker sentiment polls) but has obviously taken criticism to heart and improved its offering enough to be considered among the industry’s best.

And finally, First National is a perennial contender, making its inclusion in the top three almost expected at this point.

Of course, these weren’t the only three lenders to find themselves under careful scrutiny.

A total of 14 different lenders are featured this year. Grades were given on a scale of one (very poor) to five (very good) and while the overall response was overwhelming for each lender, a minimum of 25 votes was a requirement for inclusion in this year`s rankings.

This year, B2B Bank is proud to sponsor the annual Brokers on Lenders Report because being 100 per cent focused on brokers means supporting what brokers have to say in terms of satisfaction.

About B2B Bank

B2B Bank is a leading provider of banking products to more than 27,000 brokers and advisers across Canada. Through these channels, it offers a broad range of products and services to consumers, including mortgages, GICs, banking services, investment and RSP loans and investment accounts through B2B Bank Dealer Services. B2B Bank has been proudly dedicated to serving the needs of its clients for more than a decade, and it continues to provide innovative products and solutions that help brokers and advisers build rewarding relationships with their clients.

With the addition of our new expanded and alternative mortgages, B2B Bank now proudly offers even more ways to help brokers meet their clients’ mortgage needs. Competitive mortgage rates, broker compensation, reliable adjudication and a genuine respect for the relationship brokers have with their clients are all ways that B2B Bank helps brokers build their businesses.

B2B Bank is a Schedule I bank with more than $13 billion in consumer deposits, $9.2 billion in loans and mortgages and $28.7 billion in assets under administration. B2B Bank is a member of industry associations serving the financial community and is also a member of the Canada Deposit Insurance Corporation (CDIC). For more information please visit b2bbank.com.

SEPTEMBER 2014 | 21

FEATURE /CMP BROKERS ON LENDERS 2014

MORTGAGEBROKERNEWS.CA

PROUDLY SPONSORED BY

OVERALL STANDINGS

2014 MEDAL STANDINGS GOLD

SILVER

BRONZE

2014 TOTAL

2013 TOTAL

CMLS

4

2

0

6

3

SILVER

LENDWISE

3

2

3

8

N/A

4.14

BRONZE

FIRST NATIONAL

1

2

1

4

6

EQUITABLE BANK

4.11

4

SCOTIABANK

1

1

0

2

1

MERIX

4.11

4

NATIONAL BANK

1

0

0

1

1

CANADIANA

3.96

5

EQUITABLE BANK

0

3

1

4

N/A

MCAP

3.90

6

MERIX

0

0

3

3

7

RMG

3.90

6

MCAP

0

1

0

1

1

SCOTIABANK

3.88

7

HOME TRUST

0

0

1

1

1

STREET CAPITAL

3.80

8

STREET CAPITAL

0

0

1

1

N/A

HOME TRUST

3.79

9

B2B BANK

3.59

10

NATIONAL BANK

3.35

11

SCORE

RANK

LENDWISE

4.30

GOLD

CMLS

4.23

FIRST NATIONAL

TD BANK

2.70

12

OVERALL SCORES 2014 avg. score: 3.84 2013 avg. score: 3.90 CMP Analysis: Despite a record number of lenders cracking the four-plus point threshold, the overall score dropped slightly year over year. Still, the respectable average score is an indication that lenders are taking broker concerns seriously; though there is still room for improvement.

From an individual category standpoint, brokers gave higher marks in seven categories this year than they did in 2013; that’s compared to three categories where they handed out lower marks.

The discrepancy between the lower overall score and higher individual scores can be attributed to significant drops in two of the categories. Read on for a more detailed breakdown.

68%

20%

5+ YEARS

2-5 YEARS

BROKER EXPERIENCE BREAKDOWN

9%

1-2 YEARS

3%

LESS THAN A YEAR

22 | SEPTEMBER 2014

20-37_BrokersOnLenders_edited_V2.indd 22

24/10/2014 1:27:15 PM

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FEATURE /CMP BROKERS ON LENDERS 2014

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50%

1%

COMPENSATION

5%

RATE

PRODUCT OFFERING

WHAT IS THE MAIN REASON YOU SEND A DEAL TO THE BANKS INSTEAD OF A MONOLINE?

WHAT IS THE BIGGEST CHALLENGE YOU’VE HAD WITH A LENDER’S SERVICE IN THE LAST 12 MONTHS? “Inconsistency with policy and guidelines.”

“Property requirements -- the switch to (not financing) manufactured homes which in our area is a huge amount of business.”

“Lack of good underwriters.”

17%

27%

UNDERWRITER/ BDM SERVICE

CLIENT PREFERENCE

“Underwriter availability.”

“Interpretation of new rules, B-21/22, and very conservative approach.”

“Too many documents requested -- overpapering the clients when you know the banks aren’t requesting the same amount.”

“We are being paid based on our efficiencies, but there are no consequences to the lender/ underwriter for their inefficiencies.”

HOW MANY LENDERS HAVE YOU SUBMITTED DEALS TO IN THE LAST 12 MONTHS?

1% 2

5% 3

13%

81% 5 OR MORE

“Clients get frustrated when they can go to their bank and get a mortgage in one day while they wait several days (with a monoline lender) and sometimes lose a property during that wait time.”

“Banks not having the same rules set for their mortgage road reps as mortgage brokers.”

“Transparency about what exceptions to credit policy are allowed. Underwriting is tighter and tighter but they still allow exceptions; they just aren’t communicated well. It burns a lot of time for everyone following up to see if a credit issue is a “no” or “possible exception” to determine if a deal is a fit for submission.”

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FEATURE /CMP BROKERS ON LENDERS 2014

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TURNAROUND TIMES

TURNAROUND TIMES 2014 avg. score: 3.70 2013 avg. score: 3.75 CMP Analysis: Tighter underwriting is likely the culprit for the slight decrease in average score, with many brokers citing longer-than-acceptable wait times for files to be processed this year.

UNDERWRITER SUPPORT 2014 avg. score: 3.86 2013 avg. score: 3.87 CMP Analysis: A negligible decrease means underwriters are still, for the most part, providing valuable service to their broker partners. Several survey respondents applauded the efforts of individual underwriters continuing to go above and beyond their duties in order to get a deal through.

That’s despite tighter underwriting guidelines.

26 | SEPTEMBER 2014

SCORE

RANK

LENDWISE

4.46

GOLD

CMLS

4.42

FIRST NATIONAL

UNDERWRITER SUPPORT SCORE

RANK

LENDWISE

4.54

GOLD

SILVER

EQUITABLE BANK

4.40

SILVER

4.40

BRONZE

MERIX

4.32

BRONZE

MERIX

4.13

4

CMLS

4.28

4

CANADIANA

4.12

5

CANADIANA

4.20

5

EQUITABLE BANK

4.08

6

FIRST NATIONAL

4.16

6

MCAP

3.95

7

SCOTIABANK

4.02

7

SCOTIABANK

3.73

8

MCAP

3.95

8

RMG

3.72

9

HOME TRUST

3.92

9

HOME TRUST

3.65

10

STREET CAPITAL

3.82

10

STREET CAPITAL

3.46

11

RMG

3.80

11

B2B BANK

3.13

12

B2B BANK

3.52

12

NATIONAL BANK

3.02

13

NATIONAL BANK

3.12

13

TD BANK

1.52

14

TD BANK

2.05

14

We’ll be there first, too

Since its inception, MERIX Financial has led the way by being first to offer mortgage originators selective access, a compensation program focusing on the individual originator and dual-branded customer correspondence. With more than $10 billion in assets under management and 10 CMP medals under our belt, MERIX continues to provide originators with the tools they need to succeed. This includes innovative lending products and support initiatives, and an industry-leading compensation program that builds a book of business with ongoing value.

So you can count on MERIX to be ahead of the competition. Now. And in the future.

Learn how MERIX can reward you now and build long-term value. Call 1-877-637-4911 or email info@merixfinancial.com today.

Follow us on Twitter, Facebook, LinkedIn and YouTube.

FEATURE /CMP BROKERS ON LENDERS 2014

18% OVERALL SERVICE LEVELS

69% STAY THE SAME

DECREASE

HOW DO YOU PREDICT COMMISSIONS/ BONUSES WILL EVOLVE IN THE NEXT ONE TO TWO YEARS?

12%

INCREASE

1%

MOVE TO A FLATFEE COMMISSION

46%

THE MOVE TO EFFICIENCY RATIO

WHAT DO YOU THINK WILL BE THE MOST IMPORTANT ISSUE THAT WILL AFFECT THE BROKER/LENDER RELATIONSHIP IN THE NEXT 6-12 MONTHS?

26%

17%

COMMISSIONS

11%

LENDER CONCERNS ABOUT FRAUD DURING ORIGINATIONS 28 | SEPTEMBER 2014

HIGHER VOLUME REQUIREMENTS FROM INDIVIDUAL LENDERS

SCORE

RANK

CMLS

4.42

GOLD

LENDWISE

4.38

SILVER

EQUITABLE BANK

4.28

BRONZE

CANADIANA

4.24

4

FIRST NATIONAL

4.20

5

MERIX

4.20

5

MCAP

3.81

6

SCOTIABANK

3.79

7

HOME TRUST

3.77

8

RMG

3.73

9

STREET CAPITAL

3.61

10

B2B BANK

3.30

11

NATIONAL BANK

3.02

12

TD BANK

1.74

13

OVERALL SERVICE LEVELS 2014 avg. score: 3.75 2013 avg. score: 3.72 CMP Analysis: Lenders have scored a higher average for overall service levels in 2014 than in 2013. The improvement points to the extra effort lenders are putting forth in the wake of increased volume pressure and regulations.

