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6 | Letters to the Editor
18 | Albert Collu The founder of Argentum Mortgage and Finance explains why folding the operation into Mortgage Architects is poised to pay dividends for brokers and the industry
8 | Reading between the Lines Air Canada is making daily stops to Red Deer, Alta., and that is great news for mortgage brokers in the province’s third-largest city 10 | News Analysis Is Bigger Better? Network consolidation grabbed the headlines in MortgageBrokerNews.ca 14 | Broker Advice The Revenue Conundrum: Industry veteran Glenn MayAnderson touts the benefits of a simple referral 12 | Statistics The most-searched mortgage rate terms and types
22 | Commercial Top 10 CMP’s Top 10 Commercial Brokers list spans the country and the market itself – but there is one common thread 40 | A Marriage Made in Durham One broker’s time to slow down and smell the roses was another’s to speed up – the result a model partnership 46 | The Best of the Worst There’s so much more than ‘good luck’ for a savvy broker to offer a client headed toward a forced sale
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32 COVER STORY
Brokers who are making big money from non-mortgage deals
When others say ‘‘no Way’’ We say ‘‘here’s hoW’’. Romspen Investment Corporation is a non-bank mortgage lender specializing in commercial real estate across Canada and the United States. With over $1 billion under administration, we offer customized mortgage solutions for term, bridge and construction financing from $4M to $100M. Blake Cassidy or Pierre Leonard | 800 494 0389 | www.romspen.com
AUGUST 2013 | 1
NEWS 10 | Product News ATB.com is flipping the script
MARKETING 50 | In a Word: DOMINATION Not everyone is going to be your friend, writes Doren Aldana, and not everyone is going to be your client 54 | When the Going Gets Tough Ensuring your team stays productive when the pressureâ€™s on can be a challenge for any manager. Leanne FaradayBrash highlights nine ways to keep people motivated
GUEST COLUMN 63 | The Unsinkable Market Lachman Balani looks at the talk about rising rates sinking broker boats, but asks about the very large number of preapprovals out there
REGULARS 62 | Favourite Things 64 | CMP Service Directory
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2 | AUGUST 2013
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CONTENTS / EDITOR’S LETTER
DIVERSIFICATION HOW-TO COPY & FEATURES EDITOR Vernon Clement Jones SENIOR WRITER Donald Horne CONTRIBUTORS Glenn May-Anderson, Doren Aldana, Lachman Balani, Omer Soker COPY EDITOR Rachel Naud
ART & PRODUCTION GRAPHIC DESIGNER Alicia Chin
SALES & MARKETING ASSOCIATE PUBLISHER 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 firstname.lastname@example.org Advertising enquiries email@example.com Subscriptions tel: 416 644 8740 • fax: 416 203 8940 firstname.lastname@example.org 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.
You’re on it! As brokers, you see the challenges ahead and are ready to meet them. Well, the truth is that brokers for quite some time have prepared themselves for the inevitable dip in the real estate market, although how exactly varies from one professional to the next. Still, diversification outside of brokering mortgages has been one of the preferred routes, with many opting to broaden their offerings to insurance, financial planning and syndicate referrals. This issue highlights brokers who’ve travelled down that road toward success (Pg. 32). Each offers a candid analysis of their business as well as some insights into the benefits and, indeed, the drawbacks of diversification. August also marks the return of the CMP Top 10 Commercial Brokers, a ranking of those professionals by funded volume. The list (Pg. 22) celebrates the success of brokers who slug it out for months at a time on one deal, all in hopes of a big payoff that may never come. More certain—like clockwork in fact—is the annual Brokers on Lenders survey. An expanded, more in-depth version of that poll is waiting for you to fill you on MortgageBrokerNews.ca. Get your hands on September’s issue for the results. So read on, and then drop us a note after you’re done. Look for some of those comments in next issue’s “Letters to the Editor.” This month’s comments are on page. 6. Cheers, Vernon Clement Jones
Contact the editor:
4 | AUGUST 2013
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CONVERSATIONS / LETTERS TO THE EDITOR
TO THE EDITOR RE: TOP 75 (CMP 8.7)
Dear Abby Jim JM
Well done, Jim Tourloukis, and thank you for your tips. All makes sense. Jim, you should consider a weekly or monthly advice column. You would have no shortage of grateful readers, myself included. Thanks again, much appreciated and congratulations.
Leader of the pack RON BUTLER
Congrats to Jim, many years of hard work, business savvy, process refinement, out-of-the-box thinking, attention to referral partners and a willingness to try new things separate Jim from the pack and the numbers prove it.
Forget Eisner MARTIN PROULX
It’s understandable that Dan Eisner has decided to step out the Top 75 this year, and more power to him
LETTERS TO THE EDITOR ARE WELCOME! Due to space considerations, priority is given to those 300 words or less. We reserve the right to edit, condense or reject submissions for accuracy, brevity, clarity, good taste and legal reasons. Writers must provide their full name, address and telephone number to verify authenticity. Please reference the article and send your letter to email@example.com
6 | AUGUST 2013
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and other brokers who genuinely deserve to be on the list because of their own hard work. I think Dan does a great job, but Jim Tourloukis calls it right when he says that the list implicitly looks at profitability for individual brokers. Does Dan really come in No. 1 in that regard?
RE: TOP 20 SMALL MARKET BROKERS (CMP 8.7)
About time! MINDY PETERS
Brokers in normal markets outside of Toronto and Vancouver – especially Vancouver – deserve to get the credit this list give them. We work harder, often than those in bigger cities and we are often better connected to clients and so refinances. We`re not small; we are right-sized.
complicated. In the world of banking, common sense has become surprisingly uncommon. Rules are piled on top of rules, making life harder than it needs to be for ever ybody. Well, that’s not how we operate. We strive to do right by our broker partners in a way that simply makes sense, like our Advantage and Edge mortgage programs that offer a simple rate structure for all your customers’ needs. We’re Bridgewater Bank, and that’s just how we do things. bwballstarportal.ca
MARKET MATTERS/ READING BETWEEN THE LINES
If good-natured brokers in Red Deer, Alta., usually wear a smile, they’re now wearing grins thanks to Air Canada. The flag carrier will soon be winging its way to the Central Alberta city on a daily basis, connecting the city of 97,000 with the provincial hub Calgary. The move is being lauded by real estate agents across the community as a future driver of economic growth, making Alberta’s third largest city a real contender in the fight to attract migrants now flocking to the Prairies. The impact of the Air Canada decision isn’t lost on mortgage brokers either. They are reading between the lines of the airline’s media announcement in July.
1. We already have a large
Lesley Krawiec, Mortgage Intelligence Get ‘Er Done Girls
8 | AUGUST 2013
number of companies in the oil and gas industry with offices located in Red Deer. The daily flights should allow company executives increased accessibility to those offices and I think that we will see additional companies choose Red Deer because of the increased accessibility. More people moving to the area means more people needing mortgages.
2. Red Deer needs to grow
tremendously to be in line with Calgary and Edmonton. We don’t have the inventory of higher valued homes that the bigger cities have. By the time we do, Calgary and Edmonton markets will have increased as well, so we will never be in line with them.
1. Considering the
projections for population growth in Red Deer, I think this move is huge and will help significantly in our market. I think the Red Deer airport will become very active and likely end up growing even more.
2. We will be able to get to Katherine Meadows, MI Get ‘Er Done Girls
major cities faster, more conveniently and reduce costs for long-term parking at larger airports.
1. This will increase not
only the mortgage business as the demand for housing increases, but increase the overall viability and vitality of Red Deer as an economic hub.
2. Our population is set to
Alyson Thiessen, MI Get ‘Er Done Girls
expand exponentially and this will affect housing dramatically. An increase in construction will result as well as a demand for all other tertiary services.
3. Our clients already
residing in Red Deer will see their equity protected and opportunities increase economically, socially and culturally.
4. In terms of housing
values, I think this will put Red Deer in line with Calgary and Edmonton, although currently we are not that far off. I think in terms of growth, Red Deer will be urbanized to a degree but with our current small-town feel and accessibility.
5. I have been in the Red
Deer Mortgage market since 2001, prior to that I was in Calgary. I have seen some large fluctuations in the Red Deer market with respect to brokers in the last eight years and would have to say that we have
the perfect mix of brokers and mortgage specialists right now. If experienced brokers want to move to Red Deer and plug into this amazing community like the rest of the Red Deer brokers have, that would be welcomed.
6. In the words of Guy
Kawasaki, author of many books including How to Drive Your Competition Crazy, “Competition gives you game.” Let’s play.
AUGUST 2013 | 9
MARKET MATTERS / NEWS ANALYSIS
TO-DO LIST IS BIGGER BETTER? Network consolidation grabbed headlines on MortgageBrokerNews.ca in July, but is there more to the story? Brokers are already suggesting the channel has earned itself more influence with both lenders and governments as a result of two high-profile acquisitions creating bigger, more powerful networks. “Currently brokers have numerous soft voices,” says Mark Cashin, a broker with Dominion Lending Centres Central in Mississauga. “The banks have five loud voices. The consolidation model will bring a much-needed ‘critical mass’ to the broker channel.” Cashin and many others see the Mortgage Architects takeover of Argentum Mortgage and Finance as only improving the clout of all brokers – much like the DLC purchase of The Mortgage Centre on June 13 has done. With larger networks, Cashin argues, brokers will be able to better compete against Canada’s major banks in terms of influence with consumers and lawmakers. “There is more than enough business for the mortgage broker channel if the playing field is level, unfortunate that the playing field seems to keep tilting towards the banks’ favour,” Cashing tells MortgageBrokerNews.ca. “Hopefully these mergers will help even the playing field.” The purchase of Argentum by MA announced in July saw Argentum founder Albert Collu appointed as president of the new Mortgage Architects. Pacific Mortgage Group CEO Ron Swift said the incorporation of 500 Argentum agents into the MA fold will expose them to the sophisticated tools already available at the company. More agents using better systems with the backing of a large company are just what the doctor ordered for a struggling broker industry, say many. “On the agent side, the critical mass will help the majors build better systems and support networks for the agents,” says Cashin. “The franchisors will have to up their game to attract the good agents and teams.” MERGER MOVES
10 | AUGUST 2013
Provide more education to families about managing their debt.
Olga Danilova, VP for First Swiss Mortgage Corp.
WHAT FLAHERTY SHOULD DO… Brokers aren’t the only ones who have a bone to pick with Finance Minister Jim Flaherty. Here’s one lender’s take on those tighter mortgage rules and their impact on borrowers. We can talk about the rules and regulations and mortgage lending abuse forever, but how are we going to fix the problem for a family that is overloaded with credit card and consumer debt and struggling with income that hasn’t increased for the past 10 years while house prices have doubled. So far we have responded by not giving them access to education needed to manage their situation. We have responded by cutting their access to the most reasonably priced loans through mortgages to consolidate debt and save thousands on interest and we have done nothing to hold the banks who guided them into this situation
Hold the banks that make billions of dollars on credit card and personal loans portfolios accountable by not allowing them to dump these clients once they get into trouble. Instead force banks to provide them with reasonably priced debt consolidation loans without destroying their credit.
Expand CMHC not only for clients in rural locations, but for people who need it most and, indeed, provide it with more oversight to make sure it is used in the right direction.
