Your 2013 alternative lending guide december 2012 / issue 7.12 / $6.95
I do Brokers marry insurance? Cordial cheer MCC Prez gets in the spirit . . . of competition
The best way to consumers may be through â€˜communityâ€™
and this year's message from lenders
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contents / issue 7.12 market matters
10 | Reading between the Lines If ING Direct thought changes to its pooling policy would go unnoticed, it was very much mistaken
22 | Cordial Competitor MCC’s Eddy Cocciollo is all about ensuring his mortgage professionals beat the competition, but in the spirit of the season, he takes a more cordial look at the industry and the challenges ahead for everyone
12 | Market Matters Brokers want the consumer told who they are and what they do. They also want their broker networks to do the telling 14 | Master Class Appearing for the prosecution or the defence means you may have to go, to court, writes Lloyd Manning. Here’s what you should and shouldn’t do once you’re sworn in
46 | Pep Talk Here’s the pep talk of all pep talks for disillusioned brokers headed into 2013
28 | 2012 CMP Charity Review Brokers are giving like never before and just for the sake of giving. But there’s also a real benefit to that philanthropy, something networks know all too well
40 | Saying ‘I do’ Brokers are set on selling insurance in-house, and, surprisingly, creditor insurance companies are OK with that. But why?
MARKETING 36 | Employee mortgage benefits program: In his latest series, Doren Aldana explains what to say to company decision-makers. Get your notepad
20 | Stats You’re either hot or you’re not, and this CMP infograph on real estate markets across Canada sums it up nicely
7.12 ANYONE CAN DOTHE SLAM DUNKS.
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contents / issue 7.12 NEWS 18 | Product News This month’s product and industry announcements, even before they come out of the proverbial box 56 | At a Glance Who says market reports have to be boring. Here’s a creative infographic on CAAMP’s fall market survey.
Like Us on Facebook Canadian Mortgage 17/02/2012 5:47:37 PM Professional
CMP Alternative Lending Guide This guide is so big it has its own contents page. Go find it at Page 48 Expert mobile half page ad_with border.pdf
58 | Guest Here’s a first-person account of what it’s like to be a broker/expert witness. As David O’Gorman writes, it’s an awesome responsibility, with or without an awesome paycheque
regulars 61 | Favourite Things 64 | CMP Service Directory
58 NE W !
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British Columbia • Grant.Bennett@hlcmortgages.com • Grant.Bennett@hlcmortgages.com • 1-866-978-9919 • 1-866-978-9919
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contents / Editor’s letter
Sweet charity Ah, sweet charity. It comes in as many forms as there have been mortgage rule changes, and brokers know the ins and outs of each and every one of them. Indeed, this year’s tally of broker giving proves it. For 2012, Canada’s mortgage professionals cut their widest-ever swath through the community, raising even more money than last year’s banner performance. The ways they did it run the gamut, from the tried and true to the new and daring to the plain old whacky. Which is which? We leave you to judge (Pg. 28). But it’s interesting to note that their networks are increasingly being asked to direct those charitable events as a way of upping the profile of their members and cultivating the kind of goodwill all businesses rely on. But this last issue of 2012 doesn’t stop there. It’s aiming to get you set up for the New Year and what could be a growing demand for alternative lending. Our CMP guide, smack dab in the middle of the issue, sketches in a changing landscape thanks to tighter lending guidelines. For brokers, it threatens to bring in more business as more Canadians struggle to win A loans. On the downside, it means more paperwork for both broker and client. And speaking of next year, why not give our new commercial section a read? It, too, is providing brokers the lay of the land for 2013 (Pg. 40). What those 12 months hold for commercial specialists may surprise you, even as many of you residential players look to get in on that action. As for the here and now, you’re starting to see ads for the 2013 Canadian Mortgage Awards pop up and that’s for a reason. CMP has revamped many of the categories for the CMAs. It’s all with an eye to getting more of our readers involved. Know that very much includes you.
COPY & FEATURES Editor Vernon Clement Jones SUB-EDITOR Rachel Naud staff writer Nestor Arellano Mark David contributors Doren Aldana Lloyd Manning David O’Gorman Dustan Woodhouse
ART & PRODUCTION Alicia Chin
SALES & MARKETING
NATIONAL SALES MANAGER Trevor Biggs Marketing and Communications Julia Comitale PROJECT COORDINATOR Jessica Duce
CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker Events and Conference Manager Chris Davis
Editorial enquiries email@example.com Advertising enquiries firstname.lastname@example.org Subscriptions tel: 416 644 8740 • fax: 416 203 8940 email@example.com KMI Publishing 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 mortgagebrokernews.ca Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as CMP magazine can accept no responsibility for loss.
Your 2013 alternative lending guide
Happy holidays, december 2012 / issue 7.12 / $6.95
i do Brokers marry insurance? Cordial Cheer mcc Prez gets in the sPirit . . . of comPetition
Vernon Clement Jones
The best way to consumers may be through ‘community’
Contact the editor: firstname.lastname@example.org
and this year's message from lenders Covers and Spine.indd 1
4 | mortgagebrokernews.ca
29/11/2012 3:01:31 PM
conversations / Letters to the Editor
Letters to the Editor Re: Lenders on Brokers (CMP 7.11) Don’t rest on your laurels
I applaud those lenders, MCAP and Merix, in particular, for really helping brokers this year and making their product the best that it can be. But I know that they can and should do more to make themselves a clear choice for clients. Is it not time for a consumer marketing campaign?
Re: Reading between the lines… (CMP 7.11)
Bang on, Gord
I think Gord McCallum has it right in how he interprets the results of the CMP Brokers on Lenders survey. The fact that the big banks are in the bottom half means that they are not serious about keeping broker business. I mean CIBC doesn’t even have a proper BDM to deal with MCC brokers. What’s up?
MortgageBrokerNews.ca Reader Poll Would Dragons’ Den star Kevin O’Leary, as either a lender or brokerage owner, hurt the industry?
Yes, hurt it
No, help it
Re: Broker Networks (CMP 7.11) Pitch perfect
It is interesting that the broker networks all know that they have to make a better case for why established brokers should switch over to them and not go it alone or stay with their current superbroker. It’s also helpful to get this information without having to deal with the heavy sales efforts of some of them. It’s a softer sell that may be more effective.
Re: Broker to Broker Advice 7.11)
Are you expert enough?
I think that this is a great opportunity for very seasoned brokers to cash in on their knowledge. I don’t think that people who have been in the industry for anything less than 10 years should be trying to do expert reports for the court. Otherwise we could do the industry more harm than good. Not a good thing.
I like the idea of more mortgage brokers providing expert testimony in court cases involving mortgage fraud or creditor insurance. Where it may get tricky is in testifying against or in support of other mortgage brokers. Who is to say they have the knowledge to second guess the work of another industry veteran?
Letters to the editor are welcome! Due to space considerations, priority is given to those 300 words or less. We reserve the right to edit, condense or reject submissions for accuracy, brevity, clarity, good taste and legal reasons. Writers must provide their full name, address and telephone number to verify authenticity. Please reference the article.
6 | mortgagebrokernews.ca
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Market First UpMatters / Read between / Consumer the lines communiqué
the lines: In an announcement coming after Scotiabank's move to buy it, ING Direct informed mortgage professionals that it will cap pooling to increase efficiency. The decision immediately drew positive reviews from brokers favouring the restrictions over the specter of commission cuts, but also renewed the debate over whether pooling should be stopped altogether. In this month’s Reading Between the Lines, two brokers (one in favour of pooling and the other against it) dissect ING’s letter. Frank Napolitano, managing partner and mortgage agent at Mortgage Brokers Ottawa, says he’s all for pooling and would be disappointed if the lender scrapped it just to cut costs. Albert Collu, president and CEO of Argentum Mortgage and Finance in Concord, Ont., doesn't care a whit for pooling, but “understands and respects” ING’s quality control mechanisms.
1 I’m really not in favour of volume pooling. Rather than motivate brokers to work harder and serve their clients better, I think with some it encourages reliance on bonuses through pooled volume. 3 I understand and respect this quality control mechanism that ING has implemented.
Albert Collu 10 | mortgagebrokernews.ca
4 If an agent cannot provide two deals per year, then that should be a response in itself. ING is not asking anything that is intrusive here. 5 Completely makes sense when one takes into account that agents require licensing outside of their respective provinces to transact coupled with ING’s need to effectively manage relationships with their account managers in a prescribed geographic region. 6 Quite frankly, I love it. Our industry needs to raise the bar as it relates to education and professional development and I would like to see more of this.
ING DIRECT U Pooling Proc pdate ess 1
‘Pooling Agen t’s ING DIRECT ’ seems to be a hot topi c in the Mor re tgage Indust we do our be spects that there are se ry th ve st to work wi thin your mod ral different types of Br ese days. is a part of your team, an oker models el. We deem and d someone a ‘Pooler’ to part of their who is comm be someone business. itted to mak ing ING DIRE that CT a 2 ING DIRECT is enhancing ou efficiency an r “Pooling” d provide co process in an nsistent serv and the Pool effort to impr ice and train ing Agents ove overall ing to both ou r accredited broker Effective imm ediately, our new Pooling 3 • There will be a process is as follows: and efficienc maximum number of Po olers allowe y ratios with d based on us. You an discuss this your volume d number your Region 4 • Regist al Sales Man ered Poolers ager will m us t fund a minim 5 • Pooling Agents um of 2 deal s per year the Submittin must be within the sam 6 • Minimum Ed g Agent. No cross border poe Geographic region or prov ucation requ oling. ince of irements – ne DIRECT pres w Poolers/Ag entations wi ents must at • Any chan thin the first tend 3 ING 3 months of ges to Poolin sign up g Lists ING DIRECT on the approp (Additions or Removals) must be subm riate form & o For New all details m itted to agen ust be compl allowing any ts, please advise at le eted. ast 3 busin application su ess days pr bmissions by ior to the new agen t Shortly you will be receivi ng List. We ask that you revie a follow up email that wi ll include yo w, update & Manager on ur return the lis or before No t to your Regi current Pooling vember 30 th , 2012. onal Sales
1 I think that pooling Page 1 of 1 deals allow companies such as ours to generate more volume for that specific lender and, in turn, increase our compensation. 2 We have our own centralized underwriting unit, which allows for a second and sometimes third set of eyes to review all of the documentation. 3 It is definitely understandable if a
lender wants to eliminate pooling because of fraud. But if a lender wants to eliminate pooling because they don’t want to pay additional volume bonuses, then I Frank Nap olitano would be disappointed and would consider sending less volumes to them as a result. into the lender's 6 I agree with a guidelines, increase minimum education efficiencies and reduce standard to ensure that declines. deals fit
Market Matters / Consumer communiqué
It’s a black-and-white issue: Broker networks either get into the homes and hearts of consumers or else Thoughts of consumers: They are there when brokers get up in the morning and, not infrequently, there when brokers try to get to sleep. But, increasingly, broker networks are no less obsessed as they focus on building brands that directly connect with those same consumers – not by chance, but by design. For the first part in a series of articles, CMP sits down with the marketing heads of two broker networks, asking them to share their own branding philosophy vis-à-vis consumers. It’s all about keeping their members front of mind before, during and after the mortgage process. That’s no mean feat, say analysts, given the billions of dollars banks spend on advertising each year.
mortgage alliance consumer branding philosophy Louie Bettio Mortgage Alliance Brand Champion We promote a targeted and proven brand strategy that successfully positions Mortgage Alliance
12 | mortgagebrokernews.ca
professionals as trusted mortgage advocates and the preferred choice. We understand whom our ‘real’ competition is, banks. Since day one, our objective was to build a brand that can stand and grow on its own. Our media strategy targets adults 25 -54 years of age, with a strong skew toward women, key decision-influencers in the purchase process. Since 2006, our campaigns have created more than one billion brand impressions. Producing multiple creative messages to reach and affect consumer behaviour is also key to our success. Every MAC ad begins and ends with the Mortgage Alliance brand jingle. That tune is so memorable and popular, MAC agents use it as their ringtone and thousands of consumers entered our Sing & Win contest. Each ad is meant to be a unique creative expression and positions Mortgage Alliance Professionals as the customer’s mortgage advocate. Net result: Customers hear the ads, visit our website or call their local MAC professional. Our branding also includes demonstrating to
Market Matters / Consumer communiqué customers that we care about the same things they do. Our charity initiatives play a significant role in our brand positioning and in winning the hearts and minds of consumers. This year we’ve raised almost $200,000 for Women’s Cancer research. MAC Consumer contest – The largest in the industry, has awarded $500,000 to MAC customers since 2007. Every customer is automatically entered. Support for the brand benefit. Our AcciDances viral video – part of our social media strategy to engage the consumer has generated over 500,000 views on the MAC website. So, the benefits of our branding strategy are simple: • Increased revenues and market share for the MAC network • Increased ability to expand into new product and service categories • Increased ability to attract and retain highquality mortgage professionals
CENTUM consumer branding philosophy Paul Therien Director of Business Development At CENTUM, our marketing has a direct impact on our bottom line, giving us a 13 per cent growth this year in what has been a declining market. We focus on three specific areas: 1. Providing powerful marketing tools to our franchise owners and their agents 2. An aggressive Internet marketing strategy that drives new mortgage leads 3. Strong partnerships that provide us access to new customers Marketing Our franchise owners and their agents are the face of our company, and the first and most important
contact the consumer will have with our brand. Therefore, we give our network of agents the tools they need to put their best foot forward when dealing with their clients. Our brokers and agents receive: • Customized marketing collateral for each stage of their relationship with the consumer • Training and education to help them market themselves effectively Internet Marketing Our Internet marketing strategy is aggressive. We provide: • National awareness campaigns through online media channels • Local marketing through social media channels that enable our sales agents to demonstrate their expertise and be top of mind to consumers in their area Partnerships We have developed strong marketing partnerships that generate new business for our sales agents. For example: • Our partnership with Century 21 Canada, one of the most prominent real estate companies in the world offers us direct access to consumers right when they need mortgages At CENTUM we follow the philosophy of our parent company, the Charlwood Pacific Group, Canada’s premier franchise organization. It has successfully built brands like Uniglobe Travel International, Century 21 Canada, Century 21 Asia Pacific, and Real Canadian Property Management. Our chairman is the former chair of the International Franchise Association (IFA), the only non-American to hold the role This association allows CENTUM and its franchises to learn from the experiences gained in multiple industries, and to capitalize on over 40 years of building sustainable brands that experience consistent long term growth.
