CMP 12.09 by Key Media

MORTGAGEBROKERNEWS.CA ISSUE 12.09 | $12.95

BROKERS ON LENDERS Which lenders have risen to the challenge of industry changes, and which ones have fallen behind? Brokers tell all

HARD-WON LESSONS A top commercial lender reflects on two decades in the business

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LAST YEAR’S CHANGES: THE NUMBERS ARE IN What do new stats have to say about the impact of regulations – and could they prevent more changes?

GET MORE BY DOING LESS How you can achieve greater success by slowing down

7/09/2017 6:45:31 AM

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ISSUE 12.09

CONTENTS BROKERS ON LENDERS SPECIAL REPORT

Lenders have been scrambling to adapt to industry changes over the past year – so which ones have come through for their broker partners?

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ISSUE 12.09

CONNECT WITH US Got a story or suggestion, or just want to find out some more information?

CONTENTS

twitter.com/CMPmagazine plus.google.com/+MortgagebrokernewsCa facebook.com/MortgageProfessionalCA

UPFRONT 04 Editorial

Will new stats stop regulators in their tracks?

46 FEATURES

44 40

AN ALTERNATIVE OPPORTUNITY A Street Capital program provides extra options for clients squeezed by new lending guidelines

Amid a suddenly cooling Toronto market, an appraiser’s unbiased opinion is more valuable than ever

INDUSTRY ICON

18 Leading commercial broker Dale Bilton reveals the details behind his brokerage’s recent merger

50 WHY SLOWING DOWN IS VITAL

Three reasons why you’ll be able to get more done by doing less

Are non-banks and brokers getting a raw deal on new regulations?

10 News analysis

Recently released data paints a clearer picture of what last year’s mortgage rule changes have wrought

12 Commercial update

A scramble to get deals done is sending Torontonians to alternative lenders

16 Opinion

Why brokers should be concerned about Bill S-237

FEATURES 38 6 lessons from 20 years in the business Morley Greene reflects on what he’s learned in the two decades since he founded Trez Capital

PEOPLE 44 Broker insight

52 FEATURES

TIME’S UP FOR PERFORMANCE REVIEWS If you’re only giving employees feedback once a year, it’s time to rethink your approach

08 Head to head

14 Alternative lending update

FEATURES

PEOPLE

An alarming number of buyers aren’t shopping around for a mortgage

Canada’s commercial mortgage sector keeps going strong

FEATURES

THE ROLE OF APPRAISERS IN THE MODERN MARKET

06 Statistics

Kerri Reed talks about the ups and downs of operating in the GTA

55 Career path

A commitment to customer service has spelled success for Ken Lankin

56 Other life

Pilot Tim Hill flies the friendly skies

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UPFRONT

EDITORIAL

A silver bullet for the industry?

new round of mortgage rule changes is being carefully considered for this fall, but recent data might prove enough to deter the regulators and their itchy trigger fingers. It’s now been revealed that the insured mortgage market – the target of last year’s sweeping rule changes – took a major hit as a result of those policies. Genworth, the nation’s second-largest provider of mortgage insurance, has seen a drastic decline in new insurance written; in the second quarter of this year, it was down to $6.1 billion from $31.7 billion a year ago – an 81% year-over-year drop. Portfolio insurance saw the most drastic decline, falling 96% from $25.9 billion in Q2 2016 to $1.1 billion in Q2 2017. The decline also included a 14% decrease in insurance bought by homeowners, which fell from $5.8 billion to $5 billion year-over-year.

Perhaps Genworth’s sobering stats will be enough to convince the government that current policies are adequate to slow the market It’s been nearly a year since the Government of Canada released its mortgage rule changes, which included hiking the minimum qualification requirements for holders of insured mortgages, as well as stipulations that make it more difficult for monoline lenders to compete with the big banks, especially when it comes to refinances. The industry was collectively up in arms when the changes were announced – and for good reason, it seems. Many of the channel’s lenders relied on portfolio insurance, and that method was swept out from underneath them. So Genworth’s report likely came as no surprise to the industry. OSFI is currently considering additional mortgage rule changes that are expected to be implemented in the fall, pending a feedback period. They include additional measures that will, once again, impact monoline lenders – namely, prohibiting co-lending arrangements and requiring stress tests for all uninsured mortgages. Perhaps Genworth’s sobering stats will be enough to convince the government that the current policies are adequate to slow the market. Or maybe that’s just wishful thinking ... only time will tell.

www.mortgagebrokernews.ca ISSUE 12.09 EDITORIAL Editor Justin da Rosa Writers Joe Rosengarten Libby Macdonald Ephraim Vecina Heather Turner Copy Editor Clare Alexander

CONTRIBUTORS Samantha Gale Angela Lockwood Anneli Blundell

ART & PRODUCTION Design Manager Daniel Williams Designer Loiza Caguiat Production Manager Alicia Chin Advertising Coordinator Kay Valdez

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7/09/2017 6:49:40 AM

“

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“

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7/09/2017 7:12:41 AM

UPFRONT

STATISTICS

Doing due diligence

WHO DOES THE MOST RESEARCH?

Clients researching mortgages don’t always dig very deep – and at renewal time, they might not dig at all DESPITE THE fact that buying a home is the largest financial transaction of most people’s lives, many borrowers don’t do a lot of research before settling on a mortgage. A recent survey found that while 60% of Canadians maintained they did a great deal of research before choosing their first mortgage, 35% only “looked around a little” before deciding on an option, and 5% of mortgage-seekers took the first product they

64%

of men shopping for mortgages do “a lot” of research beforehand

63%

of first-time mortgagees with a college degree thoroughly explore the options

were offered. Even fewer research their options when the time comes to renew (or potentially switch mortgage providers); 22% said they did zero research at renewal. As for where this information is gathered, while online comparison sites are the go-to information source for other purchases (such as flights and hotels), only 17% of Canadians in the market for a mortgage said they routinely used rate comparison sites.

50%

of millennials fully research options before renewing a mortgage

Sixty-five per cent of mortgage shoppers in British Columbia said they do “a lot” of research before making a decision – the highest among all provinces. For renewals, homeowners from the Prairies most often investigated alternatives. Potential buyers in Atlantic Canada were most likely to forgo research for both purchases and renewals. KEY Take the first product found/ offered without further research Look around a little before making a decision Do a lot of research before making a decision

44%

of those earning over $100,000 do a lot of investigation before renewing Source: Ipsos/Lowrates.ca, July 2017

FIRST-TIMERS INVESTIGATE

RENEWAL INERTIA

Ninety-five per cent of Canadians shopping for their first mortgage say they did at least some research on their options before committing, although more than a third admitted they only “looked around a little.”

Those on the verge of renewing are less concerned with the need for research – though it could save them thousands of dollars a year, 57% of consumers said they did only a little shopping around or simply went with their current provider.

Take the first product I find or am offered without doing any further research

Take the first product I find or am offered without doing any further research 22%

5% Look around a little before making a decision

Look around a little before making a decision 35%

35%

Do a lot of research before making a decision

Do a lot of research before making a decision 60% Source: Ipsos/Lowrates.ca, July 2017

42% Source: Ipsos/Lowrates.ca, July 2017

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British Columbia 2% 33% 65% 32% 26% 42%

Renewals

First-time mortgages

Renewals

Alberta 5% 32% 62% 26% 44% 30%

Saskatchewan/ Manitoba 5% 31% 64% 23% 27% 51%

Atlantic

6.1%

First-time mortgages

First-time mortgages Renewals

Ontario

Renewals

3% 55% 41% 25% 51% 23%

First-time mortgages

5% 36% 59% 17% 41% 42%

Renewals

First-time mortgages

Quebec

5% 34% 61% 20% 31% 49% Source: Ipsos/Lowrates.ca, July 2017

THE MOST INFORMED GENERATION

ONLINE SHOPPING

Millennials are by far the most likely to conduct considerable research before making an initial mortgage commitment – two out of every three say they did “a lot” of investigation in preparation, compared to 56% of gen x-ers and 59% of baby boomers.

Nearly half of Canadians searching for mortgage rate information report that they bypass online comparison sites altogether.

5% 28%

HOW OFTEN DO YOU USE ONLINE RATE COMPARISON SITES?

50%

Age 18–34

38% 67%

Age 35–54

39% 56%

Age 55+

46%

40% 59%

30% 20%

Take the first product I find or am offered without doing any further research Look around a little before making a decision Do a lot of research before making a decision Source: Ipsos/Lowrates.ca, July 2017

10% 0%

17%

Always

19%

18%

Often

Rarely

Never

Source: Ipsos/Lowrates.ca, July 2017

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UPFRONT

HEAD TO HEAD

Is OSFI unfairly targeting non-banks and brokers? Is the regulator’s move to further tighten mortgage standards likely to hit certain segments of the industry especially hard?

Shawn Stillman Principal broker Mortgage Outlet

“No, the broker industry and monoline lenders are not targeted by OSFI – the industry is collateral damage in the government’s objective to reduce risk in the housing market. Consumer protection is not the mandate of OSFI; protection of financial institutions and system is. Given the Canadian banking system is amongst the world’s strongest, and there has been no evidence of lenders taking unreasonable risks, it’s safe to say the system has worked and further regulation is not required. History has shown that too much government intervention will hurt banks, monolines, brokers, consumers – and ultimately, the financial system and economy as well.”

Shaneen Mohammed Mortgage broker Blue Pearl Mortgage Group

“I do not believe OSFI is intentionally targeting non-banks or the broker industry, but I do believe there is a misunderstanding regarding how this will affect the average Canadian family. By implementing these changes, the OSFI is not only restricting potential homeowners’ ability to purchase their dream home – or even any home – but also ensuring that current homeowners may not be able refinance their homes. Micromanaging our market is the wrong direction to go. If OSFI is willing to work with all types of institutions and brokers, that will allow a way to protect all in the industry, especially homeowners.”

Vincent Tong

Mortgage specialist and manager of broker support DLC Clear Trust Mortgages “Monolines and non-deposit-taking lenders have been at a steep disadvantage since late 2016 due to OSFI’s overarching policy changes in the insurable mortgage market. Refinances, non-owner-occupied properties, mortgages with amortizations over 25 years, properties over $1 million – all have been deemed uninsurable and are thus being passed off to traditional bank lenders, who do not require securitization of loans. Even if they have a willing investor, non-deposit-taking lenders will translate the higher cost to the consumer, effectively pricing themselves out of the market. I support stringent lending regulations and due diligence, but only when the playing field is even.”

THE PROPOSED CHANGES In July, OSFI announced plans to ramp up its regulatory oversight for residential mortgage underwriting, including a raft of proposed changes to Guideline B-20. Under the suggested changes, those holding uninsured mortgages would have to undergo a qualifying stress test, loan-to-value measurements would be tied to market conditions, and co-lending measures that appear to be designed to evade regulatory requirements would be prohibited. Plenty of industry feathers have been ruffled over the fact that these potential changes are being put forward less than a year after the federal government instituted new mortgage regulations in an attempt to cool the housing market.

