CMP 9.12

2015 ALTERNATIVE LENDING GUIDE

MORTGAGEBROKERNEWS.CA ISSUE 9.12 | $6.95

THE TECHNOLOGICAL BORDER American lenders keeping up with Canadian monolines WHO COMES OUT ON TOP? Comparing mortgage brokers to financial advisors MARKET MOVEMENT New year, new interest rates?

WHO IS TODAY’S BROKER?

A comprehensive and personal look at the average mortgage professional

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ISSUE 9.12

Contents December 2014

MARKET MATTERS 8 | News analysis Industry pros offer tips for winning new-build business

18

10 | Head to head Is commercial lending really headed for trouble?

12 | Statistics Who’s hot and who’s not in national house sales

COVER STORY

The average broker’s lifestyle

14 | Technology update The latest technology that will make your job easier

Find out how you measure up to your peers on everything from portfolio size to pets – and get an inside glimpse into the life of the average financial advisor, too

16 | Commercial update Inventory challenges and slowing foreign investment could signal hard times

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DATE:

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ISSUE 9.12

FEATURES 40 | Industry icon Canadiana’s new president, Kevin Conroy, on his plans for the monoline’s future

REGULARS 4 | Editorial 6 | Letters to the editor Readers weigh in on CMP’s annual Brokers on Lenders survey results 47 | Favourite things Layth Matthews of RateMiser Mortgage Advisors

44 STRATEGY

Burning the candle at both ends Advice on sidestepping the all-too-prevalent problem of burnout

2 | DECEMBER 2014

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EDITORIAL

DOWN, BUT NOT EVEN CLOSE TO OUT CAAMP’s 2014 fall report offered anything but an early Christmas present for brokers. The annual survey tracking consumer mortgage decisions identifies a falloff in the use of industry professionals as more and more Canadians turn to the banks – for both first and repeat mortgage transactions.

Of the home loans secured in 2014, some 61% were obtained through a bank, according to the report. That’s a 20-point rise. On the other end of the spectrum, mortgage brokers saw their share fall to 31%, a precipitous drop from the 40% the channel claimed in 2013.

Make no mistake, the findings aren’t what good broker boys and girls were expecting Santa to stuff into their stockings. Still, it wasn’t a lump of coal, either.

As I see it, the survey’s results represent a growing acknowledgement on the part of the Big Five: brokers are a real threat and no mere nuisance – especially in a market where originations are increasingly hard to come by.

The Canadian broker has now forced his big-league competitors to bring their A game to the consumer in the first inning, instead of trotting it out at the bottom of the ninth and only after the client presents a monoline’s commitment letter.

The survey’s results represent a growing acknowledgement on the part of the Big Five: Brokers are a real threat and not a mere nuisance – especially in a market where originations are increasingly hard to come by Today, banks are presenting competitive rates up front and eschewing the kind of game-playing brokers have valiantly fought to expose.

That improved market transparency has been won for consumers by none other than mortgage originators, and the spoils of the battle are improved brand awareness and a greater understanding of the good mortgage brokers do.

Many of you are now leveraging that higher profile to forge new business with new clients.

Those relationships will, in turn, position you to take back some the market share lost to the banks when interest rates begin to creep upward and winning on rate alone becomes much harder.

So really, that CAAMP report may be a Christmas present after all.

Vernon Clement Jones Editor

COPY & FEATURES MANAGING EDITOR Vernon Jones SENIOR WRITER Justin da Rosa JOURNALISTS Ryan Smith, Sam Richardson CONTRIBUTORS Nestor Arellano, Samo Ayoub COPY EDITOR Clare Alexander

ART & PRODUCTION DESIGN MANAGER Daniel Williams GRAPHIC DESIGNERS Marla Morelos, Loiza Caguiat

SALES & MARKETING ASSOCIATE PUBLISHER Trevor Biggs GENERAL MANAGER, SALES John Mackenzie MARKETING AND COMMUNICATIONS Claudine Ting PROJECT COORDINATOR Jessica Duce

CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker TRAFFIC Kay Valdez EVENTS AND CONFERENCE MANAGER Chris Davis Editorial inquiries vernon.jones@kmimedia.ca Advertising inquiries trevor.biggs@kmimedia.ca Subscriptions tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca KMI Media 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 Canadian Mortgage Professional is part of a international family of B2B publications and websites for the mortgage industry Mortgage Professional Australia sam.richardson@keymedia.com.au T +61 2 8437 4787 Mortgage Professional America ryan.smith@keymedia.com T +1 720 316 0154 Offices in Toronto, Sydney, Auckland, Manila, Denver 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 IB magazine can accept no responsibility for loss

4 | DECEMBER 2014

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CONVERSATIONS / LETTERS TO THE EDITOR

MORTGAGEBROKERNEWS.CA

BROKER ESPIONAGE? RE: SUPERBROKERS 2014 (CMP 9.11) There was a lot of hard selling by broker networks in this year’s feature, but that aside, the value of learning what my competitors are doing is very useful in determining what programs my network has to improve on. I couldn’t find one, though.

-Ming Cheung

RE: LENDERS REPLY (CMP 9.9) Channel lenders listened to commentary – both good and bad – from mortgage professionals answering this year’s “Brokers on Lenders.” Then they, of course, answered back.

Now CMP is giving brokers the last serve of the game.

-Lender help line

Radius has a great service. I sent them a deal today and got an approval in 40 minutes. We lied: the last serve – or word – goes to ...

-Ranjit

The truth is that we sometimes criticize our broker lenders, but each of us has one or two that we hold onto because they come through time and again for the client. Those who take the time to respond to the [Brokers on Lenders] survey are usually the ones on our lists.

-Mark Jameson

If brokers would actually put notes in their apps that make sense, and stop sending deals to three or four lenders at the same time, it would likely improve service levels.

-Banker

I was hoping that my lender would respond this year, and again I have been disappointed.

-Graham Bishop I think that Merix’s success with Lendwise in this survey is great. It shows that they know they have to put the broker first and to listen to what they are calling for from their lenders. Good job.

-Vic Behar

I want to see broker lenders take the Lender Reply more seriously as an opportunity to really address the shortcomings of their product lines and their service. For those who don’t reply, shame.

-Jay Stratton

6 | DECEMBER 2014

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MARKET MATTERS / NEWS ANALYSIS

PRE-BUILD BUSINESS:

WINNING IN THIS INCREASINGLY IMPORTANT SEGMENT

As resales drop and the market shifts to focus on new builds, brokers – often forced to play second fiddle to in-house mortgage specialists – are thinking outside the box to win business

TERRY KILAKOS NORTH-EAST MORTGAGES

DAN FAUBERT OTTAWA-CARLETON MORTGAGE

ELISSEOS IRIOTAKIS SAFEBRIDGE FINANCIAL

As inventory challenges confront brokers, recent numbers suggest that new builds are increasingly taking the place of resale transactions.