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mortgagebrokernews.ca | 13
Market Matters / Master class
Expert Witness goes to court: Donâ€™t sweat it
14 | mortgagebrokernews.ca
Market Matters / master Class
So you’re ready to testify for the prosecution or the defence or whomever, but do you know what else is expected of a mortgage broker/ expert witness? Lloyd Manning, a 30-year veteran of the commercial real estate reports
K, you’ve made it this far: The lawyer for the defence, the Crown or a litigant has hired you to draft an expert opinion and actually needs you to appear in court. Now what? When it’s a given that you will be making that appearance, the first happening is a pre-trial examination where the lawyer who hired you outlines the case and the questions you will be asked. He/she will explore the degree of confidence you have in those opinions, the conclusions reached and the limitations of your expertise so that any situation with which you are unfamiliar or inexperienced can be avoided. Of concern is the potential for you to change your mind under cross-examination. You need to become familiar with the opposition’s case, the key facts they will present and the issues that could arise. Knowing the strong and weak points in your case and that of the opposition is important. Guide your lawyer though the facts to be recited and the minefields that could be encountered. When you get to court, the lawyer who hired you will qualify you as an expert witness. You will be questioned at length about your education, training, experience and the particular expertise you may have relative to the matter at hand. On cross examination, opposing counsel will focus on any shortcoming or omissions in your credentials. The intent is to cast doubt in the mind of the judge as to your credibility. However, when opposing counsel introduces his/her expert, that person is subject to the same challenge as were you. When on the stand, you'll be questioned regarding the extent of your research, your knowledge of the facts of the case, your opinions and the basis for those opinions. Clarifying what you know and don’t know, is crucial. Pab Chetty, a litigation lawyer offers the following suggestions:
• Never exaggerate or misrepresent your qualifications • Only render opinions and conclusions that are supported by the evidence. Never embellish. • Never testify beyond your actual knowledge. Opposing counsel will encourage you to exceed your expertise, may badger you, solicit inconsistent testimony and then shoot you down for it • Maintain an attitude of independence and impartiality • Never tailor your answers to fit what you think your lawyer wants. • Listen carefully. Be positive that you understand the question before answering. Opposing counsel may purposely ask misleading and ambiguous questions for the purpose of minimizing your testimony • Don’t guess. If you don’t know, you don’t know • If your lawyer says you don’t know something, don’t argue, even if you do • Don’t be in a hurry to answer. Give your lawyer a chance to object, • Answer all questions as briefly as possible • Never volunteer information. Limit your answers to the questions asked • Do not spar with opposing counsel, be combative, or arrogant • If you think opposing counsel only asks stupid questions, and you could be right, don’t let it show • Always assume that opposing counsel is well prepared and understands the situation as well as you do
mortgagebrokernews.ca | 15
Market Matters / Master class
Your responsibility is to the court rather than to the party who hires you
As an expert witness you are not to be an advocate, but a neutral participant, unconcerned with the outcome. Your responsibility is to the court rather than to the party who hires you. This is not to suggest that you become an amicus curiae (a friend of the court) for an amicus curiae does not get paid, which is not your intention. However, let’s be honest about it: it is difficult to remain neutral and unbiased. Selection of the appropriate witness, the preparation and how he/she answers the questions are crucial to a lawyer’s case. They will never admit it, but all lawyers want you, the mortgage broker, to win their case for them. All expert witnesses and I, having appeared many times, are as guilty as the next. If my side prevails, I’m just as apt to say “We won.” Not that the truth prevailed, or the judge adjudicated fairly, but “We won.” Ensure that you get paid. Remember, you are not going through all of this out of the goodness of your heart. Normally the lawyer for whom you act will pay you, but there are exceptions. Your account should include remuneration for researching, analysis, sometimes report writing, consulting,
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Market Matters / master Class
Before accepting employment as an expert witness, ensure there is no conflict of interest. Never go to court unprepared. Become an indispensible consultant
testifying, expenses and other costs. Before accepting employment as an expert witness, ensure there is no conflict of interest. Never go to court unprepared. Become an indispensible consultant. Win the battle of experts on a fair and non-personal basis. Show respect for opposing counsel and his/her expert(s). Learn the system, the rules of court and how it works, the laws of evidence, what to say, what to avoid and the canons of ethics, credibility and confidentiality. Going to court can be fun, and financially rewarding. Still, if you have a beat-the-hell-out-of-the-opposition-at-any-cost attitude or are unprepared or, perhaps, a little thin-skinned, it can be quite a frightening experience. STATS
About the writer: Lloyd Manning, AACI, FRI, CCRA, is a semi-retired commercial real estate and business appraiser and broker. He now writes articles for trade magazines and professional journals. His most recent book is Winning With Commercial Real Estate.
- number of homes using mortgage & HELOC Financing 2012 Source: CAAMP
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News / Product RoundUP
PRODUCT NEWS and announcements A bite-sized guide to the industry’s newest products as they come down the channel Who: Centum Financial Group What: CustomerConnect The facts: Centum recently launched CustomerConnect, a new customer relations management (CRM) system that helps mortgage brokers organize and automate many of their day-to-day business tasks and promotional efforts. As part of OnlineOffice, Centum’s web-based tool offerings, CustomerConnect provides mortgage professionals with hundreds of customizable marketing templates that they can use to personalize email letters, feature sheets and other marketing materials. The new CRM tool can also integrate and synchronize contact list data from mobile devices and various social
18 | mortgagebrokernews.ca
networking platforms such as Facebook, Twitter and YouTube. This provides users greater control in updating client contact information and automating prospecting, marketing and client interaction tasks.
What they say: “Mortgage brokers spend a lot of time and money purchasing or subscribing to various third-party contact management systems,” says Paul Therien, director for Centum Canada. “With CustomerConnect, Centum Network mortgage brokers have access to a onestop-shop powerful system that’s free of charge.”
LAUNCHING A NEW PRODUCT?
Want to be considered for inclusion on this page, send the details to the editor: firstname.lastname@example.org
Street Capital is providing brokers greater compensation flexibility by adding several new product feature enhancements to its Street Loyalty Program. “Our strategic alignment with mortgage brokers on their renewing business demonstrates our commitment to our broker partners,” says Paul Grewal, president of Street Capital. “Brokers now have more choices than ever with Street.” All compensation program options are backed by an extensive line of competitive rates, says Street. The popular Street Loyalty Program was launched back in 2011 to compensate brokers for renewal business. The program offered a choice of two compensation models – the upfront payment model and the trailer reward model.
It’s the niche brokerage that continues to go mainstream: True North Mortgage is opening yet another of its successful retail stores in downtown Toronto, making it the third location in the city and the ninth nationwide. The new location will be staffed by four full-time employees, with another Calgary centre coming in January. Coincidentally, those new Toronto digs are in the same complex as Google Canada.
STATISTICs / RESIDENTIAL RESALE ACTIVITY
This monthâ€™s roundup looks at the most recent data on residential new listings and resale activity
Kootenay, B.C. -16.7
PEI 2.2 Prince Albert, Sask. 42.3
Lloydminster, Alta. 61.0
Saguenay, Que. 7.0 Brandon, Man. 12.0
Top markets Sales Activity
(year-over-year percentage change) Source: CREA
20 | mortgagebrokernews.ca
Chatham-Kent, Ont. 55.4
Northern N.B. 44.7
Cape Breton, N.S. 48.1
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Sales Activity by Province
• Virtual office on RmaNet.ca New Brunswick: 5.9 per cent
Nova Scotia: 7.3 per cent
Alberta: 17.5 per cent
appointments Prince Edward Island: 2.2 per cent
Saskatchewan: 5.8 per cent
Mortgage Intelligence announced that Steve Heimbecker, Marg Green, Donna Ramsay and Concierge Mortgage Group are joining Newfoundland Manitoba: and Labrador: the company. 3.3 per cent -3.9 per cent Green in Mississauga, Ramsay in Orangeville and Heimbecker in Waterloo, are equal owners in Concierge Mortgage Group.Territories: Northwest Ontario: per cent -2.8 per cent Concierge is a new66.7 boutique brokerage firm that will focus on elite and experienced brokers, offering exceptional needs-based Quebec: customer service. Yukon: The goal is for -2.2 per cent 0.0 per cent Concierge Mortgage Group to have offices throughout Ontario. Source:Concierge CREA will operate as a network partner with Mortgage Intelligence, developing its own Home sales in Canada decreased slightly by 0.8 per cent between brand while taking advantage of September and October 2012, an indication that the country’s Mortgage Intelligence’s key housing markets are heading inresources the samelike direction -- down. compliance, payroll, “While we always caution that housing marketproducts, trends at the exclusive mortgage and marketing. national level can and do run counter to trends in many local “Mortgage offers markets, the decline in activity in August wasIntelligence definitely the result of competitive compensation much of the country moving inus the same direction,” said Wayne and the support that Concierge Moen, president of CREA. “That said many smaller and more needs to be successful,” affordable markets bucked thesaid national trend.” Heimbecker.
Declines were reported in about a third of all local markets representing 80 per cent of national activity, with monthly sales TMG The Mortgage Group is moving declines in almost all large urban centres, including Greater three Vancouver, of its regional the Toronto, Greater Montreal, Greater theleaders Fraserup Valley, corporate ladder, billing the move as Calgary, Edmonton and Ottawa. in keeping with its philosophy of The Northwest Territories is currently one of the hottest promoting from within. Effective markets to watch, as sales skyrocketed 66.7 perJorgenson cent since Jan.1, 2012, Bud September 2012. This marks the largest gain of any assumed the positionof ofthe VP provinces. for the With previous changes to mortgage regulations, demand Prairie Region; Gord Appel, VP,rose Alberta Region; and Gerald Krahn, between the time changes were announced and their Region. “These three haveafter implementation, and invariablyOntario fell in the months immediately already made positivelevels, changes in being implemented, before recovering to long-term their respective regions,” said Mark according to Gregory Klump, chief economist for CREA. Kerzner, president of TMG. “Their “By contrast, recent changesdedication to mortgage to regulations TMG agentswere and in force more quickly after being announced, so home buyers had farthe less time Top: Steve Heimbecker brokers is very important for Middle: Marg Green to react,”Middle: says Klump. “As a result, demand didn’t pick up just before Donna Ramsay company’s long-term success. They Gord Appel are adeclined great asset the TMG the changesMiddle: took effect, while sales oncetothey did.” Bottom: Gerald Krahn
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Feature / Eddy Cocciollo
Peace to ALL
...and to ALL brokers Save the hum-bug! MCC head Eddy Cocciollo is offering conciliatory cheer in this candid Q&A about competitors, consumers and, ahem, CIBC
22 | mortgagebrokernews.ca
Feature / Eddy Cocciollo
IBC’s FirstLine may be gone, but for MCC it’s business as usual, says President Eddy Cocciollo. Competition between broker networks is also staying put. In fact, it’s likely to grow in 2013. Still, in this Q&A – and in keeping with the season – Cocciollo stays above the fray to offer his take on a transformed mortgage market and the changes it will demand of brokers and networks, alike. Cocciollo is also candid about CIBC and its decision to close FirstLine, a move with ramification for all broker networks.
CMP: What was the reaction within MCC to CIBC’s decision to wind down FirstLine? Cocciollo: The network’s reaction was no different than the overall industry reaction: Surprise, but not shock. What I mean by that is we all saw FLM being a leader in the mortgage broker space for so long, not having FLM as an option just seemed implausible. However, with all the changes in the global lending rules and with reduced mortgage margins, we all knew that something of this magnitude could happen. But the decision that CIBC made was solely a strategic lending decision. The Mortgage Centre business and the network continue to prosper as part of CIBC.
CMP: Some have suggested all of the big banks now in the broker channel intend to get out within the next five years. First, do you agree? Second, what does that say about broker commission levels and the channel’s competitiveness?
Scotiabank and Toronto-Dominion have been committed to brokers for a long time and continue to fund billions of dollars in this space, while attracting new banking clients. I don’t see why they would want to change anything. Other big banks have chosen a different strategy. Instead of directly dealing with brokers, they choose to invest via monolines, essentially investing in the broker origination business. So really it’s the lenders’ approach to the broker channel that may change, but I would say that it is difficult for any lender to make the decision to “get out”
Cocciollo: Each major bank has its own philosophy on lending and the broker space.