What if government didn’t only see the industry as the problem but looked at its own inability to create jobs and growth so people could indeed afford a better life and wouldn’t need to finance it.
responsible. We hope to see a day that government looks beyond just creating rules and regulations to fix the
problem. Alternatively, our government could have offered their “to-do list.”
why a Mortgage Broker?
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Mortgage Brokers offer alternatives in selecting a mortgage product that are best suited for your client’s situation.
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Mortgage Brokers save you money by providing, on average, lower interest rates*.
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* According to CAAMP’s study**, those who renewed or renegotiated with a mortgage Broker reported an average rate decrease of 1.4% compared with 1.0% among all renewers. **CAAMP January 2011 study — Canadian Mortgage Channel: Industry Perceptions Consumer and Broker
mcap.com/brokers MCAP Service Corporation Ontario Mortgage Brokerage #10515 Ontario Mortgage Administrator #11692
MARKET MATTERS / PRODUCT ROUNDUP
MOST-SEARCHED MORTGAGE RATE TERMS AND TYPES MORTGAGE TYPE
34.6% 5-YEAR VARIABLE CLOSED 17.8% 1-YEAR FIXED CLOSED 5.7% 8-YEAR FIXED CLOSED 4.5% 6-MONTH FIXED CLOSED 4.5% OTHER 32.9% 5-YEAR FIXED CLOSED
Source: RateSupermarket.ca (JUNE 2013)
AND INDUSTRY ANNOUNCEMENTS
A bite-sized guide to the industry’s newest products and appointments as they come down the channel
VESNA FOR VP
TRUTH IN ADVERTISING
WHO: Vesna Vasic appointed Regional Sales Leader, Central Canada for MCAP. WHAT: The former regional vice-president of Eastern Canada for FirstLine Mortgages brings 18 years’ experience in the financial services industry to one of Canada’s leading independent mortgage financing companies. Vasic has extensive experience in broker management as well as sales, marketing and product management expertise acquired through senior leadership roles.
WHO: ATB Financial WHAT: Effective August, the mortgage rates posted on
THE EXPLANATION: “Vesna is a great addition to the MCAP sales leadership team. Her knowledge of the broker channel and expertise in sales and marketing will further assist MCAP as we continue to grow,” says Gino Tieri, vice-president of sales at MCAP.
12 | AUGUST 2013
atb.com are the actual rates borrowers can expect to win and not the inflated posted rates that generally allow banks to charge higher prepayment penalties.
THE EXPLANATION: The move puts an end to the guesswork that marks the way most banks promote rates in their marketing. It also answers longstanding broker concerns. “I understand the practice, but it’s not how we are going to treat our mortgage customers at ATB,” says Rob Bennett, executive vice-president for Retail Financial Services. “That’s why we’re making the change and why we will keep looking to make changes that make things clearer for our customers.” Mortgage brokers across the country are looking for other players to follow ATB’s lead in order to better protect clients looking to get out of their mortgages before term-end. But the Big Five have generally been slower to move in that direction, complain borrowers, often finding themselves with a bad case of sticker shock come time to break a four- or fiveyear term.
MARKET MATTERS / BROKER-TO-BROKER ADVICE
CONUNDRUM This month CMP is saluting brokers who’ve successfully diversified their income outside brokering, but there’s an alternative to becoming an insurance broker or financial planner, writes industry vet Glenn May-Anderson. How about the simple referral?
Unless you’ve spent the last year under a rock, it’s no secret that things are shifting in the Canadian mortgage industry. Some 13 months after B20 and 25-year amortizations, you would be hard-pressed to find a mortgage professional who feels that these changes haven’t had serious and ongoing impact on the industry. Combine this with increased renewal competition from the banks, and it’s become clear there’s a whole new world out there. I’ve spoken to several well-established brokers who have completely reinvented themselves just to survive. Brokers using lead-generating and rate aggregation websites are becoming the new normal, competing fiercely with the diehard “quality-over-rate” broker contingent. Welcome to the Canadian mortgage broker industry, “Year Two AF” (After Firstline). Most of the mortgage professionals who have weathered this storm have done so by taking a “backto-basics” approach: Hitting the bricks, marketing themselves aggressively, and working their existing client base for referrals. Successful mortgage brokers know that continued success means renewed focus on their core business of mortgage origination – 14 | AUGUST 2013
whatever the cost. On the other side of the fence are those who believe the road to success is paved with additional licences. They go “back to school” and add real estate, insurance, or financial planning to their arsenal. They share the stage with those struggling, or diversification-minded, insurance agents, real estate salespeople, or financial planners who have also decided to diversify by becoming licensed as mortgage agents/ brokers in their market. This is the revenue conundrum. Diversifying your income in a contracting market would seem to make sense on paper, but if generating that income takes your focus off your core business, it will most likely result in decreased income from mortgage origination. Yes, there are a few options out there – Benesure’s Mortgage Protection Plan has allowed many brokers and agents to increase their incomes another 10 per
Diversifying your income in a contracting market would seem to make sense on paper, but if generating that income takes your focus off your core business, it will most likely result in decreased income from mortgage origination
A SENSE OF...
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AUGUST 2013 | 15
MARKET MATTERS / BROKER-TO-BROKER ADVICE
cent to 40 per cent, depending on the average mortgage size in their local market. Home Trust’s secured VISA card doesn’t pay a ton, but it’s better than not getting paid. HELOCs were another option, at least until July of last year… Then there are national companies like Dominion Lending Centres that have placed a larger focus on diversification, offering unsecured credit cards, leasing, commercial, and sub-prime lending divisions to help their mortgage professionals further diversify their incomes. While these options do provide some additional income, these potential revenue streams either don’t provide large enough compensation to warrant mass marketing by the broker, or they are based on limited client needs. So, how do you take maximum advantage of and further monetize your client database while keeping your focus on your core business? There are two ways to do this. You could poll your database to find individuals who are willing to invest in private mortgages, teach them about the process,
Glenn May-Anderson, President FDS Broker Services
If you choose the syndicated mortgage route, be sure to perform proper due-diligence when determining which provider to work with, and make sure you know how much work you and/or your brokerage actually has to do and help them invest in mortgages, which your brokerage arranges. This will temporarily reduce your core mortgage origination business, but can also be very lucrative should you decide to focus on private mortgage origination and funding as a business model. Or, you could work with a company that provides syndicated mortgage investments (tied to residential or commercial development projects) that you can offer your clients. These investments typically return 8 per cent, although higher-risk providers may offer higher returns as an enticement to investors. Just remember, the higher the return offered, the higher the risk that the project will not actually be completed. 16 | AUGUST 2013
If you choose the syndicated mortgage route, be sure to perform proper due-diligence when determining which provider to work with, and make sure you know how much work you and/or your brokerage actually has to do in order to complete the transaction. For example: Will offering this product impact your E&O policy? Is the loan you are recommending placed with a well-established developer with a successful track record of completed projects? How many projects is the syndicated mortgage investment provider involved with? (FYI: the more projects they have provided financing for and the more projects they have successfully exited, the better.) Does the syndicated mortgage investment provider have access to additional sources of financing should anything go wrong during the term of the investment? You also need to ask if the company you are working with offers a simple-referral option that provides adequate compensation. If they don’t, you’re back at the drawing board. Sourcing investors for syndicated mortgages, and completing the transactions with clients directly, means your focus comes off mortgage origination, and on to learning all about how to properly facilitate and close a syndicated mortgage transaction on behalf of your clients. Bottom line: If you have a database of clients you have worked with, it most certainly contains enough information to tell you who might be appropriate for this type of investment. Tapping into this potential revenue stream, while maintaining your focus on your core mortgage origination business, is the key to potentially increasing revenues in today’s mortgage broker environment. If you’re new, then you definitely want to broaden your horizons from the get-go, and all it takes is asking your clients one simple question during the mortgage application process: “So, how are your investments doing?”
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FDS Broker Services Inc. (FSCO License #12367) offers Fortress Real Capital Syndicated Mortgage Investment products. The Fortress Real Capital product is only offered in select provinces. Ontario and Nova Scotia residents must speak with one of our licensed Mortgage Agents or Mortgage Brokersfor details. For residents of Alberta, Saskatchewan, Manitoba and British Columbia, purchases can only be made through registered investment dealers (e.g. Exempt Market Dealers) via Offering Memorandum. Fortress Real Capital transactions are all closed by Centro Mortgage Inc. (FSCO License #10102) unless specifically noted otherwise. Terms, conditions, and other loan details vary by project. Please refer to specific loan and project documentation for complete details. Additional information can be found at www.fdsbroker.com. E&OE.
FEATURE / ALBERT COLLU
The founder of Argentum Mortgage and Finance explains why folding the operation into Mortgage Architects is poised to pay dividends for its brokers and, even, the industry Albert Collu is respected as a straight-shooting industry veteran, committed to “keeping the brokering in brokering.” He sat down with CMP to discuss the move to take Argentum into the Mortgage Architects fold. His answers are very much from the perspective of the founder of Argentum and not necessarily from that of his new role as president of a beefier MA.
1. WHAT ARE THE BENEFITS OF THE MA PURCHASE FOR ARGENTUM BROKERS?
18 | AUGUST 2013
• Integration of value-added systems that include a convergence of marketing tools and resources second to none • CRMs • Marketing and promotional tools • Possibilities to convert cutting-edge ideas into advanced tools for our brokers at large is now a viable reality • Proven executive management teams converging to put the newly enhanced organization onto a path of clear vision driven by strong leadership with a strong commitment to the success of our mortgage professionals • The ability to reimburse commissions/fees for our brokers is extremely empowering and unmatched in our industry and one that embodies our commitment to our distribution channel • This transaction is an incredible lift for the Argentum agents/brokers because it injects a strategy that was not possible under the current Argentum structure • The bringing together of Argentum and MA will position the organization as a formidable presence in our industry and create positive inertia for growth • The expanded national footprint of the organization will enhance broker support and increase regional touch points. This is all made possible by a larger team of Regional VPs to execute on these commitments while driving growth in their re-
spective markets • From my point of view it will now provide a consistent presence for the Argentum brokers in Western Canada • The National footprint will also enable our brokers to gain licensing in various provinces if they so desire • The amalgamation of a leadership group who share a common vision of changing the landscape of the mortgage broker channel through proprietary products, strong training/support and operational excellence can only lead to an environment that will be embraced by our brokers and one that will continue to attract exceptional mortgage professionals. • The support of an incredible operations team will allow me to deflect some of the administrative elements of my day, granting me more time to focus on strategic growth, focused attention on the broker channel on a micro and macro level which will manifest in more hands-on mentorship, training and support to assist our brokers for the future growth of their respective businesses
2. WHAT IF ANY BENEFITS FOR BROKER CLIENTS DOES NETWORK CONSOLIDATION OFFER? The organizational infrastructure will enable us to provide “real time” training and support so that our brokers across Canada are in step with the industry’s shifts and trends. The focus on training and support on a national scale can only prove valuable as it relates to delivering an incredible experience for broker clients, which should ultimately serve as a beacon for Canadians that mortgage brokers are a wonderful channel to engage when dealing with the largest liability of a their lives, their mortgage.