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INTEREST RATES SCORE

RANK

RMG

4.72

GOLD

FIRST NATIONAL

4.30

SILVER

STREET CAPITAL

4.22

BRONZE

CMLS

4.20

4

LENDWISE

4.11

5

CANADIANA

3.96

6

SCOTIABANK

3.87

7

MERIX

3.83

8

B2B BANK

3.83

8

HOME TRUST

3.70

9

TD BANK

3.68

10

EQUITABLE BANK

3.67

11

MCAP

3.65

12

NATIONAL BANK

2.75

13

INTEREST RATES 2014 avg. score: 3.89 2013 avg. score: 3.81 CMP Analysis: Brokers – and, of course, clients – enjoyed a year of record-low interest rates that kicked off in late 2013. The good times continue to roll in 2014, with several lenders going sub-three per cent on their five-year fixed terms.

Brokers, obviously, have no complaints with lenders willing to match the market lows.

“It would be a huge mistake for any good mortgage broker to not give RMA serious consideration when choosing a brokerage.”

Maxine Crawford RMA Mortgage Broker Pickering, ON

It’s in your best interest ™

Learn more about the advantages of joining our team at

www.RMArocks.ca | 1.877.677.7778

SEPTEMBER 2014 | 29

FEATURE /CMP BROKERS ON LENDERS 2014

BDM SUPPORT

BDM SUPPORT 2014 avg. score: 3.99 2013 avg. score: 3.97 CMP Analysis: Many brokers lauded the extra effort put forth by BDMs this year in consideration of the business they send their way. The improved ranking reflects that.

PRODUCT RANGE 2014 avg. score: 3.88 2013 avg. score: 3.83 CMP Analysis: Several brokers beefed up their product offerings this year, with prime lenders adding to their alternative products and, in some cases, alternative lenders beefing up their prime offerings. These efforts did not go unnoticed by brokers.

30 | SEPTEMBER 2014

PRODUCT RANGE

SCORE

RANK

SCORE

RANK

CMLS

4.68

GOLD

NATIONAL BANK

4.30

GOLD

EQUITABLE BANK

4.61

SILVER

SCOTIABANK

4.22

SILVER

LENDWISE

4.59

BRONZE

LENDWISE

4.05

BRONZE

MERIX

4.48

4

EQUITABLE BANK

3.98

4

FIRST NATIONAL

4.10

5

CMLS

3.86

5

STREET CAPITAL

3.99

6

HOME TRUST

3.86

5

RMG

3.95

7

MCAP

3.85

6

CANADIANA

3.92

8

FIRST NATIONAL

3.82

7

MCAP

3.86

9

TD BANK

3.82

7

HOME TRUST

3.85

10

STREET CAPITAL

3.76

8

NATIONAL BANK

3.79

11

B2B BANK

3.74

9

SCOTIABANK

3.70

12

RMG

3.73

10

B2B BANK

3.57

13

MERIX

3.70

11

TD BANK

2.74

14

CANADIANA

3.60

12

MORTGAGEBROKERNEWS.CA

PROUDLY SPONSORED BY

WHAT IS THE BEST THING A LENDER HAS DONE FOR YOU IN THE PAST 12 MONTHS? “Using common-sense underwriting. Helping to make ‘make-sense’ deals work.”

“Went over a deal on the phone and helping to understand exactly what is needed to close the deal, which is all too rare with many lenders, unfortunately.”

“Explained why a deal couldn’t go through and recommended a different plan of attack.”

“One BDM sent me some scratch lottery tickets as a thank you for sending repeated business their way. I thought that was an outside-the-box type of response that made me feel special.”

“Overturned poor decisions made by the underwriter.”

“Called me and advised what day and time a file would be looked at when queues were long -- it allowed me to prep my client because the communication was open and great.”

What is one thing you would like to see lenders improve on in the next 6-12 months?

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YOur PArTNer FOr • Personal loans • 2 nd Mortgages • ConstruCtion Mortgages

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SEPTEMBER 2014 | 31

FEATURE /CMP BROKERS ON LENDERS 2014

MORTGAGEBROKERNEWS.CA

PROUDLY SPONSORED BY

OVERALL, IS ONE PARTICULAR LENDER PERFORMING BETTER THAN THE REST? IF SO, WHICH LENDER AND WHY? “First National always has great service mostly because of their fast turnaround, but Street Capital has really improved turnaround times, too. Both are go-to lenders for me.”

SATISFACTION WITH CREDIT POLICY SCORE

RANK

CMLS

4.10

GOLD

LENDWISE

4.05

SILVER

“Scotia with their designated underwriter sets them above the pack.”

HOME TRUST

4.00

BRONZE

“Xceed and B2B have taken this industry by surprise with great broker support and alternative lending - great BDMs and great management support.”

EQUITABLE BANK

3.92

4

MERIX

3.89

5

CANADIANA

3.88

6

MCAP

3.75

7

SCOTIABANK

3.75

7

RMG

3.66

8

FIRST NATIONAL

3.62

9

STREET CAPITAL

3.58

10

B2B BANK

3.48

11

NATIONAL BANK

3.43

12

TD BANK

3.15

13

“Canadiana is quicker.”

“RMG - we have a dedicated underwriter who just works on our deals. This results in faster turnaround times and more efficiency.”

“MCAP- they will do Gabriola Island without insurance on conventional.”

“Merix/Lendwise: my BDM/underwriter Chris has been awesome; he understands the deal. Very quick turnaround times, rates are good, the service has been amazing. More importantly, he has common sense, understands the deal.”

“I like Merix -- always great rates and service.”

“National Bank has the best rental product; their service is hito or miss, but we don’t have a choice.”

“CMLS Financial; Vince Agozzino is a one-of-akind BDM and takes every bit of feedback to heart and implements positive changes.”

SATISFACTION WITH CREDIT POLICY 2014 avg. score: 3.73 2013 avg. score: 3.70 CMP Analysis: A lender clampdown on underwriting notwithstanding, brokers remain largely satisfied with what many continue to refer to as common-sense thinking at Canadian monolines.

32 | SEPTEMBER 2014

“Home Trust is the best lender for sure. Their underwriters are trained to help brokers to close the deals while other underwriters are trying to find reasons to decline deals.”

“Equitable Bank performs much better than most because (its) team is reachable at all hours and turnaround times are quick.”

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FEATURE /CMP BROKERS ON LENDERS 2014

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PROUDLY SPONSORED BY

BROKER SUPPORT

IT/TECHNOLOGY SCORE

RANK

FIRST NATIONAL

4.35

GOLD

SILVER

MCAP

4.16

SILVER

4.36

SILVER

MERIX

4.05

BRONZE

MERIX

4.30

BRONZE

SCOTIABANK

3.90

4

FIRST NATIONAL

4.09

4

RMG

3.65

5

CANADIANA

4.04

5

STREET CAPITAL

3.63

6

BROKER SUPPORT 2014 avg. score: 3.87 2013 avg. score: 3.83

MCAP

3.88

6

EQUITABLE BANK

3.55

7

CMP Analysis: Lenders have continued to show their dedication to supporting their broker partners, through innovative products and helpful employees.

Brokers have obviously taken note.

RMG

3.87

7

CMLS

3.52

8

STREET CAPITAL

3.82

8

CANADIANA

3.44

9

HOME TRUST

3.82

8

HOME TRUST

3.41

10

IT/TECHNOLOGY 2014 avg. score: 3.53 2013 avg. score: 3.64

B2B BANK

3.78

9

B2B BANK

3.35

11

CMP Analysis: Technology is one area where lenders continue to struggle, according to brokers. Perhaps it’s time lenders show their dedication to aligning the quality of their technology with the growing expectations of both broker and client during and after the originations process.

SCOTIABANK

3.74

10

LENDWISE

3.10

12

NATIONAL BANK

3.39

11

NATIONAL BANK

2.95

13

TD BANK

2.25

12

TD BANK

2.38

14

34 | SEPTEMBER 2014

SCORE

RANK

LENDWISE

4.46

GOLD

CMLS

4.36

EQUITABLE BANK

FEATURE /CMP BROKERS ON LENDERS 2014

MORTGAGEBROKERNEWS.CA

PROUDLY SPONSORED BY

TRANSPARENCY OF COMMISSION STRUCTURE SCORE

TRANSPARENCY OF COMMISSION STRUCTURE 2014 avg. score: 4.14 2013 avg. score: 4.11 CMP Analysis: Lenders have always excelled in properly outlining the methodology used to compensate their broker partners and this year is no different.

36 | SEPTEMBER 2014

RANK

CMLS

4.48

GOLD

FIRST NATIONAL

4.38

SILVER

LENDWISE

4.33

BRONZE

MERIX

4.25

4

EQUITABLE BANK

4.23

5

RMG

4.23

5

MCAP

4.21

6

B2B BANK

4.17

7

CANADIANA

4.16

8

STREET CAPITAL

4.13

9

SCOTIABANK

4.06

10

HOME TRUST

3.88

11

NATIONAL BANK

3.77

12

TD BANK

3.70

13

ADDITIONAL BROKER COMMENTS: “Banks that deal with our industry are showing us that they prefer not dealing with the broker channel.”