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Feature / Eddy Cocciollo
There are many different reasons why brokers leave and are attracted to certain networks. So now the question should be how does MCC retain our brokers and agents? entirely when brokers represent such a huge slice of the mortgage origination pie for Canadians. Compare the full costs of the various origination channels; branches, brokers, proprietary sales forces, and monolines. I am not sure that the costs are all that different. Some, however, such as commissions are more apparent than others, than say bank branch overhead. I think the most likely scenario will be similar to today, with banks competing for broker business, both directly and indirectly, which is good for the broker and consumer.
CMP: Is there a danger in MCC brokers relying on CIBC and President’s Choice Financial product instead of monolines? Cocciollo: What danger would there be?
The MCC network has an advantage, in terms of choice for its customers, over all our competitors. The choice happens to be one of the most recognized banks in Canada. Out of our top three lenders, two of them happen to be monolines. If CIBC or PCF is the best lender for their client in certain situations, only MCC can accommodate.
CMP: Broker network consolidation is on the minds of many. Is this really the direction the industry is going in 2012? How many networks do you expect will disappear in 2013? Cocciollo: The consolidation rumours are being blown out of proportion. The success of the bigger networks such as MCC is that they have established themselves in the market; each proving its value proposition to attract and retain brokers who like that model. The way it happens now is healthy for the industry. It forces the national networks and independents to invest in their business to be competitive, which strengthens the overall industry and ultimately the consumer will see a better product. CMP:
Brokers were again weighing in on
24 | mortgagebrokernews.ca
MortgageBrokerNews.ca about how high commission splits for agents are unsustainable and don’t allow brokerages to really train and bring value. What are your thoughts on that key issue?
Cocciollo: As a leader in one of the largest brokers in Canada, I constantly look for ways to add value to my network, but still keep my shareholders happy. I think we all understand brokerages are working with thin margins and we need to be as efficient and effective as possible with our brokers, lenders and partners Our model is a little different: we don’t take a cut of the commission, but like everyone else, we are susceptible to volume decreases. At The Mortgage Centre, we did talk about introducing a full-service brokerage with a higher split, but our owners didn’t want us telling them how to run their businesses. Our model has been the same for over 20 years and has proven to be sustainable and of value. In a challenging economy, other brokerages may not be as well-prepared to respond to changing commission structures. CMP: Recently some high-level brokers packed up and moved to different broker networks. Will we see more
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Feature / Eddy Cocciollo
Broker commissions have come under the microscope with two lenders deciding to cut them. Will broker commissions come under greater pressure and why? migration and why?
Cocciollo: Well, I can’t speak for other brokerages, but I can tell you MCC is still going strong and we just had a record-breaking year. We keep attracting quality brokers and have been growing year after year. One of our attractions is that with a MCC franchise, the owner has a protected territory. Because we respect our agreements, this limits us at times from accepting quality brokers from a competitor. Naturally, though, when someone leaves MCC, it also leaves a territory, which we have been consistently successful in backfilling. Brokers will leave and they will come. There are many different reasons why brokers leave and are attracted to certain networks. So now the question should be how does MCC retain our brokers and agents? The simple answer is, and what we are most comfortable investing in, is to offer as many tools and value-added products as possible, so the broker and agents can see the value. I can tell you that, naturally, MCC has lost a few brokers over time, but not because we could not compete with some compelling business offer. Recently we chose not to compete with a competitor’s un-economical short-term cash offer. The ironic part is that over time it would have been advantageous for the broker to stay. Simple math really, but it’s like winning cash for life – do you want the $1,000 a week or the big upfront payout even knowing the cash upfront casts aside hundreds of thousands over time?
naturally, such as the two lenders you are referring to that cut commissions by 5 bps are seeking to reduce costs. According to my quick calculations, the average agent (assuming $60K in commissions) will be out of pocket almost $4k a year assuming they did 100 per cent in 5-year mortgages with those two lenders. While hurting somewhat, it’s just not significant enough to really make a massive difference for the individual broker, especially if better margins for a lender, leads to more investment, and happier shareholders. We need our lenders to be happy. But if lenders start to take down commissions say by 20 per cent or more, then that would change the landscape significantly. I don’t see that happening, though.
CMP: Broker commissions have come under the microscope with two lenders deciding to cut them. Will broker commissions come under greater pressure and why?
CMP: Volume pooling has also been scrutinized and criticized by some lenders as an impediment to efficiency. Do you support volume pooling and why or why not?
Cocciollo: The simple fact is that since the financial
Cocciollo: Some national brokerages have these
liquidity crisis of 2009, lenders have not been able to consistently achieve their historical mortgage profits. So,
so-called “central desks” allowing the one-deal-per-year agent to get all the advantages that the loyal broker got.
26 | mortgagebrokernews.ca
70% – avg. Canadian home paid off 2012 Source:
Feature / Eddy Cocciollo
showed a home was worth less than the bid; a Unfortunately we90.6% are seeing missteps buyer lost a job before the closing. U.S. housing market worse than thought More than two years after the recession The number of Americans who bought previously and mistakes that52.1% are costing our E&O officially ended, many people can’t qualify for occupied homes rose in October. But the National or meet higher down payment Association of Realtors says it overstated more than insurance providers some grief loans requirements. Even those with excellent credit three million sales during and after the Great Recession, inspectors have found problems; appraisals
and stable jobs are holding off because they fear showing the housing market was weaker than Percentage of that home prices will keep falling. Sales are also previously thought. homeownership being hurt by a decline in first-time buyers, who The private trade group says sales rose four per costs, including are critical to reviving the housing market. cent in October to a seasonally adjusted annual rate of I even hear about brokers who are used as “the poolers” mortgage payments, Sales have fallen in four of the five years 4.42 million. That’s below the roughly six million homes utilities and in property butsay don’t know who sending the deal through since the housing boom went bust in 2006. a year that economists areeven consistent with is a healthy taxes that take up a their names. Declining prices and record-low mortgage rates housing market. But it’s ahead of 2008’s revised sales, typical household’s Wow!!! haven’t been enough to boost sales. now considered the worst in 13 years. monthly pre-tax At the same time, home construction has The trade group revised its sales from 2007 to 2010 It goes against everything “volume” bonuses were income in Vancouver begun a gradual comeback and should add to the down 14 per cent, from more than 20.6 million to nearly created for. Now, if I’m a broker who manages a small and Toronto, economy’s growth in 2011 for the first year since 17.7 million. Among the reasons for the lower fi gures, team and I used my name to facilitate the file with that (RBC respectively the Great Recession began in 2007. Last month, the Realtors group says: changes in the way the Census small team in MY office, then, yes, I think Economics that it is Housing builders broke ground on an annual rate of Bureau collects data, population shifts and some sales Trends areand 685,000 homes, the government said recently. being counted twice. effective pooling. I’m glad to see that the lenders Affordability Report) and offering lookingwith at this more closely. theaalternative to AOctober lending,and That was 9.3 per centsolution jump from The Realtors consulted government and private housing experts, including the Federal Reserve, the Department of Housing Urban CMP: and Looking at Development, the banks and the new tighter lending the Mortgage Bankers Association, the National guidelines, where is the broker channel headed? Back to Association of Home alternative Builders, mortgage giants Fannie lending? Mae and Freddie Mac and CoreLogic, a California-based data firm that first raised doubts about the annual Cocciollo: Alternative lending will fill some of the holes numbers earlier this year. the government have created. This is a good thing: CoreLogic has estimated that the rules Realtors group borrowers who15can’t qualify for A business have the overstated sales in 2010 by at least per cent. The changing numbers could affect how economists opportunity to borrow, but will have to pay a premium to view the trade group’sdo data. It could also affect so; hopefully with thecompanies option that if they improve their that use the figures forsituation hiring and expansion plans. they will get to the A side eventually. Sales are measured when buyers close on homes. This is healthy, responsible lending: The client gets But many deals are collapsing before that point. he/she theone broker works for his/her One-third of Realtorswhat said they hadwants, at least contract commission the risk is mitigated correctly. scuttled in October, up from 18 perand cent inlender’s September. Everyone wins. In saying this, we need to ensure our Contracts are being cancelled for several reasons: Banks have declined mortgage applications; home in identifying these clients brokers are trained correctly
especially where pace private lenders being used. Private the fastest since April are 2010. economists home prices will keep lending is Most ramping up in oursay space. falling, by atwe least ve per missteps cent, through 2012. Unfortunately arefiseeing and mistakes Many forecasts don’t foresee a rebound in prices that are costing our E&O insurance providers some grief. until at least 2013. As an industry, we need to tackle this now before it bites The high rate of foreclosures has made us. ATresold MCC we are on top ofthan it and willones. be ensuring our homes cheaper new The E&O remains and affordable. medianintact price of a new home is roughly 30 per
cent above the price of one that’s been occupied – twice the normal markup. Investors CMP: before Will Scotia ultimately keep ING in the brokerare
taking advantage of the discounts. channel?
The housing market is struggling even as the broader economy has improved in Cocciollo: I think Scotia understands the broker space recent months. very well, The but will have to askat themselves, “Will of ING economy grew an annual pace two continue fill in a gap Scotia can’t?” perto cent the that July-September quarter. Many economists expect slightly better growth in the October-December quarter. CMP
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COVER / Year in review
28 | mortgagebrokernews.ca
COVER / Year in review
grows channel influence As it turns out, CMP had the easy job: Tally broker channel contributions to charity in 2012. But the really fun job, as Nestor Arellano reports, fell to you
rokers stopped at nothing this year to give back, one even landing “behind bars” to arrest – sorry, to address – community needs. “It was fun,” says Starr Webb, owner/ broker of Dominion Lending Centres - Western Lending Source in Kamloops, B.C., pointing to her stretch in the slammer. “The RCMP actually came to my office, cuffed me and put me in the backseat of the squad car and off we went with lights and sirens blaring.” That “arrest” was, in fact, for charity -- a novel fundraising event for the local United Way called “Jail and Bail.” Webb was brought to a community centre, where United Way staff had set up a makeshift jail cell in plain view of the public. From those cramped accommodations, Starr began frantically calling friends and relatives in a bid to raise bail money. The minimum amount was $500, but she raised $1,100. It was also a good day for the United Way, which cleared more than $90,000. It was an even better
mortgagebrokernews.ca | 29
COVER / Year in review day for Webb. She’s not alone. While mortgage professionals are often seen as business people laser-focused on closing deals and making a commission, veterans of the industry will tell you that’s nothing but a cardboard caricature. In fact, despite this year’s tumultuous lending environment and the slowing housing market, hundreds of those money men and women found it within themselves to “step out of character” and into the kind of charitable giving focused on people. More often than not, it’s people well outside the market for a mortgage. These efforts not only denote the growing maturity of the industry, but also testify to its influence in the communities it serves. By CMP’s calculations – the result of piecing together more than 54 individual contributions from brokers, broker networks and lenders – the channel donated no less than $1.2 million
in charitable giving for 2012. That betters last year’s tally by $200K. It also speaks, say brokers, to the increased pressure they’ve placed on their networks and their lenders to mount and support very public campaigns of giving. That work gives back and at the same time it ups the profile of mortgage brokers across Canada and in their individual cities, towns and hamlets. The acts of generosity are too many to name, but CMP has handpicked a few of those stories to share and to inspire. Our apologies in advance to those we have failed to include. It’s not all about dollars and cents for Ethan Ribalkin, a mortgage professional with Verico The Nova Team in North Vancouver. The 29-year-old has been dedicating his Wednesdays to teach residents at the Villa Carital nursing home in East Vancouver how to play the ukulele. The young-atheart musicians will play in their first Christmas concert this December. “We’re told by administrators at the home that the weekly lessons mean a lot to the seniors,” says Ribalkin. “There are many seniors who are withdrawn that break out into a real smile when they take part in the ukulele lessons.” Charity is a family tradition for Ethan. For nearly half a decade, his mother, Aure Viau, his father, John, owner/broker of The Nova Team, and his siblings turn their home into a blazing beacon of Christmas lights. No less than 100,000 to be precise. Neighbours and people from other communities drive in to view the spectacle and, in the process placing tons of food and money in bins the family sets out for the local Harvest Project. It provides life skills coaching, food and emergency drop-in help for people challenged by family breakdown, illness, job loss and poverty. Throughout the year Invis and Mortgage Intelligence brokers and agents stage various events to raise funds for Angels in the Night, the company’s own charitable venture, which provides supplies to emergency shelters
We’re told by administrators at the home that the weekly lessons mean a lot to the seniors. There are many seniors who are withdrawn that break out into a real smile when they take part in the ukulele lessons
600,000 – homes took our home equity 2012 Source:
CAAMP 30 | mortgagebrokernews.ca
Sally and Jim were so moved by the CHIP Home Income Plan they fell out of their rocking chairs.