3. WHAT IF ANY GREATER ACCESS TO RADIUS AND PREFERENTIAL RATES WILL ARGENTUM BROKERS NOW HAVE? The ever-changing landscape of our industry has demonstrated that the climate and strategies of our supply side can shift dramatically and as we have seen in some extreme cases may lead to the altogether exit of the broker channel (notably MacQuarie, ING and First Line). The opportunity to strategically affiliate the supply side (Radius) and distribution (Mortgage Architects/Argentum) is an empowering approach that has not been replicated in our channel and one that can be substantially beneficial both monetarily and strategically to the brokers who
embrace this dynamic approach. It’s not a mandatory model for our brokers, but it's most certainly a compelling model and one that has left me with no doubt that this transaction is in the best interest for the mortgage professionals across both organizations.
4. WHAT HAS BEEN THE REACTION OF ARGENTUM BROKERS TO THE DEAL? The reaction from the Argentum brokers has been very humbling for me. The support and shared enthusiasm has been incredible and overwhelming. The Argentum brokers have quickly latched onto the exciting story and are comforted by the fact that I remain the president, a partner and shareholder of Mortgage Architects going forward. Equally flattering has been the warm reception of the Mortgage Architects staff and brokers. The Argentum brokers have come to the understanding that this was not a financial decision for me. I will not be retiring or fleeing the industry to a tropical island as a result of this transaction. In fact, on a personal level the cash consideration is less than I’ve earned as bonuses from previous roles with lending institutions. This was a long-term decision for me to align and amalgamate with an organization that shares common philosophies and can empower its brokers with superior infrastructure to enable Argentum to get to the next level. I am quite proud of what I was able to accomplish up to this point as the founder of Argentum but I am acutely aware that in order for me to get Argentum and its brokers to the next level I needed to bring in proven partners and an expanded management team. Indeed I have found this with Mortgage Architects. This process of converging Mortgage Architects and Argentum will only mean great things for the brokers within these respective organizations both in the short-and long term.
Argentum Facts Founded in:
2009 # brokers in 2009:
# brokers in 2013:
Ontario Went national:
5. WOULD YOU SHARE SOME OF YOUR VISION FOR THIS BIGGER, MOREINFLUENTIAL MORTGAGE ARCHITECTS? The vision has already begun to take hold. My vision for Argentum is to continue to put the organization in a position of strength and to empower the brokers with all the tools and strategies aforementioned. Naturally the collective organization (MA & Argentum) will both feel the positive momentum created by this wonderful news and will begin to manifest new strategies and innovations that will be revealed and announced as we evolve this great story.
AUGUST 2013 | 19
“ You have been an innovator, a leader and an ambassador to our industry.”
Gary Mauris President Dominion Lending Centres
You have helped “ shape the Canadian Mortgage Colin Dreyer President and CEO Verico Financial Group Inc.
industry and are a
strong partner for us.”
“ Congratulations, you have always been an advocate for our industry.”
Michael Beckette President and CEO Mortgage Alliance
“ Your accomplishments are a testament to the vision and passion of your leadership.”
Cameron Strong CEO Invis Mortgage Intelligence
Ontario Mortgage Brokerage Licence No. 10514
“ You have been a strategic partner to us and our industry.
Eddy Cocciollo President The Mortgage Centre
“ You are a dependable partner I can always count on.”
Mike Cameron CEO Axiom Mortgage Partners
excellent service, “ Delivering and creating solutions
are the key factors of your success.
President and CEO Multi-Prêts
Your innovation in the “ broker channel has served us and Mark Kerzner President TMG The Mortgage Group Canada Inc.
our clients very well.
” Thank you
mortgage brokers for
years of shared
COVER / CMP TOP 10 COMMERCIAL
CMP TOP 10
COMMERCIA In its second year, CMP’s Top 10 Commercial Brokers list spans the country and the market itself – from construction financing to large-scale multifamily. But there is one common thread. CMP reports
22 | AUGUST 2013
Commercial brokering is one part confidence and two parts perseverance. It’s also the focus of this month’s CMP, highlighting the accomplishments of brokers who took on the challenges of 2012 and overcame them. Despite any setback to funded volume, 2012 was a pivotal year for those on this second listing of commercial brokers. Their combined volume weighed in at $573 million, down from last year’s tally, even as the number of deals represented grew. The inverse relationship reflects changes in the market, say brokers, but also the increased caution of many institutional lenders. What the numbers don’t capture are those deals that got away or the hours brokers spent on files that simply failed to cross the finish line or crossed the finish line on January 1, 2013, or just after that cut-off date. Ah, commercial brokering is often a cruel game. There’s no free lunch in commercial,” says one industry player. “But would I change it for residential? No way.”
CMP congratulates all the mortgage professionals who took part in this year’s list. Each, as always, had to be employed as a mortgage professional,with many heading MICs. Those on the list also provided a breakdown of their deals, which was verified by the CMP team. All deals were commercial, from contruction to multifamily.
MEN: 9 WOMEN: 1
4 AUGUST 2013 | 23
FEATURE / CMP TOP 10 COMMERCIAL
What was the value of the commercial mortgages you personally funded in 2011?
How many commercial mortgages did you close in 2011?
Support staff who don't write loans
Support staff who write loans
Years as a commercial broker
David William Beckingham
Dominion Lending Centres Commercial Capital Inc.
Capital West Mortgage Inc.
Mortgage Alliance Com- Toronto, mercial Canada Ont.
The Mortgage Centre Mortgage Brokers Ottawa
DLC Commercial Capital Vancouver, Inc. B.C.
First Island Financial
360° Best Interest Mortgages Inc.
Calvert Home Mortgage Investment Corporation
Christine Q Xu
First Circle Financial
AN OVERVIEW TOTAL FUNDED VOLUME
AVG. NUMBER OF DEALS
AVG. FUNDED VOLUME 24 | AUGUST 2013
TOTAL NUMBER OF YEARS IN THE BUSINESS
AVG. YEARS IN THE BUSINESS
*The fine print: Funded volume speaks for itself, says veteran commercial broker Jeff Atlin of Abacus mortgages. Still, it is very difficult, if not impossible, to measure a commercial broker’s success by mortgage volume alone. Arranging institutional funding for “A” borrowers and properties generally net brokers half as much as the compensation on a private funding deal of the same amount for the poorer-class property of a “B” client. Brokers who do secondary and mezzanine loans will make far more per dollar lent than those doing “A” lending. Those who specialize in non-institutional (private) lending will usually earn the same as the broker doing the prime deals on half, a third or, even, a quarter of the volume. Another challenge in making apples-toapples comparisons is that many commercial brokers get their referrals from residential mortgage brokers, who are paid a co-brokerage or referral fee, which is generally a percentage of the fees received. So the same $1,000,000 in volume may produce as little as half the income for the broker who gets the deal on a co-brokerage basis compared to the broker who does the same deal without the referral.
NO. 1 COMMERCIAL
BROKER It’s déjà vu all over again for David Beckingham – top broker on this year’s list ... and last Like so many in commercial brokering, David Beckingham, president and CEO of Dominion Lending Centres Commercial Capital in Vancouver, saw his funded volume slip last year. Still, he remains optimistic that the commercial channel will only grow wider going into 2014. Donald Horne spoke with this industry vet and, for the second time, The CMP Top Commercial Broker. Hard year or not, Beckingham claims the No. 1 spot with $158 million in funded volume on 32 deals. With that hard work comes one or two insights on the niche market he works and the challenges ahead for both seasoned players and newbies.
CMP: Why are we not seeing more brokers come into the commercial space? Beckingham: It takes a long time to understand and underwrite a commercial mortgage; it’s a long process. A lot of brokers do not know how to present a commercial deal properly, and it takes three to four years to develop into a successful commercial broker. Make no mistake, the commercial mortgage market is a tough market to break into. Most who are in it and are making a success of it started at a young age – I started when I was 22 years old, and today I’m 48. I was able to survive by sticking it out during the hard times and the good. Some of the deals I work on are worth $10 million to $50 million. I will work on a deal for several months to a year, and then it can go sideways and I will not see a dime. That is the nature of the business. You sometimes win and sometimes lose. Being able
to withstand long periods of time with no income is the challenge of getting into the business and it is not for the faint of heart.
CMP: In order to grow the channel’s commercial business, what do you think about making it mandatory for commercial brokers to bring in an apprentice? Beckingham: Not a good idea. Sure, it can be good for helping your overall income, but not a good scenario for every broker. It is an income decision and every broker needs to decide how much they want to invest in their own business. If you can afford it, hiring an apprentice is a good idea. I have one gentleman who does all of my closings – you need the help to do it, and it is a great way for him to learn the business. I also have my assistant help with the phoning and the paperwork, because I am on the phone and in meetings constantly. We get dozens of calls on commercial mortgages each and every day; not all are fruitful, but there are those we pursue and succeed on. I count on the assistance I get on the closings to ensure the smooth flow of the office. CMP: We’ve seen a dearth of commercial properties available for 2012 – is that what is retarding the growth of commercial deals? Beckingham: To be honest, I really don’t know; 2012 was a slower year for me in terms of my volume numbers, although there was not a slowing down of the economy. I’ve gone through some very, very slow years before, and last year was not one of them. Ac-
AUGUST 2013 | 25
FEATURE / CMP TOP 10 COMMERCIAL
tually it became increasingly busier. I mean, I just closed a deal for $40 million. I believe it is a matter of timing; that $40 million deal I closed in May took over a year to close. The fundamental economics have been the same for the last few years – 2011 and 2012 were reasonably good years for the overall economy. Yet the residential real estate market started to slow due to the general downturn in the global economy. This year is looking better –personally I think that things are great. The U.S. economy is picking up and yields are at historic lows, this will cause things on the commercial side to remain strong. CMP: Brokers are always in competition with the banks. How can brokers gain a larger piece of the pie? Where should the focus be – on small, mid-size or large deals? Beckingham: Specialize. Let’s break that down. I don’t subscribe to the philosophy of a shotgun approach, one broker doing all the deals that cross his desk. Yes, I do as many deals as I can, but I do the deals that I am best-suited for. In our offices we have specialists within the commercial office. We have brokers that specialize in multifamily, strata, land loans, retail, and office. We also have specialists in larger deals and those that specialize in smaller deals. In our office we have a broker here who did 58 transactions last year, averaging around $800,000 $900,000 a deal. He is one of the best brokers I have met, and he is an expert in the lower loan sizes. If I had a deal like this I would have him assist me on these transactions. That is the key here at Dominion. We specialize and break out each deal and allocate them to the brokers who specialize in certain types of deals. CMP: Lenders have increased the due diligence requirements. How much has that increased your paperwork? Beckingham: Tons! I seem to have to work more and more and harder and harder to do the same volume of business. It is only going to get worse! Brokers are having to jump through more hoops on due diligence with each passing year. But it is a fact of life. When I first started, there were no environmental reports, no engineering reports, no geotechnical reports, no insurance reviews and the list goes on – this due diligence trend has proliferated from the U.S., through their increased securitization in the lending sector. All those changes have now become 26 | AUGUST 2013
the standard in Canada. To be fair, 20 years ago we all thought there was a lot of paperwork at that time – I suppose any paperwork is too much. I guess it just depends on how much you are used to. CMP: Has commercial brokering changed in the last five years? Beckingham: When I first started in the business, I did a lot of construction and development financing. Today, I am doing a lot of term financing. Commercial brokers, more now more than ever, are essential in finding the lenders that are in the market. When a lender decides to curtail lending on the commercial side the commercial broker has to know where the next source of funds are. After all, commercial brokers act for the borrower and are paid directly from the borrower. We need to know how to best serve their needs on a timely and cost-effective basis. Bank of Montreal, Royal Bank, TD – sometimes they are in the market, sometimes not. Lenders are more fickle these days. For example, at the present time, RBC may be doing deals only with existing clients, and Hong Kong bank may not do deals at all. A borrower needs the services of a broker who knows the market to make the deal work. As a result, there will always be a need for a broker who is able to find funding. CMP: Where is commercial brokering headed? Beckingham: Consolidation. That is where I see change happening. I mean, commercial loans will continue to grow, and brokers will keep doing deal more and more loans. The real change will come from the super brokers. Using Dominion Lending Centres as an example, Gary Mauris, Chris Kayat and I saw a need to need for a commercial division within DLC. This allowed two things to happen: one, it allowed the residential agent the ability to due commercial deals; and two, it allowed Dominion Lending Centres to be a big part of the commercial mortgage market in Canada. I would estimate about 75 per cent of our business is helping residential brokers fund their loans, and I believe you will see other brokerage firms doing the same. As a result you will see a proliferation of more commercial brokers aligning themselves with super brokers.