8 www.mortgagebrokernews.ca

COMING TO TERMS WITH YOUR CLIENTS’ INSURANCE NEEDS

65% 58%

of Canadians would have trouble covering their living expenses, including the mortgage, for more than a few months if the primary wage earner died.*

of Canadians find it difficult to decide on the type of insurance to buy.**

43% 36%

of Canadians between the ages of 25 and 44 have no individual life insurance and 79% of Canadians have no individual disability insurance.**

of Canadians say no one has approached them about insurance.**

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07/2016 16.2098

The Manufacturers Life Insurance Company

7/09/2017 7:15:07 AM

UPFRONT

NEWS ANALYSIS

Feeling the fallout The industry is still reeling from last year’s mortgage rule changes, but a clearer picture of their impact is starting to emerge OCTOBER 3, 2016. It’s the day that changed the mortgage broker industry for the foreseeable future – the day the Department of Finance introduced a new suite of mortgage rule changes aimed at safeguarding the economy and the housing market by “encouraging” insured borrowers to take on more serviceable debt. The rule changes included a stress test that requires insured mortgage holders to qualify at the Bank of Canada posted rate. They also included a crackdown on lenders that bulk insure their portfolios. The prevailing opinion among industry players was that the changes would make it harder and costlier for Canadians to qualify for mortgages. That opinion was echoed by the big banks as well – RBC forecast an 11.5% drop in resales in the 12 months following

base case for 2017 shows benchmark prices continuing to rise at much slower rates.” Now, nearly a year after the mortgage rules were put in place, statistics are starting to reveal how impactful they have been. The first indication came from Genworth Canada. The nation’s second-largest provider of mortgage insurance reported that the total value of new insurance written in Q2 of this year was down 81% from a year ago. Portfolio insurance, meanwhile, fell 96% between Q2 2016 and Q2 2017, and Genworth saw a 14% decrease in insurance bought by homeowners. CMHC confirmed that trend, announcing in late August that the country’s insured mortgage market had declined by about 33% year-over-year in the second quarter of 2017. In its latest financial report, CMHC revealed that it provided 78,607 units of mortgage

“Millennials’ impression [is] that the government’s actions relating to ... mortgage insurance were an impediment” Phil Soper, Royal LePage the announcement. “In turn, we expect that weakening resale activity will erode sellers’ pricing power, yet, for the national and majority of provincial (and local) markets, we do not project prices to fall outright ... because we expect demandsupply conditions to remain balanced next year,” the bank said at the time. “Rather, our

loan insurance in the three-month period ending June 30, a sharp drop from the 117,463 units during the same period a year ago. CMHC told the Canadian Press that the decrease in volume was largely a result of the new rules the federal government introduced last year. On the heels of those figures, one of the

country’s largest real estate brokerages, Royal LePage, released a study on millennial sentiment around real estate. The results showed that millennials buyers believe last year’s mortgage rule changes have been a major roadblock preventing them from entering the housing market. “One of the things that came out of the report was millennials’ impression that the government’s actions relating to ... mortgage insurance were an impediment,” said Phil Soper, president of Royal LePage. According to Royal LePage’s report, 49% of millennials believe the federal government’s mortgage regulations have impacted affordability, forcing them to consider lowerpriced homes. The study also found that while 69% of millennials hope to own a home in the next five years, only 57% of those surveyed believe that they will be able to afford one. “In addition to high home values, peak millennials also face increasingly stringent

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HOME SALES IN CANADA: THEN AND NOW

44,033

September 2016 One month prior to implementation of new mortgage rules

37,048

November 2016 One month after implementation of the new rules

25,282

January 2017 Three months after the implementation of the new rules

42,238

July 2017 The most recent stats available, down 11.4% year-over-year

mortgage stress test regulations, which push potential buyers to the sidelines, electing to either remain in the rental market to save up enough money for a down payment or move to more affordable regions,” the report said, adding that 64% of millennials believe homes

(24%) are unable to qualify for a mortgage,” the report said. In late August, credit bureau TransUnion provided further proof of the mortgage rules’ impact. The agency reported a 10.4% decline in origination volumes in Q1 2017 compared

“A decline in the share of new insured loans issued to highly indebted borrowers suggests the quality of credit is improving” Bill Morneau, Department of Finance in their area are unaffordable. That number is significantly higher in hot markets like British Columbia (83%) and Ontario (72%). “Of those who do not believe they will be able to own a home in the next five years, 69% stated that they cannot afford a home in their region or the type of home they want, while roughly a quarter

to Q1 2016. That included a 12% drop in prime mortgages and a 5% decline for ‘super prime’ consumers. “Recent new regulations in Ontario appear to have had an impact on the volume of home sales and, consequently, mortgage demand,” said Matt Fabian, director of research and industry analysis for Trans

Union Canada. “So while the number of mortgages is increasing, it is doing so at a slower rate than last year.” Finally, the latest proof of the mortgage rules’ impact came from none other than the finance minister himself. “Preliminary data received since the government implemented its most recent adjustments to mortgage rules in October 2016, suggests that the rule changes are having their intended effect,” Bill Morneau said in a letter to the Finance Committee. “A decline in the share of new insured loans issued to highly indebted borrowers suggests the quality of credit is improving in the highratio mortgage market. This development helps to ensure that Canadians are taking on mortgages that they can afford.” In the face of such evidence – both hard and anecdotal – the industry can only hope those in charge of macroprudential over sight will pump the brakes on any further cooling measures.

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UPFRONT

COMMERCIAL UPDATE NEWS BRIEFS Interest in Winnipeg’s industrial market picks up

According to the Winnipeg Realtors Association, property investors are flocking to the city’s industrial real estate segment, but the organization cautioned that they might run head-on into the problem of supply that has become characteristic of Canada’s hottest residential markets. That’s because large institutional investors tend to prefer larger buildings or property portfolios, which are thin on the ground in Winnipeg, says Trevor Clay, chairman of the association’s commercial division. “They don’t want to buy one small building at a time,” Clay told the Winnipeg Free Press, adding that Winnipeg does not have many industrial spaces lager than 400,000 square feet.

Calgary no longer bogged down by the economy

A new analysis by Cushman & Wakefield revealed that between mid-2014 and the first quarter of 2017, Calgary’s industrial real estate market grew by 2.6%, a noteworthy result in light of Alberta’s struggles with the economic shocks brought about by the devaluation of oil. Companies like Walmart, Sobeys, Canadian Tire and Home Depot maintain major operations in Calgary, and the city also hosts nearly 5,000 logistics and transportation businesses. “[Calgary’s] importance as Western Canada’s distribution hub has been clearly established in recent years,” the report said.

Vancouver retail segment is hungry for space

A fundamental shift in how the retail segment operates is fuelling a growing demand for commercial space in

Vancouver. As brick-and-mortar retailers have been squeezed by internet shopping, they have shifted their focus from point of sale to point of delivery. The result, according to a report from Colliers International, is that they are now viciously competing for the right locations to accommodate this new reality. “Distributors are willing to pay higher rents in strategic locations to reduce transportation costs and improve responsiveness,” the report said.

Academic warns Saskatchewan retail expansion might not last

According to Statistics Canada, Saskatchewan’s retail sector grew by more than 65% from 2006 to 2016 – the largest increase across the country. However, Edwards School of Business professor David Williams warned that this surge is not sustainable. “There used to be a phrase in retail: ‘If you build it, they will come,’” Williams said. “[But] is there too much physical retail space in town? Yes.” He added that the recent challenges of physical retail stores in the US, along with the Sears bankruptcy, should be taken as possible warning signs of a retail downturn.

Tech industry snaps up Toronto’s office space

The Toronto tech sector has more than doubled over the past five years, fuelling an insatiable demand for the city’s office and industrial space, according to CBRE. “About 20% of the demand [for office space] is from the high-tech area,” said CBRE Canada’s Werner Dietl. The firm’s annual Scoring Tech Talent Report revealed that Toronto was the fastestgrowing technology market in North America from 2015 to 2016, causing downtown office vacancy rates to drop to a record 3.8% during the second quarter of 2017.

Sustained strength expected The rest of 2017 looks promising for Canadian commercial real estate, according to a new study A study released in early August by leading North American property management company Morguard Corporation argued that if recent trends are anything to go by, the Canadian commercial real estate sector is poised for sustained stability and reliability, especially in terms of investment. In its latest update of its 2017 Economic Outlook and Market Fundamentals Research Report, Morguard estimated that the office asset class in particular will enjoy a strong $2 billion closing volume during the second quarter of the year. Meanwhile, the retail and industrial segments are predicted to post more than $1 billion each. All of these developments are expected despite the recent increase in interest rates by the Bank of Canada. “After a second consecutive quarter of stronger-than-expected economic output, projected growth for 2017 has now surpassed 2016 levels, with signs pointing to an early winding down of global monetary stimulus,” said Keith Reading, Morguard’s director of research. “Despite a perceived eagerness to raise interest rates, particularly in the United States, low inflation pressure should continue to act as a buffer against rapid monetary policy change in the near term. “Demand for Canadian commercial real estate continues to outpace supply as Canada remains an attractive, stable option for investment,” Reading added. “While we anticipate that interest rates will continue to rise, the change will occur gradually and at levels that remain palatable for investors. There will be

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little variation in the strength of the Canadian property market in the near term.” The report also addressed the cooling effects of recent policy changes, but predicted that they would have little impact on the commercial sector. “Historically hot markets like British Columbia, Toronto and Montreal are already showing signs of reheating despite recent cooldown efforts,” Reading said. “Long-term, however, the cumulative effect of increasing interest rates should act as a buffer against future housing market imbalance.” The report highlighted the fact that vacancy rates remain low nationwide, mainly thanks to record-minimum vacancy levels in downtown Toronto, along with declining rates in Vancouver

“Historically hot markets ... are already showing signs of reheating despite recent cool-down efforts” and Montreal, which helped to offset still-high vacancies in Calgary and Edmonton. Commercial real estate services company Cushman & Wakefield backed up these observations, pointing to a steady trend that should lead to Vancouver’s office spaces being progressively filled up over the next few years. The firm predicted that by 2019, Vancouver will have the second lowest office vacancy rate in the Western hemisphere (6.3%), behind only Toronto (3.9%). Other Canadian cities that are predicted to reach remarkable lows are Ottawa (7.3%) and Winnipeg (7.4%).

Q&A

David Beckingham President and CEO

Vancouver still flourishing

DLC COMMERCIAL CAPITAL

What’s the current situation in the Vancouver market?

Years in the industry 30 Fast fact Vancouver-based Beckingham is a threetime member of CMP’s Top 10 Commercial Brokers list and was number one in 2012

The Vancouver market is incredibly buoyant right now. Actually, the Western Canadian commercial mortgage and real estate market as a whole is highly active. British Columbia is hot, and what is happening is that capital is flowing out of the residential market and into the commercial market due to the changes brought about by the provincial government’s decision to tax foreign buyers purchasing residential properties. As such, there is a really strong flow of capital toward the commercial real estate markets, which was not the case before the tax was implemented.

Amid these developments, what are the issues that you frequently encounter? The most common problem is the high price of real estate. This frequently leads to a shortage in capital, making it difficult to close transactions. Often, what happens is that domestic lenders or Canadian institutions are reluctant to buy into the low capitalization rates in the Vancouver marketplace. An apartment building, for instance, trading at a 6% cap 20 years ago, which was an abnormally low cap rate even then in the Canadian marketplace, has now moved to unbelievable low of 1% to 3%. At cap rates this low, there is not enough income to service the debt required to close the transactions. In this environment, the Western Canadian commercial mortgage broker’s persistent problem is their ability to raise enough financing to close transactions.

What role do foreign buyers now play in the Vancouver commercial segment? They’re a big part of it. In fact, they’re actually one of the main driving forces behind the sustained upward trend in the value of Vancouver’s real estate.

Does this lead to any friction between the foreign and domestic sides of your clientele? Not at all. Obviously, among those in the marketplace, there’s a constant bewilderment as to why prices are going up the way they are. Foreign presence aside, it’s ultimately inexplicable. Vancouver is a unique market in that real estate values are consistently higher than any other market in Canada.

So are there any signs of the market moderating at the moment? No, I don’t think so. Of course, there will be always things that you can never prepare for, such as a conflict between the United States and North Korea, which could send the world economy into a tailspin that we can do nothing to protect ourselves from. A collapse in the North American Free Trade Agreement could also have a similar effect on the Canadian economy. As for the moment, however, there are no local conditions that indicate the Vancouver market will go down.