COVER / Year in review than $465,000 for the Bridgeway Academy. The academy was founded in 1983 by a mother who was convinced that students with learning disabilities could learn and do anything, if they were taught in a way that works for them. Don Cherry’s not the only star that DLC brokers know. Michael Distefano, owner/broker of DLC-BTB Mortgage Solution, and his colleagues recently teamed up with Stamford High School in Niagara Falls, Ont., in a fundraiser using the celebrity of pop idol Justin Bieber to raise money for the city’s Project Share program.
across Canada. Each December, brokers, staff and lender partners in their respective communities personally deliver the supplies to various local shelters. Throughout the past 10 years, Invis/Mortgage Intelligence has raised a total of $1.8 million for Angels of the Night and aims to bump that figure past the $2 million mark for 2012. It’s all about creating the kind of traditions that get brokers into the community and into the hearts of Canadians. Speaking of tradition, people and families that troop to the office of Chris Dopp just a few days before each Christmas will be glad the industry veteran has decided to keep his. The principal broker of The Mortgage Centre Elite Mortgage Group in Collingwood, Ont., is all set to serve up no less than 250 10-pound turkeys with all the Christmas trimming this year, reports his assistant Tricia Davidson. The traditional turkey giveaway has survived downturns and recessions and the kind of slowing market many brokers are now grappling with. It will continue to do so. “If I’m having a tougher year, what about those who need the help?” Dopp said last year. While there was no shortage of brokers stepping up to the plate to help those in need, probably none of those footfalls were as fancy as Scott Bentley’s. The broker with Verico Premiere Mortgage Centres in Halifax tripped the light fantastic during this September’s Dancing for Our Stars ballroom competition, his Argentine tango ending in thousands of dollars raised for children with learning disabilities. Nearly 800 people attended the dinner gala, which featured Halifax local celebrity dancers and raised more
14% – increase in new mortgage purchases 2012 Source: CAAMP 32 | mortgagebrokernews.ca
Nearly 800 people attended the dinner gala, which featured eight Halifax local celebrity dancers and raised more than $465,000 for the Bridgeway Academy
COVER / Year in review The event included a community BBQ, a silent auction, food drive and a live draw featuring a Justin Bieber Concert package. Distefano’s seven-year-old son Christian, a child actor and singer, pitched in by donating the proceeds of a CD featuring his cover version of Bieber’s “Pray.” Education and proper nutrition go hand-in-hand and throughout the country many DLC brokers have been pitching in through various projects since September to help raise funds for Breakfast for Learning, an organization focused on providing young school children free meals. As of late November, the network reports having raised more than $14,000 through the efforts of so many of its 2,200-plus mortgage professionals. Don Cherry has also helped the cause, lending his star power to a DLC brokerage and a hockey game fundraiser last month. Cherry, who recently renewed a multi-year contract with Dominion Lending Centres, dropping the puck in the featured face-off between the Barrie Colts midget AAA squad and the South Central Coyotes of Richmond Hill, Ont. In the process, Dominion Lending Center YBM in Barrie, Ont., filled thousands of seats at the Barrie Molson Centre and collected thousands of dollars in
donations for Breakfast for Learning. Multi-Prets Mortgages, a sister company of Mortgage Alliance, raised over $40,000 for the Club des Petits Dèjeuners du Quebec, an organization that serves school children hot breakfasts before the start of class. No less than 18,000 children throughout Quebec are enrolled in the program. Since, partnering with Club des Petits some 10 years ago, Multi-Prets has donated no less than $400,000 to the Club. Apart from a good meal, children also need to get a good rest. To that end, Peter Puzzo, owner/broker of DLC Top Producers, and his colleagues are working with Sleeping Children Around the World, a charitable organization raising funds to manufacture and distribute bed kits to children in the developing world. The kits, which costs $35 each, consists of a mattress, pillow, mosquito net, and if funds are available, school supplies and clothes. “With each funded mortgage, I purchase a bed kit in honour of my clients,” he says. “SCAW sends my client a letter advising them of when the kits will be delivered and sends them a picture of the child that receives the kit.” The people at MAC/MPH go to great lengths running, riding, walking and sailing to raise money for the battle against cancer. Through its MAC Rally of Hope events, the company managed to raise nearly $200,000 for the Weekend to
mortgagebrokernews.ca | 33
COVER / Year in review End All Women’s Cancer. The events sponsored by MAC include the MAC Gold Tournaments, MAC Rally cross-country motorcycle ride, MC/MPH Boat Cruise, Weekend to End all Women’s Cancer Walk and the MC/ MPH Holiday Gala. Despite all the doom and gloom about the economy and the slowing housing market, there was no shortage of mortgage professionals going out of their way to lend a helping hand in 2012. A team led by Dave McNabb and Dave Wild, brokers/ partners of the DLC-Regional Mortgage Group, in Red Deer, Alberta, raised $135,000 this year for the Red Deer Build and Golf a Kid to Cure charity. A mortgage adviser from the same office, Scott Bourke is also an avid volunteer for the Kids Cancer Foundation, The Red Deer Curling Club and Realtors Charitable Foundation and the Red Deer Kinsman Club, where he is vice-president and dream home chair. Louise Williams, broker at DLC – Coastal Mortgages in Campbell River, B.C., and her husband a veteran of the restaurant business, has brought a new meaning to the words food drive. From a converted trailer, the couple cooks up delicious meals for various charitable fund drives. They offer their catering for free, charging only for the ingredients. Their efforts help various organizations save thousands of dollars. Debra White, owner/broker of DLC-White House Mortgage, has an agenda book filled with activities marked out for a table’s length of volunteer and charity groups. Among them are her responsibilities as director for the Run For Cure committee and working for a day at a Wendy’s restaurant. Wendy’s Dream Lift Day raises money that goes to help sick children achieve their
Despite all the doom and gloom about the economy and the slowing housing market, there was no shortage of mortgage professionals going out of their way to lend a helping hand in 2012
Sometimes our charitable instincts are triggered by something that hits close to home
3.26% – avg. interest rate on mortgages 2012 Source: CAAMP
34 | mortgagebrokernews.ca
dreams. Sometimes our charitable instincts are triggered by something that hits close to home. After her friend died of brain cancer just a few weeks away from his wedding day, Julia Parkin decided it was time to take on cancer. The mortgage expert for DLC-Homestead Financial in Burlington, Ont., decided to train for a 200-km run to raise research money for the Princess Margaret hospital foundation. Five years ago, Sharon VanderDuim, founder of the DLC - VanderDuim Mortgage team, and her colleagues spotted a man eating out of a dumpster across the street from their office in Bowmanville, Ont. “Because it was cold day, we gave him gloves a hat and coffee, and we called him ‘David,’” VanderDuim recalls. “Over the next five year, David would be a regular in our office and we would engage him in conversation and share coffee (three creams, two sugars).” Lately, the team has been missing David because of his failing health, but their involvement with their regular visitor has led to other charitable works. For example, each year, the team chooses a community cause to support. This year, it was the Durham Dragons hockey team. In 2011, it was the Champions of Youth, a local program that supports youths who come from a disadvantaged background. Recently, the VanderDuim Mortgage Team also raised $4,500 for cancer research by holding a paintball fundraising event.
Business / marketing
You’re On For this next step in launching your own employee mortgage benefits program, the stage is the telephone and you’d better know your lines, writes Doren Aldana
Step 3 - Follow up by phone In last issue’s article, I walked you through the critical elements you should include in your “Shock ‘n’ Awe” intro package, which is designed to give the decisionmaker enough information to determine if your Employee Mortgage Benefits Program is something worth pursuing further. Your goal is to get as many of these intro packages out to qualified prospects as possible – the more the better. Then, once you’ve mailed out your intro packages, the next logical step in the process is... Ten to 14 days after you mail your intro package, follow up with the decision-maker by phone to get
36 | mortgagebrokernews.ca
their feedback and, more importantly, to see if they’re open to taking the next step in the process: a 20-minute, face-to-face meeting. This is where all the magic happens because this is where you can present them with a full overview on your program and close the deal. It doesn’t matter how fancy and compelling your intro package is, if you aren’t able to book the face-to-face meeting, chances are, your program will never get approved by the company. That’s why this telephone followup strategy is so important. With that in mind, here’s a proven script you can use:
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Business / marketing
Live Call Followup Script: Hi (name) this is (your name) calling from ABC Mortgage. How are you? As promised, I just wanted to follow up on that package I mailed you last week. Did you have a brief moment? OK, great. Did you get a chance to review the package?
[YES]: What do you think of what you’ve seen so far?
[NO]: No worries. I can appreciate that you’re really
All I need is 20 minutes to give you a full overview and at that point, if you don’t think it’s worth your time, I’ll be the first to advise you to pass on it
QUALIFYING QUESTION: Let me ask you this… If I could give you enough information in 20 minutes to decide if this is something worth pursuing -- for you and your employees -- would you be open to taking a look at it some time in the next week or two? OK, great. All I need is 20 minutes to give you a full overview and at that point, if you don't think it's worth your time, I'll be the first to advise you to pass on it. Fair enough? What works better for you... this week or next week? What day works better __day or __day?
As you can see, it’s a pretty straightforward script, but it works. Just follow this script and you’ll book meetings. Of course, every now and then you’ll encounter a hard-egg-to-crack prospect who throws an objection at you, but for the most part, this script will get the job done. On that note, while we’re speaking about objections, let me show you how to overcome the top three objections...
TOP 3 OBJECTIONS: 1. We don’t have an employee benefit program and don’t plan on implementing one. I can appreciate that. This may not be for you then. I don’t want to waste your time or mine so let me ask you this... If I could help you implement a highly valuable Employee Mortgage Benefits Program that helped you attract and retain top-producing employees, while improving company morale, and all of that could be done without costing your company a dime... would you be open to learning more? May I make a suggestion? Use “Advance Script” below. 2. We don’t have time for an employee benefits program. I can appreciate that. Let me ask you this? If I could provide you with enough information within 10 minutes to decide if this is something worth pursuing, would you be open to taking a look at it sometime in the next week or two? May I make a suggestion? Use “Advance Script” below. 3. We are not interested. I can appreciate that. This isn’t for everybody. I’m just curious... may I ask why you’re not interested in a no-cost way to add value to your existing employee benefits package? So, if I’m hearing you right, your concern is _________. Is that correct? OK, let me ask you this... If I could show you how... (key benefits)... without... (key concerns)... would you be open to learning more?
18% – variable mortgage purchases 2012 Source: CAAMP
38 | mortgagebrokernews.ca
Business / Marketing May I make a suggestion? Use “Advance Script” below. Let’s get together for 20 minutes some time in the next week or two. That way I can give you a full overview on my program and how it can help your company and your employees. Provided you’re sufficiently impressed, we can discuss the next steps. If not, I’ll be the first person to advise you to pass on it. Fair enough? OK. Great. Are you the only decision-maker or is there someone else who should be there? Do you have your calendar handy? What works better for you, this week or next week? What day works better __day or __day?
So there you have it. I’ve just given you a killer script for getting appointments within companies so you can get your Employee Mortgage Benefits Program approved! With a little practice and rehearsal, these scripts will make you armed and dangerous to overcome almost any objection thrown your way! Now, if they still say “NO” after all of that, just remember this simple
MORTGAGE SOLUTIONS THAT ARE AS SMART FOR YOUR CLIENT AS THEY ARE FOR YOU
mantra: Some will, some won’t, so what, someone’s waiting -- NEXT! In next month’s article, I’ll teach exactly what to do -- and what not to do -- during your face-to-face meetings in to order to ensure your success. In fact, there is one little secret I’ll be sharing with you that can literally make or break the success of your meeting. This one tip alone could be worth tens of thousands of dollars to you over the span of your career. Stay tuned…
About the writer: Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach and recently won the “Best Industry Service Provider” award at the 2012 Canadian Mortgage Awards. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free online workshop on “How to Launch Your Own Employee Mortgage Benefits Program,” visit: www. Done4UMortgageBenefits.com
What’s in it for you? > A unique product portfolio including our award winning All-In-One Banking™. > Niche product lending allowing you to meet a variety of your client needs; including mortgage solutions for ﬁrst time homebuyers, rental properties, new immigrants, non-residents and more 1. > An incentive program built on your feedback, including reward options such as: $2,0002 towards marketing, $15,0003 travel voucher towards a trip of lifetime, rate discounts up to 15 BPS, free appraisals, great cashback offers, and more!