It’s still a seesaw game for condo starts, but a more steadfast trend is the growth of new singlefamily builds and the real potential they offer mortgage brokers. There is one problem, though: Brokers have traditionally struggled to win mortgage business associated with new builds. That has everything to do with the number of mortgage specialists invited to set up shop within the developer’s salesroom.

The phenomenon is particularly frustrating for brokers as they eye a slowdown in resale numbers, given inventory challenges across key Canadian markets such as Toronto, Vancouver and Calgary.

The end result: Brokers are increasingly going to have to jump the hurdles standing in between them and new construction purchases.

In September alone, housing starts jumped to 197,747 units compared to 191,095 in August, according to CMHC. The trend is a six-month moving average of monthly seasonally adjusted annual rates of housing starts.

“The increase in the trend reflects stronger starts activity since April, largely concentrated in multi-unit dwellings, including condominiums,” says Bob Dugan, CMHC’s chief economist. “However, the currently elevated level of condominium units under construction supports our view that

condominium starts should trend lower over the coming months.”

They did, in fact, dip for October, but at the same time, starts for detached properties in urban centres spiked to 66,514 from 62,514.

The incentive is great for brokers, but the challenge remains: how to get around the mortgage specialists ensconced in the developer’s office.

Those bank employees currently hold the upper hand, enticing buyers with low rate holds – low interest rates and the promise that those rates will still be in place after construction is finished and closing dates are set. That could be upwards of two years in some cases.

“The numbers point to the need for more broker channel lenders to offer one-year rate holds to help brokers attract the business as clients are putting down deposits on condos,” says Terry Kilakos, broker-owner of North-East Mortgages.

Those who locked in a mortgage for a pre-build condo – which most often are obtained through a mortgage specialist in the developer’s office – seem to be the only ones not feeling the brunt of tighter underwriting.

“The issue doesn’t necessarily affect consumers who got builder mortgages/rate holds three years ago,” says Lior Hershkovitz of Mortgage Edge. “It affects people who are coming into the market now.

Moreover, even the alt-A lenders are being more cautious with condos.”

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MORTGAGEBROKERNEWS.CA

Consequently, brokers are having to rely on imaginative solutions to ensure their clients receive funding for condo purchases even as lenders seek to claw back on their exposure there. In some cases, spreading the risk around may be the only choice.

“It depends on the client situation and the income they make; sometimes you need a combination of mortgages from different lenders,” says Elisseos Iriotakis, co-CEO of Safebridge Financial. “The B-lenders will usually take on 65%, and you fill the gap with a private lender, and that will get you to your traditional 75% to 80%.”

There are other creative solutions available to savvy brokers looking for an in with clients ‘buying off the plan.’ One such solution is to bypass the developer’s office altogether and head straight to online homebuyer forums, says Dan Faubert, a high-volume broker with Ottawa-Carleton Mortgage who has successfully used that detour.

“I don’t think a lot of brokers know about these sites and how they can get access to buyers who already have one-year rate holds with the banks but are coming up to the four-month mark before closing,” Faubert says. “It’s the perfect time to get them because I can offer them a better rate than what they got a year ago from the bank, and they’re now free to cancel that deal and go with a broker.”

The little-known strategy has helped the veteran grow his book, with new construction deals now accounting for 10% of his business.

Online forums bring together thousands of new construction buyers exchanging tips, commentary and complaints about the process of buying a condo, townhouse or detached home from a developer’s plan. While some of those websites are focused on a particular development, others draw their membership from across the market.

Faubert and a handful of other mortgage professionals have been successful in mining those online forums for leads by striking up conversations with users and providing informal advice, which helps build relationships. The strategy is similar to those used by brokers on Twitter, although the forums provide Faubert with a more targeted group from which to draw deals.

“It’s the perfect time to get [buyers] because I can offer them a better rate than what they got a year ago from the bank” Dan Faubert, Ottawa-Carleton Mortgage

A ROLLING START

Detached property starts (urban centres)

62,514 units SEPTEMBER

66,514 units OCTOBER

Housing starts

191,095 units AUGUST

197,747 units SEPTEMBER

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HEAD TO HEAD

Q:

Commercial catastrophe on the horizon?

A recent report forecasts tough times ahead for commercial brokers. We spoke with three leaders in that space to get a sense of whether the warnings are being heeded

HARRY TYSON

JASON COSMAN MORTGAGE CENTRE

DOMINION LENDING CENTRES COMMERCIAL CAPITAL

“Commercial real estate, especially the industrial sector, is in strong demand; cap rates are, at times, below 5%. Some properties in Burnaby close to Lougheed Highway are being bought as investment properties; borrowers are looking for upside in rezoning potential, which drives the cap rates lower.

A current example: A standalone property in Burnaby of 5,500 square feet will ultimately be sold for about $1 million, which would be a 4.2% cap rate, and would allow financing of approximately 55%.

Standalone properties below $1.5 million are being snatched up by owner-users or investors, so cap rates at these levels are being seen on a regular basis. Properties above that level also are being purchased at lower cap rates. If you go into the Industrial market in the Vancouver Main/ Cambie area, some sizable transactions have occurred at below 5% cap rates.

It is believed that if/when interest rates go up, the cap rates will have to follow; otherwise, financing at 50% will become the norm, versus 70% to 75%. At 50%, it will take a lot of investors out of the marketplace.“

“In response to a recent article published

by CMP, I believe there should be concern regarding the long-term sustainability of lower interest rate debt available within the commercial market. In my experience, more and more borrowers are being forced to accept mortgages from ‘B’ institutional lending sources and, in many cases, private lenders. The institutional ‘A’ banks are tightening their lending criteria, making it far more difficult to obtain financing for these borrowers unless they have substantial experience and a large net worth.

It is difficult to comment on whether there will be enough tenants to fill the vacancies of older commercial properties.

However, there has been a recent increase in commercial renovation projects in the city of Toronto, in which buyers have taken over older buildings that have had vacancy issues and constructed fresh facades to improve overall appearance. This suggests that owners are realizing the importance of the property’s appearance in order to compete with newer, more attractive developments.”

“Overall, I do not think that the commercial mortgage market is in trouble.

However, I do think there are certain markets, especially in Western Canada, where there could be cause for concern. This is due to incredibly low capitilzation rates that are not economicaly justifiable. Major markets, on the whole, will remain consistent. However, secondary markets that are heavily dependent on resource industries are more unpredictable and can be influenced significantly by economic changes.

In my view, interest rates are the primary factor influencing the future of commercial mortgage markets. This issue receives a great deal of attention in Canada. Should interest rates move up, I believe capitalization rates will begin to rise and reveal signs of commercial real estate market weakness. That said, I don’t necessarily see signifigant interest rate hikes in the near future, and as a result, I believe capitalization rates will remain low.

Personally, I have never been busier.

Our office is experiencing one of the best months in recent history, and I expect this trend to continue for some time.”