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7/09/2017 7:17:32 AM

UPFRONT

ALTERNATIVE LENDING UPDATE

Alternative mortgages thriving in Toronto Buyers and sellers alike are fuelling the renewed hunger for purchase funds as the market cools

Toronto market. According to data from the Toronto Real Estate Board, home prices in the city are down nearly 19% from their peak in April, just before the provincial government introduced its Fair Housing Plan. Resales, meanwhile, were about 40% lower in July than a year earlier. This has sent sellers scrambling to get deals closed before home prices decline further. Sellers are considering suing those who are lagging on their agreed purchases, while

“What we have found recently is a whole bunch of aborted deals … and we’ve stepped in”

With the Ontario government tightening real estate rules earlier this year and the Toronto market slowing down soon after, a renewed hunger for cash has led to the increased popularity of alternative mortgage lenders. “What we have found recently is a whole bunch of aborted deals … and we’ve stepped in,” Atrium Mortgage Investment Corporation CEO Robert Goodall told Reuters. Atrium – which lends to those unable to

NEWS BRIEFS

access cheaper bank credit by pooling resources from moneyed individuals – provides would-be buyers with second mortgages and bridge loans at around 7.5% to 8% interest, two or three times the rates available for first mortgages. “It is actually really good business … these are good people with impeccable credit ratings who just got caught,” Goodall said. The mad dash for purchase funds has stemmed from the recent cooling in the

Home Capital appoints new leadership

As part of its ongoing stabilization efforts, Home Capital Group has shaken up its executive team. Yousry Bissada came on as president and CEO on August 3, and a few weeks later, the lender announced Brad Kotush as its new EVP and chief financial officer. Bissada has a wealth of experience in the mortgage industry, having held leadership positions at Filogix, Street Capital, Paradigm Quest, Canadiana Financial, Kanetix and Equity Financial Trust. Kotush, meanwhile, comes to Home Capital by way of Canaccord Genuity Group.

buyers are desperate for a way out of contracts without losing deposits of up to $100,000. “Some people want to walk away, some want half their deposit back, and some bury their head in the sand and say, ‘I’m not closing; if they want to sue, fine,’” said real estate lawyer Bob Aaron, who added that he’s been encouraging clients on both sides of the transaction to refrain from filing lawsuits, as these years-long recourses could involve as much as $40,000 in legal fees. Realtors in the area told Reuters that there’s been a notable increase in re-listings in Toronto over the past few months, although it’s unclear whether these are deals that have collapsed or properties that are simply being re-listed at lower prices.

Channel lender launches alternative offerings

Last year’s mortgage rule changes have led to a growing clamour for alternative lending solutions among Canadian consumers – and now, brokers have one more option. Street Capital’s Street Solutions Mortgage Program features lending solutions aimed at addressing the needs and of nontraditional homebuyers, including newcomers to Canada, the self-employed and those with impaired credit. Originally launched in Ontario, the alternative mortgage program is now being rolled out to Western Canada.

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Q&A

Elise Hildebrandt

A multi-layered challenge for first-time buyers

Mortgage associate THE MORTGAGE CENTRE

Years in the industry 7 Fast fact Outside of mortgages, Hildebrandt works with the Chamber of Commerce in Warman, Saskatchewan, to support the growth of local businesses

As a specialist in alternative mortgages, what are you currently seeing in your local market? Here in Warman, [Saskatchewan], our market seems to be quite strong, especially for starter homes – that is, those around the $300,000 to $325,000 mark. Many of my clients would be considered among those who have gotten themselves into a bit of a financial bind.

You’ve worked as a mortgage broker for nearly a decade now – what has changed between the time you started and the present? The biggest change is the way our lenders do financing and the way the federal government continues to tinker with the rules. It’s really a headache.

Could you elaborate on that? What kinds of challenges are you encountering? With the rules that came into effect in October 2016, I have a lot of first-time home buyers who, on an income of $45,000 – which is what plenty of people aged around 25 years old are making – can now qualify to carry only a $190,000 mortgage. Even in Saskatchewan, that’s a very small amount. Our federal government has really made it more difficult for people to buy houses. Often, a buyer

Home Capital finalizes sale of commercial assets

In late August, Home Capital Group announced the on-time completion of its commercial mortgage asset sale to private equity firm KingSett Capital, two months after first announcing the deal. KingSett invests through growth, income and mortgage funds, and owns interests in assets worth more than $10 billion. KingSett purchased the portfolio for 99.61% of outstanding principal value, less a share of future credit losses. Home Capital received approximately $1.2 billion from the sale and discharges of commercial mortgages.

has to take on two or three roommates to even begin carrying the costs. That’s probably my biggest frustration right now: The new rules have been put in place because we are hoping that a healthy housing market would prevent a crash – but while those in Toronto might say that it’s just as hard to buy a home as before, people in smaller communities like ours can’t even find anything anymore because they qualify for only $190,000 under the stress test. In the meantime, credit-card companies keep sending these young people letters saying that they’re approved to increase their limits by $5,000 or so. They keep saying, “Here, take more money, take more money” – and as soon as my clients run into a problem because of a job loss, the credit-card companies throw up their hands, say it’s not their problem, and tell the people to deal with it on their own. Personally, I’d love to see the government come down hard on these companies and say, “Hey, just stop giving people the ability to spend more.” More importantly, nothing in our educational system equips our students with fundamental financial literacy. Things like, “This is how you pay off your mortgage and credit cards; this is how simple/ compound interest works; this is what’s happening when we’re looking at your ratios; this is the home you can afford with your budget and income.” I’ve even had clients say to me, “Nobody taught us these things when we were growing up. What are we supposed to do?” It’s a vicious cycle.

Shareholder to vote against second Buffett investment

When Home Capital Group’s shareholders convene at the end of September to vote on the second tranche of investment from Berkshire Hathaway, at least one major investor is preparing to say no to the American firm’s proposed second equity infusion at $10.30 a share. “Given how things have improved so significantly and so much faster than we thought, it’s not prudent,” David Taylor of Taylor Asset Management told the Financial Post. “Times have changed, and we don’t need Berkshire’s second tranche.”

Court dismisses syndicated mortgage claims

A number of claims brought against developer and syndicated mortgage provider Fortress Real Developments have been dismissed. Fortress found itself embroiled in a number of class-action suits to the tune of over $100 million – many of which were for allegations of delayed projects and investment payouts – but in mid-August, the Ontario Superior Court dismissed four class-action claims against the company. A representative from Fortress told MortgageBrokerNews.ca that there are no additional pending claims.

www.mortgagebrokernews.ca

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7/09/2017 7:18:32 AM

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email mortgagebrokernews@kmimedia.ca

The makings of a bad law A low-profile bill making its way through Parliament almost unnoticed could have a seismic effect on the mortgage industry, writes Samantha Gale A SEEMINGLY innocuous public protection bill is currently making the rounds in the Senate; if passed into law, it is likely to have a profound and unexpected impact on the mortgage industry. Bill S-237 proponent Senator Pierrette Ringuette seeks to amend the Criminal Code to reduce the criminal rate of interest from 60% to the Bank of Canada’s overnight rate plus 20% for non-business loans and mortgages. The bill is complex and would create three classes of loans, subject to different rules: • Mortgages for residential purposes would be subject to a maximum interest rate of 20% above the Bank of Canada rate. • Mortgages for business purposes under $1 million would have no limits. • Mortgages for business purposes over $1 million would be subject to a maximum interest rate of 60%. Justifying the proposed change, Senator Ringuette pointed to a case involving loans offered by credit repair companies. “They call your house,” she said. “They say, ‘If you have credit-card debt, we can help you.’ I know – I got the call at my house. These are offered under the guise of rebuilding credit, but … fees and interest reached 50%. This case falls under the current limit of 60%.” She went on to say, “Even if we’re outraged about that 50% interest rate, we can’t do anything because the Criminal Code says it’s OK up to 60% … By lowering the criminal interest rate, we can send a strong message that profiteering off the financially vulnerable of our society will not be tolerated.” There appears to be little opposition to

the bill. However, the mortgage industry needs to take a closer look at the proposal to determine if it works for mortgage lending. What Senator Ringuette might not understand is that the courts have interpreted the concept of ‘interest’ broadly, making the Criminal Code prohibition somewhat ambiguous. Prosecuting criminal interest cases requires the expert services of an actuary to add to the contract interest rate upfront or commitment fees, fines, and expenses (including legal expenses), and

prise is considered a mortgage for business purposes, even though the mortgage itself is residential. The challenge with consumer protection legislation is that it does not always mesh with business practices. The creation of categories with arbitrary criteria dependent on ill-considered definitions makes Bill S-237 look more like bureaucratic regulation than criminal law. And we need to ask whether government should really be controlling lending rates using the heavy hand of criminal law. The concept of legal certainty requires that citizens have some clear idea as to what is unlawful so that they can regulate their own conduct. Bill S-237 fails this test, making it a bad law. It goes without saying that the purpose of the Criminal Code is to prohibit criminal conduct, not to interfere with the capacity of parties to make sound contracts based on reasonable factors. It is reasonable for lenders to charge higher costs to borrowers who are higher-risk. As long as there is a commercial rationale to justify the rate and other costs, the Criminal Code has no business interfering with the transaction. It is quite conceivable that a high-risk borrower

“Perhaps rather than churning complex regulatory rules into criminal law, we should determine whether criminal interest prohibitions are really needed at all” then to apply these costs over the term of the loan. A lender can’t simply rely on the contract interest rate in evaluating whether the rate is prohibited by the Criminal Code. There is also ambiguity with the concepts of residential and business purposes, which trigger whether or not the criminal rate of interest prohibition applies. For example, an equity take-out mortgage on a commercial property for the purposes of purchasing a family home is a ‘residential purpose’ under the criminal interest rate prohibition, even though the mortgage industry would consider this a commercial mortgage. Likewise, taking out a second mortgage on a residence to invest in a commercial enter-

might attract an interest rate of over 20%. There are, of course, loans that are so exorbitant, they lack any commercial rationale. But extortionate lending conduct is already prohibited under existing offences relating to extortion and racketeering. Perhaps rather than churning complex regulatory rules into criminal law, we should determine whether criminal interest prohibitions are really needed at all.

Samantha Gale is the CEO of CMBA-BC and serves as executive director of its umbrella organization, CMBA. Gale practiced law prior to a 15-year stint at FICOM.

www.mortgagebrokernews.ca

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7/09/2017 7:19:17 AM

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2017-07-05 10:20 7/09/2017 7:19:22 AMAM

PEOPLE

INDUSTRY ICON

TAKING THE NEXT STEP Dale Bilton has run one of the country’s most successful commercial mortgage operations for several years. He tells CMP why he decided now is the time to expand and merge

AS ANY commercial broker will tell you, that segment of the business is as timeconsuming as it is rewarding – one deal can net you an absurd amount in commissions, but it can also cost you months of hard work. And there’s always the possibility that large-scale files will fall apart after all that hard work. With that in mind, Dale Bilton, who has been one of the country’s leading commercial players for more than two decades, decided it was time to enlist some help. So he merged with Michel Laval, who also runs a DLC franchise, Winestone Laval. “The reason I joined was because he has a full underwriting department, which, being a smaller broker, I didn’t have,” Bilton says. “I did all my deals myself from start to finish, as did all my brokers. Now with [Winestone Laval’s] underwriting department, it’s a big help for both commercial and the $500 million in funds we put out for residential mortgages.”

A miracle deal Bilton made the decision to merge after years of striking out on his own as a commercial broker, learning the ropes as he went. “I wanted to do commercial mortgages – I

had to do residential to keep an income balance, but gradually became a commercial specialist,” he says. “Becoming a commercial specialist, I had no mentors to really work with and help me figure out how to put commercial deals together. Really, finding the appropriate lenders

lender/buyer dynamic that miraculously worked out. “I was referred by a lawyer to an industrial building for sale that the buyer wanted to convert into a church; it was a $5 million property, and the buyer had a low down

“I did all my deals myself from start to finish, as did all my brokers. Now with Winestone Laval’s underwriting department, it’s a big help for both commercial and the $500 million in funds we put out for residential mortgages” for the many different kinds of commercial properties was just trial and error. That [was] the start of the challenges. After that, figuring out how to finalize a deal – it’s all different than working on residential deals.” And commercial deals are certainly challenging. Bilton points to what he considers his most rewarding deal – it’s a story of a tough-to-fund property type and a strange

payment,” Bilton says. “I got together with the pastor and the financial planner for a two-anda-half-hour meeting, and the financials just didn’t work. They said they’d pray for me to do the deal.” Bilton personally believed there was zero chance he could get the deal done, but nevertheless he shopped it around to lenders. “I went to more lenders than I normally

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PROFILE Name: Dale Bilton Title: Executive director and president of commercial lending Company: Winestone Laval Based in: Kitchener, Ontario Years in the industry: 22 Career highlight: “Saving numerous powers of sale on different types of commercial properties – we were able to restructure a foundry and save it from being closed.” Career lowlight: “The biggest challenge I’ve faced is having unethical competition and people who don’t play by the proper rules for the clients.”

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7/09/2017 7:20:01 AM

PEOPLE

INDUSTRY ICON

would,” he says, “and the last lender I approached was an atheist who swears more than a drunken sailor. He wanted to take a look.” The private lender, Bilton and the pastor met for dinner – a dinner Bilton had to properly groom the lender for. The pastor had only $200,000 to put down on the multi-milliondollar property, but just when it seemed like the deal would never happen, a $1 million donation came in that helped save it. “That was my most rewarding deal that

from the lenders. You have to accept the challenges and face them and come up with new solutions. The challenges will be where a lender has their own issues in how they would have lent previously, and they aren’t able to lend that way now. [You have to find] new sources to replace those situations, but that’s a huge opportunity to do that.” Bilton also argues that today, more than ever, the mortgage business requires absolute focus from brokers.