“Underwriter support and turnaround times are very important! If we feel you don’t care about our business, we will take it elsewhere.”

“When volumes are high it would be nice to receive notification that a deal has been received and the name of the underwriter that will be working on the file.”

“Work for and with the brokers. We are all in this for the same reason. To see the client into their home, with a mortgage that is suitable for them.

Slow turnaround time and duplication is a slowdown none of us can afford.”

“Websites where clients can monitor their mortgage progress would be helpful.”

“Hopefully TD’s decision to outsource underwriting and doc review to First National will solve their massive problems with turnaround times.”

“Stop hiding behind the alleged results of FSCO audits. There is at least a small amount of room in our business for logic; however, that seems to have been set aside in the strive for compliance.

Take the stated-income products completely off your menu, and perhaps your portfolio will strengthen to the point where average Canadians won’t have to be treated like potential fraudsters.”

“Accountability from BDMs and underwriters is dropping. I suspect it is because deals are much tougher to get approved due to excessive guideline changes over the recent years from the insurers, the government and lenders.”

Credit  Income  Debt Servicing  Title Issues  Down Payment  Immigration Status

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serving Ottawa and Kingston (and surrounding areas), Gatineau, london, Cambridge, Guelph and Kitchener-Waterloo.

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CALL:

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Andrea Haines,

Sr. Manager-Sales & Client Relations

Cell: 613-850-0711

Andrea.Haines@magentainvestment.ca Tel 613-230-5014 ext 307 | PIN: 2AE4858C

Rebecca Griffeth,

BDM, Southwestern Ontario

Cell: 226-377-0809

Rebecca.griffeth@magentainvestment.ca Toll-free Tel 1-888-267-1744 | Fax 613-267-7644 Toll-free Fax 888-267-7644

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232 Herzberg Rd., Suite 201, Ottawa, ON, K2K 2A1

Committed to serving mortgage agents and brokers for 20 years

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HEAD TO HEAD / MCAP

UP CLOSE AND PERSONAL WITH

MCAP’s NEWEST VPs

Elaine Taylor and Megan McDonald are embarking on newly created shared vice presidency roles at MCAP – the final changes in a two-year reorganization.

The two women bring a unique skillset and experience to their vice-president, sales positions.

38 | SEPTEMBER 2014

Elaine Taylor brings with her extensive experience and knowledge from a lengthy career focused on relationship-building as a senior leader in three industries (relocation, real estate commission advances and mortgage brokering). Her in-depth career has seen her successfully build and manage

MORTGAGEBROKERNEWS.CA

teams, and oversee a wide range of areas – from sales, marketing and communications to customer service delivery and technical operations.

Taylor is well known in the mortgage brokering landscape, having been a part of the industry for nine years. She joined MCAP seven years ago and most recently worked as Senior Director, Strategic Partnerships, Single Family Origination. Her earlier roles within MCAP include Director of Communications and Sales Leader for Eastern Canada.

Megan McDonald has quite literally grown up in the mortgage brokering industry – beginning as an underwriter a decade ago – where she has culminated wide-ranging experience in people management and performance coaching. She has been with MCAP for the past nine years, most recently as Senior Director, Strategic Partnerships, Single Family Origination.

McDonald’s prior roles within MCAP include BDM, Director of Servicing and Director of Sales for Eclipse.

Q: Why are two VPs sharing this role?

A: We offer very different, yet completely complementary, styles and experience that make perfect sense for this dual VP role.

“Together, we can offer brokers a unique experience across Canada – with Elaine located in the east and me in the west – moving forward in a fresh and collective manner to ensure a balanced and thorough approach to broker relations,” says McDonald.

Q: How does it feel to be two women in an industry traditionally dominated by men?

A: We’re honoured to be women in this industry, but we hope to be seen first as professionals and second as women. Woman advocacy is not our goal, but if we can further the cause for women in this industry and act as role models, that’s great too.

“Although this industry has been traditionally dominated by men, there’s definitely room for women,” says Taylor. “Several women have helped pave the road for us in leadership roles within this industry, and we wish to continue their great work.”

We’re experienced industry professionals who feel we can truly make a difference by ensuring we continue to adapt to the ever-changing needs of brokers.

Q: How are you planning to do things differently in this joint role?

A: Collectively, we would like to enhance the overall broker experience. More than ever, we’re actively seeking broker feedback. We’re listening closely so we can make changes that will boost the customer experience. We’re returning to grassroots so we, alongside our team, can hear first-hand what we need to do as opposed to assuming we know what brokers need and want.

“We want to hear from our broker partners about what they need to improve important aspects of their day-to-day businesses such as technology, deal turnaround, notifications, underwriter relationships, BDM visits and ongoing communication,” says Taylor.

Openly seeking feedback at all levels, in turn, enables us to react and adapt quickly to the changing needs of brokers.

One key enhancement we’ve recently made includes a single tab on Professor (MCAP’s broker portal) that allows brokers to see all MCAP policy/ procedural updates in one place so they don’t have to rifle through emails to see what’s new.

Q: What’s new at MCAP? A: “This is an exciting time for change at MCAP – including everything from positive internal management changes to new products and services,” says McDonald. “We’re focused on continuing to provide consistent service, competitive rates, as well as enhancing Professor to make brokers’ lives easier.”

We just launched the MCAP Value-Flex mortgage, which combines a low rate with flexible mortgage terms to meet borrowers’ current and future needs– one of many new products being rolled out by MCAP. MCAP Value-Flex is ideal for borrowers who are rate-sensitive and want the flexibility to access mortgage privileges including early renewals, ports and refinances with blended rates or the ability to pay out early if they sell their property to a thirdparty purchaser. Borrowers can choose either a fiveyear variable or five-year fixed mortgage with a 90day rate hold period.

Brokers across Canada can expect to continue to see a lot of enhancements within MCAP that will help boost broker efficiency and offer an even stronger range of flexible products to their clients.

SEPTEMBER 2014 | 39

BUSINESS STRATEGY / SECRET #19

CREATIVE STRATEGIC

ALLIANCE

Not all referral partnerships are equal, writes Doren Aldana. The best ones result in wins for all parties involved SECRET #19: THEY USE CREATIVITY TO HARNESS THE UNPARALLELED POWER OF STRATEGIC ALLIANCES. Strategic alliances are referral partnerships that provide a win-win benefit for both parties. In most cases, your strategic partners will be other complementary businesses (not competitive) that have the same target market as you do. For example, you could partner with Realtors, financial planners, accountants, divorce attorneys, real estate attorneys, insurance agents, etc.

The biggest question I hear from mortgage professionals on this topic is, “how do I approach Realtors or financial planners in the right way so they will want to refer business to me?” Good question. One of the secrets of Superstar mortgage pros is that they use their imagination and creativity to add unique value to their strategic partners. They understand that everyone is tuned into the same station: WIIFM – What’s In It For Me! They don’t expect to receive referrals just because they exist.

They know they need to earn referrals. That’s why they consciously choose to adopt a “go-giver” attitude, with a proactive focus on adding massive value such that they are seen as an irreplaceable, indispensable asset on their partner’s team. And it all starts with creativity.

Here are a few powerful questions to start activating your creativity…

1 2

What referral partner category has the highest capacity to send me the most amount of referrals most often? (Hint: it’s probably the one with the most competition).

What are your referral partners’ primary marketing objectives? For example, a Realtor’s primary objectives are to attract more quality listings, generate more buyer leads and sell their listings faster at top dollar.

40 | SEPTEMBER 2014

MORTGAGEBROKERNEWS.CA

3

What are your referral partner’s biggest challenges when it comes to their primary marketing objectives? For example, Realtors often drop the ball when it comes to database marketing and struggle to attract quality active listings. If it’s a buyers’ market, they often have a hard time generating qualified buyer leads for their listings. All this results in slow-to-sell, stagnant listings, inconsistent cash flow and lying awake at night worrying about where the next deal is going to come from. Sound familiar?

4

How can you help your referral partners solve those problems and, at the same time, generate more qualified leads for your mortgage business? For example, you could provide your Realtors with tools, templates and systems that allow them to effectively “mine the gold” from their database, attract more quality listings and generate more quality buyer leads for each listing, thereby increasing the chances of a fast sale! And here’s the cool part: each buyer lead this system generates, provides a sizzling hot new lead for you!

5

How can you create more “pain of disconnect” so your referral partner would go into instant hysteric convulsions at the mere thought of losing you as a partner? To illustrate this, imagine you’re part of a surface-supplied scuba diving team and you get stuck in the boat to keep watch while everyone else goes down in the water to explore.

Then, being the prankster you are, with a sly smirk on your face, you decide to turn off everyone’s air supply for 10 seconds -- just for the fun of it!

Obviously, you’d never do that in real life but my point is this: That 10 seconds of no oxygen would cause HUGE pain of disconnect!

Now let’s apply this concept to your business.

What if you could provide so much amazing, compelling, unique value to your Referral partners that they would literally shutter at the thought of losing you? That’s exactly the kind of pain of disconnect you want to create -- the kind that positions you as an irreplaceable, indispensable asset on their team. It may sound like a tall order but with the right mindset and the right marketing, it’s a lot easier than you might think.

Can you see how this win-win approach to your strategic partnerships would dramatically increase the amount of partners you attract and, more

importantly, the number of referrals you generate?