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FEATURE / CMP TOP 10 COMMERCIAL
Experience speaks volumes in commercial brokering and newbies face hard times but an even harder choice, one industry veteran tells Don Horne What is the best way to enter the world of commercial brokering? For one man, all you need are a couple of engineering degrees and experience in fighting a war. An understanding of English helps, too – but isn’t really necessary. “I’m 60 years old, and half of my life I spent in Israel and half in Canada, with 29-and-a-half of those years as commercial broker,” says Chaim Dotan, founder and president of Venture Financial Ltd., based in Vaughan, Ont. “When I came to this country I couldn’t spell the word ‘mortgage’ – it was by sheer mistake that I got into this business.” Dotan, who holds two engineering degrees from his native Israel, came to Canada in 1983 when his Canadian wife wanted to return home. “She didn’t get used to the Israeli lifestyle,” Dotan remembers. “So we came here with our two-year-old son and moved into my wife’s family’s basement. All I had was $2,700 in my pocket, and a lot of rejections from different employers telling me I was ‘overqualified’ for my line of work. Thank God I never got a job as an engineer!” By pure chance Dotan saw an advertisement in a local paper from an Israeli man who was looking for someone to work providing leads for mortgage brokering. “I called and I went to the interview and he said ‘You got the job.’ But it is on commission,” he says. Dotan explained that he needed money, and was told that he would be provided with educational courses on mortgage brokering and there would be a free lunch. “Back then brokering was pretty much unlicensed,” says Dotan, “and at that time a free lunch sounded really good.” Dotan was taught the basics of finding clients and putting together a mortgage deal (passing it along to the broker to be closed). “That first six months I made $500. That’s it $500.” Dotan saw that the real money was in being a 30 | AUGUST 2013
mortgage broker, and so he went to take the course. But his English was still minimal. “I understood how it all worked, but the English side of the exam was difficult, and there were a lot of words I hadn’t even heard of before,” he says. It was with a little help from another friend that Dotan was able to obtain his brokering licence, mostly based on his track record of success in brokering deals, and was taken under the wing of a syndicated private lender. “He had a lot of access to private money, and I now had a nice office to work out of,” he says. “He gave me the institutional side of the business, because he didn’t want to do it himself.” Dotan’s first deal came and went almost without him realizing it. “It was a development at Sheppard and Kennedy, and my English was so poor,” he laughs. “The lender issued a commitment, and we went to the borrower’s solicitor’s office and they signed off on the deal. When the lender told me ‘You just made a deal’, I said ‘How do you know?’” It was a $3 million deal, and Dotan received a one per cent commission - $30,000. “When I got my fee my broker told me to go and certify the cheque,” he says. “I asked him, ‘What does certify mean?’” Dotan credits much of his business success to his engineering education and military training and experiences. Therefore as a broker you have to be very tenacious and never give up, says Dotan. “It’s a very tough game. You can work on a deal for six months and then lose it with nothing to show for it. It is heartbreaking.” Dotan says that commercial brokering is unlike any other business. “A grocer sells groceries – that’s tangible,” he says. “I’m selling money that’s not mine. I am presenting a 20-page document on a deal that might not happen, that might get hung up on an environmental assessment, get hit with development fees, or have a financial backer decide to move his money elsewhere.
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COVER / DIVERSIFIERS
32 | AUGUST 2013
SAFEBRIDGE FINANCIAL GROUP (VERICO)
NORTHEAST MORTGAGES (VERICO)
GORD MCCALLUM FIRST FOUNDATION
These brokers have branched out into various financial services and are thriving under a diversified model. But, as CMP discovers, not all diversification strategies are the same Diversification has been a buzzword in the mortgage broker industry for some time, but differences of opinion still remain as to whether brokers should branch out from their traditional territory of bricks and mortar loans and dip their toes into other parts of the financial services spectrum. The amount of regulation now levelled at financial services professionals dictates that there are only a certain number of areas that a mortgage broker can diversify into without undergoing significant additional training or taking on already qualified staff. So, should a broker stick to the basics, wear several hats and qualify in several areas, or take on a team of specialists? CMP canvassed the input of brokers who have successfully diversified, and discovered that it’s possible to make a go of diversification by following various strategies.
It would seem that, just as no two brokers are the same, no two diversification strategies will be identical. But it’s vital to know your strengths, what you want to achieve and be realistic about the amount of work that goes into successfully branching out of the mortgage space. Profiles of each of the brokers interviewed are presented within this special report and – whether you’re looking at increasing your presence in the insurance, financial planning or commercial finance space – these broker insights make for some fascinating reading.
Just as no two brokers are the same, no two diversification strategies will be identical
The broker’s resource for
Real Equity Lending for Homeowners
Greg Kakuno 604.329.6067
Donna Adams 780.426.2145
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COVER / DIVERSIFIERS
LOCATION: Mississauga, Ont. Which areas have you diversified into We have diversified into doing insurance, financial planning and wealth management directly through our Involvement with Canadian First Financial Centres, which allows us the ability to deliver more Financial Products direct to the client. CFFC is aggressively developing more financial products and Services for our clients now that they have been approved as a Schedule One Bank.
Is being a one-stop shop the key to diversification? Absolutely! In our opinion providing only mortgages moving forward has a limited future. Our clients are looking to us to provide more because they understand that we have their best financial interest at heart. They are committed to us because they understand the value of a comprehensive wealth plan that is more beneficial than just the lowest rate. They understand that we are teaching them to pay less interest for their homes.
What advice would you offer brokers wanting to diversify? Reach out to members involved in Canadian First Financial where the infrastructure is already established to make a simple and profitable transition to selling additional financial services. Like the banks, the broker objective should also be to cross sell multiple products to compete and to build a fence around their clients. Studies confirm that if you have three proprietary banking products you own that client relationship.
Like the banks, the broker objective should also be to cross sell multiple products to compete and to build a fence around their clients How to deal with compliance? At Mortgage Architects we enjoy the benefit of having an internal Compliance department, which allows us to develop new business and provide better service to all our clients. Meanwhile, our internal financial personnel also enjoy having an internal compliance service provided by Canadian First Financial.
Do you have specialist devoted to that nonbrokering area? Yes, all products need to be distributed by a licenced agent and regulated entity. Currently we employ a licensed certified financial planner who is responsible for the distribution of all non-mortgage products.
How do you generate leads and service the client to meet all their needs?
What are the potential pitfalls in diversifying? What have you learned?
We are primarily introduced to all of our new clients by our existing family of borrowers. By selling additional financial products there is reason for them to reach out to us now more than ever. Above and beyond the mortgage we are now capable of directly addressing all of their financial needs regardless of whether it’s a debt, insurance OR investment strategy.
A potential pitfall is to lose sight of the core mortgage business. Therefore, our other financial products and services are delegated to our branch employees and Canadian First Financial Centres. As a team our common goal is to make sure that our clients’ mortgages fits into their overall financial plan. I would see home loans being around 60% of our business in future, and insurance being around 35% – and we’d be very happy with that.
34 | AUGUST 2013
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COVER / DIVERSIFIERS
SAFEBRIDGE FINANCIAL GROUP
LOCATION: TORONTO, ONT. Which areas have you diversified into? As a company, we chose to provide mortgage, insurance and investment services to our clients the day we opened our doors.
Is being a one-stop shop the key to diversification? We wouldn’t suggest multiple products are key to diversification, but more the value and experience we are able to offer our clients as a result. Mortgage, insurance and investment decision tend to be the largest financial decisions the majority of Canadians will ever make in their lifetime. As a result, we believe that having the ability to provide a team of mortgage and financial professionals to help take a co-ordinated approach towards each client’s situation is best for the long term success of the clients we serve.
What advice would you offer brokers wanting to diversify? The transition for a client to move from one service to another is not as easy as one. If you plan on adding additional services, be sure to start with why a client would consider purchasing multiple products from your firm, and of course, which products would make the most sense to help service the overall needs of your client. Once you can answer those two questions clearly, you’ll need to focus on ways to demonstrate why this makes a difference for your client’s needs, so it doesn’t look like just another revenue stream for your company.
How do you generate leads and service client to meet all their needs? A truly consultative approach is key to any lead generation or client transition. The more our team takes the time to understand the full financial needs of the client combined with the services or products they can introduce to help the client meet those needs, the more natural that transition will become. If a professionals don’t have a clear understanding of what they are capable of offering and why they would consider doing so, the transition will happen only when a client 36 | AUGUST 2013
Safebridge Financial Group
If you plan on adding additional services, be sure to start with why a client would consider purchasing multiple products from your firm, and of course, which products would make the most sense starts the conversation.
How to deal with compliance? Compliance is, of course, one of the most important factors in any financial business when offering multiple products and services. Full disclosure is absolutely essential; but always make sure to speak with and engage the various governing bodies you will be representing. In this case, asking for forgiveness is definitely not a better strategy than asking for approval.
Do you have specialist devoted to that nonbrokering area? Jim Collins wrote in his book Good to Great that some of the best and fastest growing companies in the world “determine what they can be the best in the world at, and then focus on that.” We believe that as professionals we can only be “the best” at one specific service and as a result have decided to partner with profes-
sionals who focus on either mortgage financing or financial planning. Together, they are much more prepared to provide exceptional service and advice to their clients in their respective fields, while still helping each client manage their overall financial situation.
What are the potential pitfalls in diversifying? What have you learned? In order to properly offer clients multiple products and services, a business needs to be willing to invest a lot of time and resources to help create the proper infrastructure to ensure each client and team member receives the same service and experience. In addition, the responsibility of managing a client’s financial situation, almost in its entirety, is significant. Unless you are willing to accept that responsibility and do everything possible to ensure each client is managed and serviced exceptionally well, you may just be
opening yourself up for potential issues in the future.
What are the benefits to servicing more of your clients’ needs in-house in terms of building relationships and ownership of the client? For us, the biggest benefit is our opportunity to have a drastic and lasting impact on each client who chooses to engage our team for their overall financial needs. This in turn creates a very intimate relationship with each client that allows us to truly understand who they are, how they think, and how we can help them achieve what matters most to them with their finances. From a purely business perspective, there is no question that clients tend to stay with the same company longer the more products or services they engage with. This alone proves to be extremely valuable, especially in the mortgage industry, as the life time value of a client is so essential to long-term success in our industry.
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COVER / DIVERSIFIERS
NorthEast Mortgages (Verico) LOCATION: MONTREAL, QUE.