“I think the really dedicated brokers will continue to do well. However, there will be new challenges thrown at us every day from the lenders. You have to accept the challenges and face them and come up with new solutions” never should have happened – it was a miracle,” Bilton says. “I do a lot of church deals, and I always tell clients that story when I’m working with tough files.”

Going commercial It’s unique deals like the one Bilton experienced that draw residential brokers to the commercial side – that, and the promise of lucrative commissions. Bilton has some advice for those brokers. “Get a good relationship with a good commercial broker you are comfortable with and you trust,” he says. “As you co-broker deals, you can figure out how to do the deals on your own eventually. When I do a deal with others, they try to figure out how not to do a deal with me the next time. You have to learn the rules of the jungle. “I think the really dedicated brokers will continue to do well,” he adds. “However, there will be new challenges thrown at us every day

“It’s going to continue to get more difficult to survive,” he says. “You need to focus 100% on this industry; don’t try to wear too many hats. Hopefully you have your base and you continue to market yourself seven days a week.” Another challenge Bilton sees is the issue of ethics in the industry. He argues that the profession needs to up its game overall, and that there needs to be a crackdown on those brokers who don’t have their clients’ best interests at heart. “The lenders need to be cautious with what brokers they deal with,” he says. “They have to weed out the unethical brokers quickly. There always has been an issue, and there continue to be too many unethical brokers. They are desperate, and when people are desperate, they will bend the rules and break them. It’s really annoying how certain people will take advantage of clients. You’re not going to survive for long if you’re unethical, but it hurts the brand and the industry.”

DALE BILTON’S CAREER TIMELINE 1990

1995 Started in the industry with Norlite Financial, which became Mortgage Intelligence

2000

2000 Became a commercial specialist with Mortgage Intelligence

2010

2012 Joined DLC

2017 Merged with DLC Winestone Laval

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7/09/2017 7:20:04 AM

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8/28/2017 7/09/2017 4:45:54 7:20:08 PM AM

FEATURES

SPECIAL REPORT

BROKERS ON LENDERS Brokers told CMP which lenders are staying well ahead of market and regulatory changes – and which ones need to get up to speed

WHICH LENDERS are performing above the rest? For the 11th year in a row, brokers sounded off on their lenders’ performance, revealing the best lenders in the business, along with the ones that need some improvement. Brokers from around the nation rated their lenders on a scale of 1 (poor) to 5 (excellent) in 10 key categories: • Turnaround time • Underwriter support • Overall service levels • Interest rates • BDM support • Product range • Satisfaction with credit policy • Broker support • IT/technology • Transparency of commission structure

This year’s results highlighted dramatic improvements in lenders’ performance in two critical areas: transparency of commission structure and BDM support. But it wasn’t all good news for lenders – interest rates took a hit this year; lenders’ average score in the category dropped by 0.6 points. Returning contenders such as Merix/ Lendwise, CMLS and MCAP are still leading the pack. They’ve been joined by a couple of welcome new additions, including a few alternative lenders that are surpassing the performance of their traditional counterparts. When comparing this year’s results to last year’s, what’s clear is that brokers overwhelmingly trust that their lenders are doing their best to meet their needs amidst the tightening measures in the market.

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Brokers rated their lenders higher across all categories this year, with the exception of interest rates. On a positive note, lenders continued their top-notch performance when it comes to the transparency of their commission structures â&#x20AC;&#x201C; the category received the highest overall score for the fourth consecutive year. 2017

2016

Transparency of commission structure 4.30 4.14 BDM support 4.15 4.04 Underwriter support 4.08 4.01 Broker support 4.05 3.92 Overall service levels 3.98 3.90 Product range 3.97 3.94 Satisfaction with credit policy 3.92 3.84 IT/technology 3.92 3.73 Turnaround time 3.89 3.87 Interest rates 3.84 3.90

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7/09/2017 7:23:04 AM

FEATURES

BROUGHT TO YOU BY:

SPECIAL REPORT TRANSPARENCY OF COMMISSION STRUCTURE O

S BROKER S

BROKER

BR O

BR BR

E R N AT I V E

SILVER

A LT

E R N AT I V E

LE ER

S 2017

Bronze MCAP

GOLD

A LT

S 2017

ON LENDER

Silver CMLS Financial

E R N AT I V E

SILVER

A LT

S 2017

GOLD

ON LENDER RS S

Gold Lendwise

ON LENDER

TOP ALTERNATIVE LENDERS

BROKER

TOP LENDERS

2017 average score 4.30

Gold NPX Silver Optimum Mortgage Bronze Equitable Bank

2016 average score 4.14

As in previous years, this category received the highest overall score from brokers, at 4.30 out of 5, and the top performers all scored

well above average: Lendwise at 4.66, CMLS Financial (which jumped from bronze to silver this year) at 4.52 and MCAP at 4.47. Just a handful of comments mentioned commission, which suggests brokers are still generally content with lenders’ performance in this area, though there’s always room for improvement. One broker commented that it would be a plus if lenders could “eliminate ‘minimum volume’ to get max commission and bonuses” and “send finder’s fees and commissions sooner, after the file has closed and [been] funded.” Alternative lenders also stepped up their game in this category this year – NPX led the group with an impressive score of 4.48, surpassing the score of last year’s goldmedal winner.

S BROKER S

BROKER

A LT

E R N AT I V E

LE ER

S 2017

2017 average score 4.15

Bronze Merix

E R N AT I V E

SILVER

BR O

ON LENDER

A LT

S 2017

Silver ICICI

BROKER

GOLD

ON LENDER

SILVER

LE S 2017

Gold CMLS Financial

E R N AT I V E

GOLD

A LT

LENDE S ON RS

R KE

TOP ALTERNATIVE LENDERS Gold Magenta Capital Silver Bridgewater Bank Bronze NPX

2016 average score 4.04

BDM support also kept its position as the second highest-ranked category, with an average score of 4.15 out of 5. In terms of the factors that separate the best lenders from the rest of the pack, brokers often pointed to BDMs as a key differentiator. This year, CMLS took gold in the category, scoring a whopping 4.79, thanks to its “amazing BDM and turnaround [times].” It was trailed by ICICI at 4.67, which has

The vast majority of brokers are still submitting deals to a wide variety of lenders, although the proportion of brokers targeting five or more lenders has dropped from 85% to 79%. 1.3% 1.8% 6.7% 11.2%

79%

5 or more lenders

BDM SUPPORT TOP LENDERS

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

4 lenders “great BDMs [who are] quick to respond.” Merix, where “the BDM always returns calls within two hours and normally can get a deal through,” came in at third place with 4.52. Not all brokers had glowing reviews of BDMs, however. A number pinpointed the lack of coordination between BDMs and underwriters. Others called on BDMs to improve their responsiveness: “[We need] BDMs that actually do something other than refer you back to the underwriter, who is not responding,” said one broker. “If BDMs do not get back to me within half a day, I move on to the next lender,” said another. Ultimately, brokers highlighted the need for a true partnership. “The BDM/underwriter must ensure that the concerns of the broker are looked into, instead of thinking all brokers are out to go against company policy of the particular lender,” wrote one broker. “In a very difficult time, I think everyone is extremely frustrated and everyone is doing their best,” said another. “Underwriters and BDMs do have to exercise patience, and brokers have to be polite and helpful.”

2 lenders 1 lender

3 lenders HOW LONG HAVE YOU BEEN A BROKER?

4.9%4.9% 14.7%

75.5%

5+ years 2–5 years

Less than a year

1–2 years

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S ERS K

ON LENDER

S ERS K

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S ERS K

ON LENDER

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FEATURES

BROUGHT TO YOU BY:

SPECIAL REPORT UNDERWRITER SUPPORT

S BROKER O

E R N AT I V E

SILVER

E R N AT I V E

LE ER

S 2017

2017 average score 4.08

A LT

Bronze First National

A LT

BR O

ON LENDER

S 2017

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ON LENDER

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TOP ALTERNATIVE LENDERS

BROKER

TOP LENDERS

Gold Magenta Capital Silver Equity Financial Bronze NPX

2016 average score 4.01

Lenders have been striving to keep their performance steady in terms of underwriter support, despite continuous regulatory changes that have made it more and more challenging. It seems they’re on the right track, though – lenders received the third highest score from brokers in this category, at 4.08 out of 5, and they even managed to slightly improve upon last year’s results. CMLS unseated First National from first place this year, scoring 4.55 out of 5, but First National was able to slide in behind Merix and claim the bronze. Newcomer Magenta Capital led the alternative lenders; one broker praised Magenta for going “above and beyond

to make things work.” A whopping portion of the responses in this category underscored the fact that brokers are really after just one thing these days when it comes to underwriting support: common sense. Tough as it is to define what constitutes ‘common sense,’ it’s a reminder that underwriting should be about exercising expertise and judgment, rather than blindly checking off boxes. “[Our lender] used common sense when a final issue needed resolving and the required document was not available but all the other items pointed toward satisfying a final condition,” one broker gave as an example, adding that “[it’s] strange to say, but it’s not out there so much ...” Another broker opined that “underwriters are afraid to approve anything that is outside the box. I don’t see any consistency in underwriters’ standards of underwriting and find it hard to structure files at times.” Another broker admitted that “policy changes make it more difficult to get files approved, [but there] seems to be a lack of common sense.” Ultimately, brokers feel good underwriting needs to strike a balance between maintaining effective general guidelines and being f lexible enough to make exceptions for a handful of deserving cases.

WHY CHOOSE A BANK OVER A MONOLINE? As was the case in previous years, brokers’ chief reason for choosing banks over monolines is the wide variety of products they are able to offer. Rate has now become the second most important factor in choosing a bank, taking precedence over underwriter/BDM service and client preference.

Product offering 51.8%

Rate 22.3%

Underwriter/BDM service 12%

Client preference 12%

Compensation 1.8%

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FN_C

Your recognition means everything ON LENDER

S 17

ON LENDER

S 17

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Overall Average

ON LENDER

S 20

SILVER

Turnaround Times Overall Service Levels IT/Technology

Underwriter Support

When you commit to something – and uphold that commitment for 30 years – and you are recognized by the very people you’ve committed to, it’s rewarding. And humbling. And very much appreciated. As a result of your ongoing support and belief in First National as your business champion, we have received outstanding recognition in CMP Magazine’s annual broker survey. Three gold. One silver. One bronze. Awarded in areas that we invest time and effort in, so we can continue to go beyond service for you. We are so proud of these awards because they directly reflect your experience with us. Your recognition motivates us to continue going beyond service and growing our loyal partnership with the broker channel. www.firstnational.ca

Going beyond service.

Ontario Mortgage Brokerage License No. 10514

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FEATURES

BROUGHT TO YOU BY:

SPECIAL REPORT BROKER SUPPORT O

S BROKER N

A LT

E R N AT I V E

SILVER

S 2017

Bronze Lendwise

E R N AT I V E

ON LENDER

A LT

S 2017

Silver Merix

GOLD

BROKER

ON LENDER

SILVER

E R N AT I V E

S 2017

A LT

GOLD

Gold CMLS Financial

ON LENDER

TOP ALTERNATIVE LENDERS

BROKER

TOP LENDERS

2017 average score 4.05

Gold Magenta Capital Silver NPX Bronze Home Trust

2016 average score 3.92

Having bagged gold for both its BDM and underwriter support, it’s not surprising that CMLS took the lead again in broker support. “CMLS kept service levels intact during peak seasons” and “Great turn-

around times, rates, solid comp, and good and straightforward products” were just a few of the compliments brokers gave the lender. Sister companies Merix and Lendwise rounded out the top three, garnering comments like “Merix always [has] informative, knowledgeable staff; great service; and turnaround – [a] true broker partner” and “[Lendwise’s] portal is amazing, and [they are] so quick and helpful.” Magenta Capital, meanwhile, led the pack among alternative lenders, followed by NPX and Home Trust. However, not all brokers felt the same support from their lenders. As one unsatisfied broker explained, “When the market is challenging, don’t bite the hand that feeds you because brokers have long memories, and we will remember which lenders stood by us when the market returns to normal.”