Contact your local BDM or email email@example.com
TM National Bank All-In-One is a trademark of National Bank of Canada. 1 Financing shall be subject to the credit approval by National Bank. 2 $2,000 marketing fee is a one-time reward for the ﬁrst 65 deals or $20M funded in the ﬁscal year. 3 $15,000 trip paid for every 125 deals or $40M funded in the ﬁscal year. The ﬁscal year is from November 1, 2011 to October 31, 2012.
mortgagebrokernews.ca | 39
Feature / American friends
Friends in American
high places Commercial Mortgage Section Brought to to you by
40 | mortgagebrokernews.ca
FSC0 Lic.# M08000714
Phone: 416-483-8018 ext. 233 Cell: 416-986-3688 Email: firstname.lastname@example.org
Feature / American friends
Brennan W ood
It’s always nice to have friends in high place, but as CMP’s Mark David finds out, it’s even nicer to have American lenders willing to fund Canadian commercial deals
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Phone: 416-483-8018 ext. 233 Cell: 416-986-3688 mortgagebrokernews.ca | 41 Email: email@example.com
Feature / American friends
For brokers who know how to do that – and they are pretty few and far between – there are a lot opportunities Brennan Wood has hit upon an interesting and lucrative development for commercial brokers now scrounging around for financing on behalf of clients. It’s not exactly a secret, but he’s finding a growing number of U.S. pension funds willing to bankroll his clients’ new-build projects, even as the Big Five get stingier and stingier. “The banks are definitely getting more conservative, particularly on the construction side,” says Wood, a broker with Mortgage Alliance and one of CMP Top 10 Commercial players this year. “What you are seeing is a lot of Canadian conduits being set up with U.S. pension funds, and so there is a lot of American money pouring into the market, for sure.” Searching for proper financing can often be a thorn in the side of many builders, and an increasingly cool response from Canada’s big banks are frustrating many smaller developments represented by mortgage brokers. “Obviously, it’s a little bit difficult to find that
42 | mortgagebrokernews.ca
FSC0 Lic.# M08000714
money because you (need to) know where to look and who to call, and not everybody in Canada has a contact at Wells Fargo or Bank of America,” Wood says. The fact that U.S. pension funds have been more than willing to provide financing has created many new opportunities for Canadian commercial brokers, especially those who specialize in one specific area. As Wood explains, many opportunities exist specifically for brokers who specialize in structured finance deals. If you have a bank that wants to do 50 per cent of the loan to value, he tells CMP, and then you have some mezzanine financing that will do another 25 per cent, (this will help in) structuring these deals. “For brokers who know how to do that – and they are pretty few and far between – there are a lot opportunities,” says Wood. The Toronto professional personally brokered $150 million in commercial deals during 2011, a feat earning him the second spot on CMP’s inaugural Top 10
Phone: 416-483-8018 ext. 233 Cell: 416-986-3688 Email: firstname.lastname@example.org
Feature / American friends Commercial Brokers list by funded volume. The banks’ loss has resulted in a major gain for brokers, who have benefitted greatly at a time when more and more investor clients are looking to commercial deals, both big and small, as a hedge against small-scale residential. “They benefit because developers are used to just calling up their bankers and easily getting a loan,” Wood says. “But now, they’re finding it more difficult. So a broker who is working with foreign institutions like we are can definitely benefit by introducing the money sources into the market with the builders.” Wood attributes the banks’ collective stinginess to the fact that the markets in many major cities have begun the downward slide analysts have predicted for months. “In Toronto, for example, it (the market) is starting to slow down a little,” says Wood. “They (the banks) are on the ground, and they have a lot of money out there with some very large builders, and they just aren’t hungry for the product anymore. They’ve filled up that silo, and they don’t need more CMPloans. Nov 2012.eps 1 10/25/2012 AM ratios construction Otherwise, their10:24:17 lending
aren’t going to look very good.” Foreign financers, specifically those based in the U.S., seem to enjoy the prospect of providing financial backing toCanadian property builders. According to Wood, it all boils down to the fact that they simply have more money available to those who need it. “The foreign banks have huge amounts of equity, and they’re hungry for projects,” Wood says. “They need yield, and they’re not getting it in their local markets.” While the U.S. market has now begun to claw its way back from the housing crisis that ultimately cancelled construction plans from one end of the country to the next, lender confidence in new projects remains muted, says one analyst.
The foreign banks have huge amounts of equity, and they’re hungry for projects
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mortgagebrokernews.ca | 43
Feature / American friends
I think it will continue as long as the Canadian market is perceived as being strong and a good, safe place to put money as a foreign bank
That isn’t necessarily the case for Canadian projects, the success of Canuck REITs (Real Estate Investment Trusts) demonstrating the level of American appetite. Going forward, Wood predicts that the trend of U.S institutions handing out loans to developers in Canada may grow, even as the Big Five in this country edge toward more conservative underwriting, itself a reflection of regulatory concerns about loose lending practices. “I think it will continue as long as the Canadian market is perceived as being strong and a good, safe place to put money as a foreign bank,” says Wood. “If Canada’s credit rating begins to slip, or the housing market takes a hard fall, the foreign lenders are going to pull back fast and hard.”
Although U.S. lenders often seem willing to part ways with their cash in order to fund new Canadian projects, they tend to focus on some specific criteria when determining which horse to back. Their decision is often based on four criteria: product type, loan amount and term and loan-to-value ratios. Loan term – “U.S. funds seem to have a lot of 10-year money, which can be limited or nonrecourse loans,” Wood says of the American lenders’ collective attitude towards Canadian looking for funding. “This is something that just doesn’t exist for Canadian banks, which are aggressive in product that is high-quality, but not quite Triple-A, and owned by large, sophisticated borrowers.” Product type – The types of projects that American lenders look for include “assets that are Triple-A, but owned by small clients” and “(assets) where it’s just not good enough for a pension fund because lease up hasn’t occurred or there are some leases coming due or there is a little bit of hair on the deal,” says Wood, who adds that “the rates are still great.” Loan amount – Americans tend to think big when it comes to handing out loans. Wood indicates that “on the construction side, it has to be large, a loan of $10 million or more for them to even start looking at it.” Even on the smaller side, the loans may seem
relatively large on this side of the border. “The minimum loan size is $2 million,” Wood says. “I think the smallest deal we have done with an American lender in (our) office is $8 million. For construction projects, they want loans of at least $10 million.” Loan-to-value ratios are also important for U.S. financiers. These can vary by the project, but according to Wood, the Americans tend to zero in on a specific LTV ratio. “It’s all deal and asset specific, but you’re typically in the 65 per cent to 75 per cent range for LTV,” says Wood. “What you are getting with American lenders is some flexibility.” Mortgage brokers are very much onboard with helping their Canadian clients to find the right American lender for their projects, and have been providing them with good referrals upon request. This is not only beneficial to the clients, but it also has the power to help the brokers in the long run. “As a side benefit for our clients, recently, we have (had) a number of large clients who are taking advantage of the wonderful opportunities in the U.S. real estate market,” Wood says. “As we do more business with American lenders, we gain credibility with them. We can refer our clients who are buying in the U.S. to American lenders who are more than happy to lend to Canadians buying property down there. So we can help Canadians finance purchases in the U.S.”
44 | mortgagebrokernews.ca
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Phone: 416-483-8018 ext. 233 Cell: 416-986-3688 Email: firstname.lastname@example.org
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Contact Steve Fabian, Vice President Mortgage Investments, Principal Broker. email@example.com 416-248-6206 ext 260. Downing Street Financial Inc. Brokerage #10962 Administrator #11957. 56 Aberfoyle Cres. Suite 500. Toronto,Ont. M8X 2W4
Feature / Pep Talk
Hereâ€™s a pep talk for 2013 guaranteed to banish any brokerâ€™s self-doubts and market fears
46 | mortgagebrokernews.ca
Feature / Pep Talk
ith 2013 just over the bend, a leading B.C. broker is offering battle-weary colleagues a pep talk of sorts. The encouragement extends to industry professionals outside the province’s slowing market and to those struggling with fence-sitting clients across the country. The confusing climate is enough to weaken the optimism of any broker, but here’s why you shouldn’t let things get you down, writes broker Dustan Woodhouse: It is often said that our own worst enemy is simply ourselves. I know that in my own experience this is often been the case in many different facets of my life. Jumping to conclusions, judging situations with only half the facts or perhaps just a piece of one fact, and imagining entire stories about what’s going on in other people’s lives from the limited information and typically narrow perspective that we each have on such things. For a broker an example of this would be that client who is not responding to your emails, not returning your calls, always letting you go to their voicemail doesn’t want your services anymore. You know who I’m talking about: the one currently with RBC that has already been offered 2.99 per cent or some other competitive rate to stay there with no big stack of documents to worry about, the client you spent hours working through the advantages of working with an independent broker, the superior prepayment options of the lender you have set them up with, perhaps even at the same rate. However, after all those hours invested, you just can’t seem to reach that client anymore and it must be because he or she has dumped you. They are evading your calls because they just don’t know how to tell you they have gone and signed with their own bank. You’ve heard the story before and you know exactly what is happening this time around. You commiserate with a few of your co-workers; they share stories of clients that they have lost at the eleventh hour. Despite the fact that the client really seemed to take to your pitch on an annual mortgage check in, inflation hedge strategy, you being their third party advocate, the superior prepayment privileges of the lender you offered, or maybe even the better rate you have access to, you’re pretty sure after two full weeks of no response that you have lost them. Perhaps the messages you leave them or the e-mails you send them start to change in tone from that happy helpful broker who originally was working with them to the tone of a broker resigned to having lost another client or worse an air of frustration slips into your voice. Or the worst thing of all an air of desperation and you start negotiating
with an answering machine, suggesting to the clients that suddenly you’re able to cover their appraisal or perhaps even their legal fees. You start getting the farm away to them without ever actually having had a conversation with them. They are nowhere to be found and the clock is counting down to their renewal date, subject removal, or completion. What has happened? Hey, you sent them the approval and they signed it, hopefully even met in person and had a great meeting, all you need is one last document perhaps just a void check to wrap up the file and yet all has gone dark.
Here enters your false thoughts for the day:
• I know that they went back to their own bank. • I annoyed them by not calling often enough through the process • I called them too often • I wrote too-abrupt emails (you are re-reading them now…) • I wrote too-long emails, giving them too many choices and too much data. I confused them • I trash-talked their current lender • I should have delivered the docs in person • I was too pushy in person • I should’ve met them at their house, not made them drive to my office. • I should never have forced them to drive to my office, they live right on my way home anyways • I failed ‘insert text here’ Is any or all of that running through your mind? Well, let’s rethink this. Let’s get real. The reality is that the client went away camping for a few days, came home to a hacked Hotmail account and folded it without thinking to notify you, then dropped their cell phone in the ocean while boating. They got busy with a few different things and finally called to say “Hey, is everything all cool with my new mortgage?” Or maybe the reality is this: the client was unaware that the lender had asked for that one last document. Bang! The client sends it through instantly. Here enters what for me what is my most meaningful thought for the day: Do not build your own story in your own mind, wait for the real story and always give the client the benefit of the doubt. Keep convincing yourself you have lost a deal and next thing you know you will have. Stick with that positive energy! It’s funny how things go sometimes.
About the writer: Dustan Woodhouse is a CMP Top 75 broker based on B.C. Lower Mainland and head of Dominion Lending Centres Canadian Mortgage Experts.
mortgagebrokernews.ca | 47
Feature / news review
News in black and white and gray Here’s a reminder of what got you going in 2012, at least January through May in orks
Jan. 13 BMO 2.99 rears its head
ker n e bro
tely e ltima 1 r 1 u h l . l i T n er ew Ja iction: lidat ega brok ne o s d n e o m Pr years ush to c r three argues o ould fi vendustry p as two o ve years, esting it c kers An i in as few ittle as fi ers sugg ess to bro l h t resul rks in as , with ot ir usefuln n o e a r h w t t e et ne en stry v strength u d n i ately ultim ients. l c and
BMO may be positioning itself at the forefront of any movement to do away with the 30-year amortization, presenting a limited-time offer on what may be the industry’s lowest five-year fixed rate – but one specifically capped at 25 years.
Feb. 11 FirstLine up for sale Any mov
e by CIBC FirstLine is undo to sell ubtedly a business decisio n, argues the president of the country’s national broker association, suggesting the bi g bank’s exit would offer the industry real opportunity.
April 4 Thousands of ag walk away from ents industry
Feb. 8 Builder: Do not use mo rtgage brok April 24 ers Dominion L veteran tea ending Centres w ins 5 ms “Coup” m
Jan. 18 CIBC class action attracts hundreds of inquiries Jan. 24 B.C. brokers win Oprah spotlight A team of Vancouver mortgage brokers is giving the industry a PR boost, at the same time helping a community get its financial act together for a new reality show on Oprah’s OWN network.
ay n announcem ot come close to descr en ib high-profile t this week that it wil ing DLC’s l welcome broker team five $500 millio s – represe n in annual n funded volu ting more than industry ve teran Don me and incl Stoddart. uding
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48 | mortgagebrokernews.ca Fisgard Capital Corporation | 3378 Douglas Street, Victoria BC V8Z 3L3 | www.fisgardmortgage.com
New ALT Agent Don't gum up the works
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lenders need... b20 bombshells?
A SENSE OF...
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guide / contents
2 Don’t Gum Up the Works When it rains, it pours. Alternative lenders are reporting a record number of originations this year largely due to a tide of borrowers shut out by the big banks. But will a stream of ill-prepared apps clog the pipe? 5 | Psst. Here’s the Ugly Truth Going forward, it may be hard to ignore the ugly truth staring your BFS clients in the face: Is it time to declare your full income?
8 | B20 Breakdown? B20 – it’s not that bad, but, writes Lester Shore, but brokers have to know what the new expectations are for bankers and borrowers and themselves
16 12 | The Great Paperwork Roundup Broker Dustan Woodhouse offers a comprehensive list of documents you’ll need to help BFS clients roundup on today’s B20 frontier
16 | Don’t Avert Your Eyes MCAP’s Eclipse is casting light on the new alternative lending landscape and inviting brokers to prepare themselves and their clients for that new day
Alternative Lending guide December 2012 | 1
GUIDE / Alternative lending
Alternative lender to ‘newbie’ broker:
Don’t gum up the works!