DOMINION LENDING CENTRES INNOVATIVE MORTGAGE SOLUTIONS

JASON BECKINGHAM

Got an opinion that counts? Email mortgagebrokernews@kmimedia.com, or join the discussion at www.mortgagebrokernews.ca/forum

10 | DECEMBER 2014

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STATISTICS / RESIDENTIAL SALES ACTIVITY

TERRITORIES SEE BIG GAINS Sponsored by TM

Some of Canada’s smaller markets pulled more than their share of the weight in October; several recorded impressive sales jumps Ontario, Alberta and B.C. continue to chug along at what has come to be an expectedly steady pace; however, four smaller provinces also turned in impressive numbers to kick off the fall.

“While the strength of national sales activity is far from being a Canada-wide phenomenon, it extends beyond Vancouver, Calgary and Toronto,” says Gregory Klump, CREA’s chief economist. “Sales in a number of B.C. markets have started to recover from weaker demand over the past couple of years. They have also been improving across much of Alberta, where interprovincial migration and international immigration are reaching new heights.”

Starting in the Arctic, Northwest Territories (+72.7%) saw the country’s most significant sale increase in October, with 469 homes sold. Meanwhile, Yukon (+33%) and Prince Edward Island (+21%) also saw major increases in home sales.

Canada as a whole saw a 7% year-over-year sales jump in October, bolstered in large part by record-low interest rates. However, not all markets faired as favorably.

“Low interest rates continued to support sales in some of Canada’s more active and expensive urban housing markets and factored into the monthly increase for national sales,” says CREA president Beth Crosbie. “Even so, sales did not increase in many local markets in Canada, which shows that national and local housing market trends can be very different.”

32.3%

Northern Lights

84.2% 8.6%

0.0%

Medicine Hat Swift Current Portage La Prairie

TOP CITIES

Sales Activity

(year-over-year percentage change) C

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HOT TO COLD: SALES ACTIVITY BY PROVINCE (year-over-year monthly percentage change) Source: CREA

+7.0%

Northwest Territories: +72.7 Prince Edward Island: + 21.0 New Brunswick: + 17.0 British Columbia: +14.6 Alberta: +8.9

Overall Canadian sales activity

Ontario: +6.6 Quebec: +2.5 Nova Scotia: +0.3 Saskatchewan: -2.1

31.5% Moncton

Manitoba: -5.8

50.0%

Newfoundland and Labrador: -7.9

47.2% Yarmouth D+H CMT Mortgage ad final.pdf

1 4/16/2014 10:53:44 AM Tillsonburg District

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TECHNOLOGY ROUNDUP

The latest from the world of mortgage

BITS & BYTES >> AMBA ONLINE COURSE ON MORTGAGE PROTECTION The Alberta Mortgage Brokers Association is offering a five-module online course that analyzes actual Canadian court cases to explain why brokers need to be proactive in apprising clients of their insurance protection options.

At the end of the course, brokers will be able to: –– Extrapolate relevant concepts from case law pertaining to the presentation of mortgage protection to borrowers –– Describe a mortgage broker’s duty of care in tort to borrowers –– Identify reasons why the protection option has to be presented to borrowers –– Define a mortgage broker’s limited role in terms of presenting insurance –– Identity strategies to assist in minimizing broker liability in terms of presenting insurance Completion of the course is equivalent to 5 AMP credits. The course requires Adobe Flash Viewer (minimum Flash 8). >> BUGS FIXED ON MOBILE MORTGAGE APP Bendigi Tech reports that it has fixed small bugs in the location service and user interface of its Canadian Mortgage mobile application, and with the flaws remediated, the app is working better.

The app is essentially a mortgage calculator. It works on Apple iOS

and Android mobile devices. The app enables users to use a slider or a keyboard to input and adjust values and instantly receive calculation results.

The Canadian Mortgage app calculates total monthly home cost, Canadian mortgage payment (fixed and variable), payment frequencies, Canada Mortgage & Housing Corp. premiums, all Canadian provincial land transfer fees, municipal land transfer fees and more. >> SAVE ON ROAMING CHARGES WITH MAPS.ME Being able to use map applications on your phone is handy. Navigating around outside your wireless service area, however, can be costly because of data and roaming charges.

Maps.me is a completely offline navigation service available for Android and iOS devices that helps you get from point A to point B with the least amount of complication. It doesn’t need an Internet connection, so you save on roaming charges. It provides maps on every country, city and even the smallest island in the world.

Using your device’s GPS feature, Maps.me is able to show your location on a map in relation to your intended destination. You can zoom in and out smoothly, and the screen never freezes. Maps are detailed and show restaurants, tourist spots, railway stations and more.

The Lite version is free, but for other features like location bookmarking, offline map searches and more, you’ll need to pay $4.99 to upgrade to the Pro version.

MORTGAGE OUTSOURCE SCRAMBLE

Canadian lenders are usually the ones taking a page or two from American banks, but maybe not as far as technological outsourcing goes Technological challenges and the regrowth of mortgage lending have spawned a wave of outsourcing by U.S. monolines – all hoping to win efficiencies their Canadian counterparts also struggle to attain.

At the heart of the matter are increasingly stringent mortgage rules in the U.S. In January this year, the federal government began implementing the qualified mortgage rule mandate, requiring lenders to be able to prove that borrowers have the ability to repay their loans. Earlier this month, six regulators released a document stipulating that lenders need to retain a stake in mortgages they sell to investors, something federally regulated lenders in Canada effectively do already.

By 2015, new rules will require lenders, at the onset of the application process, to provide borrowers documents detailing mortgage costs that

have to be signed and returned within three days, a process that must be repeated three days before the mortgage closes.

Mortgage firms fearful of being slapped heavy penalties if their loans do not come up to scratch are scrambling to hire tech companies to drag their processes into the 21st century.

The mortgage IT outsourcing market is estimated to be worth $5 billion a year, and everyone from startups to giant conglomerates like Xerox are losing no time cashing in. Lenders will likely fork out about $500 per loan in order to upgrade their systems, according to mortgage banking consulting firm Stratmor Group.

While many lenders use some form of technology to handle loans, it will not be enough to cover the flood of regulatory requirements expected in the coming year, says Jonathan Corr, president of technology firm Ellie Mae, in a recent interview with the Chicago Tribune. Ellie Mae processes nearly a quarter of mortgage applications in the U.S. Lenders processing applications chiefly with paper forms and sending out documents via courier or fax, for example, run the risk of having to push back closing dates. That’s why electronic signing is one of the most lucrative areas of the market right now.

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technology

Q&A: WHY BROKERS HAVE TO CARE ABOUT CREDIT ... AFTER THE ORIGINATION

Derik Rehou, a tech expert and veteran agent with The Mortgage Centre, on why – not how – brokers are using technology to get clients up to speed on debt containment

DERIK REHOU

CMP: As an agent, you’ve excelled at helping clients contain debt. Why should brokers, using technology, encourage clients to focus on protecting credit?

Derik Rehou: An

increasingly competitive marketplace, paired with the blurring of borders between financial service providers, demands increased levels of service. Also, more people today find themselves on shaky financial ground than a generation ago. This demands a rethink of any transactional business model and its transformation into that of a service business. Professionals who go above and beyond for their clients stand a greater chance of not only winning the immediate contract, but also generating repeat and referral business. Those who choose to stay in the past will see their client base shrink quickly.