WHO IS YOUR BEST REFERRAL PARTNER? Past clients remain the biggest source for referrals by a wide margin, although a small number of brokers mentioned that they rely on friends, social media contacts and banks. 0.6% 5.3% 25.7%

68.4%

Past clients Realtors

OVERALL SERVICE LEVELS

S BROKER O

E R N AT I V E A LT LE

S 2017

2017 average score 3.98

Bronze Merix

SILVER

ON LENDER

E R N AT I V E A LT LE

S 2017

SILVER

Silver CMLS Financial

GOLD

BROKER

ON LENDER

E R N AT I V E

S 2017

Gold First National

A LT

GOLD

ON LENDER

TOP ALTERNATIVE LENDERS

BROKER

TOP LENDERS

Gold Magenta Capital Silver Equity Financial Bronze NPX

2016 average score 3.90

Overall, lenders showed slight improvement in service from 2016 to 2017, earning a score of 3.98 out of 5. First National retained first place in this category, which came as no surprise, given some of the comments from brokers. “[At] First National, the service level is 100 times better than every lender out there,” one broker wrote. “From underwriting to fulfillment, it’s quick, it’s easy, and

they answer questions within minutes.” CMLS stayed in the silver-medal spot, while Merix rose to bronze. “Merix seems to be the most present and proactive,” said one broker. Another commented: “Merix’s customer service is amazing, and the retention team works with me on renewals instead of trying to block me out once they have the client.” Talk about service inevitably touches on other categories, particularly turnaround times and underwriting. One respondent was frustrated with his lender’s service, saying that “whenever there is a rate change, good turnaround times go out the window.” A couple of others pinpointed document review time and flexibility in underwriting as areas where service could be improved. One broker defined overall service as “the ability to make judgment calls to satisfy conditions over and above having to have a document for the file,” again underscoring brokers’ overwhelming desire for lenders to take a common-sense approach.

Insurance brokers

Financial planners WHERE ARE COMMISSIONS HEADED? As they did last year, the majority of brokers said they expect commissions and bonuses to stay the same over the next six to 12 months, though the remaining brokers are now leaning more toward commissions going down rather than up. Stay the same

64.3%

Decrease

22.8%

Increase

11.1%

Move to a flat-fee commission

1.8%

www.mortgagebrokernews.ca

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7/09/2017 7:23:41 AM

REACHING NEW HEIGHTS WITH US!

UNDERWRITER SUPPORT Silver

SATISFACTION WITH CREDIT POLICY Gold

OVERALL SERVICE LEVELS Silver

TURNAROUND TIME Gold

INTEREST RATES Bronze

THANK YOU TO OUR BROKER PARTNERS. We appreciate your support and will continue to work hard to earn your business! Stay tuned for upcoming broker recognition programs to show how much we value your hard work and loyalty to us.

e q u i t y fi n a n c i a l t r u s t . c o m

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1.855.272.0050

c o n t a c t @ e q u i t y fi n a n c i a l t r u s t . c o m

7/09/2017 7:23:49 AM

FEATURES

SPECIAL REPORT PRODUCT RANGE

GOLD

A LT

E R N AT I V E

S 2017

Silver B2B Bank

E R N AT I V E

BROKER

ON LENDER

A LT

S 2017

SILVER

Gold Scotiabank

ON LENDER

GOLD

TOP ALTERNATIVE LENDERS

BROKER

TOP LENDERS

E R N AT I V E

LE ER

S 2017

2017 average score 3.97

A LT

Bronze MCAP

BROKER

ON LENDER

SILVER KE

Gold Equitable Bank Silver NPX Bronze Home Trust

2016 average score 3.94

When looking at the average scores for this year and last year, it seems not much has changed in terms of product offerings. Scotiabank maintained its gold-medal position with a score of 4.40, while B2B took

over the second spot at 4.35 and MCAP came in third at 4.19. Among alternative lenders, Equitable Bank also maintained its gold medal; NPX and Home Trust rounded out the top three. Despite MCAP’s drop from second to third place this year, quite a few brokers commended the lender for its product range, pointing to the fact that MCAP is “listening to brokers to come up with new products to help [them] be more competitive.” Meanwhile, brokers praised number-one lender Scotiabank for its “competitive rates and product offerings,” including “uninsurable files and exceptions.” Brokers are still hoping to get more from their lenders in terms of products, especially monolines, which they hope will “improve their product offerings to keep pace with chartered banks.” Others said they’re looking for

“more options for non-insurable products such as refinances, single unit rentals, etc.” and “more unique product specials focusing on

Brokers are still hoping to get more from their lenders, especially monolines underutilized market opportunities.” Though most brokers are bracing themselves for the negative effects the B-20 amendments will have on lenders’ product ranges, a couple suggested lenders look at the forthcoming changes as a challenge to keep up with those who have “created innovative products to help with the new changes.”

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Manager, Residential Mortgages tomw@peoplestrust.com 604-331-2210

Business Development Manager jonathans@peoplestrust.com 604-209-0702

www.mortgagebrokernews.ca

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7/09/2017 7:23:57 AM

BROUGHT BROUGHT TO YOU TO YOU BY: BY:

SATISFACTION WITH CREDIT POLICY TOP ALTERNATIVE LENDERS

TOP LENDERS

BROKER

BR BR

SILVER

E R N AT I V E

GOLD

E R N AT I V E A LT L

S 2017

Silver Scotiabank

ON LENDER

A LT

S 2017

Gold Lendwise

BROKER

ON LENDER

GOLD

O S

E R N AT I V E A LT LE ER

S 2017

2017 average score 3.92

Bronze MCAP B2B Bank (tie)

BROKER

SILVER ON LENDER RS S

Gold Equity Financial Silver Equitable Bank Bronze NPX

2016 average score 3.84

Brokers’ satisfaction with lenders’ credit policy has improved compared to last year, though scores – both the overall average of 3.92 out of 5 and the scores of the top

lenders – were a bit lower than those in other categories. Lendwise took first place with 4.17, while Scotiabank maintained the silver, and MCAP and B2B Bank tied for bronze. Several brokers voiced concerns over credit issues when asked about their biggest challenges with a lender’s service. While some applauded their lenders for coming through for clients despite poor credit scores, others are still facing challenges due to tighter credit policies and the uncertainty of getting “approvals on deals [lenders] say they will do – i.e., bruised credit, self-employed or stated income.” On the flip side, alternative lenders got some positive reviews here – specifically Equitable Bank, which one broker described as “much better than any other bank or lender because of their precise requirements.”

HOW HAVE LAST YEAR’S MORTGAGE RULE CHANGES IMPACTED YOUR BUSINESS? 6.5%

Positively

16.4%

No impact

77.1%

Negatively

Email lender notes, application, and credit bureaus to:

deals@vwrcapital.com D IMITRI K OSTUROS

Chief Operating Officer dimitri@vwrcapital.com

P AULA H UTTON

BDM - Prairies paula@vwrcapital.com

www.mortgagebrokernews.ca

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FEATURES

SPECIAL REPORT IT/TECHNOLOGY BR

A LT

E R N AT I V E

LE ER

S 2017

GOLD

A LT

E R N AT I V E

ON LENDER

S 17

SILVER

Bronze MCAP

BROKER

2017 average score 3.92

A LT

E R N AT I V E

S 2017

ON LENDER

SILVER

Silver Merix

S 2017

BROKER

Gold First National

ON LENDER

GOLD

TOP ALTERNATIVE LENDERS BROKER

TOP LENDERS

Gold Home Trust Silver NPX Bronze Optimum Mortgage

2016 average score 3.73

In 2017, lenders seem to have considerably improved in their use of technology – their overall score in the category jumped from StewartCMPad_7.25x5_v1_hires_final.pdf

The trusted partner for residential and commercial title insurance

3.73 out of 5 in 2016 to 3.92 in 2017. First National edged its way into the top spot this year with a score of 4.47. Merix came in

Some brokers are still experiencing difficulty with uploading documents or accessing them immediately after. One broker went so

Although effective broker portals are a must, there are still lenders struggling in this area second with 4.36, while MCAP was a very close third at 4.35. Although effective broker portals are a must in the modern mortgage industry, there are still lenders struggling in this area. Brokers complained about portals that “[don’t] have conditions updated quickly enough” and “pose problems with communication and 1 9/5/17 12:18 PM time management.”

far as to say he’s “stuck in technology hell” with his lender. Lenders who are excelling in this area have portals that are easy to use, allow brokers to clearly see the status of a deal and are constantly being improved. One broker praised silver-medal winner Merix for “always coming up with new products and improving broker portals.”

When the pressure is on, you want to know that you’ve got the backing of a title insurance company that you can count on. At Stewart Title, our focus is on providing the coverage and underwriting expertise you need to complete even your most complex transactions. Learn more about our level of support, call (888) 667-5151 or visit stewart.ca.

www.mortgagebrokernews.ca

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7/09/2017 7:24:15 AM

BROUGHT BROUGHT TO YOU TO YOU BY: BY:

TURNAROUND TIME

S O BROKER

A LT

E R N AT I V E

S 2017

2017 average score 3.89

Bronze Lendwise

E R N AT I V E

SILVER

A LT

S 2017

ON LENDER

GOLD

Silver CMLS Financial

E R N AT I V E

BROKER

ON LENDER

A LT

S 2017

SILVER

Gold First National

ON LENDER

GOLD

TOP ALTERNATIVE LENDERS

BROKER

TOP LENDERS

Gold Equity Financial Silver NPX Bronze Equitable Bank

2016 average score 3.87

Getting a deal done in a timely manner can make or break a broker’s reputation,

and accordingly, brokers didn’t shy away from criticizing their lenders’ turnaround times. Lender performance in this category improved just slightly this year, going from 3.87 to 3.89 out of 5. First National and CMLS continued to outperform the competition again this year – they took gold and silver, respectively, while Lendwise earned bronze. Among alternative lenders, Equitable Bank dropped from silver to bronze, while Equity Financial and NPX earned this year’s gold and silver medals. The majority of brokers mentioned turnaround times as the biggest challenge they faced with lenders over the past 12 months. Consequently, many brokers named

improvement on turnaround times as the one thing they would like to see from lenders in the near future. However, a few brokers positively reviewed their lenders, commending their efforts in getting deals done on time. “First National’s turnaround times are excellent,” said one broker. Another satisfied broker commended his lender for being “more efficient, and turnaround time is a bit faster than its competitors/peers.” While a few lenders are excelling in the area, turnaround times appear to be a fickle business – several brokers said they’ve noticed a difference in the time it takes to get a deal processed as a result of rate or policy changes.

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www.mortgagebrokernews.ca

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7/09/2017 7:24:20 AM

FEATURES

BROUGHT TO YOU BY:

SPECIAL REPORT INTEREST RATES

S BROKER S

BROKER

A LT

E R N AT I V E

LE ER

S 2017

2017 average score 3.84

Bronze DUCA

E R N AT I V E

SILVER

BR O

ON LENDER

A LT

S 2017

Silver RMG

GOLD

ON LENDER

SILVER

LE S 2017

Gold Lendwise

E R N AT I V E

GOLD

A LT

LENDE S ON RS

R KE

TOP ALTERNATIVE LENDERS

BROKER

TOP LENDERS

Gold NPX Silver Optimum Mortgage Bronze Equity Financial

2016 average score 3.90

“Consistency on rates” and “being able to adapt to the ever-changing world” sums up brokers’ wish list when it comes to their lenders’ interest rates. Lenders had the poorest overall score in this category at 3.84 out of 5 – which comes as little surprise, given how many times the word ‘greedy’ factored into brokers’ comments. “Lenders are being greedy with the rates they charge for non-securitized deals,” said

THE MOST IMPORTANT BROKER-LENDER ISSUE one broker. “Lenders are all pulling back, waiting for the market to crash.” Another complained about “rate changes on approved B deals once [a lender] had their issue. B lenders were changing their rates on approved B deals after the news – greedy.” Among individual lenders, Lendwise and RMG landed in the top three again this year, while DUCA nabbed the bronze. Alternative lenders also performed poorly on interest rates – gold medallist NPX scored just a 3.75 in the category, far below the goldwinning ratings in other categories. With regulatory changes shaking up the industry, brokers have taken notice of their effect on rates: “Tightened mortgage ‘rules’ always make our job more challenging, especially if it impacts interest rates,” wrote one broker, adding that “conventional rates are now higher than insured rates.” Brokers also noted that while some lenders may offer great rates, turnaround times usually suffer as a result: “Whenever there is a rate change, good turnaround times go out the window,” one broker said.