You better believe it! What’s more, this value-added strategy positions you as a giver not a taker, a partner not a parasite. And the law of reciprocity works in your favour to bring you more business than you can handle!

Want some help putting this into practice? In my Mortgage Superstar Coaching Program, I provide step-by-step instructions on how to put together an irresistible, unique value proposition that will get potential referral partners eager and motivated to partner with you, working on your terms, not theirs.

I also stuff your quiver full of killer marketing weapons that you can use to add massive value to your referral partners, including but not limited to:

• MONTHLY CLIENT NEWSLETTERS • LEAD GENERATION SYSTEMS • REFERRAL SYSTEMS • CLIENT “WOW” SYSTEMS • SALES SCRIPTS AND MORE

Regardless of whether you decide to use my systems, someone else’s or (heaven forbid) you create your own from scratch, know this: systems are mission-critical to your success. You see, that’s exactly what most of your active and prospective referral partners lack the most... systems! So, if you want to have a long lineup of high-powered referral partners banging down your door to do business with you, you’ve got to go beyond the Plain Jane Vanilla “great rates” and “great service” shtick. You need systems that provide so much outrageous value, that you become the only logical choice. Now that’s a goal worth pursuing!

In next month’s 20th secret, you’ll discover how superstar mortgage pros minimize their risk and maximize their return on investment on their paid advertising. Stay tuned...

Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach and has won the “Best Industry Service Provider” award three years in a row at the 2012, 2013 and 2014 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.

SuperstarMortgageBroker.com

SEPTEMBER 2014 | 41

LEADS / ANALYTICS

The

5

Qualities of an Analytics Expert The online world has solidified itself as the primary lead generation channel for many brokers , writes Anne Marie Lorriman of Pineapple Circuit. As they clamour to partner with rate engines, place ads, earn followers, & create content, many will overlook the most important aspect of all these efforts.

Around the turn of the last century, a wealthy merchant named John Wanamaker, was quoted as saying, “half the money I spend on advertising is wasted; the trouble is I don’t know which half”. He has been immortalized since the industry of internet advertising finally found his answer. It’s the holy grail of online advertising, and if you’re not doing it, then you’re doing it wrong.

It’s analytics...

42 | SEPTEMBER 2014

MORTGAGEBROKERNEWS.CA

If you don’t know how many leads you get from each of your promotional channels, or how much each of these leads cost you, you are still living at the turn of last century, and you are wasting half your ad money... if not more.

How does it work? It’s not dissimilar to Hansel and Gretel; little pieces of invisible code, when placed on your website, tie your site visitors’ actions to how they got there. Setting it up is pretty much a copy and paste job.

Performing the analysis however, is where you may want to enlist an expert. And I mean a real one.

Let’s face it, you’re busy, and when you try to turn your attention to something resembling an airplane dashboard like this,

Nevertheless, without paying attention to it, your cost per lead trend is at best, going to look like this:

Or worse,

OR THIS,

So if you want to make your cost per lead trend look like this (you do):

You’re not going to do it because you’re neither paid, nor are you likely qualified, to fly airplanes.

Let me absolve you of any guilt you feel over this; this is a specialized skill, requiring years of mentorship, practice, and a personality that enjoys staying in on Saturday night to tackle some serious data automation in her excel documents.

SEPTEMBER 2014 | 43

LEADS / ANALYTICS

MORTGAGEBROKERNEWS.CA

Hire someone. But who? How do you know they’re doing right by you? Whether this is a person, consultant, agency, etc. There are a few things that will help you know you’re analytics specialist is on their game.

1

It doesn’t take you longer than 2 minutes to comprehend their report The first time you see it, you might need a 2030 minute walk-through, and then you might need another refresher but after that you should be able to look at it, know exactly where your time and money is best spent, and the most important next steps for reducing the costs associated with a lead.

2

...But you still have the answer to every important question It’s not uncommon to see reports with a few numbers and maybe a graph, and you get the same thing each time. If there isn’t a “so what?” happening, you aren’t getting to the heart of it.

Your analytics expert should be able to pinpoint 1-3 of the most important action items for improvement so you can walk away knowing exactly what you have to do this month to reduce your cost per lead.

3

You are looking at the tip of the iceberg, not the whole thing If you’re seeing the exact same data and analysis every month, chances are the analytics expert is not looking at any additional data to what you’re seeing. What they look at should be a much bigger data pool than the executive summary that you ultimately see. The analytics expert is not just churning out numbers but asking questions like, ‘could a decrease in traffic on the rate engine’s site have this effect on our report?’, ‘how many times a day does this brand tweet, and could increasing or decreasing this have an impact?’ This is the part of the iceberg that you don’t see, but you still benefit from.

4

You’re focusing on one key performance indicator, and only one It’s almost instinctual to categorize everything you do as the most important thing. If you just made yourself a snazzy new video, there is strong temptation to make the number of views the most important thing in your life. Your analytics expert should be there to talk you off the ledge of data destruction. Which is closer to money in your pocket, a video view or a lead? Yes the video may increase leads, but leave that to your analytics expert to conclude. With a great analytics expert, the most important data will always prevail, despite any data add you may have.

5

Your key performance indicator improves on an ongoing basis This isn’t to say that every single time you get your report the performance should improve.

Some months the educated guesses will be wrong, you’ll get hit with seasonal factors, recessions, and really sometimes it’s just bad luck. But if you look back over years at your trend line, your cost per lead should be improving. This is, of course, provided you’ve conformed to the dictum of your analytics expert. But otherwise, without improvement, you have to ask what you’re paying for.

Finding an analytics expert who works well with your advertising providers and delivers on these five points, will prove worth every effort. It may take a few tries to find the right fit, but when you do, decreasing your cost per lead will become inevitable.

At Pineapple Circuit, these five principles are our dogma, so if analytics is your Achilles heel, please give us a call, because spending Saturday night with a spreadsheet is our bag.

44 | SEPTEMBER 2014

LEADS / GENERATION

TAKING THE LEAD

Leads are the lifeblood of successful mortgage companies, and figuring out how to generate them can almost be a full-time job in itself. But not all lead generation strategies are created equal It doesn’t get much simpler than this: If you have no customers, you have no business. And if you have no leads, you have no new customers.

If you want to grow your business and keep new customers coming through the door, you’ve got to have a rock-solid lead-generation strategy. But the lead-generation game is changing. Originators used to be able to rely on direct mail, radio advertisements

46 | SEPTEMBER 2014

and the like. But as technology takes a bigger and bigger role in the industry, originators are adding websites and social media to their lead-gen efforts.

Keeping up with the industry’s tech trends is vital – but, according to Lead Gen Concepts cofounder Paul Johnston, that doesn’t mean the triedand-true strategies don’t work, too.

MORTGAGEBROKERNEWS.CA

POUNDING THE PAVEMENT “Leads come in from you doing something. You have to pick up the phone. You have to create some kind of worth for yourself so people want to work with you,” Johnston says. “You really just need to ask. You need to get out there and do it.”

There are a lot of lead-generation strategies, ranging from low- to high-tech. And yes, an online presence is important. But the way to start, Johnston says, is to get out there and do some good oldfashioned pavement pounding.

“If you want to generate your own leads, you need to start with marketing to local Realtors, marketing to specific demographics in various forms,” he says. “Networking to title companies and doing presentations for their Realtors – even offering some kind of strategy session on how they can generate their own leads. I could go on and on, but that would be a couple of good places to start.”

KEYS TO SUCCESSFUL LEAD GENERATION • Authority Choose a niche to own • Buyer empathy Understand the needs and wants of your target audience • Marketing Drive qualified traffic to your website through search engine optimization, pay-per-click advertising, press releases, content marketing and online networks • Sales management Invest in a good lead-management system and keep a close eye on the results Source: Mark Madsen, Best Rate Referrals

LEAD GENERATION BY THE NUMBERS: WHAT ORIGINATORS NEED TO KNOW Hot tips

Calls

Email

391%: Leads

5 minutes:

16%: Leads that are

called with 60 seconds have a 391% better chance of converting

138%: Attempting

contact at least six times can increase the contract rate by 138%

3 or more texts:

Sending three or more purposeful text messages after contact has been made with a prospect can increase the conversion rate by 328%

Calling a lead within five minutes increases the contact rate by 500%, compared to calling after 10 minutes

76%: Up to 76% of

high-quality leads contacted within three minutes are immediately qualified

100 times: Calling a

50%: More than 50%

lead within five minutes makes you 100 times more likely to reach the lead than if you called after 30 minutes

60%: Nearly 60% of

2 calls: Making two

of aged leads are still interested in buying 30 days after inquiry salespeople make less than six contact attempts

78%: of buyers close

with the company that contacted them first

calls instead of one increases the chance of contacting a lead by 87%

2.8 calls: Lenders

averaged 2.8 calls per lead

Source: Velocify

Follow-up

sent email messages in between phone contact attempts have a 16% higher chance of being contacted by phone

3.5 times: Leads that receive email nurturing have a 3.5-times higher conversion rate

53%: An average 53%

conversion gain can be achieved with the recommended email timing

Less than 1: Lenders averaged less than one email per lead

24 hours: 74% of

lenders failed to call within 24 hours

58%: of lenders sent email within 24 hours

391%: Response

within one minute = 391% improvement in conversion rate

47% of lenders failed

to make an average of one call attempt per lead

21%: Only 21% of

lenders attempted to call leads within 24 hours

9 out of 19: Nine out

of 19 lenders failed to contact all leads

SEPTEMBER 2014 | 47

LEADS / GENERATION

MORTGAGEBROKERNEWS.CA

TRUST THE PROS Social media can be a powerful tool, Johnston says.