2 | Alternative Lending guide December 2012
GUIDE / Alternative lending
When it rains, it pours. Alternative lenders are reporting a record number of originations this year largely due to a tide of borrowers shut out by the big banks. But will a stream of ill-prepared apps clog the pipe?
anada’s new mortgage rules continue to shut out more and more borrowers from the chartered banks sending consumers spilling over to alternative lenders. Yet, despite the mounting originations, some point to a troubling puddle of ill-prepared documents that could gum up the works. Those applications, in case you were wondering, come courtesy of brokers. “The mortgage rule revamp, B20 and other changes have been a big opportunity for brokers and alternative lenders,” says Nick Kyprianou, CEO of Equity Financial Trust. “Generally business has been in the upswing, but we are also seeing an increase in applications that have not been prepared properly.” The submissions, he says, could be attributed to mortgage professionals who are either new to dealing with alternative lenders or unfamiliar with the document requirements under the new mortgage rules and OSFI’s B20 lending guidelines. Earlier this year, OSFI compelled federally regulated lenders to implement a series of lending changes by their fiscal year-end (October 31 for most banks). Among those changes were the reduction of HELOC loan-to-value from 80 per cent to 65 per cent and the elimination of 100 per cent financing. The B20 guidelines are seen by the Credit Union Central of Canada as a barrier to accessing mortgages for so-called “non-conforming borrowers” such the self-employed, freelancers, low-income individuals and even immigrants, Aboriginal people and rural Canadians. Three months ago in an effort to avert a debt crisis, the government also reduced the maximum
amortization for government-insured mortgages from 30 years to 25. The feds also reduced the amount of equity that can be borrowed against a home from 85 per cent to 80 per cent. “I get a sense that as many as 20 per cent to 25 per cent of brokers who submit to us are not familiar with
Documents now under greater scrutiny but often found missing in a borrowers’ files: •
Notice of Income Assessment
All of Optimum’s more than in originations this year came exclusively from business brought in by mortgage brokers Alternative Lending guide December 2012 | 3
GUIDE / Alternative lending
Now more than ever, records that go back up to two years or more are needed. The goal is to establish the borrower’s cash flow the stricter document requirements under the new lending regime,” says Kyprianou. “There’s some degree of hand-holding on our part now to help brokers out.” “Now more than ever, records that go back up to two years or more are needed,” Kyprianou explains. “The goal is to establish the borrower’s cash flow.” When brokers submit incomplete documents for their clients, the time required to sort things out increases the workload on the lender’s staff, lengthens the processing cycle and runs the risk of creating a backlog. The pressure is likely to increase in the near future before it abates as more borrowers turn to alternative lenders, says Lester Shore, VP of Optimum Mortgage. All of Optimum’s more than $12 billion in originations this year came exclusive from business brought in by mortgage brokers. Shore estimates that 95 per cent of that number represents deals rejected by the banks. “Our typical client falls into two main categories: a borrower rejected by the banks because he or she does not have a credit history or has poor credit; and borrowers rejected by the banks because they do not have a traditional form of income determination,” Shore says. “In other words, they work freelance or are BFS clients.” He estimates that half the time, these customers are dealing with “newbie” brokers. “No, they are not necessarily new entrants to the industry,” Shore points out. “Rather, they are most likely brokers, used to handling A deals and not well-versed in the documentation needed to support a BFS application or B mortgage.” He believes the difficulty is an issue of perception. “I think our main challenge is convincing these brokers that their client no longer lives in the A world,” says Shore. “The new rules have knocked a lot of people down a few rungs and now they have to meet new requirements and big banks won’t touch them.” For example, he said, because of the B20 guidelines many of the big banks no longer do alternative lending. The B20 guidelines also require lenders like Optimum to scrutinize and verify income sources of all borrowers. Brokers, according to Shore, can help the approval
4 | Alternative Lending guide December 2012
process along by making sure that they are submitting deals that have a high possibility of being approved. An initial determination of three key points would be helpful. For instance, mortgage professionals need to determine the following: • Does their client have a job or means of income that will enable him to afford the mortgage? • How can these sources of income be backed up by records and documentation? • How much flexibility does the lender have in providing a mortgage to the borrower? Barring evidence that the borrower is a “perpetual credit abuser,” said Shore, most applications are denied because of affordability issues or because the lender does not see the house as an “acceptable home for the borrower,” or, in other words, may need costly repairs. “The home is our security,” says Shore. “We have its condition and value appraised. We approve the loan when the appraisal meets our criteria.”
GUIDE / Tax-talk
Here’s the ugly truth? Going forward, it may be hard to ignore the ugly truth staring your BFS clients in the face: Is it time to declare your full income?
hall CMP break it to your BFS clients or should you? The ugly truth about B20 is that selfemployed borrowers may actually have to report their full income. The new OSFI lending guidelines demanding an unprecedented level of scrutiny with regards to BFS borrowers has caught a lot of those self-employeds flatfooted and scrambling to meet the document requirements. The constraints have negative repercussions for many brokers who deal primarily with self-employed clients, says Rachele Raia, broker/partner at Your Mortgage Connection in Vaughan, Ontario. “BFS borrowers make up 30 per cent of our client list,” according to Raia, representing the concerns of hundreds of brokers in the same boat. “More document requirements mean more back and forth and longer wait times.” The focus at the moment is the identification and verification of a borrower’s source of income in order to assess that person’s ability to pay the mortgage. “Several months ago, a stated income was enough,” Raia says. “Now lenders want to see a person’s stated income, T1, notice of assessment and bank statements.” Prior to the mortgage rule changes, BFS borrowers could easily apply for mortgages with A lenders. However, banks and A lenders have adopted stricter qualifying controls following the mortgage rule revamp and lately B lenders appear to have “lost their appetite” for BFS borrowers as well, she tells CMP. Under this new level of scrutiny, according to another seasoned broker, document preparation is not the only strategy. “Brokers also need to coach BFS clients on issues such as when to file income taxes and document
authentication,” says Dustan Woodhouse, broker with Dominion Lending Centres Canadian Mortgage Experts on B.C.’s Lower Mainland. For instance, borrowers should opt to pay more personal income tax this year, he says. The goal is to bump up a borrower’s income to a level that will qualify that individual for the mortgage he or she is hoping for. “Advise your clients against starting a dividend income program this year,” he says. “It may be a good tax strategy, but not a good mortgage strategy.” Brokers should also make sure of their clients have a 2012 business license. “The number one reason I hear from various tradespeople is: ‘I work all over town,” says Woodhouse. “My answer is: Get one from the municipality in which you reside.” BFS borrowers also need to have an accredited accountant prepare their business financials and file their tax returns. “I think brokers should connect with their client’s accountant at tax time and make sure they are working on the same page regarding the borrower’s mortgage plans,” he adds. Brokers can also advise their clients to incorporate their business, says Woodhouse. Apart from the liability and tax advantages, in the new lending regime, limited corporations will have an easier time compared to sole proprietors. BFS borrowers also need to be reminded to report all rental income in the T1 General forms or via Hold CO Financials and made sure those financials are up to date and filed. “Remember, your clients need to keep an impeccable record of their financial status,” Woodhouse says.
Alternative Lending guide December 2012 | 5
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guide / optimum
B20 â€“ itâ€™s not that bad, writes Lester Shore, but brokers need to know what the new expectations are for bankers, borrowers and themselves
B20 breakDOWN? 8 | Alternative Lending guide December 2012
guide / optimum
suspect that by now, brokers are well aware of B20; the underwriting guidelines for residential mortgages that OSFI, the regulator of all Canadian Financial Institutions, has imposed on all regulated lenders and CMHC. These underwriting guidelines have been created at the insistence of the Financial Stability Board, the financial oversight organization of all G20 nations. The creation of these guidelines is a direct result of the financial crisis caused by poor American mortgage lending practices. Itâ€™s essential brokers get a good overview of the
situation: the components of B20 in general terms and what it means to lenders; what it means to them, the brokers; and, then, how we at Optimum Mortgage are responding.
Components of B20 The guideline sets out what OSFI considers to be prudent residential mortgage underwriting standards. A residential mortgage is considered to be a loan or any other product, like a HELOC, that is secured by a residential property -- up to a four-unit dwelling.
Alternative Lending guide December 2012 | 9â€‚â€‚
guide / optimum
The guidelines set
for sound residential mortgage underwriting:
All lenders must have a policy outlining risk appetite, governance and oversight
mechanisms to ensure lenders follow their own policies.
While not one of the principles, on a quarterly basis, lenders must now publicly disclose their book of business by insured vs. uninsured loans, amortization buckets, and average LTV at origination. They must also provide commentary on the impact on residential mortgage loans and HELOCs in the event of an economic downturn.
What Does this Mean to Brokers? In terms of “A” business - not a lot has changed. As I suspect is the practice now, brokers must know their client, know their client’s financial circumstances and be satisfied that their client has the ability to repay. For HELOC “A” clients, LTV on the HELOC portion of the advance has been limited to 65%. Brokers can still provide their clients with an 80-per cent LTV option by combining the HELOC portion with a fixed or variable portion if the HELOC product allows, such is the case
Lenders must confirm the borrower’s identity, background and demonstrated
willingness to service debt obligations on a timely basis.
Lenders must assess the borrower’s capacity to service their debt
obligations on a timely basis.
Lenders must be satisfied that the value of the property being financed
has been confirmed by an independent third party.
Lenders must stress test their portfolio of business for unlikely, but plausible
scenarios to determine the impact to their business. Lenders are expected to impose a higher level of due diligence on higher risk deals, conduct ongoing risk assessments on the insurers they use and generally pay close attention to the risk attached to their residential mortgage portfolio.
10 | Alternative Lending guide December 2012
As I suspect is the practice now, brokers must know their client, know their client’s financial circumstances and be satisfied that their client has the ability to repay
guide / optimum
with our HELOC product Homeworks. For clients that we call alternative lending clients, including “B,” NIQ and Stated Income clients, brokers will probably have to provide a little more information. The biggest challenge will be business-for-self (BFS) clients who do not have traditional income confirmation documents.
What Does this Mean to Optimum Mortgage? Well, in summary, not much has changed. Our previous underwriting policy was generally compliant with B20 regulations. We are primarily an alternative lender, which is we are a BFS and “bruised credit” mortgage lender. We have always conducted due diligence to determine the borrower’s ability to make repayments. We also offer “A” residential mortgages and have very competitive HELOCs, which is now limited to 65 per cent on the HELOC portion as a result of B20. Prior to B20, we did not have stated TDS and GDS ratios in our alternative lending policy. Consequently, our underwriting policy will now include TDS and GDS ratio limits for our alternative lending products. These limits will be significantly higher than "A" lending requirements as our main focus will continue to be on ensuring affordability for the borrower. B20 does state that if a lender advances a “nonconforming mortgage,” the LTV is limited to 65 per cent. At Optimum Mortgage, a non-conforming mortgage is one where a borrower has either (or both) a lower-thanaverage beacon score and/or the borrower’s ability to service the proposed debt cannot be confirmed to our satisfaction. Defining a non-conforming mortgage beyond this is difficult at this time. We suggest brokers work with our business development managers and underwriters on a case-by-case basis and clarification will become evident. In response to the challenge to confirm income levels for BFS clients who do not have traditional income confirmation documents, for the last couple of years, we have requested bank statements as a means of doing so. That will not change. If a BFS client states he/she has income of $75,000 per annum, we would expect to see business bank statements that would suggest the business can afford to pay the borrower $75,000 annually. We may also need to see personal bank statements, demonstrating personal income at this level. This all assumes no traditional income documents, such as tax returns, are available. We suggest brokers continue to ask their clients, “is this mortgage payment affordable?” Our expectation is that brokers are satisfied that their client can afford to repay this debt and we can see in their bank statements that the debt is affordable.
Breaking it down • Bad underwriting practices in the USA on Residential Mortgages created a financial crisis throughout the world that has yet to be solved. • These guidelines ensure lenders do not fall into the trap of doing business without appropriate consideration to risk assessment. • Lenders have to ensure that referring brokers conduct due diligence to satisfy themselves that they know who their client is and they have the capacity and the willingness to repay. • Is this bad? No, not at all. • Will this make business more difficult to conduct? Initially, but on balance, brokers should not see much difference. • As a broker, what can you do? Work closely with your underwriter and your BDM. Remember, we all want to get the deal done, so let’s all work through these changes together.
Alternative Lending guide December 2012 | 11
guide //paperwork paperwork roundup roundup
The gr 12 | Alternative Lending guide December 2012
guide / paperwork roundup
eat The great paperwork roundup
An expert broker offers a comprehensive list of documents you’ll need to help BFS clients round up on today’s B20 frontier
Alternative Lending guide December 2012 | 13
guide / paperwork roundup
Chartered banks Mandatory documents:
n media headlines – if only in media headlines – brokers are struggling with the carnage of this summer’s mortgage rule and guideline changes: slashed amortizations, shrunken LTVs and all those merciless B20 guidelines. But in the actual trenches, most brokers have moved on. They’re already grappling with the nitty-gritty, says Dustan Woodhouse, and conducting business with that new norm in mind. “I am often asked what are the biggest challenges in the industry these days,” says the Top 75 broker for Dominion Lending Centers Canadian Mortgage Experts. “My answer is that it’s not the recent mortgage rule changes trumpeted in the newspapers, but the challenge of relaying to clients what those new rules mean in terms of documentation.” B20 guidelines from the Office of the Superintendent of Financial Services have had a profound effect on the ease and access BFS clients have to mortgages. For many those new underwriting rules have virtually shut themselves out of the bank and sent them knocking on the doors of Canada’s credit unions and alternative lenders. No matter where brokers take them, there’s an increased amount of paperwork those clients will have to bring with them, says Woodhouse. “A lot of consumers, especially first-time buyers and BFS clients, are faced with a significant increase in documentation requested for all mortgage files,” he says. “The list of income confirmation documents, for instance, has grown from one or two pages to several dozen.” For example, a T1 General Tax Return is required, and in the case of BFS applicants the T1 must be accountant prepared. There is also now greater scrutiny on RRSP withdrawals and meltdowns, and rental properties not listed on the Statement of Real Estate Rentals within the T1 General and the Notice of Assessment.