Hello neighbour… We just moved in.

Once again this year, brokers pegged the move to an efficiency ratio as the issue most likely to define their relationships with lenders over the next six to 12 months. Higher volume requirements have become a more pressing issue, too, moving up a spot from last year.

Move to efficiency ratio 38.8%

Higher volume requirements from individual lenders 29.9%

Lender concerns about fraud 16.5%

Commissions 14.7%

Hi there neighbour, allow us to introduce ourselves. For mor than 30 years, Kokanee Mortgage has been a trusted partner in alternative lending throughout smaller cities and towns in Western Canada. Today we’re excited to announce that we are now expanding into Ontario. To learn more about our new expanded lending areas, or sign up for our newsletter updates please visit us online at www.KokaneeMortgage.com or call us at 1 844 KOKANEE.

We’ll make it happen.

www.mortgagebrokernews.ca

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N AT I V E L E N

ON LENDER

GOLD G

ON LENDER

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GOLD LT

N AT I V E L E N

GOLD LT

ON LENDER

N AT I V E L E N

7/09/2017 7:24:38 AM

FEATURES

BROUGHT TO YOU BY:

SPECIAL REPORT WHICH DEALS DO YOU SEND TO ALTERNATIVE LENDERS?

Bruised credit

71%

Business-for-self

66%

Secondary/ vacation home

15%

New to Canada

Purchase for improvement

WHAT’S THE BIGGEST CHALLENGE YOU’VE HAD WITH A LENDER’S SERVICE IN THE LAST 12 MONTHS?

WHAT’S THE ONE THING YOU’D LIKE TO SEE LENDERS IMPROVE ON IN THE NEXT SIX TO 12 MONTHS?

“Lenders pulling commitments at the last minute – [there’s] no regard for the client; [they’re] not able to understand condition confirmation and not closing.”

“I’d really like to see some forums with underwriters explaining their job to brokers more fully. Knowledge leads to understanding and stronger partnerships. There is a real disconnect right now, as frustrations are through the roof.”

“Underwriters are rewarded based on volume of files processed, rather than on approving deals; this has made it a huge challenge for brokers to get proper support and help from lenders.” “New regulations are changing the way lenders look at files, [making it] much harder to get approvals.” “Service has not been a huge issue for me – it has been the product availability (refinancing) and the new benchmark qualification rules that have affected my clients the most, causing a drop in my business in 2017.”

“More transparency with regard to document requirements from the outset.” “I would like to see turnaround times and service limits improved.” “Government relations, efficiencies, more products to compete with banks – all A lenders should get into the B space.” “Remove required volumes – put a program in place for small independents with limited volume.”

WHAT’S THE BEST THING A LENDER HAS DONE FOR YOU IN THE PAST 12 MONTHS?

WHICH LENDERS PROVIDE BROKERS WITH EXCELLENT SERVICE?

“Going to bat for a client because it made sense. Even though on the surface, this file was just outside the box of what is normally accepted, both the BDM and underwriter found a way to get it funded.”

“Merix underwriters are amazing. I had two days to arrange financing, and they came through for me.”

“Responding in a timely manner and communicating even when there are no updates.” “Pushing the government and regulators to even the playing field between banks and mono lenders.”

“MCAP and First National maintain great service levels, even in the most challenging circumstances.” “Scotiabank is by far the best overall. They seem to have the most common sense.” “RMG has the best rate, service and commission offerings.”

“Working through all the changes with us and staying committed to the industry [with] extra compensation and staffing to help us through these confusing times.” “Helping suggest other ways of packaging and approving a deal, or offering an alternative when the original submission is declined.”

“ICICI [has] a great BDM and underwriter, always quick to respond.” “In the alternative space, Magenta wins, hands down. You typically use alternative lenders when you are in a pinch, and they can accommodate that time crunch you are in.”

www.mortgagebrokernews.ca

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7/09/2017 7:24:47 AM

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25/04/2014 7/09/2017 4:29:10 7:24:53 AM

SPECIAL PROMOTIONAL FEATURE

TREZ CAPITAL

6 lessons from 20 years in the business When Morley Greene started Trez Capital in 1997, he couldn’t have envisioned the extent of the growth to come. On the company’s 20-year anniversary, he reflects on some of the wisdom he has acquired over that time TODAY, TREZ CAPITAL manages more than $2.2 billion in capital; has offices in Vancouver, Toronto, Dallas and Palm Beach; and is supported by more than 100 employees. It’s obviously a very different business than the one I started 20 years ago, if you compare our humble beginnings to where we are now. Along the way, I’ve learned a great deal – and continue to do so, firmly believing that lifelong learning is the key to success. These lessons, which have been sharpened, honed and practiced over the course of that time, bind our past accomplishments and pave the way for the next 20 years of success (and, no doubt, the 20 after that as well).

Don’t stop

My goal was to always do more – to never stop or think I had done enough. Once a person stops and doesn’t keep growing their business, it slides backwards. As a result, we expanded: first to Toronto and then, after success there, to Dallas and Palm Beach. Even today, at 76, I have no interest in stopping. I love what we do every single day at Trez.

Surround yourself with the best

Find people you trust, who are smart and knowledgeable and can be honest with you. I have also never balked at paying to get the best, and as we grew, I kept on looking to hire the best. I never presume to think I am the smartest guy in the room. I always want to have people around who are smarter than me.

lending has expanded from simple second mortgages on income-producing properties to include construction, lot development, joint ventures and real estate ownership, and we continue to build up expertise and relationships in these areas.

Build and maintain positive relationships

I believe good relationships are the backbone of any good business. Looking back over the last 20 years, much of the advice and introductions I received were from people with whom I had long-term relationships. Hand-in-hand with that, we provide good communication to our investors and borrowers. People will stick with you if they have a positive experience – and that goes beyond just making money. As a company, we take great pride in our investors and how they see us. We strive to be timely and transparent in our reporting, going beyond minimum disclosure requirements.

Be committed and work hard

I was committed to building Trez and worked single-mindedly to achieve growth. I continue to be committed to our work and our investors, and always want to ensure that our investors achieve the best results. I

My goal was to always do more – to never stop or think I had done enough. Once a person stops and doesn’t keep growing their business, it slides backwards 3

Be on the lookout for opportunities

Successful people are not lucky; they just know how to take advantage of opportunities when they arise. You must always seek out new opportunities. For us that has meant – and still means – seeking out new markets, new borrowers and new investors. Over the years, our

am extremely dedicated to my business, and I feel an enormous sense of responsibility to my investors.

Never be afraid to ask for the cheque

Many people give great presentations but do not know how to ask for the cheque. You can’t do one without the other if you want to

www.mortgagebrokernews.ca

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7/09/2017 7:27:22 AM

I never presume to think I am the smartest guy in the room. I always want to have people around who are smarter than me succeed. That said, once we receive an investor’s cheque, we take great strides to protect the principal and generate an attractive risk-adjusted return.

What do I still have to learn? I firmly believe I will never stop wanting to learn – even now, having learned so much, I am not prepared to stop. My will and

perseverance have been key in the development of Trez Capital, and they are not going away anytime soon. To have helped pioneer an industry, to build and define world-class cities has been – and continues to be – a truly unique and life-changing experience. While building Trez Capital may have been the driving force in my life over the past 20 years, my prime motivation has never been

money. Ultimately, what keeps me going is the urge to continue to learn and see my employees learn, excel and succeed – and pass that success on to our investors.

With a background in structuring large property acquisitions and mortgage transactions for lenders and borrowers, Morley Greene founded Trez Capital in 1997. He remains actively involved in the firm, providing management strategy and building long-term client relationships. Prior to founding Trez Capital, Greene practiced law for 32 years at several prestigious law firms, specializing in tax and transaction work in the mortgage and real estate industry.

www.mortgagebrokernews.ca

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7/09/2017 7:27:28 AM

SPECIAL PROMOTIONAL FEATURE

APPRAISALS

The role of appraisers in the modern market As the GTA market shifts and uncertainty spreads, the part appraisers play in the home-buying process has become even more crucial

SAVVY BROKERS know just how important relationship-building is in today’s mortgage industry. Brokers’ knowledge and ability to navigate the market is crucial in any environment, but as uncertainty spreads though the GTA real estate market, clients are leaning on their brokers for expertise and support more than ever. As the market has cooled, it’s gotten harder to estimate the value of property. Clients run the very real risk of overpaying to secure a home if they are led by their emotions rather than the facts, and mortgage brokers have a responsibility to step in and prevent this from happening. As a result, more brokers are realizing how partnering with a qualified appraiser can help their clients avoid any nasty financial surprises. “Appraisers are so critical in this type of market because they are unbiased and do not have any vested interest; they are hired to look at things in a factual, open, big-picture way,” says Dan Brewer, AACI, P.App, past president of the Appraisal Institute of Canada [AIC]. “The appraiser is completely objective and will come to an opinion of value based on current, as well as past, market trends.” Appraisers’ impartiality is an ethical obligation to their clients; an appraiser arrives at their opinion of value through a detailed and complex process. Their compensation is not based on a percentage of the sale price, which also ensures unbiased results. In a shifting

www.mortgagebrokernews.ca

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Bank Trust Wealth Management

We’ve grown

EDMONTON CALGARY

GTA

And we’re ready for your business. 2017 has been an unprecedented year for the alternative lending market. At Optimum, our market share increased at a rate faster than we were able to keep up with; so we’ve grown. It’s with great excitement we announce the opening of our new office in the Greater Toronto Area. With additional underwriting and fulfillment staff, Optimum Mortgage now has three underwriting centres across Canada entirely dedicated to you - our brokers. Let’s get to work. T. 1.866.441.3775 | F. 1.866.477.8897 | OptimumMortgage.ca |

A CWB Group Company

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@OptimumMtg

Sensible Lending®

7/09/2017 7:28:27 AM

SPECIAL PROMOTIONAL FEATURE

APPRAISALS

market, having access to a neutral, designated professional is crucial for brokers who are committed to protecting their clients. “At the end of the day, lenders should not be underwriting buyer emotion, but that can be hard for people to get their heads around,” Brewer says. “In the GTA, we are not seeing the multiple-offer scenarios of a few months ago; there’s now what we would call more of a ‘normal’ market without offers of $200,000 over asking.” The changing nature of the market is creating challenges. When prices were escalating, some took the view that market value is determined by whatever someone is willing to pay; however, this adage does not always hold true. Lenders are only prepared to provide financing for the market value of a property as determined by an appraiser. So, in some cases, buyers are being forced to come up with addi-

“At the end of the day, lenders should not be underwriting buyer emotion, but that can be hard for people to get their heads around” Dan Brewer, Appraisal Institute of Canada tional cash if the value of a property is deemed to be lower than their purchase offer. “People were making unconditional offers in order to win the bid during those multipleoffer scenarios, and now they are scrambling to make up the difference between what the lender is able to lend and the purchase price,” says Keith Lancastle, CEO of the AIC. “It is a very stressful situation, and I don’t envy those people, but when collateral valuations get skewed, that can put the whole financial system at risk.” As uncertainty around valuations rises, more lenders are taking the option of getting properties reappraised, especially if the initial appraisal was completed a few months ago when the market was at its peak. Lenders see it as a risk-management tool; if a property

was purchased in early summer but is not due to close until the fall, it’s possible that a reappraisal will be requested. “Appraisers compare neighbourhood to neighbourhood and sometimes street to street in order to really estimate value, because not all areas have been impacted by the same level of correction,” Lancastle says. “The role of the appraiser really is critical when you look at where we are today. But there is no crystal ball – an appraisal is a snapshot in time.” In recent times, Brewer has noticed increased pressure being placed on AIC’s members as lenders demand a quicker turnaround on appraisals for a lower fee. Lender demands could be leading the industry toward a tipping point, which, Brewer fears, has the potential to erode public confidence in all the professionals who are involved in the real estate process. “As a result, there are appraisers who will not work with certain lenders because the expectations are not realistic,” Brewer says. “The reality is that we require our members to comply with the 25 appraisal standard rules within an appraisal report, regardless of the lender’s demands.” Lancastle believes the role of experienced and designated appraisers is more crucial now than in any period in recent history. With the stakes high and clients’ financial futures on the line, Lancastle encourages brokers to seek out appraisers with proven track records. “AIC members make up about 85% of the valuation professionals in Canada, and our designation process is recognized internationally as one of the most rigorous in the world,” he says. “We are the only group that delivers designation education in partnership with two major universities: UBC and the University of Laval. By the time an appraiser has received their AIC designation, they have been through a very challenging process and have certainly earned their stripes. Mortgage brokers can trust the appraisal reports that members deliver, which, at the end of the day, helps borrowers secure the mortgage that best suits their needs.”

www.mortgagebrokernews.ca

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STAY Deal Connected MCAP Service Corporation | Ontario Mortgage Brokerage #10515 | Ontario Mortgage Administrator #11692

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PEOPLE

BROKER INSIGHT

Going it alone Kerri Reed opens up about starting her own brokerage and what’s really happening on the ground in the Toronto market

CMP: What made you first get into the mortgage broker industry? Kerri Reed: I have worked in the financial services – starting in the banking industry – since I was 16, and it was a natural transition for me to move through the industry and become a mortgage broker. I started in financial planning but recognized very quickly that I did not have a passion for it. I then took a look at the other opportunities. When it came to credit, the mortgage side was the biggest piece, and I went from there. With mortgages, it was about finding financial solutions for clients, and I loved working with people all day long. I still do today.