And it seems simple enough – but unless you’re an expert, you might want to consider farming out your Facebook presence. “(You get leads from) realtors, insurance brokers, financial planners, title companies, and anyone you’ve worked with in the past,” Johnston says.

“Those would be your top five. And you can throw in Facebook – if you know what you’re doing. It takes practice. If you’re going to go out and use social media to try and generate leads, you need to find someone specific who knows what they’re doing. That can be a company, an individual – somebody who specializes in that.

“Leads come in from you doing something.

You have to pick up the phone. You have to create some kind of worth for yourself so people want to work with you. You really just need to ask. You need to get out there and do it.”

Paul Johnston, co-founder, Lead Gen Concepts “If you’re going to specialize in mortgages, that’s what you need to specialize in just that – mortgages,” he adds. “It’s very complicated. I would say delegate the lead-generation part of your social media.”

BUYER BEWARE What about buying leads? Well, the biggest buyers of leads are large companies like Quicken Loans – but they have the manpower to follow them up.

Johnston warns that while buying leads may seem like a timesaver, it’s really no substitute for generating them yourself.

48 | SEPTEMBER 2014

BUILDING A BETTER WEBSITE • Know what people are searching for Google’s keyword tool can tell you the search volume for particular keywords • Build pages for those specific keywords Put the keyword in the page title, description, header, content – even the image tags • Provide links Link to your site in press releases, Yelp reviews, YouTube – anywhere it makes sense • Use analytics Track how many people come to you – and from where • Hire a pro A lot of people say they know how to build websites. Make sure you find one who can do it the right way Source: Sexton & Co.

“There’s a lot of companies out there that advertise their leads, their databases, that kind of thing. But one, most of them aren’t worth anything,” he says. “And two, it takes a very specific kind of loan officer – really, a pushy salesperson – when you’re buying leads. You really want (your customers) coming to you on a recommendation instead of you trying to chase them down.

“I know people do well buying leads – not everyone – but unless you’re a pushy salesperson, you’re probably not into buying leads,” he adds.

“Learn to generate your own leads, and people will come to you. You’ll do a lot better.”

If you do think purchased leads are the way to go, Johnston says, don’t just hand your credit card over to the first company you find online. Not all lead companies are created equal, and a wise originator will do plenty of research before purchasing a single lead.

“If you’re looking to buy leads, you need to speak to the company that’s trying to sell them,” Johnston says. “Ask them for three current clients who are doing so well with their leads that you can call and get an honest opinion. If someone is generating business with company leads, they should be more than happy to tell somebody else that it’s working.”

Ultimately, Johnston says, you have to evolve a strategy that works for you, and keep at it.

“You would have no business otherwise,” he says.

“It’s pretty simple.”

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BUSINESS STRATEGY / LEADERSHIP

Inspired Ordinary

THE REAL COST OF POOR LEADERSHIP

Without strong leadership, your business will continue to sit on top of a wealth of untapped potential. Karen Gately reveals how to inspire the best in your staff – not just aim for ‘ordinary’

Read any research on employee engagement and you are likely to find a similar story. Global statistics show only 30 per cent of people are actively engaged at work. Active engagement means that people feel a sense of emotional ownership and are committed to achieving the objectives of their role. The remaining 70 per cent fit somewhere between somewhat engaged to actively disengaged. The actively disengaged are those deliberately looking for ways to minimise their contribution and even sabotage success.

These statistics show the vastness of the untapped potential sitting in most organizations.

The unfortunate reality is that at the heart of the issue is poor leadership. Through recruitment decisions, leadership development and employee engagement strategies, there is much you can do to inspire far more than ordinary. The most important things you can do to inspire your own team and support business leaders to do the same are explored through the remainder of this article.

STRIVE FOR EXTRAORDINARY Leaders who bring an uninspired, lethargic, conservative or cautious approach undermine the ambition and confidence of their team. Hesitant and reserved leadership diminishes the belief people have in their own potential and drains the team of vital energy needed to succeed. Without confidence and energy people are unlikely to strive.

Thriving people and teams are ambitious and push beyond safe boundaries to give new or challenging things a go; they work hard to achieve results and take the opportunities that come along.

Leaders who accept the mediocre fail to inspire other people to reach beyond ordinary standards of performance. Equally they struggle to inspire people to be committed to the organization and excited about their future. Aiming for easily achievable goals is only ever likely to inspire ordinary levels of engagement and outcomes. The real cost of this approach to leadership can be seen in sub-optimal operational performance, customer satisfaction, staff loyalty and engagement.

50 | SEPTEMBER 2014

MORTGAGEBROKERNEWS.CA

News

InternatIonaL

PLAN TO SUCCEED

u.s.starting point of any successful endeavor is The understanding and articulating the specific U.S. housing than thought outcomes youmarket want worse to achieve.

Laying out your The number of Americans who bought previously plans and what you need from each person is occupied homes rose in October. But the National fundamental your says ability to leverage thethan talent Association of to Realtors it overstated more and your team drive results. threeenergy million of sales during andtoafter theoptimal Great Recession, However, hectic pace which showing thethe housing market wasat weaker thanso many previously thought. managers and teams operate makes achieving this Theand private trade group at says salesWith rose four clarity focus difficult times. our per minds cent in October to a seasonally adjusted annual rate ofis occupied with here-and-now priorities there 4.42 million. That’s below the roughly six million homes often little energy and space created for reflecting a year that economists say are consistent with a healthy on future possibilities. planning as housing market.

But it’s aheadConsider of 2008’s revised sales, essential and forge the time now considered the worst in 13needed years. to do it well.

Engage your team by not insight to The trade group revised itsonly salessharing from 2007 to 2010 down own 14 perthinking cent, frombut more million them to nearly your bythan also20.6 allowing to 17.7 million. Among the reasons the lower figures, contribute.

Allow people to befor a part of the process the Realtors group says: changes in the way the Census you work through to determine where you are Bureau collects data, population shifts and some sales heading and how you plan to get there. Ask the being counted twice. people your team to work you to define Theon Realtors consulted withwith government and the strategies, values, behaviours capabilities private housing experts, including theand Federal Reserve, needed to achieve more than ordinary outcomes. the Department of Housing and Urban Development, the Mortgage Bankers Association, Don’t underestimate the qualitytheofNational contribution Association of Home Builders, mortgage Fannieof people can make irrespective of thegiants seniority Mae and Freddie Mac and CoreLogic, a California-based their position in your team. data firm that first raised doubts about the annual numbers earlier this year.

CREATE ANhas INSPIRING CoreLogic estimated that the Realtors group VISION OF THE overstated sales in FUTURE 2010 by at least 15 per cent.

Every leader numbers I have achieving The changing couldobserved affect how economists view the trade group’s data. could also affect extraordinary results hasItdone so by firstcompanies creating that use the fivision gures for hiring and expansion plans. an inspiring of the future that people believed measured when on homes. in. Sales Thesearemanagers have buyers won close buy-in through But many deals are collapsing before that point. encouraging belief in exciting possibilities and in One-third of Realtors said they had at least one contract the team’s ability toupsucceed. too often, scuttled in October, from 18 However, per cent in all September.

I meet leadersare who know what they want the future Contracts being cancelled for several reasons: to holdhave butdeclined fail to share theirapplications; dreams with anyone Banks mortgage home

&

TOP 8 REASONS inspectors have found problems; appraisals WHY PEOPLE QUITshowed a home was worth less than the bid; a

90.6% 52.1%

buyer lost a job before the closing.

Forbes has listed the top reasonsMore why than your two bestyears after the recession offigoes, cially ended, employees leave. As the saying ‘peoplemany people can’t qualify for loans or meet higher down payment quit their bosses, not their jobs’: requirements. Even those with excellent credit jobs are holding off because they fear 1. Percentage You’ve overloaded yourand beststable people of that home prices will keep falling. Sales are also with too many responsibilities homeownership being hurt by a decline in first-time buyers, who

including 2.costs, You’re a micro-managerare critical to reviving the housing market.

mortgage payments, Sales have fallen in four of the five years 3. You’re never around utilities and property since the housing boom went bust in 2006.

4. You’re touch how some of taxes that not takeinup a with Declining prices and record-low mortgage rates yourhousehold’s hires or promotions are driving typical haven’t been enough to boost sales. your best people nuts monthly pre-tax At the same time, home construction has income in Vancouver 5. You’ve never given yourbegun people sense comeback and should add to the aa gradual and Toronto, of where they can go with their careers economy’s growth in 2011 for the first year since respectively (RBC the Great Recession began in 2007. Last month, 6. You run Housing terrible meetings Economics builders broke ground on an annual rate of Trends and 7. You communicate that you care more 685,000 homes, the government said recently.

Affordability Report) about yourself than the That teamwas a 9.3 per cent jump from October and pace since April 2010.

8. You’ve never given themthe thefastest big-picture economists say home prices will keep vision of where your group isMost heading or falling, atpicture least five per cent, through 2012. you are constantly changing thebybig

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

The high rate of foreclosures has made resold homes cheaper than new ones. The median price of a new home is roughly 30 per else. Other leaders I meet struggle to create a clear cent above the price of one that’s been occupied picture in their own mind and therefore lay markup. Investors are before – twicefail thetonormal advantage of the discounts. down the path for their team taking to follow.