Which areas have you diversified into? Currently NorthEast Group is diversified into 5 areas: 1) Mortgages 2) Real Estate 3) Insurance, both life and disability 4) Investing services, financial planning 5) Home and auto insurance
Is being a one-stop shop the key to diversification? Yes, definitely. By offering a wide variety of services we are able to provide the client with convenience and security knowing that his/her entire financial and real-estate portfolio is managed by one group of people. This also gives the broker an advantage by increasing client retention and credibility.
What advice would you offer brokers wanting to diversify? Invest in powerful CRM tools that will be capable of tracking a client’s needs across multiple platforms and industries. Hire the right people to manage each branch and to service your clients’ needs.
How do you generate leads and service the client to meet all their needs? Cross pollenating from one branch to another definitely helps in attracting new clients to less performing branches of the company. Set advertising budgets for each branch of the business and target your market correctly. Once a lead has been generated make sure that the client sits in front of a qualified representative for the service they are to receive. For example the mortgage broker will make the referral to the company insurance guy as opposed to trying to sell something that they know very little about.
How to deal with compliance? Each branch has a dedicated person responsible for handling conformity for that specific branch.
What are the potential pitfalls in diversifying? What have you learned? In any business venture, spreading yourself too thin across multiple industries can be dangerous. Before you diversify into other fields it is important to master what you are currently doing. 38 | AUGUST 2013
Invest in powerful CRM tools that will be capable of tracking client’s needs across multiple platforms What are the benefits to servicing more of your clients’ needs in-house in terms of building relationships and ownership of the client. Whenever a client ventures outside of your company’s walls to find a service you run the risk of someone trying to poach them. If a client comes to you for a pre-approval then goes to see a real estate agent for the home purchase, for example, that agent because he receives compensation from the banks for a referral will try to poach that client from you. If you offer real estate service as well as mortgage service then that client will stay in-house and the chances of them going elsewhere are reduced. Client retention and satisfaction is paramount and by offering multiple branches we are able to accomplish this.
LOCATION: EDMONTON, ALTA. Which areas have you diversified into Home, auto, commercial and life insurance with more to come.
Is being a one-stop shop the key to diversification? It has to make sense first and foremost for our clients... and then secondly as a business decision. If either one of those components is missing then it won’t work.
What advice would you offer brokers wanting to diversify? I’d say to individual brokers that it makes more sense to focus on what you’re licenced to do and be an expert in that field...but for business owners you always have to consider whether or not diversifying your business can be of benefit to your clients or not.
Do you have specialist devoted to that nonbrokering area?
How do you generate leads and service the client to meet all their needs?
What are the potential pitfalls in diversifying? What have you learned?
We have a wide variety of both inbound and outbound marketing tactics. Networking, word of mouth, marketing to our existing database, social media, web SEO and PPC, etc.
Losing focus of the core business, depleting cash reserves, regulatory compliance burden, confusing your clients, not properly managing client privacy.
How to deal with compliance? Each service we offer has its own set of regulators and compliance issues so we have to be very careful to manage that. You really need someone dedicated to it who isn’t also busy trying to take care of individual clients. Growing your business this way requires structure, proper management, policies and procedures, etc.
Yes - each line of business has specialists devoted to that area...so as individuals we are experts in our own fields, but as a brand we can be more of a generalist.
What are the benefits to servicing more of your clients’ needs in-house in terms of building relationships and ownership of the client? There are statistics out there that show that it’s beneficial to do more business with each client. It helps to create long-term relationships, it lowers trust barriers, it can be more profitable if done properly, and, most importantly, it’s more convenient for the client.
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FEATURE / MORTGAGE MARRIAGE
MADE IN DURHAM! One broker’s time to slow down and smell the roses was another’s time to speed up. The result was a model partnership for baby-boom brokers
D av id H
40 | AUGUST 2013
u.s. U.S. housing market worse than thought The number of Americans who bought previously occupied homes rose in October. But the National Association of Realtors says it overstated more than three million sales during and after the Great Recession, showing the housing market was weaker than previously thought. The private trade group says sales rose four per cent in October to a seasonally adjusted annual rate of 4.42 million. That’s below the roughly six million homes a year that economists say are consistent with a healthy housing market. But it’s ahead of 2008’s revised sales, now considered the worst in 13 years. The revised fromwant 2007totowork 2010 What dotrade you group do when youits nosales longer down 14 per cent, from more than 20.6 million to nearly full-time in the broker channel, but you just aren’t 17.7 million. Among the reasons for the lower figures, ready for the rocking chair? For the past two years, the Realtors group says: changes in the way the Census Elfie Hayes of data, Mortgage Intelligence running Bureau collects population shifts andwas some sales her business while being a full-time carbeing counted remotely twice. egiver her husband of 20 years, Harry. and ThetoRealtors consulted with government private housing experts, including Federal Reserve, It wasn’t always easy gettingthe things done while the Department of Housing and Urban Development, she was away for weeks at a time -- in the fall of 2012 the Mortgage Bankers Association, the National it was for three months at a stretch. But her company, Association of Home Builders, mortgage giants Fannie built on great people who serve loyal clients all the Mae and Freddie Mac and CoreLogic, a California-based while relying on business partnerships, data firm that fi rstvaluable raised doubts about the annual has survived. In fact, it’syear. once again thriving. numbers earlier this “We wouldhas have closed the doors more than a year CoreLogic estimated that the Realtors group overstated sales in 2010 by at least 15 women per cent.who are ago had it not been for the amazing numbers but couldalso affect economists not The justchanging my co-workers, myhow friends here at view the trade group’s data. It could also affect companies Mortgage Intelligence,” says Hayes. “During those that use the figures for hiring and expansion plans. darkSales days, Kelly Kozar, Jacalyn Cook and Carmela are measured when buyers close on homes. Knight carried on with a business-as-usual mindset. But many deals are collapsing before that point. “I willofnever be able to repay Nor One-third Realtors said they had attheir leastefforts. one contract will I ever forget that they18 sacrificed family time to scuttled in October, up from per cent in September. are being several reasons: be atContracts work covering forcancelled me whenfor I couldn’t be here.” Banks have declined mortgage applications; home
inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing. More than two years after the recession officially ended, many people can’t qualify for loans or meet higher down payment requirements. Even those with excellent credit and stable jobs are holding off because they fear Percentage of that home prices will keep falling. Sales are also homeownership being hurt by a decline in first-time buyers, who costs, including are critical to reviving the housing market. mortgage payments, Sales have fallen in four of the five years utilities and property since the housing boom went bust in 2006. taxes that take up a Declining prices and record-low mortgage rates typical household’s haven’t been enough to boost sales. monthly pre-tax At the same time, home construction has A stronginonline presence through their websites, income Vancouver begun a gradual comeback and should add to the blogs and media kept those mortgage profesandsocial Toronto, economy’s growth in 2011 for the first year since sionals in front of (RBC new clients every day. Hayes always respectively the Great Recession began in 2007. Last month, Economics Housing embraced the web and in some circles is known builders broke groundas on an annual rate of Trends and she concedes. a full-blown “nerd,” But that has helped 685,000 homes, the government said recently. Affordability Report) the time carry the firm through sheper wasn’t That when was a 9.3 cent jump from October and the new fastest pace since April 2010. available to network and build relationships through face-to-face meetings. Most economists say home prices will keep falling, by at least five per cent, through 2012. On the other side was a loyal database of clients Many forecasts don’t foresee a rebound in prices who kept coming back whenever they needed a until at least 2013. mortgage, in the process referringThe their own friends high rate of foreclosures has made resold homes cheaper than new ones. The median price of a new home is roughly 30 per cent above the price of one that’s been occupied before – twice the normal markup. Investors are taking advantage of the discounts. The housing market is struggling even as the broader economy has improved in recent months. The economy grew at an annual pace of two per cent in the July-September quarter. Many economists expect slightly better growth in the October-December quarter. CMP
We would have closed the doors more than a year ago had it not been for the amazing women who are not just my co-workers, but also my friends here at Mortgage Intelligence
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AUGUST 2013 | 41
FEATURE / MORTGAGE MARRIAGE
42 | AUGUST 2013
and family. Fast-forward to the spring of 2013 and Hayes found herself at another crossroads. Her husband had made a remarkable recovery after a bone marrow transplant and she was facing her 60th birthday in June. The question has never been, does Hayes love to work? “It was just that sometimes family must come before everything else,” she says. That time is now. “Harry and I worked hard during our careers and we want to enjoy ourselves while we’re still young and crazy,” she tells CMP. “In the past we travelled to five continents and enjoyed exploring every corner of them. “It’s time to make some new memories and take in new experiences now that Harry is well.” Understanding her need to stay involved in the company that she founded, albeit at a lesser degree, Hayes’s husband agreed that if she could find the right person to merge businesses with, she could find the balance that she was seeking both at home and at work. While in Toronto on one of the many hospital visits, Elfie had coffee with her regional sales manager, Jim Rawson. She shared with him her desire to work less in her business, but not retire completely. He suggested she speak to someone she already knew from the industry. Timing is everything they say and timing could not have been better. David Hetti of Invis was that person who was recommended to Elfie. He had a desire to grow his business while Hayes was hoping to pare down her hours and involvement. Phone numbers were exchanged and a meeting was set up the following week. At that very first discussion, it was clear that they were two people at different phases of their careers. One wanted to slow down and the other wanted to build something bigger than what he currently had. But even more than business goals being aligned, there was a great feeling of having come together
with someone who shared a professional and ethical concept of how a business should be managed, says Hays. Hetti shared his desire to maintain control of his mortgage business and Hayes assured him once he had a full-time experienced underwriter like Kozar or Knight as his right hand that life would hold greater balance for him. Cook is the “Girl Friday” personified and her administrative expertise will also serve to give Hetti more personal time. No doubt if proved true, his wife, Orla, would be pleased. The couple have four growing children in their busy blended family. Discussions ensued and on a lovely Saturday morning a few weeks later, Hetti and Hayes and her husband got together over coffee at the office in downtown Oshawa. “It was like friends getting together to catch up on things. We were all immediately comfortable!” recalls Hayes. The meeting in no way felt like business, it just felt right.” In early June it was time to get down to the business of paperwork. There’s always too much paperwork in the mortgage business and the merger would prove to be no exception. Thankfully, Scott Musselman from head office came out to lend his expertise, says Hayes. It was a good thing the team already had a substantial office building out of which to run the business. That would save finding a location and for the time being it would be big enough. A whole new team will be formed through the coming together of Hayes and Hetti. There is the support staff, Kelly Kozar, Jacalyn Cook and Carmela Knight. There was also a group of independent mortgage agents, Corinna McKnight, Rob Dobson and Sherry Corbitt on Hayes’s team and Jeff Robar who currently works with Hetti. In order to keep things running smoothly Hetti has taken on the role of director of operations. He will oversee the entire company including staff, and
FEATURE / MORTGAGE MARRIAGE
outside independent agents, while making decisions about the day-to-day running of the business. Hayes will remain in her role as director of sales and marketing. She will be recruiting new talent while assisting Hayes with training and mentoring the team. She will also be working from home a bit more, affording her time with Harry who was her greatest supporter while she built the business. One of the primary goals of the Oshawa Mortgage Intelligence office is to add to the number of experienced independent mortgage agents working on the team. That’s happening by bringing quality training, mentoring and support to those joining the team. “Higher compensation levels, a strong team spirit and lots of support will attract the right individuals,” says Hayes. Hetti says much the same.