CMP: Clients who qualified for a mortgage as recently as a year ago may not be able to refinance or get a new mortgage. What should brokers do after they’ve originated a loan to ensure the client can access that lending again?

DR: They need to communicate the fact that credit ratings and qualification, like many other areas of life, can change at any time. CAAMP surveys mention clients are looking for five to seven touch points a year. I think at least two of these should be credit and qualification reminders.

Mortgage brokers who shy away from this, feeling they may be the bearer of bad news, need to rebrand themselves as guides and mentors, proactively looking out for their clients’ ongoing financial health.

CMP: What are the challenges brokers face in getting clients to prioritize debt reduction?

DR: The first challenge is the client’s awareness. Clients are generally unaware of the state of their finances, and they are also very accepting of their huge debt load.

They’ve been taught that it’s OK to hold large amounts of personal debt. Clients are afraid to own up to the amount of debt they hold, since it can be very depressing.

They find it easier to simply carry on, in a “minimum monthly payment” mindset.

The second challenge is the client’s desire for instant gratification. The post-war generation would make $10, live off $3 and save the rest. Today’s consumer wants to spend without consideration of the true costs of goods purchased, especially when it comes to purchasing on credit. Consumers today want to spend more than they have, and are willing to accept mortgage terms based on a desire to move quickly, rather than search for a good, legitimate deal.

The third challenge is time. People do not have the time to sit down and budget.

Workdays, evenings and weekends are often overbooked, and the lure of social media is stronger than the tedium of budgeting, so financial literacy is seen as unpleasant and not rewarding.

The fourth challenge rests with the brokers themselves, who do not see themselves as financial mentors to their clients. There needs to be greater initiative to be more than simply a ‘broker,’ and instead help guide the client through the challenges of qualifying for a mortgage and maintaining a sound financial existence.

They need also to be aware of the fact that business does not always just come from the client immediately facing them. Some of my best referring clients are those whom I have not yet closed a mortgage with, but who have been impressed with my approach and

have referred business as a consequence.

CMP: What are the basics brokers need to be sharing with clients to bring home the importance of protecting credit?

DR: The simplest way to remember what affects credit score is to think “A, B, C, D, E.” A: Always pay on time. The client may pay all their bills fully and still have a low score. The key is to focus on that payment due date. Even if they cannot repay the entire balance, they need to make the minimum payment on time.

B: Beware of high balances. Outstanding balances (balances they keep for longer than a month) should be kept low – below 70% of their approved limit is best. The higher their balances, the lower their score.

If they go over the limit on their card, their score can plummet. We’ve seen people with no missed payments and otherwise clean credit have credit scores plummet due to high balances.

C: Credit is like fine wine – older is better. Clients should always keep their oldest piece of credit. Do not cancel old cards for the fancy new card with points. The card may look good, but their credit will not.

D: Do not be desperate. This portion refers to credit checks or inquiries. The reason that credit checks affect credit is that they are rated on how often, or how desperate they appear to be for loans. The goal is not to appear too desperate. Don’t let anyone and everyone check their credit.

E. Employ two types of credit: one revolving type of credit (like a credit card) and one non-revolving type (like a fixedterm loan). Notice that I didn’t say “have two credit cards,” since these are the same type. There’s nothing wrong with having two credit cards, but it’s best for their credit rating if they also have a non-revolving type of credit, like a car loan or an investment loan.

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LTV LOWDOWN

SPECIAL GUIDE

LENDER COMMITS TO ALT SPACE BE PREPARED FOR B-21

ALTERNATIVE

LENDING GUIDE NAVIGATING THE NEW BROKER REALITY

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GUIDE / CONTENTS

2 Not your father’s mortgage segment When clients can’t qualify for a traditional mortgage, The Mortgage Centre’s Adam Hale steps in

6 | An alternative commitment Just three years old, Equity Financial Trust is dedicated to making a name for itself in the alternative lending space 10 | ‘B’ prepared for B-21 Optimum Mortgage’s Lester Shore outlines what you need to know to navigate the recently released OSFI guidelines 12 | The alternative mainstream Tightened credit regulations mean more borrowers are looking for alternative financing. Home Trust’s Agostino Tuzi tells us what this means for the future

16 | Broker’s document checklist for 2015 A helpful guide to documents you’ll need to provide for a variety of lenders

14

14 | Learn and loan Ongoing education is essential to finding the best mortgage product for your client, says Steve Lydon of MCAP Eclipse

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GUIDE / MARKET SHARE

NOT YOUR FATHER’S

MORTGAGE SEGMENT

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Brokers are increasingly relying on alternative deals.

Adam Hale, a broker with The Mortgage Centre and one of Canada’s leading players in that space, shares some new tricks to winning market share in this important (and ever-changing) segment Following a number of Canadian mortgage rule changes, which were kicked off by several measures in 2012, brokers across the country turned to alternative lenders to fund deals the conventional banks were forced to turn away. Two years on, the Alt-A deal continues to demand a great deal of time and expertise.

“After all the regulations – the B-20, the B-21 – the banks are declining deals because of these new policies,” says Adam Hale, a multiple winner of the CMA award for alternative brokering. “They don’t want to stick their necks out and explain to you what’s going on in the industry. It falls to the brokers to explain to the consumers why they get denied by the banks when their credit isn’t perfect.”

Hale, in fact, predicted this development years ago and prepared himself accordingly. When clients don’t qualify for conventional borrowing, he’s ready to step in. Sometimes, that means helping clients his father, Bruce, turns away.

The two share an office, and although conventional deals account for more than 50% of the team’s business, the younger Hale focuses solely on subprime business.

The two divisions within the brokerage work symbiotically, with client leads who don’t measure

up to A lending standards transferred to the alternative division and vice versa. But the end game, in each client’s case, is to eventually get them placed in a prime mortgage.

“Anything my dad turns down comes into my office, and I try to turn them around and get them back into my dad’s office as soon as possible,” Hale says. “This is where my colleagues seem to fall on their faces. Where they’re doing A business and the odd B business comes along, it doesn’t matter about the rate, it doesn’t matter about the LTV – what matters is an exit strategy.”

“[Banks] don’t want to stick their necks out...

It falls to the brokers to explain to the consumers why they get denied by the banks when their credit isn’t perfect” ALTERNATIVE LENDING GUIDE DECEMBER 2014 | 3

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Indeed, brokers across the country have recognized the effectiveness of using alternative lenders to help clients who don’t yet qualify for a prime mortgage attain temporary funding while they fix the issues that disqualify them in A lenders’ eyes. And this is where Hale excels and the hard work begins.

“We’re not finished on closing; that’s just the beginning. Now you have to come into my office after closing, and we have to make sure all the little things – the credit bureau – are cleaned up,” he says.