The housing market is struggling even Paint a picture of what you are aiming to achieve as the broader economy as well as the contribution you need each person on has improved in recent months. your team to make. Ensure vision isn’t limited to the The economy grew at an annual pace of two ‘big picture’ view of your organization’s ambitions; per cent in the July-September quarter. Many the vision each team has of their own future matters economists expect slightly better growth in the just as much in inspiring people to strive. Influence October-December quarter. CMP Source: Forbes.com

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BUSINESS STRATEGY / LEADERSHIP

your team’s confidence that big things can happen but also inspire in them a passionate desire to strive to get there.

Hesitant and reserved leadership diminishes the belief people have in their own potential and drains the team of vital energy needed to succeed.

Without confidence and energy people are unlikely to strive THINK BEYOND CONVENTIONAL WISDOM

Karen Gately is a leadership and people-management expert and a founder of Ryan Gately, a specialist HR consultancy practice.

She is also the author of The People Manager’s Toolkit: A Practical guide to getting the best from people and The Corporate Dojo: Driving extraordinary results through spirited people. For more information, visit www. karengately.com.au or contact info@ karengately.com.au

52 | AUGUST 2014

To achieve the best possible outcomes it’s essential that your team challenge conventional wisdom.

Limiting dreaming to within the boundaries of what is commonly understood or accepted is likely to lead to, at best, ordinary results. Being a leader in any industry takes a willingness and ability to think beyond what is typical – to have the courage to take the road less traveled, or even one that has never been traveled at all. Our history is rich with examples of the achievements of people who dared to think differently and give new things a go.

By promoting a creative culture you are more likely to continue to expand your own vision and realm of possibilities over time, and it is these expanded possibilities that will empower you and your team to reach the highest peaks of your potential. Your own ability to conceive of a bigger and brighter future matters, but so too does your ability to inspire that belief in others. Challenge limiting beliefs and make it OK for people to suggest and try things that haven’t been done before.

KEEP DREAMING Visioning is neither a one-off nor a once-a-year event. Looking into the future, dreaming about what might be possible and imagining the places you would like to go are crucial if a business or team

MORTGAGEBROKERNEWS.CA

is to achieve their full potential over time. Our ability to continuously grow and evolve depends on curiosity and the desire to keep exploring new and better options or approaches. Leaders who lack imagination and are happy to evolve slowly will struggle to inspire other people to strive for excellence.

Plodding along doing what you have always done is not necessarily going to serve you well in the future. Organizations that ‘stick to their knitting’ and fail to innovate are those most likely to be adversely impacted by change. Unless you inspire people to challenge what they do and how they do it you are unlikely to keep pace with the rapidly changing world in which all businesses operate. No matter the competitive advantage your organization may have today, it can change quickly and you are wise to be ready to respond.

UPHOLD STANDARDS AND DEAL WITH POOR PERFORMANCE Inspiring a team to strive for excellence requires that leaders hold people accountable for the standard of contribution they make. It’s essential that immediate steps be taken to address mediocre through to inadequate performance. As poor performers drag down a team’s results, those who are making a positive contribution begin to lose motivation. Failing to deal with the issue will eventually lead others to give up, resigned to the fact that only ordinary is possible.

Among the most commonly reported reasons people leave an organization is because they are unhappy with their manager. While it’s common for complaints to relate to the manager’s style, just as often people express frustration with their manager’s failure to deal with the poor performance or behaviour of their colleagues. Often when strong performers feel held back by their manager’s failure to hold some people accountable, they choose to move on.

IN SUMMARY Expect more than ordinary and you will have taken the first step toward inspiring people to give more than ordinary. Lead by example and showcase what it means to strive to achieve the heights of what is possible. Bring energy to your own role and hold people accountable for doing the same. Give people something to strive for and keep them informed about how your team is progressing toward turning your dreams into reality.

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BUSINESS STRATEGY / WORST CASE SCENARIO

If there is one thing that always rings true about investing in real estate, it’s this: regardless of where you invest, what type of property you buy, and what kind of market you’re buying in, property investing comes with inherent risks attached. Period!

There is no way to eliminate these risks completely – just as there is no way to be 100 per cent certain you won’t have a car accident when you drive your car.

That said, there are definitely things you can do to minimise the risk of something going wrong.

When you slide into the driver’s seat of your car, you can pop a seatbelt on, drive at the speed limit, have a clear destination in mind and start your journey with plenty of time on your side, so you’re not feeling stressed or under pressure to meet an unrealistic deadline.

And when you invest in property, you can put a number of measures in place to ensure your investing journey is as smooth – and as profitable – as possible.

So what are some of the imminent risks for investors in the current market, and how you can prepare for them?

Preparing 1 for the

CLEAR AND PRESENT DANGER

The first step is to work out exactly what risks you could potentially face. In my view, three immediate risks spring to mind:

worst Despite what some ‘experts’ tell you, investing in property carries risks. The good news is, with preparation you could easily surmount these threats.

Helen Collier-Kogtevs explains 54 | SEPTEMBER 2014

Relying on low interest rates If you are making repayments on any type of home loan right now, then you should be as happy as a clam when paying your monthly interest bill. Why? Because currently, Canadians are paying some of the absolute lowest mortgage rates we’ve paid in years.

Variable rates presently hover at around three per cent, while fixed rates can be locked in at three to 3.5 per cent levels. The ability to take advantage of these super-low interest rates is an opportunity that many investors are using to their advantage, in order to qualify for larger loans and be able to pay off their mortgage debts more quickly.

However, one potential risk for investors in the current market is that they may be too reliant on these incredibly low interest rates, without taking into account the fact that they are historically low and will likely rise at some point.

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The fact is, interest rates are at all-time low levels and eventually they will increase to the historically ‘average’ mortgage interest rate of around five per cent. If you’re paying three per cent now, that’s a huge jump on your current repayments. Therefore, if you rely on current interest rates staying in place for the long-term, you could end up financially overextended.

My advice is to enjoy interest rates while they are low now, but also factor in rates of up to six per cent or even seven per cent to ‘stress test’ your loans, to see how you’d cope with higher rates in place. This will help you ensure you can afford your investment property now and in the future. Also, having a buffer in place will help you ride out any financial turbulence if interest rates do start trending upwards.

2

Investing without a clear strategy In my view, buying property without a clear investment strategy in place is one of the biggest risks an investor can take and, unfortunately, this is what many Canadians do on a daily basis.

Investing in real estate should be a positive and financially rewarding experience that ultimately lines your pockets and makes your lifestyle more comfortable. There are dozens of ways you can make money out of real estate – and therein lies the problem.

With so many potential ways to make a buck, it can be tempting for would-be investors to haphazardly employ several strategies at once.

Worse still, they could have so many “stars in their eyes” about the potential profits coming their way that they fail to put in place any solid strategy at all.

I’ve seen it happen dozens of times.

An investor gets excited about the potential that property has to transform their wealth, so they jump onto the next opportunity that presents itself without taking into account the fact that every opportunity comes with certain risks and potential issues to be aware of.

For instance, an investor might come across an incredible development opportunity. It’s a subdivision and duplex project that, once complete, would generate several hundred thousands of dollars in instant equity. The investor sees the dollar signs and tries to move heaven and hell to make the deal work – even though they can’t afford to finance that type of deal;

even though they have to remortgage their own home in order to fund the deposit; even though the project puts immense stress on their finances, their relationships and their ability to sleep peacefully at night, because they’re so stressed about money…

It may have been a good investment opportunity.

It may have even been a great opportunity. But that doesn’t necessarily mean it was a great opportunity for you and your personal situation.

This is why it’s so important for investors to devise and implement their own personalized property investment strategy, one that matches both their immediate and long-term goals, and their present lifestyle needs.

There’s no point in living from pay cheque to pay cheque and sacrificing your current lifestyle in order to financially manage your property portfolio while you create wealth for your future. There is a better way to invest, and it starts with you creating an honest picture of where you stand financially right now, and where you hope to be in five, 10, 15 and 20 years.

Without this kind of investment strategy and financial road map in place, you’re effectively gambling, as it’s impossible for you to make clear, smart investment decisions that take you towards your goal. After all, how can you reach your goals if you don’t even know what they are?

3

Buying in an overheated market I’ve noticed a mentality that develops among some investors, which virtually scares them into thinking that they must secure their next investment immediately, lest they risk missing out on a rare and especially profitable real estate gold mine.

I’ve seen this happen frequently in recent months, particularly in certain suburbs around major capital cities that are becoming majorly overheated. One of the immediate risks for investors is that people are increasingly paying too much for property because they feel this urgency to buy – and, as a result, some people are simply buying anything for the sake of getting into the market.

I’ve had lengthy discussions with clients and investors in an effort to cool them off and encourage them to look at the bigger picture. I’ve even had some clients who were just so keen to get into the market in a particular area that they temporarily lost sight of what they were trying to achieve.

Do whatever it takes to create a cash buffer account so that you are in a position to make clear decisions without being ‘forced to sell your properties from a place of desperation

SEPTEMBER 2014 | 55

BUSINESS STRATEGY / WORST CASE SCENARIO

10 WAYS TO BLAST YOUR DEBT AND START INVESTING If you want to be truly successful as a property investor, then you need to make a serious and concerted effort to pay down any ‘bad debts’ such as credit cards, as they chew through your disposable income and divert precious funds and resources away from your investing pursuits.