One of the primary goals of the Oshawa Mortgage Intelligence office is to add to the number of experienced independent mortgage agents working on the team “There’s a lot of buzz at 57 Kenneth Ave these days,” he tells CMP. “And with the input from such a dynamic group together under one roof, you can count on things never being status quo in the future. We’re all excited about the prospect of this merger and creating the largest Mortgage Intelligence office in Durham Region.”
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2 2 60 deals in the fiscal year. Bank All-In-One is a trademark National BankofofNational Canada. 1Financing be subject1 to the credit approval by National Bank. $2,000 marketing fee is aby one-time rewardBank. for the first National Bank All-In-One is aoftrademark Bank ofshall Canada. Financing shall be subject to the credit approval National $2,000 marketing fee 3 3 trip paidreward for everyfor 125the deals in the65 fiscal year or up to a maximum of 2 in tripthe vouchers. Minimum to fund ratiopaid of 60% fiscal 2013 required be eligible for either incentives payments be $15,000 trip forforevery 125 isdeals orto$40M funded in financial the ﬁscal year.and The ﬁscalwill year is$15,000 a one-time ﬁrst deals $20M funded ﬁscal year. approve made in February 2014. The fiscal year is from November 1, 2012 to October 31, 2013. is from November 1, 2011 to October 31, 2012. TM TM National
44 | AUGUST 2013
DO YOU KNOW
WHERE YOU’RE GOING?
Here’s a look at the historical best five-year mortgage rates over the last 12 months. Where are they headed next, and are your clients prepared? Source: RateSupermarket.ca
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AUGUST 2013 | 45
FEATURE / COMMERCE CONSIDERATION
THE OF THE
There’s so much more than ‘good luck’ for a savvy broker to offer a client headed toward a forced sale, writes Rebecca Lamarche. Why not a private mortgage to win them an ‘orderly sale’
46 | JULY 2013
It’s the ugly file. The client approaches his broker in crisis mode: he’s going to lose his property. This client has defaulted on mortgage payments and is on the precipice, or in the midst, of a legal process. Often, he has sacrificed various forms of credit (car payments, credit cards, phone bills, etc.) in a desperate attempt to save his home. The trigger point of this financial deterioration varies as much as the files. He was laid off work, is in the middle of a nasty divorce, pays child support, has unexpected or chronic medical expenses. The list goes on. The client was likely caught in the trap of waiting for a miracle that never materializes. He has a cash flow problem but equity in his property. The client needs money. And he needs it fast. There are two options most commonly presented to a client with this profile. In the first option, he loses his home. In the second, he sells it in a fire sale. Both options leave the broker with a closed file and the client with catastrophic repercussions. The majority of clients in this position will lose the roof over their head along with the equity in their
home. Those who manage to sell in a fire sale are forced to channel the proceeds towards their mortgage, penalties, arrears and legal fees. Clients who come out of a fire sale are often left with little-to-no funds. The ramifications continue. Without the financial support to restart, any remaining funds go towards immediate living expenses instead of building a future. The client’s most pressing hurdle is to provide a roof over their family’s head. The stress on the family unit grows exponentially. The broker loses too. The broker has failed to find a solution for his or her client. As a result the file closes and does not fund. The client has no incentive to provide referrals; by losing the equity in his home the client is not in a position that will foreseeably generate future files. Ultimately, the broker has failed to differentiate him or herself from the competition. Let’s return to what the client needs: time and money. This is where a third, and often overlooked, strategy can come into play. The broker can present an alternative option: the orderly sale. A handful of private lenders, most notably the Quebec-based PENTOR Finance, have innovated varying versions of a short-term mortgage engineered specifically to maximize the preservation of equity in the property during just such a crisis. This unique repayment program buys the client time to sell his property at a marketable price, and
Without the financial support to restart, any remaining funds go towards immediate living expenses instead of building a future is structured to work with the client’s cash flow problems. The orderly sale is designed to leave the client in a position to restart and rebuild. The first stage of this orderly sale model is to evaluate the client’s financial needs associated with the property, says Peter Galli, president of PENTOR Finance. This includes the client’s debt to the financial institution, associated arrears and fees, closing costs, and the lender’s finance fees and interest payments for the term of the mortgage. These numbers are crunched into a sum that determines the loan needed to sell the property over the next six months. This is the client’s new mortgage, which is then funded by the private. In stage two, lenders such as PENTOR direct a portion of these funds to pay off the capital, arrears and legal fees tied to the property. The client’s debt to the original financial institution is now cleared and PENTOR Finance is the first mortgage holder.
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JULY 2013 | 47
Brokerage # 10160
FEATURE / COMMERCE CONSIDERATION
Rebecca Lamarche is a freelance writer and multimedia journalist published across Canada and in the United States. Lamarche has become known for her strength in breaking stories worthy of international attention, such as an article about the improper use of the birth control pill and her review on embedded media with the Canadian Forces. Lamarche’s most recent research based project is a short documentary film unveiling Canada’s lack of protocol on the grass-fed beef industry. Follow her on Twitter @ RebeccaLamarche
This is a huge advantage because interest payments to service the debt have already been structured into the loan. The client is relieved from the burden of monthly interest payments during these six months; alleviating cash flow problems and providing peace of mind. Stage three of the orderly sale is the sale itself. PENTOR’s model, for example, gives the client six months to sell his property at a competitive price. This price is not the client’s “emotional price,” listing the property at or above top market value, cautions Galli, who has originated over 2,500 alternative mortgages worth over $700 million. Setting the bar at that level means it could take months or even years to realize a sale. Still, that price isn’t the liquidated price of a fire sale, either. In an orderly sale, the property sits just below market value. It sells faster than it would at an emotional price and for a significantly greater amount than in a fire sale. The orderly sale is structured to maximize the preservation of equity in the home. “We work with the client’s real estate agent to see that an aggressive marketing plan is constructed and executed,” says PENTOR head Galli. “Throughout the term of the mortgage, our team has weekly checkins with the agent to ensure that the property is being properly marketed. PENTOR Finance has no financial stake in property sales, receiving no commissions or cash bonus.” PENTOR Finance’s orderly sale model is a win for the client and the broker.
Got Plans? We should get together.
The client has gained the opportunity to start over. By having the time to sell his home just below market value the client now has the opportunity to preserve more equity in his home then he would have in a fire sale, or worse, if he lost the property. By choosing the orderly sale strategy the client reduces his shortterm cash flow problems, has greater peace of mind and can pursue his next steps: professional development, first and last month’s rent on housing, child care. Legal tags and the financial ruin of losing his home have been avoided. Ultimately the client is empowered to rebuild his future. “The orderly sale is a tool the broker can use to build a specialist’s profile, branding him or herself as one of the mortgage industry’s top performing brokers,” says Galli, an industry leader with 26 years of experience behind him. “By providing a solution for the client, the broker has differentiated him or herself from the competition. The broker has generated compensation from the file, a client for life and referrals.” The thinking is the broker utilizes the unique services offered by private lenders, earning the reputation as the go-to-person. This tool can be used to diversify product offerings and portfolio. It opens a possible floodway of leads from other brokers. Contact Peter Galli at (514) 918-7426 or pgalli@ pentor.com
Loans from $1,000,000 to $15,000,000+ Financing for projects in southern Ontario Only
Contact Mickey Baratz Lic.# M08000714 (416) 483-8018 ext 233 or email@example.com
We’ve been underwriting real estate backed Construction, Bridge and 48 | JULY 2013 Financing for over 35 years. Equity Brokerage # 10160
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Romspen Investment Corporation is a non-bank mortgage lender specializing in commercial real estate across Canada and the United States. With over $1 billion under administration, we offer customized mortgage solutions for term, bridge and construction financing from $4M to $100M.
OppOrtunity is Often simply a matter Of seeing it first. Blake Cassidy or Pierre Leonard I 800 494 0389 I www.romspen.com
BUSINESS STRATEGY / SECRET#6
IN A WORD: DO Not everyone is going to be your friend, and not everyoneâ€™s going to be your client. The trick, writes Doren Aldana, is deciding who should fall into that last category
50 | AUGUST 2013
MINATION SECRET #6: THEY CHOOSE A NICHE AND THEN THEY DOMINATE IT.
This is similar to our previous secret where we talked about the importance of being a specialist, not a generalist. However, when we talk about specialization we are referring to your personal “specialty” as a mortgage professional, which is inwardly focused. In contrast, when we talk about choosing a niche, we are referring to your specific target market, which is outwardly focused. For instance, you might be a specialist in refinancing, but you would focus your efforts working with homeowners who are up to their eyeballs in high-interest credit card debt. In other words, you nichify yourself. Most every superstar mortgage professional picks a niche to proactively market to and then they dominate it. But interestingly, when mortgage professionals call me for consultations, invariably, we find that their No. 1 frustration is linked to the fact that they don’t have any focus in their marketing. They don’t have a niche! They are trying to be everything to everybody. Here’s the problem with that approach. If everyone is your prospect, no one will be your customer.
This comes back to the objection I often hear from mortgage professionals who fear that if they narrow their market they won’t have enough prospects. In fact, the opposite is true. When you pick a niche and customize your marketing message to be especially compelling and relevant only to that specific niche, you’ll have more qualified, hot-for-what-you-got prospects than you ever would trying to be everything to everybody. Remember, it’s always better to be a meaningful specific than a vague generality. Put another way, it’s much easier to be a BIG fish in a small pond than a small fish in a big ocean. Your services are going to be a lot more attractive to those people within the small niche because you’re going to be providing a customized unique solution for their unique problems. Additionally, by marketing to a narrow niche, your name will spread a lot faster because people tend to associate with other people who have the same interests, goals, passions, etc. They congregate at conferences, trade shows, seminars and group meetings. They pick up the phone and call each other. The more tightly knit the community, the faster your name will spread. On top of that, niche marketing allows you to
But interestingly, when mortgage professionals call me for consultations, invariably, we find that their No. 1 frustration is linked to the fact that they don’t have any focus in their marketing. They don’t have a niche!
AUGUST 2013 | 51
BUSINESS STRATEGY / SECRET#6
You’ll have highly qualified prospects banging down your door who are pre-sold on working with you spend less time with duds and more time with studs. Rather than wasting your valuable time with lookyloos, tire kickers and rate shoppers, you’ll have highly qualified prospects banging down your door who are pre-sold on working with you before they even meet you. All of this culminates in more income for you with less hassle.
I could go on and on but you get the idea. Now it’s time to get rich in your niche! In my Mortgage Superstar Coaching Program, I give you four specific guidelines to help you determine the best niche for you, based on your unique strengths, talents and abilities. Not only that, I show you, step-by-step, how to create your brilliant marketing message and deploy effective marketing systems in order to dominate your niche with blinding speed. And here’s the best part of it all. With each step in the process, you’ll receive ready-made templates, tools and systems so you don’t have to create this stuff from scratch -- it’s all done for you! In next month’s 7th secret, you’ll learn how Superstar mortgage professionals maximize their closing ratios so they can earn more, while working less. Stay tuned...
SO, WHAT ARE SOME POSSIBLE NICHE MARKETS?