“We’re also re-establishing credit, and I tell clients that they have to report their own credit to the bureau; you can’t rely on the creditors to do that for you. That’s just a part of it. You have to get that receipt out to Equifax and make sure it’s reported. If you want to get your credit cleaned up in a year, you have to make sure these things are reported.”

“In my area, there is still a stigma, and we have trouble getting over 75% loan-to-value, even though you know they can go up to 80% ... it’s just whether or not they want to.

Sometimes a little bit of fighting and wrestling is required” But before helping a client fix his or her credit in the hopes of eventually attaining conventional mortgage funding, brokers have to get financing from an alternative lender. This can take some creativity, especially in smaller centres such as Hale’s home market of Hamilton. There, institutional players are apprehensive to lend up to the 80% loan-to-value threshold.

“Our loan-to-values are still 65% below the Hamilton escarpment; there are areas that are just blackballed completely, even though there are brand new homes and Toronto investors coming in left, right and centre,” Hale says. “In my area, there is still a stigma, and we have trouble getting over 75% loan-to-value, even though you know they can go up to 80%. They’re all allowed to go to 80%; it’s

just whether or not they want to. Sometimes a little bit of fighting and wrestling is required.”

To circumvent this, he uses two different strategies. “Key number one is private funds; sure, anybody can get a first mortgage, but if you’re short funds from the proceeds of the sale or having to pay off some debt to get ratios in line, then the only market you can go to is a private second mortgage, and they’re costly,” Hale says. “To close any private second mortgage costs $5,000 and up, you have to pay the broker $1,500, along with legal and registration fees, so it adds up pretty quick.”

Another tactic is to turn to local credit unions, whose provincial regulations sometimes allow for a little more regulatory wiggle room.

“What I find is that if you have good credit but you’re just missing the mark with income for the A lenders, what works well is local credit unions – they’re worth their weight in gold,” Hale says.

“They’re hit or miss, though; some aren’t very broker friendly, but with some of them you can squeeze in there with relationships over time. You have to build a structured deal while not wasting their time.”

Hale has made a career of alternative mortgage brokering, despite the fact that these deals require more effort than their conventional counterparts.

And although his father may close more conventional deals, the extra effort required for subprime transactions leads to increased profits.

“My dad probably does double the transactions I do, but we make the same income,” Hale says. “I’m adding a lot more value, and they’re seeing that. You can charge $2,500 on a $150,000 mortgage because you’re adding that extra strategy.”

4 | ALTERNATIVE LENDING GUIDE DECEMBER 2014

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GUIDE / MARKET SHARE

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GUIDE / EQUITY FINANCIAL TRUST

AN ALTERNATIVE COMMITMENT 6 | ALTERNATIVE LENDING GUIDE DECEMBER 2014

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GUIDE / EQUITY FINANCIAL TRUST

Alternative lending can be lucrative, but it also can be challenging – ensuring your client fits the lending criteria takes product knowledge as well as experience. One major alternative lender speaks to CMP about its commitment to working with brokers as well as its plans for the next 12 months Toronto-based Equity Financial Trust is a federally regulated trust company that specializes solely in alternative lending. It has an aggressive growth strategy that centres on its work with mortgage brokers.

“We’re only focused on the non- and near-prime mortgage space, and we only originate mortgages through the broker channel,” says Michael Jones, president and CEO of Equity Financial. “Our goal for 2015 and beyond is to become the brokers’ preferred choice as a lender in this space and in that channel.”

“To us, the more successful we make the broker in the eyes of their customer, the more successful we will be. That’s a goal that the whole organization has and intends to realize in the next 12 months.”

For now, Equity is already a presence in Ontario, focusing on urban and suburban locations with liquid real estate markets. A fairly new player in the mortgage lending business, opening up shop in the broker industry in 2011, the lender is focused on growing its operation and adding to its broker base in the coming year.

“We have a fairly large appetite for growth, and a lot of that growth will occur in 2015,” Jones says. “We’re in the process of finishing the design and creation of the new team, and it’s our expectation that that team

will be ready to write large volumes of business for the spring market in 2015. Equity has already hired some of the industry’s best underwriters and sales people and continues to look for more. We not only want to be the preferred choice for brokers, but the preferred employer for those on the lending side.”

As with most alternative lenders, Equity focuses on clients who do not fit the criteria required of prime lenders – clients with no credit (such as newto-Canada borrowers), self-employed Canadians and those who have experienced a major life event that has caused credit issues. And they believe the alternative space is poised for continual growth.

“We think all the changes CMHC have announced over the last five or six years have inevitably acted to constrain the growth of the prime market, so we want to go where the best opportunity is and where we can partner with brokers to find solutions for their customers,” Jones says. “A prime decision often gets driven by the beacon score, and it’s very binary – you either are or you’re not. When they aren’t prime, you need to provide solutions; one deal is not like the other, and you need underwriters who can figure out what the best solution is for each individual client.”

However, just because a deal is denied by a prime lender doesn’t mean it’s tailor-made for a non-prime

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GUIDE / EQUITY FINANCIAL TRUST

Equity Financial team L to R: Lorraine Sato, VP of mortgage operations, Michael Jones, president and CEO, Gino Tieri, VP of sales and marketing

“One deal is not like the other, and you need underwriters who can figure out what the best solution is for each individual client” alternative. There is a learning curve with alternative deals, and underwriters and brokers must be willing to work together to do what is needed to expedite the deal. Equity doesn’t expect brokers to have learned all the underwriting guidelines by heart; it is a willingness to work together to fund a deal that matters.

“Brokers can help by understanding the product of the lender and knowing what our guidelines are with respect to where we will lend, what type of blemished credit we will look at, how we look at qualifying a business-for-self person who doesn’t have that perfect record keeping,” says Lorraine Sato, VP of mortgage operations for Equity. “Education is really important to making sure that when they come in, they know it’s a deal that we’re probably going to be able to work with, and it’s the job of the BDMs on the road to educate our broker partners. Once you build the relationship with the broker, sales then hands it over to the underwriter, and the underwriter will take it from there.”

Equity has pledged continuing education as it

grows and expands its network of preferred brokers.

“On the alternative lending side, there is a lot of broker frustration in what they call ‘hostage deals’ – last-minute surprises – and we are very focused on ensuring that if a broker is going to send Equity a deal, we’re going to do all our due diligence in partnership with them,” says Gino Tieri, Equity’s VP of sales and marketing. “Our strategy is that days before funding, there is no surprise. It comes down to our BDMs and our sales approach, which is geared toward educating and supporting brokers so they are better equipped to provide solutions that work for their clients that fall in the non/near-prime category.”

In fact, says Tieri, “The lender has an obligation to educate brokers about its policies.” That’s something they see as paramount.

“Our focus is to enable brokers to be successful, and that’s going to be through education,” he says. In addition, Tieri indicates that in 2015, Equity will not only have competitive product offerings, but will introduce a broker compensation program that will reward brokers today and in the future.

“As the alternative lending space continues to grow, we encourage and support the advancement of the underwriting profession by investing in training programs and career growth, offering great compensation and benefits,” Sato says. “We are looking for underwriters who are customer-focused, open-minded and can think outside the box. For great career opportunities, go to equityfinancialtrust. com/careers.”