You can do this by following these proven debt reduction strategies.

1 2 3 4 5 6 7 8 9

ACKNOWLEDGE YOUR OVERALL DEBT Most people don’t want to know the full picture of how much debt they actually have, but it’s essential to know what you’re dealing with.

CREATE A STRUCTURE Getting all the information into one spreadsheet or document is the key to managing and eliminating your debt.

REDUCE DISCRETIONARY SPENDING You may need to sacrifice some lifestyle ‘wants’ in the interim, which isn’t easy; remember this is short-term pain for long-term gain.

HAVE A CLEAR GOAL Having a clear goal to work towards (ie two credit cards paid off in 12 months) will help you stay focused when your motivation is waning.

COMMIT TO YOUR ‘WHY’ You want to get out of debt to invest in property and create wealth, right? Keep this ‘why’ front and centre to avoid overspending unnecessarily.

TARGET THE SMALLEST DEBTS FIRST By paying off the smallest debts as quickly as possible, you will streamline your debts and march quickly towards financial freedom!

STOP USING YOUR CREDIT CARDS You need to stop using your credit cards immediately, otherwise all of your debt repayment efforts will be in vain.

CANCEL YOUR DEBTS As each credit card, store card or personal loan gets paid off, cancel the account so that you’re not tempted to run up the debt again.

CONSIDER CONSOLIDATION You may want to consolidate all of your debts into one large personal loan in order to minimise interest payments and fast-track your debt repayments.

10

SET A GOAL FOR SAVING A DEPOSIT While you’re paying off your debts, you also need to boost your savings so that you have some funds to invest with.

Whether it’s saving 10 per cent of your salary or $500 per month, put a tangible savings plan in place.

56 | SEPTEMBER 2014

For instance, their investment strategy may be calling for a positively geared, two-bedroom apartment, but they’re so focused on getting into the ‘suburb of the moment’ that the supply and demand imbalance has skewed their view.

They’ve gone from seeking out a two-bedroom apartment that suits their strategy, to looking at buying anything they can get their hands on and at almost any price, because properties are routinely selling within 24 hours of hitting the market.

It’s crucial at times like this that investors remain steadfast in sticking to their buying rules, by staying focused on what they are looking for.

If you swing from a two-bedroom unit to a threebedroom house, then back to a one-bedroom unit before viewing a two-bedroom townhouse, well, it’s fair to say your investment strategy is all over the place and it’s time to get laser focused on what you really want to achieve.

If an area is overheated, look somewhere else.

There are thousands of suburbs and towns around Canada; so shift your focus because there will always be more opportunities for you to make money from real estate.

HOW DO YOU ENSURE YOU DON’T FACE THESE RISKS IN THE FIRST PLACE? Research, research and more research. Regardless of the market, but especially right now, the best way to protect yourself from the risks associated with property investing is to arm yourself with as much information as possible, so that you can make the smartest, most informed decisions you can.

Doing proper due diligence is all about ensuring you are 100 per cent comfortable with every aspect of the deal. For me, this comes down to doing thorough and extensive research into a potential property’s past, present and future.

Interpreting the data plays a big role here. Many investors don’t realize just how much data is available, nor do they realize how they can effectively use it to their advantage.

The end result? I’ve got 10 years of data explaining how the property has performed in the past, along with up to eight years of data projecting how the property is expected to perform in the future.

This is in addition to all the other research I’ve done on vacancy rates, rental demand, overall supply and demand and local demographics.

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I now have a comprehensive parcel of data to inform my investing decision, which is a major factor in mitigating my risk and ensuring I don’t invest in a low-performing property. It’s a quick and easy way to create an effective process and harness the power of the masses of data that is available.

IF YOU’RE AT RISK, WHAT CAN YOU DO NOW TO LESSEN THE DAMAGE? Let’s say you own an investment property and you’re at risk of things turning pear-shaped.

Perhaps you overextended yourself financially, or you’ve run into trouble with dodgy tenants.

Whatever the problem, there is always a potential solution. For instance, you could:

1

Reinforce your finances If you are facing financial difficulties for a particular reason, such as a prolonged tenant vacancy, then you need some funds to help you manage the situation at hand. My advice would be to immediately focus on creating a buffer account.

If you don’t already have a cash buffer account at your disposal to help you deal with unexpected financial emergencies, I suggest you focus on creating one immediately. Savings from your salary, tax returns, redrawing equity in your home loans – do whatever it takes to create a cash buffer account, ideally offset against your PPOR mortgage, so that you are in a position to make clear decisions without being forced to sell any of your properties from a place of desperation.

At the same time, make a serious and concerted

effort to pay down any ‘bad debts’ such as credit cards, as they chew through your disposable income and divert precious funds and resources away from your investing pursuits.

Ultimately, if you do not have a tenant, you want to do what you can to get a tenant in place to ensure you have some rent coming in so that you are not having to fund the full mortgage repayment each month.

2

Get your head out of the sand Often when a situation is turning negative, we may avoid facing up to it – and this can be a very costly mistake to make. I’ve seen many investors who have needlessly gone to the wall financially, often because they didn’t face their financial woes early enough. The sooner you take a proactive approach, the sooner you can put the right steps in place to turn your situation around.

3

If necessary, seek help A trusted property mentor, a friend in the industry, a colleague who knows property inside out – turn to those people you know and trust for advice, as they will be able to help you review your situation from a clear, unbiased and objective place. Importantly, they can then help you strategize how to move forward in a positive way.

Remember, there will always be new opportunities to create wealth through real estate, and by having a clear strategy and a flexible, honest approach, you place yourself in the best possible position for property success.

Helen Collier-Kogtevs is an active investor with a multimilliondollar property portfolio and is the managing director of Real Wealth Australia

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www.vectorfinancialservices.com SEPTEMBER 2014 | 57

BUSINESS STRATEGY / FINANCE

Financing issues you may overlook when property investing

It’s easy to get carried away with the excitement of buying a property, so Eddie Chung lays out what you need to explain to your client in order to keep them grounded

Where you deem the property as affordable will depend on your personal risk appetite

58 | SEPTEMBER 2014

Let’s face it. Buying your first investment property is often an exciting experience. In between property inspections and speaking with real estate agents, it’s easy to get caught up in the moment and overlook the financial aspects of the purchase.

Luckily, some financial consideration is a good way to temper the impulse when buying an investment property. After all, a financial misstep could set you back for years.

PROPERTY VALUE Contrary to popular belief, what you are willing to pay for a property does not necessarily equate to its market value. It is possible to overpay for a property.

There are ample real-life examples that have involved marketeers artificially inflating the value of properties for sale to unsuspecting investors.

Therefore, some proof of the value before you start negotiating a price will put you in good stead. Here are a few ways to gauge the value of the property you’re interested in.

1

Check out listing sites Perhaps the best place to start when it comes to estimating the market value of a residential property is to use Internet websites that provide the sales history of similar properties in the

neighbourhood of the property you are considering.

Some of these websites require a paid subscription, while others provide free – but limited – information. The more recently a comparative property was sold, the more likely it is that the sales price of the property will approximate to the market value of the property you are comparing it with. Usually, based on a number of commensurate properties nearby, you should be able to get a fair idea of the range of values for the property you are considering buying.

2

Check out the price per square foot and compare it to properties on the market Another way to assess the value of a property, albeit by no means precise, is to calculate the value of similar properties recently sold around the neighbourhood on a per-square-foot basis and compare that against the asking price per square foot of the property under consideration.

To ensure comparability, the calculation usually excludes outdoor areas such as balconies and patios, which is especially true for units and apartments.

On the other hand, if houses are involved, the total land area may sometimes be used for comparison purposes, given that the size of house blocks is generally decreasing and the value of land therefore increasing.

3

Get a professional valuation If all else fails, there is always the option of obtaining a formal valuation from a professional valuer, who will most probably conduct a stocktake of recently sold properties in the neighbourhood that is not dissimilar to what you could do yourself. However, a professional valuer could arguably conduct the exercise in a more systematic and efficient manner, which may save you some time and effort at a cost.

Some people may argue that if you need finance to acquire the property, the bank will use their own panel of professional valuers to value the property as part of the loan application process anyway, so there is no need for you to assess the value of the property independently.

However, unless the value of the property on the contract is grossly overstated, it is likely that the bank’s valuer will nominate the contract price as the market value of the property. After all, the value of a property is theoretically determined as the price an unanxious buyer would be willing to pay to an unanxious seller in an arm’s length transaction,

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which is what you have negotiated with the vendor to pay for the property on the contract.

At other times, a valuer who is engaged by a bank is generally conservative and may come back with a lower value than the contract price, with a bias in favour of the bank. Therefore, an independent valuation may not be a bad idea after all.

VALUING COMMERCIAL PROPERTIES Valuing a commercial property is generally more complex as its value is often dictated by the remaining term of the lease(s) on the property and the prevailing yield of similar properties on the market. The annual gross rent on the property may simply be divided by the prevailing gross yield, which may give you a reasonable market value for the property.

However, notwithstanding this mathematical approach to valuing commercial properties, there are other factors that may affect their value.

The current yield on a commercial property may not render it an attractive investment, but the potential of the site under an alternative use may produce a far greater return (for example, if the property is redeveloped), which may compel a buyer who is a property developer to pay a higher price than a value that is determined with reference to the yield of the property alone.