14 | Alternative Lending guide December 2012
• Two most recent years of Notice of Assessments to confirm there are no income taxes owing and to test reasonability of income exception being requested (in most cases stated income of over $100,000 will not be approved) • Two most recent years of accountant-prepared T1 General Tax returns to confirm sources of income Additional documents that may be requested: • Business license covering two years • Notice of Articles, to confirm shareholder status • Two most recent years of accountant-prepared business financial statements • Six to 12 months corporate bank statements to demonstrate cash flow The maximum mortgage offered by chartered banks is $1 million, and lenders may require a 35-per-cent down from the borrower’s own resources.
Credit Unions Mandatory documents: • Two most recent years of Notice of Assessment
Additional documents: • T1 General Tax Returns covering two most recent years • Business license covering two years • Notice of Articles • Accountant-prepared business financial statements covering two years • Corporate bank statements covering 6 -12 months
guide / paperwork roundup
Because of increased demand since the banks tightened lending, Woodhouse says, the maximum mortgage offered by most credit unions is $500,000 and lenders typically require a minimum 35-per-cent down from the borrower’s own sources. MBS (non-bank) lenders
Mandatory documents: • Notice of Assessment for two most recent years • T1 General Tax returns for two most recent years • Business license for two years Additional documents that may be requested • Notice of Articles • Accountant-prepared business financial statements for two years • Corporate banks statements for 6-12 months
Insured businesses Mandatory requirements: • Minimum 10-per-cent down. 5 per cent down payment from personal resources, additional 5 per cent can be gifted **with one insurer, not all three. • Notice of Assessment for the two most recent years, to confirm there are not taxes owed and to test reasonability of income exception being requested (in most cases stated income of over $100,000 will not be approved) • T1 General Tax returns for last two years • Business License covering two years • Notice of Articles • Accountant-prepared business financial statements • Corporate bank statements for 6-12 months
Here’s a rundown – or roundup - of all the documents brokers should help their self-employed clients gather before sending hitting up a lender for a loan. Woodhouse has also had the foresight to break it down by institution type, although this list is strictly for owner-occupied properties:
Asset items and dividend income
Many, if not all, lenders also view dividend income as a one-time ‘”pecial circumstance” income and will exclude it from debt servicing calculations. Lenders simply will not allow borrowers to reduce their income by X amount in one year and replace it with an equivalent dividend income amount, according to Woodhouse. “This is the kind of thing that sets the blood boiling of a skilled accountant or knowledgeable business owner,” he tells CMP. However the mandate of the lenders, perhaps at the behest of the In insured cases, the maximum property value cannot exceed $999,999.99 bringing the maximum mortgage approval to $900,000, says Woodhouse. The insurer federal Government, truly appears to be to shift any and all income towards standard taxable income.” In short, says Woodhouse, only half tongue in cheek, “great ideas tax-wise can be disastrous ideas mortgage approval-wise.” Lenders are not likely to put much weight on a borrower’s assets as well, he adds. “It is not about how much you are worth, how much you own, how great your credit is, or the equity in your properties or the retained earnings of your corporations,” says Woodhouse. “It’s all about your documented personal income. “That wonderful financial history and overall picture will get a client within inches of the finish line, but the only thing these days that will get them across it is documented income.”
It is not about how much you are worth, how much you own, how great your credit is, or the equity in your properties or the retained earnings of your corporations. Alternative Lending guide December 2012 | 15
guide //eclipse eclipse
y now, most of you have likely heard about government changes that took place on Nov. 1, 2012. The new regulations require stricter underwriting guidelines on all residential mortgages offered by regulated lenders and mortgage insurers, including CMHC. They have been implemented at the insistence of the Financial Stability Board (FSB) – the financial regulatory body that oversees financial sector policies for all G20 Nations. The new regulations are a result of aggressive lending practices in the United States that led to the global financial crisis. The guidelines will directly and indirectly impact all mortgage lending operations across Canada, including alternative and independent lines of business. So what do the new regulations mean? The new rules are designed to ensure that residential mortgage underwriting practices are conducted in a prudent manner and that risks are properly identified and managed effectively. As an example, business-for-self applicants’ supporting documentation around income and debt servicing ratios will play an increasing role in the decision-making. More stringent guidelines have been placed on conventional mortgage qualification, self-employed income verification, cash-back options, down payments and credit beacon scores. What does this mean for Eclipse? We’re open for business. We’ve always believed in responsible lending so it’s business as usual. As a critical stakeholder and trusted business partner, mortgage brokers will most likely have to provide more information for your self-employed clients than in the past in order to confirm that the income being used to qualify the mortgage is both reasonable and sustainable. As a
16 | Alternative Lending guide December 2012
Eclipse is casting light on the new alternative lending landscape and inviting brokers to prepare themselves for that new day
lender, we need to work together with our referring brokers to conduct increased due diligence in order to ensure that we both know our customers and the clients you refer have the willingness and capacity to honour their mortgage obligations. Our industry relies on strong partnerships within the financial services community, and this includes government regulators. Eclipse recognizes the importance of preserving the integrity of lending practices in the alternative space and therefore feels it is critical that we give credence to what the new regulations are intended to do, both in spirit and in content. Lenders like Eclipse are a vital part of the mortgage industry. We believe self-employed Canadians have a right to reasonably priced mortgages in order to purchase and maintain their homes. We also feel it is important that those Canadians who have suffered from life events such as job loss or a family emergency are given a second chance. Where can you go for help? Our Deal Run broker hotline gives brokers the opportunity to talk one-on-one with a real live person who works with you to help you and your clients. Our mortgage solutions for clients with low or no beacon scores, previous bankruptcies or other often unforeseen circumstances are designed to help them improve their financial position. By providing realistic payment options, we offer the opportunity for your clients to not only retain their homes, but repair their credit for the option of better rates in the future. If you have a client with a less-than-perfect financial situation, call our Deal Run Desk and see what the Eclipse team can do to help!
Our staff will seem smarter and more knowledgeable.
Mainly because they know how to pick up the phone. , That s Eclipse Lending. Brokers need answers fast. So Eclipse lending ensures you reach a knowledgeable person, not a voicemail. Our underwriters typically have 10+ years experience and are now standing by to help make your deals more efficient. Plus, our new DEAL RUN broker hotline gets you answers almost immediately. Give us , , a call. You ll find the light s always on at Eclipse lending.
Call us at 1-866-260-D-RUN (3786) or email us at DEALRUN@mcap.com. MCAP Financial Corporation Ontario Mortgage Brokerage #10600 Ontario Mortgage Administrator #11790
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Feature / Insurance
or forever hold your peace Insurance and mortgages are tying the knot at a growing number of brokerages, reports Vernon Clement Jones, but donâ€™t expect creditor insurance providers to object to the union
50 | mortgagebrokernews.ca
Feature / Insurance
f most men really are slow to commit, Alberta’s Gord McCallum is the exception to that rule. Almost a year ago, the brokerage owner married his mortgage business to insurance, a case, he says, of the pros outweighing any cons around time, paperwork and hard work. “We are fighting fire with fire,” the principal broker at First Foundation tells CMP. “We decided that as a revenue centre, it made sense to bring insurance in-house, not only as a way to diversify our revenue stream, but also as a way to grow retention with our clients, to play a bigger role in their lives instead of referring out that business.” McCallum has now brought auto and home offerings under First Foundation’s expanding roof. The product offering -- additional ammo in the firm’s battle against banks – is only made possible by the employment of a licensed insurance broker to oversee that end of business. It may be more apropos to say “that level of the business” – while his mortgage agents occupy the top floor of the office, insurance is handled on the ground floor, says McCallum. “So far the system has been good for crossselling,” he says. “Our brokers are able to generate leads for the auto insurance and the insurance guy is able to refer clients to our brokers.” It shouldn’t require a whole floor of its own, but McCallum’s possible next step is to incorporate the type of insurance that goes part and parcel with mortgage originations: Term life. A growing number of brokers have beaten
mortgagebrokernews.ca | 51
Feature / Insurance
While models vary, the objectives mirror those of McCallum, who hasn’t yet set a date to bring life coverage under his roof McCallum to the punch. Indeed, CMP’s own informal research points to no fewer than 40 brokerages across Canada now officially “in life.” While models vary, the objectives mirror those of McCallum, who hasn’t yet set a date to bring life coverage under his roof. Ostensibly the trend spells bad news for creditor insurers in Canada, which have often times struggled to bring mortgage brokers onboard and actively selling the one insurance product they’re already permitted to arrange. But any sympathy for creditor insurers relying on brokers to sell their wares may be misplaced. While a growing number of mortgage professionals are, indeed, making the move to incorporate insurance directly into their business plans -- partnering with insurance brokers or themselves getting licensed -- their long-time
52 | mortgagebrokernews.ca
creditor insurance providers aren’t fearful of the trend. Actually, they’re finding ways to facilitate broker ambitions in that area at the same time meet their sales projections. “We understand why brokers might want to do it,” says Rich Spence, Sales VP for Benesure Canada, the company behind the Mortgage Protection Plan. “We’re seeing it, but we’re not afraid of it. We’ve developed a new program where we facilitate that move.” Essentially, what they’re doing is enabling MPP to act as the conduit between the mortgage broker and their in-house life agent, and both parties will benefit. When the broker offers MPP in conjunction with the mortgage, argues Spence, his potential liability has been dealt with; ie, the broker’s client leaves his or her office with protection in place. Then, the life agent can go over the client’s other insurance choices, and compare those to the MPP coverage already taken out. “We’re very comfortable with this approach because it provides a great level of personal service for the client and we’re confident that our product stacks up very well against any competitor,” says Spence. The company is also piloting a term life insurance referral program for brokers. Essentially, the broker arranges MPP protection for a client, but then the
Feature / Insurance client also can choose to be referred to a licensed insurance agent for advice and with an eye to accessing term insurance. It’s another way of keeping creditor insurance in the loop, even if only as a stop-gap measure. “Plus, our testing shows that a lot of people still want their creditor protection, even after consulting with an agent,” adds Spence. But even where mortgage brokers are now offering insurance, getting a client to commit to life coverage remains a challenge. “We have said to brokers, in the past, that ‘hey, when you refer a client to an insurance agent without providing them creditor insurance, in many cases they`re putting off that trip to the insurance broker -- if they ever go at all. That means the client has no protection and the broker is exposed,’” says Benesure’s Spence. “Why not do both – send them out with the only insurance product mortgage brokers are permitted to offer, and then refer them to a life agent? That way they’re covered even before the mortgage closes and they don’t have to worry. If they ultimately get whole- or term-life coverage, they can then cancel their creditor insurance.”
Plus, our testing shows that a lot of people still want their creditor protection, even after consulting with an agent
mortgagebrokernews.ca | 53
Feature / Insurance Still, brokers now hawking insurance are winning some of the highest conversion rates in the business, something their move to offer life has actually grown by building on client goodwill. “We’re seeing conversions of about 70 per cent of our mortgage clients who are now taking out term life,” Terry Kilakos, owner of not only Verico North East Mortgages, but its newest offshoot, North East Insurance Financial Services. “I think it’s because we have built up a lot of trust with the client in arranging the mortgage and that adds to our credibility in suggesting the insurance and because it’s coming from us, they also have more faith in it.” When Kilakos re-launched his brokerage earlier this year, he also made room for that in-house insurance agency, hawking life, disability and whole life coverage. North East Insurance is actually run out of a building some two blocks away, with Kilakos having hired eight licensed insurance agents. Where he has hired his insurance muscle, other brokers are beefing up themselves, taking on the time commitment needed to become licensed as life agents and then brokers. One industry player in London, Ont., is now dually qualified as both a mortgage and an insurance broker, the latter involving a two-year commitment to study. Ostensibly, that allows her and others like her to almost double the revenue on the same client – if that client opts for the kind of lucrative, if rare, whole-life coverage agents dream of. Still, mortgage clients making that level of commitment are themselves in the minority, something that may limit the ability of brokerages to keep an insurance agent on staff and happy. In fact, it may be another reason creditor insurance providers are taking this latest broker trend in stride. “Whole-life policies are what life agents are looking to get,” says David Young, president of Propel Insure, “but they’re fewer and harder to get and that may limit just how much they get from joining a mortgage brokerage.” It’s one of the many reasons Young and Spence are encouraging brokers to make a deeper commitment to creditor insurance and to increasing conversions in order to broaden revenue streams in this slowing market. “That opportunity is already there,” says Young. “Brokers already have the tools.”
54 | mortgagebrokernews.ca
An insure-and-refer proposal Creditor insurance providers are anything but blind to the growing interest brokers have in term and life insurance, but that shouldn’t leave them out of the loop, they say. Here’s Benesure’s insure and refer pitch: •
By getting an insurance form signed before the client leaves his office, a broker is protecting himself from liability. At no point in the future, is he going to have to answer one of the scariest questions of all – “Why didn’t you offer us insurance?”
An independent agent can then provide the client with an honest comparison between mortgage protection and other forms of insurance. Training your own in-house agents about creditor insurance will make sure your clients don’t get misinformation that is based solely on media hype.