8 | ALTERNATIVE LENDING GUIDE DECEMBER 2014

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Equity Financial Trust GUIDE / EQUITY FINANCIAL TRUST

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GUIDE / MORTGAGE GUIDELINES

‘B’ PREPARED

FOR B-21

What can brokers expect as a result of OSFI’s recently released guidelines?

Lester Shore, VP of Optimum Mortgage, weighs in

On November 6, 2014, OSFI released the Guideline B-21 Residential Mortgage Insurance Underwriting Practices and Procedures. This guideline was intended to define principles that encourage best practices with respect to sound residential mortgage insurance underwriting. Therefore, it focuses on mortgage insurers’ underwriting governance, controls and risk management. The guideline was just issued and will be fully implemented by June 30, 2015. Many brokers are wondering what impact the new regulations will have on their own business.

Let’s start from the beginning: What caused B-21?

The mortgage crisis of 2007 in the U.S. is the leading factor in these regulatory changes. Back then, bad underwriting practices were rampant: borrowers were qualified with little documentation and bad credit, applications were not checked for accuracy, and as many as 40% of subprime loans were generated by ‘automated underwriting.’

As result, there were 179,599 foreclosure filings in July 2007, or one foreclosure filing for every 520 households. The total loss to the U.S. economy was estimated at $8.3 trillion, which greatly impacted the global economy. In October 2011, the Financial Stability Board issued the consultation paper “FSB Principles for Solid Residential Mortgage Underwriting,” including five recommendations – one of which was “Prudent Use of Mortgage Underwriting.”

B-21 was established as a result of this particular recommendation, and sets six principles for insurers’ oversight of all approved lenders.

WHAT DOES IT SAY?

1

The insurer must set business objectives and oversight mechanisms of their insurance underwriting.

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GUIDE / MORTGAGE GUIDELINES

2

The insurer must set standards to assess and qualify any lender to be approved to issue insurance.

3

The insurer must set underwriting criteria and requirements for lenders for continuing mortgage insurance.

4

The insurer must review approved lenders’ underwriting practices.

5

The insurer must assess and validate their own underwriting processes.

evaluate deals, so make sure your notes tell your client’s whole story. Your notes should avoid a CRISIS: •CREDIT Identify any credit issues and how they are being resolved.

•RISK Recognize the weaknesses and mitigate them.

•INCOME Note how long your client has been employed in his or her current position.

•SECURITY Inform your lender of any security issues related to the property.

6

•IDENTIFY Provide your contact information so the lender can easily reach you.

WHAT DOES IT MEAN?

•STORY Answer why the borrower is coming to you, what their unique circumstances are, what strategy you are using to get them into the “A” market, and how long your exit strategy will take.

The insurer must have effective portfolio risk management practices.

The devil is in the details, and we all have until June 30 to fully understand how insurers will react. Ultimately, we believe that we are going to see more rigorous underwriting from CMHC, Genworth and Canada Guaranty for insured deals. As result, I expect that we may see an increase in the number of borrowers who move into the alternative lending space.

WHAT CAN YOU DO? There are a few things you can do to package your deals appropriately and ensure that the implementation of B-21 won’t slow business. These include: •Knowing your alternative lending partner’s TDS/GDS limit •Understanding what your lender’s definition of ‘non-conforming’ is •Understanding when your lender might make exceptions •Leaning on your BDM and underwriter for guidance and support At Optimum, we make an exception to any deal when we feel that it makes sense. Our policy is and always has been to first confirm the affordability of the deal, then work to find a solution that meets each borrower’s needs.

Remember that all lenders rely on deal notes to

GROW YOUR BUSINESS: HAVE YOU CONSIDERED THE ‘ECHO BOOMERS’?

With rumours of the impact of B-21 and expected housing bubble, you may feel pessimistic, but there’s one important factor that many have overlooked: the Echo Boomers.

The “Echo Boomers,” who are in the 20-38 age bracket, have outnumbered the notorious Canadian Baby Boomers. According to Bank of Montreal economist Robert Kavic, their emergence is expected to significantly boost the housing market for the next five years. This is because a significant portion of the population is entering the first-time homebuying years.

This forecast suggests that brokers should be targeting this group of 25- to 34-year-olds before 2018. Try contacting your network of Boomers, who may have children who are looking to purchase a home, or consider targeting Echo Boomers directly through social media channels.

B-21 will not have as great of an impact on the housing market as OFSI’s other regulatory changes; however, it’s important to be prepared. Understand what can be done to package your deal for success, and take advantage of future opportunities, such as the Echo Boomers.

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GUIDE / EMERGING TRENDS

THE ALTERNATIVE MAINSTREAM

Tighter credit regulations are driving alternative lending into the mainstream like never before. Agostino Tuzi, VP at Home Trust, speaks to CMP about emerging trends and the company’s own plans for 2015

While everyone wishes the mortgage experience could be as streamlined as possible, today’s complicated and distressed international financial markets can make that a challenge. Despite the fact that Canada’s economy has remained relatively strong across most market segments, Canadians still struggle with stricter credit regulations. As a result, many credit-worthy members of the labour force continue to face dwindling financing options.

Luckily, experienced broker channel veterans such as Agostino Tuzi, VP of mortgage lending for Home Trust, are helping illuminate the murky marketplace with wisdom for and from the frontlines.

With a primary focus on alternative mortgage markets, Tuzi manages the classic mortgage portfolio

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GUIDE / EMERGING TRENDS

across Canada. While alternative lending is his segment of choice, Tuzi was exposed to everything from underwriting, credit, collections and sales before jumping into the role of VP at Home Trust. He was kind enough to share insights on trends in the alternative lending space for 2015.

“Overall, we see an increased demand for mortgage brokerage services and even more so in the alternative space. Consumers want more expertise, they want more options, and they often need advice when they’re looking for any mortgage. This is particularly important in the alternative lending space. We’re coming across more consumers experiencing difficulty receiving financing from their bank, so the need for more professionals that offer the services in the alternative lending space will grow.”

Brokers who previously focused solely on the prime lending space are now expanding into Alt A, a phenomenon that can be attributed to evertightening guidelines prompting brokers to incorporate alternative deals into their portfolios.

“As the banks and insurer guidelines tighten, the need in the market will continue to grow,” says Tuzi.

“Which does not necessarily mean that the financial needs of Canadians are changing; however, it is an opportunity for brokers to embrace the alternative lending market if they aren’t already active in it, and to grow that side of the business if they are.”

Home Trust is one of a growing number of industry shops now offering alternative lending training and knowledge-sharing to brokers who once focused exclusively on prime mortgages to help them meet the climbing market demand. In fact, in ever-growing numbers, brokers are reporting an increased reliance on these deals, and Tuzi sees the trend continuing. Since companies such as Home Trust also offer conventional mortgages, he argues that offering services in both segments provides a competitive advantage.