CMP: How would you describe your time in the industry? KR: I’ve been in the mortgage industry for 18 years, and it’s been a roller-coaster ride. I’ve had experiences with many different brokerages, and I’ve enjoyed every bit of it. I started as a mortgage specialist for a bank, and within one year moved into the brokering side of things. I stepped out of the comfort and safety of the bank and moved to a brokerage, where I stayed for five years before I started my own brokerage with a couple of partners 11 years ago.

CMP: Recent data shows a cooling in the GTA market. Have you noticed a slowdown in your business? KR: No. We have challenging periods, but they are not because houses are not selling. The challenges we face today are directly

related to supply-and-demand issues. The other challenge we face is to do with policies and regulations that are being implemented, we feel, almost daily at this point. That being said, our sales have not decreased at all. We’re actually up 13% year-over-year.

CMP: What are your views on the tightening of mortgage approval rules? KR: Some of the rules I agree with, one of which is the qualifying rate for clients who are putting down less than 20%. I think it’s important for everyone to understand that money is almost free today. The rates we’re looking at, whether they are 2.5% or 3.5%, are really cheap, and there is a huge impact to an average person if those rates change. They may have purchased a home that is well within their means today, but five years from now, when they’ve taken on two new car payments and had three children, a significant change in rate could have a huge impact. Qualifying clients at a rate that is 200 basis points higher than their

contract rate, I feel, is important to making sure clients can tolerate a rate increase. However, I do not agree with some of the other regulations. Programs for self-employed individuals are dwindling, if not gone, and it’s really unfortunate that people stable in their businesses are having to jump through hoops in order to prove themselves. The new regulations currently being proposed by OSFI are looking at also qualifying clients who do have a significant down payment at a much higher rate. I don’t think that is a fair policy to put into play, but sure, we can work with it.

CMP: Are you being forced to direct more clients to B lenders? KR: Everyone is forced to look for alternative opportunities – I wouldn’t call them B lenders, but alternative lenders. Those lenders will tell you that today they are seeing more business than ever before. We have lenders that are not accepting business on the alternative side; they simply cannot keep up with the opportunities.

REED’S TIPS FOR NEW BROKERS “Surround yourself with great people who are going to support you and help you with your business. New agents need a lot of support, but there are a lot who are getting no support or guidance whatsoever. It’s a scary place to be, and it’s more than likely that those agents are going to fail, which is extremely unfortunate. If an agent can find the opportunity to work with a brokerage house that supports, assists and guides them, they are much more likely to succeed.”

www.mortgagebrokernews.ca

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FAST FACTS: KERRI REED

Spent two years working as a financial advisor for CIBC before entering the mortgage industry

Founded Verico Premiere Mortgage Centre in Toronto in 2006

Her brokerage was recognized on the Profit 500 list of Canada’s fastest-growing companies in 2013 and 2014

“Qualifying clients at a rate that is 200 basis points higher than their contract rate, I feel, is important to making sure clients can tolerate a rate increase” What were A clients are now B clients; what were once B clients are now looking at private opportunities.

CMP: What’s the secret behind your success in the industry? KR: I don’t think there are any secrets – it’s about a lot of hard work, dedication, persis-

tence and patience. As someone who owns a brokerage, the biggest part of our success in the last 11 years has been focusing on the right people. All of our agents and brokers have their own independent businesses, but there is a consistency in terms of the type of agent and broker they are and how they do their business.

Awarded the Verico National Network Ambassador Award in 2014

Won Verico’s Mentor of the Year Award in 2015

Has repeatedly appeared on CMP ’s Women of Influence and Hot Lists

www.mortgagebrokernews.ca

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7/09/2017 7:30:01 AM

SPECIAL PROMOTIONAL FEATURE

ALTERNATIVE MORTGAGES

An alternative opportunity for brokers Street Capital Bank of Canada’s new program provides brokers with alternative mortgage solutions for their clients with unique circumstances IT’S NO SECRET that the landscape of the mortgage market has shifted significantly over the past several years, due to regulatory and provincial changes aimed at stabilizing the Canadian housing market. As a result, lenders, brokers and insurers alike have been forced to adapt their businesses to remain competitive. This changing marketplace has made alternative lending solutions a necessity for many Canadians looking to purchase or refinance their homes. Further changes are expected, so it’s important for brokers to have a clear understanding of the mortgage solutions their

lender partners can provide. Using a lender that can service clients with a broader spectrum of mortgage solutions ensures that a broker’s business requirements are

consistently being met. With the launch of the Street Solutions program in May 2017, Street Capital has expanded its lending programs to better

“Current market conditions have provided a unique opportunity for brokers to increase their business by placing a focus on the alternative space” Steve Kissuk, Street Capital Bank of Canada

www.mortgagebrokernews.ca

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SARAH, 48 – SMALL BUSINESS OWNER IT HAS TAKEN SARAH A FEW YEARS TO BUILD HER BUSINESS TO WHERE IT STANDS TODAY. WHEN QUALIFYING FOR A MORTGAGE, THIS WAS VIEWED AS INCOME INSTABILITY.

BEHIND EVERY CLIENT IS A UNIQUE STORY. Street Solutions — helping clients like Sarah redefine their financial future with mortgage solutions that meet their needs. Learn more about the Street Solutions program. Contact your RVP today! STREETCAPITAL.CA/BROKERS | 1.877.416.7873

™Trademark of Street Capital Bank of Canada.

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SPECIAL PROMOTIONAL FEATURE

ALTERNATIVE MORTGAGES

THE BROKER’S PERSPECTIVE “As an agent who often finds myself dealing on the alternative side of mortgages, I was excited to hear that Street Capital was relaunching their B program – Street Solutions. After much anticipation, I can personally say that it was well worth the wait. They have put together a product that is truly a testament to its name. Street Solutions is just that – sensible, thoughtful, solutions-based lending. After months of multiple industry changes, lenders scaling back and rules tightening up, it is refreshing to have a lender willing to hear the whole story and work tirelessly and directly with the agent to find creative, cost-effective ways to make your deals happen.” Wendy Bradshaw Mortgage agent The Mortgage Advisors Ottawa

serve its broker partners. The program uses a common-sense approach to lending to provide mortgage solutions to Canadians with unique financial circumstances. “Current market conditions have provided a unique opportunity for brokers to increase their business by placing a focus on the alternative space,” says Steve Kissuk, vice-president of mortgage credit at Street Capital. “There are many niche Solutions products that brokers can take advantage of in order to build their book and provide a more holistic approach to their clients’ borrowing needs.” The program was initially launched to a target group of brokers in Ontario, and has since expanded to include all broker originators in the province, as well as certain areas of British Columbia and Alberta. The slow rollout has allowed Street Capital the

“Placing a client with a lender who can facilitate an array of mortgage offerings provides them with an opportunity to graduate into the prime space as their mortgage reaches maturity,” says Alfonso Casciato, senior vice-president of sales at Street Capital. “This is a selling feature for brokers to use with their clients who are looking to improve their financial circumstances.” The Solutions program provides brokers with the opportunity to redefine a client’s financial story, which has otherwise been restricted by rigid lending guidelines. Street Capital’s common-sense approach to underwriting plays a large part in qualifying a client’s mortgage. “One thing we continually stress with our broker partners is placing focus and attention to detail on the application and submis-

“Placing a client with a lender who can facilitate an array of mortgage offerings provides them with an opportunity to graduate into the prime space as their mortgage reaches maturity” Alfonso Casciato, Street Capital Bank of Canada opportunity to engage its broker partners in developing a program that works for their business needs. The Street Solutions program includes lending solutions aimed at: Self-employed Canadians requiring flexibility in income qualification Borrowers in need of accommodating mortgage solutions due to past credit impairment, debt serviceability/extended ratios or larger loan amounts New Canadians with limited Canadian credit history Individuals seeking rental and investment properties

sion to the lender,” Casciato says. “All mortgage applications need to make sense. In terms of the Solutions program, we understand that this isn’t always cookie-cutter, but providing a strong rationale on every transaction allows for a more seamless approval process.” If there’s one thing both lenders and brokers should take away from the past year, it’s that pivoting your business focus is absolutely vital in a changing market. Visit streetcapital.ca/brokers for more information, or contact your RVP to explore how the Street Solutions program can help you grow your business.

www.mortgagebrokernews.ca

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7/09/2017 7:33:51 AM

FEATURES

WORK-LIFE BALANCE

Why slowing down is vital to business success Ever feel like life is moving too fast? Do you wish you had more time to work on your business? The great news is you can – you just need to slow down, writes Angela Lockwood IN BUSINESS, there is a lot to do. Whether it’s your own business or you’re working for a company, there is always an endless list; people expect a lot of you, and a mountain of tasks is vying for your attention. Whether we like it or not, the situation is not going away, and if future predictions are correct, things are not going to slow down. In fact, strap in, because we are in for a long and fast ride. Advancements in technology, an overwhelming amount of choice and everchanging expectations are impacting our ability to cope with the speed of change and the expectation that we will keep up. Unfortunately, there’s no big red button in front of us to press when things are getting too overwhelming. Instead, we keep persisting with working late, working on weekends and pushing through sickness in an attempt to get the basics done, even though we know the long hours and constant connectivity aren’t doing us any favours. Constant connectivity to people, technology and our workloads is resulting in our work and life becoming overwhelming, making it hard to ever switch off. Our frenetic pace – racing from one meeting to the next and one client to the next – is affecting our ability to take time out, slow down, switch off and refuel. We are in a state of chronic ‘overconnec-

www.mortgagebrokernews.ca

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tion’ – overwhelmed and overstimulated. With our bodies and minds constantly ‘switched on,’ our health, well-being and relationships are increasingly paying the price. Despite our best efforts to manage focus and productivity alongside creativity and progress, as a society, we are finding that the pursuit of ‘more’ and ‘now’ is not working, and is an ever-growing concern we must address before it gets out of hand.

our lives and see what is happening to our health, our relationships, our businesses and our goals. When we are too bogged down in our to-do list, looking down constantly at our devices, our field of view narrows, and we can miss the opportunities that are right in front of us. Giving ourselves the opportunity to step out of the detail of our day and take a look at the big picture will provide perspective on whether we are moving in the

3 Sharper focus. We all know what it feels like to hear the alarm sound when it seems like we have just fallen asleep – it’s awful! Sleep deprivation is known to affect our ability to make rational decisions and respond to situations, and it impacts our mood and emotions. Not getting enough sleep could be holding you back in business, and if you are not an early riser, then you could be missing out on your peak period of produc-

Life role evolution Over the last two decades in particular, we have seen a significant shift in life roles for men and women. Stay-at-home roles and parttime work that were predominantly undertaken by women are now being embraced as options for men, allowing them to pursue their passions outside of work or share family responsibilities with their partners so they can both develop careers. The evolution of our value of work and its purpose in our lives on a personal level is creating a shift in our expectations of our workplaces as we look for new ways of working that allow us to be engaged in productive and meaningful work, in addition to spending time with family and pursuing our interests. From workplace health and well-being incentive programs to paid mental health days and health education sessions, the responsibility for employee health and well-being is now falling to both the employee and the employer. This continual shifting of work roles and workplace expectations is evidence that people are searching for ways to better manage their lives and all this involves, knowing that without optimal health, we are not performing at our best.