Early results from in-market testing show that clients often choose to keep their creditor insurance coverage after speaking to a licensed agent.
The agent can also offer additional coverage if the client has life insurance needs that go beyond their mortgage.
The broker wins by eliminating a potential liability; the agent wins by having the opportunity to market his products and services to a new prospect; the client wins by getting personalized insurance advice.
Feature / This Time Last Year
Feature / Insurance
2011 Bozic: brokers need to embrace creditor insurance As brokers clamour for more ancillary products from channel lenders, Boris Bozic is suggesting they’ve largely failed to capitalize on one available to them for more than a decade: creditor insurance. “They haven’t grown that portion of the business because they haven’t focused on it,” the Merix Financial president and CEO told MortgageBrokerNews.ca. “It was introduced more than 10 years ago to brokers and they simply haven’t significantly built on the level of business they were doing then. I think it would be prudent to do that.” The comments answer, in part, the growing call for broker channel lenders to deepen their product pool as mortgage originations slow sending brokers scrambling for ways to maintain, if not grow, their revenue streams. Industry insiders have also suggested that strategy as key for mono-line lenders now grappling with the triple whammy of tight spreads, growing competition from the banks – both in- and out-side the broker channel – and compensation obligations. Banks have, in fact, been able to undercut mono-line rates in large part because of their ability to cross-sell a host of other ancillary products to mortgage borrowers, said John Bargis, head of broker network Mortgage Edge, pointing to credit cards, insurance and other banking services. Those offerings have freed banks up to offer mortgages as a sort of loss-leader, a luxury that those lenders all but limited to mortgages do not have. While brokers are increasingly asking for more of those types of product offerings as a way of diversifying their own utility to clients and claiming ownership for themselves as well as broker lenders, Bozic argues that they simply haven’t demonstrated the willingness to hawk those wares, given that less than 25 per cent of their originations include creditor insurance deals. Other channel lenders, pointing to lackluster credit card sales through mortgage professionals, back up his criticism. Still, brokers are willing to expand their sales efforts for the right product, said Wayne Mah, a Vancouver broker and 16-year veteran of the rate wars. “It really depends on the product and the lender,” he told MortgageBrokerNews.ca. “Offering Visa cards can be beneficial and I’m open to products from lenders who offer renewals because that demonstrates to me that in cross-selling on their behalf they will be inclined to share the client more so than the banks or lenders who don’t offer renewals.” But, like some brokers, his interest in selling creditor insurance is limited.
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Profile / ratehub
reading Reading industry reports doesn’t have to get you down. Here’s a quick and easy study of CAAMP’s market report for fall 2012 CAAMP’s fall market report is an important, if weighty, research document. This year especially so. The 2012 report outlines the current state of the market in terms of borrowers and mortgage preferences, but also offers the most revealing glimpse to date of the collateral damage from the latest round of mortgage rule changes and B20 guidelines from the Office of the Superintendent of Financial Services. Now, just in case you were looking for a quicker way to get at that research, RateHub has come up with a handy-dandy infographic to tell the tale.
56 | mortgagebrokernews.ca
Profile / ratehub
For mortgages that have been repaid during the past two decades, actual repayment periods have generally been only two-thirds of the contracted periods – Will Dunning, Annual State of the Residential Mortgage Market in Canada
mortgagebrokernews.ca | 57
GUEST / column
takes the stand
A leading Ontario broker is also leading the way as an expert witness
58 | mortgagebrokernews.ca
guest / column
n this – as well as the November issue – we introduce you to the potentially lucrative world of providing expert analysis and testimony as a broker. What better way to cap that discussion than with a candid Q&A featuring the one of the industry’s leaders in that niche area. In fact, with 10 years of expert testimony under his belt, David O’Gorman, broker/owner of MortgageLand Inc. in Markham, Ont., knows all the challenges waiting to ensnare brokers looking to enter that arena. He also has some tips for those looking to come through the process without a nick. Rule one: Know what you’re talking about.
After writing a number of expert reports I was finally put on the stand to give testimony and was acknowledged by the courts as an “expert.”
CMP: How did you become involved in providing expert testimonies? O’Gorman: It’s not something you wake up one morning and decide “Today I am going to be an expert witness.” What you are offering is your opinion based on experience, so in my case it’s 35 years of mortgage lending, including 10 years in banking, 25 years owning a brokerage, 25 years of teaching something in the order of 16,000 real estate agents, brokers and appraisers, and developing educational courses, including one on preventing real estate fraud, and participating in a number of professional boards, associations and committees. After writing a number of expert reports I was finally put on the stand to give testimony and was acknowledged by the courts as an “expert.” I am an “overnight sensation” that took 25 years to develop.
CMP: What was the first file that you worked on? O’Gorman: About ten years ago, one of my teaching colleagues at the Ontario Real Estate Association recommended me to a lawyer looking for someone to provide an opinion in a case where a mortgage agent had put together a fraudulent transaction and submitted it to an institutional lender. Subsequently the lender had the property appraised, approved the deal and advanced the funds to a lawyer to close. At the closing, the lawyer was given fake I.D. by the fraudsters. The institutional lender was suing the lawyer and the mortgage
brokerage to recover the total mortgage, about $200,000. I was hired by the Law Society’s E&O insurance company’s lawyers. My job was to review the documents from examination for discovery, including those submitted by the broker, plus the FI’s underwriting docs. My report outlined the lack of supervision of the agent by the brokerage, the fact that the FI’s underwriter did not catch inconsistencies in the CB report and the fact that the underwriter wrote up the deal like it was an owner-occupied property, yet twice in the appraisal report the appraiser noted that it was a rental property. Ultimately, the court found the lawyer responsible for 20 per cent of the loss, the brokerage 30 per cent and the lender 50 per cent.
CMP: What kinds of challenges do you face in doing this work? O’Gorman: There are dozens of challenges in every case. First and foremost, is the lawyer who is hiring me someone I can work with? They are the quarterback calling the signals to some extent, but as the expert you might not run the pattern they call. There can be conflict. Second, is ensuring I don’t have any conflicts of interest with any of the parties involved in the litigation. Have I done significant business with a private lender, or do I own any shares in the FI? Are there any close friends or relations involved? You have to be independent and avoid any appearance of conflict of interest. Next and this is often a “deal killer,” What is the timeframe within which the lawyer
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GUEST / column wants the report? In many cases an expert is brought in just before the case goes to court or arbitration as an aid to mitigating a loss either side may anticipate. You may have less than a month from beginning until you provide your completed opinion. For example, in August, I agreed to provide a report within three weeks in a case where a private lender was suing a mortgage broker, an appraiser and a lawyer for several million dollars. In those three weeks I had to read and re-read more than 2,000 pages of documents from examination to discovery, looking for information and inconsistencies, evaluate the allegations against the mortgage broker in relation to the laws and regulations in effect at the time the incidents occurred and write two drafts of my report. There were several mornings I was in my office until 2 or 3 a.m. working on that file as well as working on it throughout the Labour Day weekend. Finally the biggest challenge is not to appoint yourself judge, jury and executioner. You are a friend of the court providing experience and independent insight into a transaction. Your report must be balanced. If your client is in the wrong, you acknowledge it. You are not an advocate for the guy who is writing the cheques that compensate you. In the case I mentioned above, five days after receiving and reading the 2,000 pages and before I wrote my first draft report, I called the lawyer and told him his client was “toast,” there wasn’t going to be a lot that I would be able to write that was positive about the actions of his mortgage-broker client. I subsequently learned that they already had one expert opinion report that was negative and, given the significant number of dollars involved in the case, they wanted to verify the negative responses before determining if they would continue to litigate or settle. In essence, I was being used as a “doubleblind test” to validate the report of another expert’s opinion.
CMP: What kind of fees do you charge? O’Gorman: That question is like the mortgage borrower calling a broker and asking what is the best rate you can get for them. I don’t quote rates until I know the
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facts: who are the parties involved? What is my “brief;” i.e. the issues the lawyer wants me to address in the report? Also, how much documentation is there to review? and the timeframe I have to provide the report. There is not a flat fee. There is a retainer paid up front and we agree in writing on an hourly rate and how that will be paid. As in all cases, the fee is not contingent on the outcome of the case.
CMP: What was the most memorable case you have worked on? O’Gorman: It’s interesting you ask that question immediately after asking what fees I charge, because it is the case in which I made the least amount of money, but left me with the greatest feeling of accomplishment. I was hired by the lawyer of the estate and the family of a deceased male mortgage borrower. A husband and wife, working folks and parents of three young daughters, bought a house in December of 2001, and arranged an $180,000 mortgage through a mortgage agent who had the borrowers sign an application for group creditor life insurance. A month later the husband was diagnosed with terminal cancer, the deal closed in April and the husband died in June. The surviving spouse claimed against the life insurance policy. The insurance company claimed it didn’t get any forms or payments so the claim was denied. It was alleged that the agent did not get the borrowers to sign the insurance form in the proper place, he did not get a void cheque from the borrowers for the PAD and the agent did not submit the insurance form to the insurance company. The brokerage that the agent worked for at the time of the transaction had been wound down, and they did not have E&O insurance, so the lawyer sued the mortgage agent personally and the insurance company for $300,000. My job was to go in and prove the agent had not performed to a reasonable standard, which apparently I did. The day before we were to go to court I received a call from the lawyer thanking me for my work and telling me I did not have to appear in court the next day as the other side settled.
We agree in writing on an hourly rate and how that will be paid. As in all cases, the fee is not contingent on the outcome of the case
Unfortunately, he could not tell me for how much as there had been a confidentiality agreement signed, but he did say the widow was very satisfied with the result and had asked the lawyer to thank me personally for my efforts. Somethings money can’t buy.
profile / favourite things
Valerie Brewer Broker, The Mortgage Group Bedford, N.S.
NEW Mortgage Term:
NEW Mortgage Product:
Reid ohnny g, by J n li r a D usic:
year fixed Mortgage from TMG
Film: Painting the Future: Drink: Shiraz, Yellow Tail
Tales of Everyday Magic, by Louise Hay
Food: Blackened salmon with grilled asparagus and mashed potatoes
Vacation: P unta Can
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service / directory Broker Networks
Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 16
B2B Bank b2bbank.com/mortgages Ph: 1 800 263 8349 Inside Back Cover
Bridgewater Bank www.bridgewaterbank.ca Ph: 1 888 837 2326 Page 8 & 9
Dominion Lending Centres www.DominionLending.ca Ph: 1 888 806 8080 Page 19
Radius Financial www.radiusfinancial.ca Ph: 1 877 369 6398 Page Inside Front Cover
HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 31
Street Capital www.streetcapital.ca Ph: 877 416 7873 Page 7
National Bank www.nbc.ca Ph: 1 888 483 5628 Page 39 Non-Bank Lenders
Centum Financial Group Inc. www.centum.ca Ph: 1 604 257 3940 Page 11
INVIS Mortgage Intelligence www.invis.ca â€˘ Ph: 1 866 854 6847 Pages 35
Tribecca Finance Corporation www.tribecca.ca Ph: 416 225 6900 Page 53
Home Loans Canada www.hlcmortgages.com Ph: 1 866 452 1821 Page 3
ROMSPEN Investment Corporation www.romspen.com Ph: 1 800 494 0389 Page 2
Capital Direct www.capitaldirect.ca Ph: 780 868-0550 Page 13
Equitable Trust Company www.equitabletrust.com Ph: 1 866 407 0004 Page 5
The Mortgage Centre www.mortgagecentre.com Ph: 1 800 423 0107 Outsert
RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 21
The Downing Street Group www.downingstreet.com Ph: 416 248 6206 ext 260 Page 45
Firm Capital www.FirmCapital.com Ph: 416 635 0221 Page 23
VERICO www.verico.ca Ph: 1 866 983 7426 Outsert
Terra Firma www.tfcc.ca Ph: 416 866 3135 Page 43 Law
Vector Financial Services www.vectorfinancialservices.com Ph: 1 866 483 8018 Page 40-44
Fisgard Captial Corporation www.fisgardmortgage.com Ph: 1 866 382 9255 Page 48 Insurance
Home Trust www.hometrust.ca Ph: 1 877 903 2133 Guide 6&7
Anderson Sinclair LLC www.rightclose.com Ph: 416 300 4004 Page 37 Technology & Software
Canada Guaranty Mortgage Insurance Company www.canadaguaranty.ca Ph: 1 866 414 9109 Page 25
D+H Limited Partnership www.dhltd.com Ph: 1 866 345 6449 Page 3 Real Estate
MCAP www.MCAPBROKER.com Ph: 1 866 289 7389 Guide Inside Back Cover
Optimum Mortgage A Division of Canadian Western Trust www.OptimumMortgage.ca Ph: 866 441 3775 Guide Inside Front Cover
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Genworth Financial Canada www.genworth.ca Ph: 1 800 511 8888 Outside Back Cover
Mortgage Protection Plan www.mppbroker.com Ph: 1 866 677 4677 Page 55
Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 27
service / directory
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If only shopping for a first home was this easy… With a little help from Genworth Canada, shopping for a first home doesn’t have to be complicated. We understand the importance of owning a home and having the information your clients need to make smart homeownership choices. Our promise is to help them with homebuying basics such as understanding down payment options, maintaining good credit and staying on budget. Find us on Facebook! Visit Genworthsmartshopper.ca for tips and resources to help achieve homeownership dreams.
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The magazine for Canadian mortgage professionals