The current yield on a commercial property may not render it an attractive investment, but the potential of the site under an alternative use may Given that higher values are usually involved in commercial property transactions, compared to those of residential properties -- and the valuation complexities involved -- there may well be a stronger case for the purchaser to obtain a formal valuation and undertake a due diligence process to prove the

asking price and other details associated with the property (for example, the state of the existing leases).

FINANCE Banks generally consider your finance application to buy a property based on the loan-to-value ratio (LVR) and debt service ratio (DSR).

Loan-to-value ratio The LVR ensures that the bank is getting sufficient security over the loan, so that if you default on the loan they can sell the property and use the proceeds to repay the loan, even if the property is sold in ‘fire sale’ conditions. The LVR essentially provides a margin of error for the bank to allow for any discount required to sell the property quickly to enable them to get their money back.

For residential properties, the bank will usually lend up to 80 per cent of the value of the property without any mortgage insurance. The LVR may go up if you agree to take out mortgage insurance, which can usually be added to the loan. In contrast, given the higher volatility of commercial property prices, the bank will usually lend between 60 per cent and 70 per cent of the value of the property, depending on the bank to which you are applying for the loan and the prevailing economic conditions.

In a sluggish economy, the bank may perceive that there is a higher risk associated with the property as security, so they may reduce the LVR to reflect their risk appetite.

SEPTEMBER 2014 | 59

BUSINESS STRATEGY / FINANCE

Debt service ratio (DSR) In addition to the LVR, the bank will also assess the DSR to satisfy themselves that you will be able to service the debt over the term of the loan. The DSR is calculated by dividing the periodic loan repayment amount by your gross income over the same period. For residential properties, banks are generally happy to lend where the DSR is no more than 30 per cent to 35 per cent. A higher DSR may indicate that you are stretching your finances, which increases the chance of you defaulting on the loan from the bank’s point of view.

Debt coverage ratio For commercial properties, banks sometimes substitute the DSR with the debt coverage ratio (DCR), which is also commonly known as ‘interest cover’.

The DCR is calculated by dividing your net operating income (i.e. gross income net of operating expenses) by the interest expense that would be payable on the loan if it is approved.

Banks will generally look for a DCR of at least 1.5 before they will lend you the funds.

In any case, it may be an idea to use a mortgage broker to source the loan for you because your current bank may not always provide you with the best deal, and, even if they have done so, using a broker may give you confirmation that you are getting the best deal possible.

Eddie Chung partner, tax and advisory, property and construction, at BDO (Qld) Pty Ltd.

60 | SEPTEMBER 2014

Budget and safety net Notwithstanding how a bank may assess your loan application, it is critical that you prepare a budget for yourself, which takes into account all your income and expenses, as well as the rental income and rental expenses associated with the property you are considering buying. You should also discount the expected rent for the full year to account for potential vacancy, and include the loan repayment as an expense under the assumption that the loan is approved, which will tell you whether you can afford the property.

To build in an additional safety margin, it may be prudent to calculate the loan repayment on a ‘principal and interest’ basis even if you are applying for an interest-only loan. You should also calculate the repayment under a scenario in which the interest rate on the loan is doubled, and import this repayment amount into your budget. This is known as a ‘sensitivity analysis’ as it gauges how sensitive your budget is to potential future interest rate rises.

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In the end, where you draw the line and deem the property as affordable will depend on your personal risk appetite but a sensitivity analysis should always be done so that you are fully informed of how robust your finances are in case the economic conditions surrounding your property change in the future.

BEFORE YOU SIGN Apart from the key financial issues above, consider the following tips before you sign the contract to buy an investment property:

1

While the real estate agent may recommend that you put down the ‘standard’ deposit of 1 per cent of the value of the property upon signing the contract, this is not absolutely necessary and you should try to negotiate a lower amount to free up your cash flow.

2 3

Even if you do not need it, always include a ‘subject to finance’ condition in your offer, which will allow you to secure finance that is most suitable to your needs and circumstances.

Do not sign the contract until you have made the decision on the ownership structure of the property; for example, you may want your discretionary trust to buy the property instead of owning the property in your own name.

4

Upon signing the contract, speak to your insurer and take out insurance on the property.

In my view, the relatively small insurance premium is well worth your peace of mind if the unthinkable happens.

5

If you are selling a property and need the proceeds to buy another property, never commit yourself to a purchase contract until your sale contract has gone unconditional and the cooling off period, if applicable, has expired. Otherwise, you might find yourself painted into a corner if something goes wrong with the sales contract!

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PROFILE / FAVOURITE THINGS

Favourite things Tim Hill, MBA - Mortgage Broker with Dominion Lending Centres EAP Primex Mortgages Favourite Book: Tao Te Ching is not a novel or anything like that, but it’s something that I keep reading over and over. The text itself is rather ambiguous, so it’s difficult to summarize what it is all about - I get something new or different out of it each time. I’ve worn out a couple of copies so now I just read it on my iPad.

Favourite Celebrity: I’m not really one for the whole celebrity thing, but I think like just about every little boy of my generation, I wanted to be Han Solo or Indiana Jones, so maybe Harrison Ford. I understand he collects airplanes and helicopters, which makes me more than a little envious!

Favourite Music: I’m all over the map: I’ll listen to anything from classic rock to hip hop, depending on my mood. When I’m in the mood to relax, the “Back Porch Americana” mix on Songza gets a lot of replay.

62 | SEPTEMBER 2014

Favourite Movie: Pretty tough to pick only one, but I think Casablanca should be on everybody’s “must see” list. It’s a great film on every level, but the dialogue particularly is insanely great: “We’ll always have Paris,” “I’m shocked; shocked to find out gambling is going on in here... Your winnings, Sir,” “Play it, Sam,” “I think this is the beginning of a beautiful friendship,”“Of all the gin joints, in all the towns...,” etc., etc.

Favourite Sport: Trail running combines the endorphin buzz of running with the zen-like focus of surfing and the scenery of backcountry hiking. I think it’s really the only regular opportunity I have to totally unplug, de-stress and recharge.

Favourite Place to Be: Out on the trails in Lynn Headwaters and Mt Fromme (North Vancouver) - whether with my family or just my dog or even alone, it’s one place that I really feel comfortable (despite the bears, cougars and Sasquatches)!

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Favourite Food: Both Cajun and Thai: the thing, particularly with Cajun food, is that people tend to think of it as being overly spicy, but the point is that the spice is meant to complement the other flavours, not overwhelm them.

Favourite Vacation Spot: Every summer we rent a cabin in Tofino for family vacation.

It’s a totally different pace of life over there, and the big daily decision is whether to go fishing or surfing. In the evenings, we get into the hot tub and watch the sun set over the ocean.

Favourite thing about working in the mortgage Industry: I worked on the lender side for quite a few years, and always loved the rush of closing a deal: as a broker I have much more at stake and the feeling of bringing people and lenders together is awesome!

Favourite Mortgage Product: Educating Realtors about Purchase Plus Improvements products gives them a great tool for getting to YES. Being able to tell a buyer that they can get the house with a new kitchen or rental suite is a huge selling feature. Buyer gets their house, Realtor gets their sale, and mortgage broker gets the mortgage - we all win!

Favourite Drink: I’m a big fan of the newer west coast style (extra-hoppy) IPAs...that said, a Sapphire Tonic with a lemon wedge is pretty tough to beat!

Paula Hutton BDM - Prairies paula@vwrcapital.com

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SERVICE / DIRECTORY

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Banks

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

B2B Bank b2bbank.com/mortgages Ph: 1 800 263 8349 Page 23 HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 33

The Mortgage Centre www.mortgagecentre.com Ph: 1 800 423 0107 Page 25 RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 29

Tribecca Finance Corporation www.tribecca.ca Ph: 416 225 6900 Page 31

Non-Bank Lenders

Commercial Lenders

V.W.R Capital Corp www.vwrcapital.com Ph: 1 866 907 5407 Page 63

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

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

Insurance

Home Trust www.hometrust.ca Ph: 1 877 903 2133 Page 15 Magenta Mortgage Investment Corporation www.magentainvestment.ca Ph: 1 888 267 1744 Page 37

Vector Financial Services www.vectorfinancialservices.com Ph: 1 866 483 8018 Page 57

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

Technology & Softwares

Axiom Mortgage Partners axiommortgagepartners.ca Ph: 1 866 504 0516 Page 7 & Outsert

D+H Limited Partnership www.dhltd.com Ph: 1 866 345 6449 Page 17

MortgageToGo.ca www.mortgagetogo.ca Page 24

Centum Financial Group Inc. www.centum.ca Ph: 1 604 257 3940 Page 5

Marlborough Stirling Canada www.morweb.ca Ph: 1 877 626 2022 Page 2

MCAP www.mcap.com/brokers Page 35

Dominion Lending Centres www.DominionLending.ca Ph: 1 888 806 8080 Page 45 & 49

Merix Financial www.merixfinancial.com Ph: 1 877 637 4911 Page 27

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

Real Estate

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

64 | SEPTEMBER 2014

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Mortgage Architects www.mortgagearchitects.ca Ph: 1 877 802 9100 Page 11

Appraisal Institute of Canada www.AICanada.ca Ph: 613 234 6533 Inside Back cover Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 51

YOU SEE A DREAM PROPERTY

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Want to know the value of a property before buying or selling? Bring an AIC-designated appraiser on board to help make your investment decision. AACI and CRA appraisers are real estate experts, providing reliable, independent and unbiased appraisals on all property types based on current and emerging market trends.

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