Doing more by doing less To achieve more, we do not have to keep pushing ourselves to do more; in fact, we are capable of achieving more by doing less. How? By slowing down. By taking our foot off the pedal, we are allowing ourselves three important gains that will improve our motivation for work while also improving our productivity and progress. 1 Perspective. When we slow down, we can take a big metaphorical step back from

By taking our foot off the pedal, we are allowing ourselves three important gains that will improve our motivation for work while also improving our productivity and progress right direction. This can be as simple as setting a reminder to look out the window, going outside to eat lunch to take in your surroundings, or reflecting on your week with a friend or partner.

tivity. Early morning is when our circadian rhythms are at their most alert, our attention and energy peak, and it’s the perfect time to work on priorities, setting a frame of clarity and calm for the rest of the day.

2 Renewed energy. Ever tried sprinting a marathon? It would be impossible. Our bodies are not designed to go full throttle for long periods without rest. When we try to push ourselves beyond our limitations, the effects of burnout take over, and we find ourselves without the energy, focus and motivation to get through the day. Energy, focus and motivation are three factors crucial to success in any business. When we slow down, we give our bodies the time they need to rest and re-energize, boosting their resistance to illness, meaning fewer sick days and more energy. With energy, we become agile in our responses to unexpected challenges; this enhances our ability to make better decisions, and our creativity flows. If you live life at full throttle, slowing down can feel like you are being lazy or wasting your time. But that is far from the truth. Resting can be as simple as a fiveminute break where you stand up from your desk and take a big, deep breath. Slowing down is necessary if we want to keep moving forward with energy and stamina.

Making time to slow down The argument that slowing down is impossible in today’s society is not true, and there is ample evidence to show how people are successfully integrating the skills of slowing down into their fast-paced lives. Slowing down can feel like an impossible scenario when we lead such full lives, but switching off isn’t about doing more; it means doing less! If we focus on the payoff of taking time to slow down – better health, improved energy, clearer thinking and a renewed motivation for work – switching off will no longer seem like a cop-out or a luxury, but instead a necessity if we are to keep up with the pace of life.

Angela Lockwood is an occupational therapist whose retreats, corporate education programs and keynotes help organizations, schools and individuals prioritize their health and wellbeing. Lockwood is the author of Switch Off: How to Find Calm in a Noisy World and The Power of Conscious Choice.

www.mortgagebrokernews.ca

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FEATURES

PERFORMANCE REVIEWS

Time’s up for performance reviews Annual performance conversations no longer cut it. Targeted, real-time feedback means we can change, grow and develop the skills needed to stay in the game, writes Anneli Blundell

IT’S TIME for performance development to get a performance upgrade. As far back as 2014, Deloitte found that “managers who provide regular feedback and opportunities to improve are far more likely to field high-performing teams than those who retain once-a-year rankings.” People need constant and targeted feedback, in real time. That’s how leaders create high performance. Imagine the coach of an elite sports team giving performance feedback once a year: ‘“OK, Ritchie. I really like how you improved your kicking accuracy this season. That second-quarter goal in the third game was amazing. If you could do more of that and pass the ball more often, our results will improve. I’ll sign you up for a collaboration workshop, and we’ll see how next season goes.” Ridiculous concept, isn’t it? Sports are fast. They require skill, teamwork and individual performance. What makes us think the game of business is any different? Leaders need to pay attention and give feedback in the moment – not in a year’s time. State of play for performance reviews Many large companies remain loyal to annual performance reviews, much to the frustration

of those involved. For employees, it can be an administrative formality that ‘ticks the box’ but doesn’t develop or change actual performance; for managers, it’s an administrative burden that interrupts ‘real work.’ Research is beginning to empirically support what we intuitively know: Annual performance evaluations don’t positively affect performance. A 2010 study published in the Neuroleadership Journal found that feedback interventions like performance reviews improve performance 41% of the time and make

matters worse 38% of the time. The Harvard Business Review found that 58% of executives believe their current performance management approach drives neither employee engagement nor high performance. And 71% of respondents to a 2015 Deloitte survey said they were either currently evaluating or had recently reviewed and updated their performance management systems. The annual evaluation is a time-consuming,

TIME FOR A CHANGE? Deloitte surveyed companies worldwide and found that dissatisfaction with annual review performance management systems was leading companies to change their systems. Respondents’ plans for updating performance management systems Plan to review in the next 18 months

18%

Currently evaluating

29%

Reviewed and updated in the last 18 months No plans to review

42% 11% Source: Deloitte, Global Human Capital Trends 2015

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want opportunities to get there. 3 Conversation mindset

non-value-adding and possibly destructive process that does not positively improve performance at work. The future of annual performance reviews as a management tool is bleak. So, what’s the alternative?

The performance conversation trifecta The simple solution is regular performance conversations: timely, targeted development conversations that drive engagement to both develop performance and produce results. However, ‘simple’ does not mean ‘easy.’ Effective performance conversations require the right consistency, style and mindset. 1 Conversation consistency

“Organizations where employees reviewed their personal goals quarterly – or even more often – were nearly four times more likely to score at the top of the Bersin by Deloitte Total Performance Index.” –Deloitte Developing performance requires feedback that is regular and in real time. You develop a better kick by doing it repeatedly and getting real-time feedback. Regular conversations mean in-the-moment, unscheduled feedback when it’s needed most. Establishing a regular

conversation cadence gives the brain the attention and repetition needed to create a sustainable behaviour change. The greater the gap between action and adjustment, the slower any change takes hold. Ongoing focus and reinforcement provide optimum conditions for growth and learning.

“Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others.” –Jack Welch The leader’s mindset toward performance conversations plays an important role in how effective the conversations are. A leader’s role is to develop their staff. This is not in addition to their regular work; it is their regular work. In fact, some progressive organizations – for example, Hindustan Unilever, the Indian subsidiary of the consumer goods giant – feel so strongly about the competitive advantage this mindset offers, they expect their leaders to spend 30% to 40% of their time developing their people – hence Unilever’s reputation as a ‘talent factory.’ It’s not rocket science. Leaders who have not embraced this idea will struggle to make the time to develop their staff. Eventually, their staff will leave in favour of a manager who will make the time. If the leader does not embrace this mindset for themselves, no amount of policy, sophisticated performance systems or culture change programs will make a difference. The elite player wants to play for the best team – the team that is continually challenged and growing and called forth into their greatest potential by the coach and leader. They want to be inspired.

2 Conversation style

“High-performing individuals, teams and organizations focus on exploiting development opportunities in the workplace because that’s where most of the learning happens.” –Charles Jennings Leaders need to coach and develop their staff, not just direct and control them. A coaching conversation is more than a simple check-in about daily tasks. It includes a broader conversation about career potential, role progression, required skills and new opportunities. It covers both the skill and the will. Motivation and engagement, barriers and blockers – these are the topics required to kick organizational goals. The new player on the elite team is ambitious. They want progress, they want to know what’s next, and they

A call to action Leaders can take action today with regular real-time conversations and a mindset that embraces the crucial role leaders play in developing high performance. There’s no need to wait for the cultural tide to turn or for new processes to be developed and sanctioned. As the leader, you’re the coach on the field. Are you giving your team the performance feedback they need to win?

Anneli Blundell is a professional people whisperer who specializes in decoding people dynamics for improved performance. She is the co-author of Developing Direct Reports: Taking the Guesswork out of Leading Leaders.

www.mortgagebrokernews.ca

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16:47 PM

PEOPLE

CAREER PATH

RECIPE FOR SUCCESS The road to success has twists and turns, but for Ken Lankin, it all comes back to customer service

After leaving a fledgling hockey career, Lankin discovered the world of finance, thanks to a fateful encounter in Toronto “I was walking down Yonge Street, and a horn honked. It was an old school buddy – we had a beer and talked about his work, and he suggested I join the company. The next day, I was interviewed by two senior supervisors and was hired on the spot; that Monday morning was the start of a 25-year career”

1973

HEARS FATE HONKING A HORN

1975

BREAKS THE ICE AT BENEFICIAL

1980

REACHES THE TOP Lankin eventually became Beneficial’s number-one mortgage producer. For the next five years, Beneficial financed more than $25 million in mortgages each year, 96% of which were residential

Lankin was the author of the first ever mortgage deal done by the Beneficial Corporation “It was a huge $10,000 deal. We predominately did second mortgages; this was a client request. I was the first person to do a mortgage at Beneficial in Canada. It was a sign of things to come. Beneficial went on to become the leading second mortgage lender in the entire country”

1986

TAKES FLIGHT A promotion put Lankin in charge of the company’s national sales program, as well as its mortgage centres portfolio “I travelled coast-to-coast for 10 months out of the year. I would be in Halifax one day and then on a plane to Vancouver – that was my life for seven years”

“The bottom line is that customer service was the ticket then, and it still is today. We were always number one on customer service” 1997

CHANGES COURSE Seeing Beneficial going in a direction he was uneasy with, Lankin took the ‘golden handshake’ with no idea of what was next, beyond several months of vacation. On his return to the Niagara Region, Lankin decided to make his own future “I stopped by Norlite Financial Services [which became Mortgage Intelligence] on my way home; they immediately offered me a desk. I stayed for almost 20 years”

2006

GOES OUT ON HIS OWN When a storefront just around the corner from Lankin’s house became available, the opportunity was too perfect to pass up “It was an unbelievable spot. I knew the landlord – it was one simple phone call to get the location, and it became our new home for nine years”

2015

FINDS HIS PERFECT PLACE Lankin attributes his current success to ‘location, location, location’ “[We’re] between three banks and a credit union –we knew their customer service levels were inferior to ours. I love what I do – toss in a huge amount of knowledge with some quality customer care, and it forms a recipe for success” www.mortgagebrokernews.ca

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PEOPLE

OTHER LIFE

TAKING FLIGHT Vancouver broker Tim Hill has long been driven to slip the surly bonds of earth

TELL US ABOUT YOUR OTHER LIFE Email mortgagebrokernews@kmimedia.ca

FLYING WAS always Tim Hill’s dream growing up. Before he became a broker at DLC Primex Mortgages in Vancouver, that dream drove Hill to get his private pilot’s licence and later join the Air Force once he realized that “other people were getting paid to do something I was paying to do – it was a pretty good incentive.” Much of his time in the service was spent on “chair flying, every night, for hours” to prepare for the real thing – which Hill describes as “a million times better than any video game.” “It’s time-consuming, and it’s hard work; but it doesn’t feel like it till afterwards – while you’re doing it, it’s a lot of fun,” he says. “You’re completely focused on the task

at hand with a sense of, ‘Wow, this is so cool.’ People compare flying to race-car driving because everything happens really fast, but time slows down for you.” And, Hill says, there’s nothing quite like the challenge presented by flying over Canada’s Rocky and Coast mountains – not to mention the scenery. “It’s just gorgeous, and it’s amazing the impact the mountains and valleys have on air currents – smaller aircraft are hugely impacted by the wind,” he says. But the real lure for Hill is the sense of freedom that comes from taking flight: “Defying gravity is the last major achievement of mankind; I’m cheating the laws of nature!”

550

Hill’s approximate body weight (in pounds) in a typical aerobatics loop

Years Hill spent in the Air Force (plus four more in the Army)

1,100

Horsepower of the Harvard 2 aircraft Hill spent the most time training on

of Ea ch h o u r a t ch e d m is g in f ly at e ly by a pp rox im 15 h ou rs o fn d p ra ct ice a st u dy

56 www.mortgagebrokernews.ca

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INTRODUCING THE NEW

CHIPADVISOR.CA

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We Stand for All Canadians Together we’ve made a major impact helping thousands of Canadians feel the pride of owning their own home, even when they thought it wasn’t possible.

The determination of small business owners, the courage of newcomers and the hope of people that have faced personal and financial hardship are some of the finest examples of our collective Canadian spirit. These clients are vital to Canada’s housing and mortgage industry and to our future. We’ve expanded our loan offerings and introduced new competitive rates. So now, when your clients need alternative financing, our team is here to help!

To stay informed visit hometrust.ca/we-stand

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