First-time homebuyers Revenue properties Self-employed Commercial New construction Jumbo mortgages Debt consolidation Reverse mortgages
Specific ethnic groups (usually your own) Employee Mortgage Benefits Program (employers) or “gateway” niches like... Realtors Financial Planners For sale by owners Accountants
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Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach and has won the “Best Industry Service Provider” award two years in a row at the 2012 and 2013 Canadian Mortgage Awards. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. For a free copy of Doren’s new CD titled, “21 Secrets of Superstar Mortgage Brokers,” visit: www.SuperstarMortgage Broker.com
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Salomon JameS Realty & tRuSt DallaS texaS 75254
BUSINESS STRATEGY / MOTIVATION
WHEN THE GOING Ensuring your team stays productive when the pressure’s on can be a challenge for any manager. Leanne Faraday-Brash highlights nine ways to keep your people motivated
In the space of three days, the unthinkable happened. I read that China’s annual economic growth had slowed to 7.7 per cent. Goldman Sachs was quick to point out that the market must shed expectations that continued double-digit growth could be sustained. Then, after digesting that one, I was sent reeling again when Apple reported its first profit decline in a decade. As someone who’s mad for an allegory, it got me thinking about those individuals and teams who sustain extraordinary performance for an extended period, so much so that the unexpected is what we come to expect. What pressure is there on a manager and team members when the extraordinary becomes ordinary? How do you continue to inspire and how do you keep your staff’s hunger burning without burning out yourself in the process? In the course of a typical working week, I found that four separate clients were puzzling over this same issue in very different contexts and which they described in very different ways (see box overleaf ). In all these situations, an almost idyllic past has been replaced by a fraught, stressful state of play that requires balancing the needs of the team with the needs of the organization, and the needs of the team with the needs of the individual.
HOW TO KEEP A TEAM ON TRACK The most critical balance to strike is between relationship and outcomes. If we’re too soft on relationships, teams can run amok. If we’re too hard on relationships and only serve profits, targets, senior management and our own careers, we will have a target on our backs long after any problems have abated. As a leader of people, you have a responsibility to 54 | AUGUST 2013
GETS TOUGH… strike this balance effectively. These nine strategies will help you manage your people effectively and keep their momentum heading in the right direction. Communication is critical. If you are asking the team to shift gears, make sure you spend more time on the why than the what. The former is more likely to be heard as inspirational, while the latter will be viewed as transactional. You will also need to be more accessible and visible, as your team will resent and disrespect any hint of abandonment.
Be honest when you’re asking a lot from them. They know it, but need to know you know it so they can feel less exploited.
Be compassionate, but don’t let anyone get away with murder. Don’t let anyone jeopardise good culture because they’re bringing home the bacon. That’s how we create vulture cultures that ravage the organization.
Don’t get sucked into doing other people’s jobs for them. Resist the temptation to do so, and take every opportunity to coach your people. Astute managers have worked out that it is more sustainable and impactful to get everyone to do five per cent more than for you to do 60 per cent more on your own. Besides, stepping in or stepping on your people can result in one of two untenable outcomes: either communicating a lack of trust that stifles initiative and innovation, or allowing the lazy to take a leisurely ride on a titanium road bike while you wear yourself out running alongside them.
Distinguish between those who want to and can’t right now, and those who can but won’t. The former deserve our compassion; the latter, an enunciation of potential consequences. I am not suggesting we ever become threatening or punitive for its own sake, but individuals who are not living up to the team code need to understand this is not acceptable. Ensure they see the line in the sand that you’ve drawn before
AUGUST 2013 | 55
BUSINESS STRATEGY / MOTIVATION
you ever penalise them. Set them up to win, but red card them if they refuse to take the field or play dirty.
if you walk in the door and someone says, “Oh, it’s you.”
Don’t be too proud to bring in reinforcements. Unless you have advanced training in mental health first aid (and even if you do), don’t give struggling employees gratuitous advice, or tell them they should be at home when perhaps only work is getting them up in the morning, or pretend you have the answers or know how they feel. Let those who aren’t coping tell you what support they need and defer to expertise while checking in with your staff tactfully, discreetly and often.
Adopt a stable yet flexible style. Too many of us lurch from a relaxed management style (aka team neglect) to authoritarian when people “take advantage of our good nature”. Sometimes we lash out with exaggerated intensity because we got told off for seemingly letting the lunatics take over the asylum. The professional embarrassment alone may make us want to pay out on team members when, in effect, we were asleep at the wheel and blamed the tree when we crashed.
Put on your oxygen mask first. Don’t be selfish, but don’t assume you must be selfless. Martyrdom isn’t attractive and is often self-serving anyway. This is a time to take care of yourself. Opt for peer support over beer support, get a coach, have a confidant, and don’t ruin your relationships at home or become sick with guilt because you gave your life to the workplace and your kids don’t recognise you any more. Unless you really want to travel incognito, you’ll only get more stressed
Finally, don’t get too bogged down in the day-to-day. You’ll miss the bigger picture. This might be convenient and less confronting but not helpful to you or your team. If you’re a people manager, the best you can do for all concerned is to embrace the role and truly manage your people. Ensuring roles are clear and meaningful, expecting excellence, and providing compassion when required balances what you want from your team and what your team needs from you.
Leanne Faraday-Brash is an organizational psychologist and principal of Brash Consulting. She is the author of Vulture Cultures: How to Stop Them Ravaging your Performance, People, Profit and Public Image.
WHEN THE STATUS QUO CHANGES Every team is different, and every stressful situation requires a different approach. How would you tackle these situations?
the smooth way in which the new recruit has masterfully made rain in a short space of time, but this one is truly a law unto himself.
Manager One is a full-blown creative and runs a loose confederation of creative cowboys (yes, they are all boys). They have enjoyed lots of trust and freedom for several years. Our manager’s issue is that his team have become so accustomed to a permissive, supportive and encouraging regime of loose leadership that they’ve become entitled and precious. They haven’t adjusted to a more constrained fiscal environment. They pout and tantrum when told “we can’t afford this”, and now bicker with each other over whose project should be supported. The executive have said this team doesn’t want to be handled, and that they forget they are part of a bigger organization. This manager is upset and disappointed that this mutually supportive team has morphed over time into a kindergarten cohort who now won’t share and are more likely to want to hit others over the heads with their buckets and spades when no one is looking.
Manager Three runs a tax team in a second-tier firm. The firm has always been profitable, but some of their clients are doing it hard. Margins are squeezed, bills are contested, write-offs are up, and two associates who left within weeks of each other have not been replaced. While the team is not traditionally known for oozing excitement out of every pore, the manager can see the beginnings of real disgruntlement and withdrawal. Some staff are quietly telling others they’re feeling vulnerable to layoffs. Others are resentful about workloads increasing but do the work anyway. Others are working to rule, having acquired a profound interest in watching the clock.
Manager Two runs the trading floor. She is used to mavericks and would peg herself as one. However, in the wake of several scandals in other organizations, she has always instilled some notion of the importance of boundaries in the team. While living on the edge of their authorities, they haven’t stepped over the line, until she hired her latest recruit; that is, a tiger that doesn’t want to be tamed. They all see the brilliance, the flair and
56 | AUGUST 2013
Manager Four had a dream team, albeit a small one; cohesive, friendly, purposeful and focused. Regrettably, one supervisor separated from their life partner some five months ago. This took everyone by surprise as there had not been any hint of problems until it was blurted out at a team morning tea. People didn’t know where to look or what to say. It’s obvious to all, even without clinical qualifications, that the supervisor’s mental health has been in steady decline since then, and the manager freely admits she’s out of her depth. The supervisor is barely functioning and the rest of team are having to make major allowances.
Au bmissio gu ns Cl st ose 23
Rank, Reward, Roust (?) ...your lenders ThiS iS your opporTuniTy To Send The moST infLuentiAL MeSSAge to your LenderS Change today’s lending environment now! • Acknowledge your best lender • Provide positive feedback • Ask lenders to step up to the plate CMP magazine is calling for submissions for the annual Brokers on Lenders special report featured in the September issue.
Submit before August 23 to have your say!
BUSINESS STRATEGY / TRUST
ONE BRICK AT A
Trust is the new competitive advantage for financial services. It’s a simple enough concept or is it?
58 | AUGUST 2013
Canada was spared the worst effects of the Global Financial Crisis, but six years on, its powerful legacy continues to haunt all this market. One word sums up the sector’s biggest problem and its greatest opportunity. That word is “trust.” Capitalism runs on trust, and it was a lack of trust that brought the system to its knees during the financial crisis in 2008. Ironically, it was a lack of trust permeated between the very financial institutions - both government and private sector - whose role it was, and still is, to serve as our fiduciaries. As the crisis unravelled, trust was further eroded: in the infallibility of markets, the sustainability of iconic institutions, the quality of executive leadership and the wider purpose of business itself. But it is the financial services industry that has taken the biggest hit in terms of trust. Part of this is logically due to the role it played in the crisis, which still bears its financial name. Secondly, the fiduciary
TIME nature of the industry’s relationship with a customer’s money adds considerable weight to the responsibility it has to act in a trustworthy manner, which raises both expectations on behaviour and condemnation for breaches. Added to this, customers have witnessed incessant financial scandals throughout 2012 including allegations of mortgage fraud at Deutsche Bank, money laundering at HSBC, Libor manipulation at Citi and Barclays, rogue traders at UBS and, of course, the infamous Muppet Manifesto at Goldman Sachs. Is it any wonder they distrust whether the industry has learned any lessons? Not only has reputation suffered, so too has perceived performance and perceived behaviours. What does this mean for mortgage professionals? How can they drive demand in the sector, meet the expectations of savvy customers or add value by educating key clients on wealth creation? On a bigger scale, how can they distance themselves from the AUGUST 2013 | 59
BUSINESS STRATEGY / TRUST
The crisis has also strained the trust between companies and their employees, which can be measured by the amount of gossiping, venting and complaining that goes on under the surface unethical behaviours of mortgage lenders who will forever be linked to the origins of the financial crisis in the U.S.? Trust is measured not only in terms of reputation, performance and behaviour, but also in the specifics of transparent, fair and objective customer engagement. It provides an exceptional opportunity not just to restore the lost trust in the greater system, but use the creation of trust through responsible recommendations as a new competitive advantage. Prior to 2007, we bought into the idea that wealth creation and growth would be everlasting, and that our economic model would keep us safe and prosperous. That perceived invincibility was exposed, and we now have equal measures of both vulnerability and invincibility. The enormity of the crisis has also, perhaps unfairly, tainted all financial services firms, and this is the reality they must now work to change. The 2013 Edelman Trust Barometer reinforces the crisis of confidence in leaders themselves, with trust in business 32 points higher than trust in its leaders to tell the truth. This means the lack of trust ignited by the crisis has grown personal, with the onus now on leaders themselves to start restoring it. Michael E. Porter, a leading authority on company strategy and the competitiveness of nations, says that the legitimacy of business has fallen to levels not seen in recent history. One of the dangers he cites is that this diminished trust may lead governments to set policies that further undermine competitiveness and sap economic growth. Trust needs to be restored by the financial services firms themselves, not only to avert the intervention of more government regulation, but also to keep in line with customer expectations. Ethical Consumer’s research shows that between five to 10 per cent of buyers are always ethical, while 60-75 per cent are sometimes ethical and influenced by availability and choice. In other words, the majority of buyers are influenced by ethics, and favour companies demon60 | AUGUST 2013
strating trustworthy behaviour. Another fundamental point of difference today, from the past, is the ready availability of information and “mass-connectivity.” The restoration of trust and growth now takes place in an environment of transparency and accountability. There are no short cuts. This time, the world is watching. Armed with knowledge and social media, consumers are holding financial services firms accountable to act with ethics. “Spin” is almost dead; Twitter has killed it. Consumers have been burnt by too many corporate frauds and scandals not to demand a move towards integrity. As consumers fully realize their newfound power, they are increasingly wielding it to change the way business is conducted. The crisis has also strained the trust between companies and their employees, which can be measured by the amount of gossiping, venting and complaining that goes on under the surface. Most leaders are too weak to address this, because they are scared of conflict and don’t know how to build the trust that resolves it, in turn, creating a vicious cycle. Organizational ethics will restore trust, because ethical leadership demands that issues such as a lack of resources, inappropriate pressure, mixed messages, lack of oversight, wasted productivity and internal politicking are addressed. Talented employees are quickly realizing they don’t have to be compromised by this kind of conduct, and are selectively targeting the best-practice employers they want to work for. Financial services firms must earn and maintain the trust of their employees by acting with integrity to get to the truth of what’s causing a problem, and then fixing it. Once this is done, the onus can shift to employees to deliver. This is essential to rebuild the trust that is the foundation of our system, and strengthen it through effective processes that sustain it. Trust is the key commodity in business. It may not have been so in the past, but it is today. In the 1500s Nicolo Machiavelli argued in his book The Prince that cruelty restores order and obedience. During the Industrial Revolution in the 1800s businessmen were able to ignore social justice to increase profits. In the 1980s, “Greed was Good” on Wall Street. In 2013, companies no longer have such control over markets, customers or employees and need new tools of engagement. Our global system too is now so interdependent that our interests are becoming aligned. Financial services firms need to serve customers and communities better in order to
serve their own interests. UQ Business School engaged Dr. Graham Dietz and Dr. Nicole Gillespie for a study on Building and Restoring Organizational Trust, and found three characteristics leaders need to build trust: • Competence – the knowledge, skills and experience to do the job • Benevolence – people want to feel their leaders have their best interests at heart • Integrity – the adherence to a set of clear principles such as honesty and fairness Ultimately, trust can only be created by behaving in a trustworthy manner on a consistent basis and delivering on integrity, competence and benevolence. Trust arises through respect, transparency, knowledge and diversity of ideas and influence. These are not new concepts. They are fundamental aspects of our true nature. To access them, we need to “unlearn” many of the stereotypes we have been taught about business. In particular, we need to unlearn that
control and command systems are effective, that secrecy and deceit enhance value, and that benevolence and integrity are actions that business often associates with weakness or naivety. For mortgage professionals, it starts with better questioning at the customer interface to understand fully and act on their needs and concerns. Recommend not just property-related options when asked for bigger-picture guidance, and you will find, in the long run, your trust will be rewarded. To restore trust in modern-day commerce, financial services firms need to change customer perceptions around ruthless, manipulative or hard-talking advisers being good for business. We need to unlearn many of the outdated, often un-challenged concepts we link with success, and open our minds to an evidence-based, pragmatic review of how integrity, benevolence and competence will drive commercial success in the financial services future.