“By having a mortgage for every type of borrower, the advantage is the ability to offer a full suite of products to Canadians to meet their demands. While many companies offer variety and combinations of products to their customers, no one, in my opinion, offers the depth of products that Home Trust does.”

No doubt, in an increasingly complex financial

landscape, the ability to tailor services or broaden the menu of products available to Canadians is a smart play for any company. With all the talk of an increasingly niche-oriented world, some markets still continue to benefit from product diversity and extensive selection.

“Divorce, temporary job loss, illness, challenges in life can happen to anyone, and every person has a unique story. At times, their personal situations can make it difficult for them to qualify for a conventional mortgage. Alternative lending offers flexibility and security and gives those clients the opportunity to own their own home.”

Whatever the individual needs or demands may be, alternative lending can be a great solution. These types of deals are ideal for a variety of borrowers, Tuzi says.

“Clients who may look for alternative mortgage solutions are financially secure; however, they have challenges obtaining the credit they need and providing traditional forms of income required by major banks. Some examples are self-employed individuals, or clients who have good credit but lack years of history on their credit bureau, such as a first-time homebuyer or someone new to Canada.”

In other words, these types of deals are not restricted to those with income documentation challenges, but can in fact help people from every possible background or segment in the market.

With all the advantages of alternative lending, it’s difficult to see the trending demand dwindle any time soon. Quite the opposite, Tuzi says, as Home Trust continues to see bigger and newer markets.

“As we look forward to the new year, we expect to see growth in our alternative lending mortgages as the need in the segment grows, but we also see growth in our Equityline Visa (ELV) product. This product can help borrowers who may want to unlock some of their home’s equity, but are unable to pay out their existing prime mortgage or may not want to pay it out. The ELV provides a nice, simple solution for a wide variety of credit needs, and our ELV customers have the opportunity to earn 1% cash back.”

Evidently, alternative lending and diversified mortgage product offerings represent a rapidly expanding trend that’s unlikely to abate.

AGOSTINO TUZI VP OF MORTGAGE LENDING HOME TRUST

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GUIDE / EDUCATION

ALTERNATIVE MORTGAGES:

LEARN AND LOAN

The growing trend toward alternative lending is suitable for today’s complex economic climate. More consumers are reaching out for the segment, and consequently, more brokers are positioning themselves to cater to the seemingly complex area.

Fortunately, a leading industry expert is on hand to shed some light on the subject

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GUIDE / EDUCATION

Not every Alt A deal is a walk in the proverbial park. Ideally, every mortgage deal would be a cut-and-dry affair. Brokers would draft and submit the deal, lenders would issue commitment letters, clients would sign, and the conditions would be fulfilled and everyone would then ride off into the sunset. Reality, unfortunately, can be more complicated, and the alternative lending space is no exception. Often, for a variety of reasons, borrowers may not fit the standard lending criteria of today and for them alternative loans are a very viable option.

However, the industry has weathered substantial changes over the past number of years since the financial crisis. Many of the U.S.-based alternative lenders have left, and some of the smaller Canadian alternative lenders who relied on the Asset Backed Commercial Paper (ABCP) for funding were forced to wind down operations. The introduction of B20 also has resulted in changes to the residential underwriting and qualification practices. Some of these changes have helped to create a larger market for alternative mortgage products that previously may have been done as prime A mortgages. While that regeneration is a reaction to a growth in need, broker due diligence still remains a priority, as brokers must sort through the variety of options available in the marketplace today to ensure they find the best possible solution for their client.

“I do see an increased reliance on alternative mortgages; however, the big thing is to really understand all the solutions out there in the market,” says Steve Lydon, national sales manager at MCAP Eclipse. “It is important for brokers to know the benefits of the different methods that they have to offer.”

Lydon got his start in the alternative lending market in Canada and the U.K. 25 years ago. He has remained in the space, now heading the national sales office for Eclipse, operating under the MCAP umbrella. While he has noticed the growing trend toward alternative lending, he advises brokers to really take the time to educate themselves.

“It’s a ‘short-term pain for long-term gain’ situation. Clients can sometimes present challenges to a broker, who in turn can present a solution that will not please the client. Unfortunately, brokers may not always know how to best get over the hurdle. That’s what I see as the biggest challenge in

“Clients can sometimes present challenges to a broker, who in turn can present a solution that will not please the client.

Unfortunately, brokers may not always know how to best get over the hurdle. That’s what I see as the biggest challenge in the space at this time” the space at this time.”

Certainly a thorough education in every aspect of the market segment is an advantage, but it raises a key question.

“You have to spend the time so you can provide the best possible service and solution. There are many clients who suffer from life events, such as health issues, temporary interruption of income or marital split, to name a few, and for some reason or other their credit has gone below the acceptable rate for conventional bank financing. They could go to a private lender, where they may pay a higher interest rate and possibly a large fee as well. But by taking the time to assess their client’s current situation and their needs and goals, a broker with a strong knowledge of what institutional lenders and products are available, is better equipped to offer a smart refinance plan, which can help get their clients back on track within one to three years.”

Of course, a broker armed with experience is a very valuable commodity, but this is no reason to dismiss junior brokers as less competent. Thankfully, professionals like Lydon and industry shops like Eclipse are actively guiding and supporting younger professionals as they get up to speed on alternative lending. The more support Eclipse can lend its team, the greater the benefit to their clients, which remains a top priority.

STEVE LYDON NATIONAL SALES MANAGER MCAP ECLIPSE

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GUIDE / BROKER’S CHECKLIST

A BROKER’S DOCUMENT CHECKLIST 2015

by Dustan Woodhouse

CHARTERED BANKS Mandatory documents: • Two most recent years of Notice of Assessments to confirm there are no income taxes owed and to test reasonability of income exception being requested (in most cases stated income of more than $100,000 will not be approved) • Statement of account to confirm taxes paid, if NOA shows taxes due • Two most recent years of accountant-prepared T1 general tax returns to confirm sources of income Additional documents that may be requested: • Business license covering two years • Notice of Articles, to confirm shareholder status • Two most recent years of accountant-prepared business financial statements • Six to 12 months corporate bank statements to demonstrate cash flow The maximum mortgage offered by chartered banks is determined on a case-by-case basis, and loan amounts in excess of $1 million are exceedingly difficult to get approved. Few chartered banks are using the insured BFS programs and tend to require a 35% minimum down payment from the borrower’s own resources.

CREDIT UNIONS Mandatory documents: • Two most recent years of Notice of Assessment Additional documents that may be requested: • T1 general tax returns covering two most recent years • Business license covering two years • Notice of Articles • Accountant-prepared business financial statements covering two years • Corporate bank statements covering six to 12 months Because of increased demand since banks have tightened lending, the maximum mortgage offered by most credit unions is $500,000, with exceptions in rare cases where the client has significant liquid assets. Credit unions do tend to work with the insurers’ programs, and on the sub-500K files are willing to go as low as 10% down for BFS applicants.