Omer Soker is a corporate speaker, trainer and the founder of The Ethics of Success Corporation. This article is an edited excerpt from his new book on business ethics, trust and engagement entitled The Trust Future, which has been described as “a breath of fresh air in current business literature.”
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PROFILE/ FAVOURITE THINGS
Favourite things Fiorella Fromager, Dominion Lending Centres Downtown Financial, Vancouver, B.C. Favourite Mortgage Product:
They’re all great and it really depends on what’s best for my clients and their current situation. It doesn’t take much time at all for me to have a fairly good sense of what would work best for my clients and typically it’s all done over the phone until the final signing of the mortgage documents. This way, I can save them time, money and the planet as most of the
application process can be done online or over the phone... it’s so simple!
Favourite Drink: Coconut water, it’s delicious and I’ve been told it helps to bring my body to alkaline, which is a healthier state to be in.
Favourite Place to Be: Home sweet home...with my children!
Favourite Book: That’s a great question and I’m going to say the Neville Reader. Why? Because it speaks of how important our thoughts are and the feelings behind what it is that we want to create in our lives. It’s a good read on the principle of “to think is to create.” One step beyond this book is a fabulous class called the Basic, which is an educational class where you get to explore, question and discover your life such that you expand your personal and professional effectiveness NOW! If you want more information on it, just give me a call!
Favourite Sport: I have so many that I love and my all-time favourite would be, hiking! Just the feeling of peace and contentment I get when I’m in nature is magical and I am so blessed to be close to some of the most beautiful places to hike, just outside of Vancouver.
Favourite Music: I’ve gone
Favourite Movie: The most recent movie that has had an impression on me would be Avatar. The reason is that I too believe that we’re all connected and I know that each and every one of us has the ability to make a positive difference on this planet. We can create generations of hope and the life we choose filled with infinite possibilities! 62 | AUGUST 2013
through so many stages of music growing up in the late 60s and I love it all. Music is an international language and speaks to our hearts regardless of background, ethnicity, language...it has always seemed to cross over so many boundaries because music for me is something I feel that can touch me on so many levels !
Favourite thing about working in the Mortgage Industry: My favourite thing about working in the mortgage industry is the amazing people I get to meet and be of service to. Every new opportunity allows me to be a beneficial presence on this planet as I get to help my clients create the life of their dreams... and, in turn, it supports me in creating the life of mine (paying it forward through various volunteer work). It’s a win-win. How great is that?!
Favourite Vacation Spot: One would be the Mii Amo Resort in Sedona, Arizona. It’s a short flight away. The hotel and food is fabulous, not to mention the beautiful hikes up the red rocks!
GUEST / COLUMN
THE UNSINKABLE MARKET There’s been a lot of talk about rising rates sinking broker boats, but what about the very large number of preapprovals? asks agent Lachman Balani
A year after the tightening of the mortgage rules, the Toronto housing market still stands firm. Last year, many pundits were aggressively predicting a crash in the Toronto Real Estate market and vehemently knocking others who said there was no basis for a crash, but perhaps a slowdown. Media was rife with news that the household debt had reached 165 per cent of household income, which was unsustainable and that a huge downward plunge in house prices was imminent. Also, in July of last year, the government tightened mortgage rules contracting the amortization term from 30 years to 25 years and increasing the limit of the down payment on homes of more than $1 million. This led to a slowdown of sales but not in prices. However, the naysayers still kept on saying that home prices would fall substantially. As a matter of fact, earlier this year, Maclean’s, ran an article with the headline “The housing bubble has burst, and few will emerge unscathed,” that report going on to say, “a housing correction—or, possibly, a crash—is no longer coming. It’s here.” An oft-quoted economist from Capital Economics was also very bearish on the housing market as a là Maclean’s. As late as May of this year, many foreign analysts and magazines including England’s well-renowned The Economist said the housing bubble in Canada is about to burst.
TORONTO It must be pointed out here that mortgage rates have in the last month or so risen quite substantially with five-year closed rates going up from as low as 2.79 per cent to 3.29 per cent (please note these rates are only indicative—some institutions may have lower or higher rates) and may even go higher. The primary reason is because the US Fed’s head honcho Ben Bernanke suggested in his June statement that the Fed might ease off its bond-buying programs later this year, which sent bond prices reeling downwards as people started dumping their holdings. This led
to an exponential rise in bond yields (bond prices and yields are inversely proportional), which in turn led to a subsequent rise in mortgage rates, which are tied to bond yields. As an example, in a short span from May 1 to Jul 26, five-year bond yields, which are tied to five-year mortgage rates, have risen from 1.15 per cent to 1.72 per cent (and even went higher in between) representing a huge increase of 50 per cent! This increase of rates has once again spurred talk of a crash in home prices because people will not be able to afford homes at these rates. However, it should be pointed out that many homebuyers already have pre-approvals from institutions at low rates, from 2.79 per cent to 2.99 per cent which are valid to as late as October, so prices of homes will not move downward a lot until then to accommodate the current increase in mortgage rates. If after that home prices do decrease at a healthy rate, then so be it. It would probably be a good sign. However, in the event there is a huge downward spiral so as to affect the economy adversely, then the government has many aces up its sleeve. The most obvious ace would be to expand the amortization accordion to 30 years, making sweet music as it does so, and then to 35 years and so on. The government has in the last four years tightened mortgage rules every year and can loosen it again over the same period, so I personally don’t see a crash in sight anytime soon. As an example, increasing the amortization period from 25 to 30 years effectively means mortgage rates can climb one per cent and the monthly mortgage payments will not change. That is to say, one pays the same amount monthly for a 25-year amortization at 2.79 per cent as one will if the rates rise to 3.79 per cent for a 30-year amortization. Barring a huge unforeseen political or economical event, the Toronto housing market is still a safe bet.
Lachman Balani is a mortgage agent with the Mortgage Centre M.O.S. MortgageOne Solutions Ltd., based in Mississauga.
JULY 2013 | 63
B2B Bank b2bbank.com/mortgages Ph: 1 800 263 8349 Inside Back Cover
Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 39
Bridgewater Bank www.bridgewaterbank.ca Ph: 1 888 837 2326 Page 7
Radius Financial www.radiusfinancial.ca Ph: 1 877 369 6398 Inside Front Cover
RMG Mortgages www.RMGmortgages.ca Ph: 866 809 5800 Page 27
HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 43
RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 45 Technology & Software
ROMSPEN Investment Corporation www.romspen.com Ph: 1 800 494 0389 Page 1,49
Capital Direct www.capitaldirect.ca Ph: 1 800 959 9290 Page 33
D+H Limited Partnership www.dhltd.com Ph: 1 866 345 6449 Page 2
Vector Financial Services www.vectorfinancialservices.com Ph: 1 866 483 8018 Page 47-48
First National Financial LP www.firstnational.ca Ph: 416 593 1100 Page 20,21
Home Loans Canada www.hlcmortgages.com Ph: 1 866 452 1821 Page 3
Mortgage Architects www.mortgagearchitects.ca Ph: 1 877 802 9100 Page 28, 29
Tribecca Finance Corporation www.tribecca.ca Ph: 416 225 6900 Page 61
National Bank www.nbc.ca Ph: 1 888 483 5628 Page 44 Non-Bank Lenders
Dominion Lending Centres www.DominionLending.ca Ph: 1 888 806 8080 Page 13
Keystroke Quality Computing Inc. www.keystroke.ca Ph: 1 800 857 0558 Page 37
Home Trust www.hometrust.ca Ph: 1 877 903 2133 Page 31
Canada Guaranty Mortgage Insurance Company www.canadaguaranty.ca Ph: 1 866 414 9109 Page 35
MCAP www.mcap.com/brokers Page 11
Genworth Financial Canada www.genworth.ca Ph: 1 800 511 8888 Outside Back Cover
Marlborough Stirling Canada www.morweb.ca Ph: 1 877 626 2022 Page 9 Real Estate
Optimum Mortgage A Division of Canadian Western Trust www.OptimumMortgage.ca Ph: 866 441 3775 Page 15
64 | JULY 2013
Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 41 Services
Centum Financial Group Inc. www.centum.ca Ph: 1 604 257 3940 Page 5
FDS Broker Services Inc. www.fdsbroker.com Ph: 905 566 4420 Page 17
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