MBS (NON-BANK) LENDERS Mandatory documents: • Notice of Assessment for two most recent years • T1 general tax returns for two most recent years • Business license for two years Additional documents that may be requested: • Notice of Articles • Accountant-prepared business financial statements for two years • Corporate bank statements for six to 12 months INSURED BUSINESSES Mandatory documents: • Minimum 10% down. Half from personal resources; additional half can be gifted with one insurer.

• Notice of Assessment for two most recent years, to confirm there are not taxes owed and to test reasonability of income exception being requested (in most cases, stated income of more than $100,000 will not be approved) • T1 general tax returns for last two years • Business license covering two years • Notice of Articles • Accountant-prepared business financial statements • Corporate bank statements for six to 12 months

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GUIDE / BROKER’S CHECKLIST

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Get the light shining on your next deal Contact Eclipse lending at: Eclipse Underwriting Centre DEAL RUN desk 1 866 260 D-RUN (3786) Fax 1 866 289 7390

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

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ALTERNATIVE LENDING GUIDE DECEMBER 2013 | 1

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“a new broker will be “It’s Important to treat It “It’s been one terrIfIc rIde

wise to focus not like a job.” and for me to be on understanding “This win has created recognIsed GUIDE / BROKER’S CHECKLIST

like a business,

evolving guidelines” a great deal of for It Is fantastIc.” “this business is based on relationships – what goes around comes around.”

excitement “it’s really a within the company”

relationship

“Cma Winners “It feels amazIng to have industry.” “the community service fills my heart”

defy rough affIrmatIon of on the money. you work hard the market” what we do.” ifmoney will come.” won – lIke a delIghtful “Work hard and don’t focus

“behind every great

“Without my “i work very hard success is a great team.”

and i try to think phenomenal outside the box” team this Would “I couldn’t ImagIne wInnIng two better awards.”

“i hope i have contributed knowledge,

information, education; i’ve done so many

things in my life in the

mortgage business.”

not be possible.” “This is such an “it’s our people

unbelievable

“Winning that make honour.” this is a testament to hoW great us great.” who really care “we have the rIght people

our team is.”

and we treat the customer rIght.”

canadianmortgageawards.com

1 | ALTERNATIVE LENDING GUIDE DECEMBER 2014

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COMMERCIAL UPDATE

News and analysis of Canada’s commercial

NEWS BRIEFS >> REPORT WARNS OF COMMERCIAL SLOWDOWN Real Property Association of Canada’s fourth quarter report notes that foreign investment – which has heretofore been a major contributor to the real estate market and, as a result, the economy – is about to slow in all markets except one.

“Vancouver is an incredibly expensive market right now, getting flooded with equity.

There is so much money coming from Asia that you’re seeing 2.5% to 3% cap rates. It’s insane,” the report’s authors state. “A bunch of bids came in for one deal at 3.5% to 4% cap rates, and a Chinese bidder stood up and bought it at a sub-3% cap.”

Commercial mortgage holdings ($ billion)

TYPE OF HOLDER

2011

2013

CHANGE

28.4

35.6

25%

Credit unions

23.7

29.2

23%

Life insurance companies

28.7

26.5

-8%

NHA MBS multi-family

15.8

19.7

25%

Trusts and other institutions

7.2

10.0

39%

CMBS

13.7

10.0

-27%

Chartered banks

Pension funds TOTAL

9.2

8.6

-7%

126.7

139.5

10% Source: Statistics Canada, DBRS, CMHC

>> LENDER REPORTS ON MAJOR COMMERCIAL TRANSACTIONS CMLS Financial has reported on the big deals penned in the commercial space in Q3 2014, signalling major opportunities still abound for brokers who operate within the space.

“This quarter witnessed two large real estate transactions,” the report states. “In August, Cominar REIT announced the acquisition of a portfolio of shopping centres and office buildings from Ivanhoe Cambridge valued at approximately $1.63 billion. In September, Ventas Canada Finance refinanced its 29-property independent living portfolio, purchased in August, with two tranches of senior unsecured debt totalling $650 million.” >> COMMERCIAL SLOWDOWN IN THE CAPITAL CITY Growing tech hub or not, Ottawa is expected to see vacancy rates remain relatively high through 2015, effectively removing any immediate incentive for many broker clients.

“With the federal government downsizing and very little private-sector demand downtown, the market is really quite flat,” says CBRE Ottawa vice president Shawn Hamilton, pointing to his firm’s 2015 outlook, released in December. “The government’s changing real estate strategy is impacting everything.”

The analysis echoes that of a growing number of brokers anticipating lackluster sales activity in the commercial sector as office space grows and landlords grapple with the lower yields associated with higher vacancy rates.

The federal government’s move to consolidate its own operations under an increasingly smaller roof is a key driver. The Department of National Defence relocating all of its divisions to the old Nortel campus is but one example.

COMMERCIAL INVENTORY CHALLENGES SEND BROKERS SOUTH It’s the inventory challenge more Canadian brokers should worry about, as it’s sending both institutional and small-time buyers south of the border, into the hands of American brokers.

“The domestic Canadian [commercial real estate market] is quite tightly held by the domestic pension funds,” says Lucy Fletcher, vice president of international capital group and capital markets at Jones Lang. “Very few of the assets are trading in the current market.”

Canadian investment in commercial real estate south of the border is set to hit an all-time high by the close of this year – driven, say agents, by the dearth of properties, from small multi-family complexes to downtown office skyscrapers. Increasingly, the alternative for buyers shut out of the domestic market is to turn to the U.S. Ivanhoe Cambridge is the latest big player to close on a $2.25-billion deal to buy the 42-storey landmark building at 1095 Avenue of the Americas in Manhattan. But that Canadian spending spree extends to all types and sizes of buyers, the latest numbers suggest.

In the first three quarters of the year, Canadians spent $8 billion on U.S. commercial property, according to news

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al

MORTGAGEBROKERNEWS.CA

mortgage market agency Reuters. That’s compared to the $7.8 billion spent in the same period last year. Canada is also on target to surpass the $11.86 billion it spent in all of 2013.

In fact, since 2010, Canada has spent $43.4 billion in the commercial market in

In the first three quarters of the year, Canadians spent $8 billion on U.S. commercial property the States – four times as much as China, the second biggest spender in the U.S. market.

The interest stateside is being felt by commercial agents in this country as they grapple with the scarcity of properties on the market and the corresponding dropoff in business.

However, spending on commercial new builds is on the rise in Canada, say experts, pointing to the latest round of numbers released by the CMHC. Constructions starts, excluding singlefamily homes, rose 4% year-to-date over 2013, to 90,838 units.

BROKER Q & A

Mickey Baratz, director of finance and principal broker of Vector Financial Services, on making the most of a tough market As the commercial sector hits a rough patch, brokers are actively focusing on the market and keeping themselves abreast of developments. The idea is to MICKEY BARATZ amass the kind of VECTOR FINANCIAL SERVICES LIMITED insider knowledge that will allow them to better steer clients – especially those new investors to the segment – to the right opportunities.

CMP: In terms of projects in major metropolitan areas, which ones do you think will be the most attractive for commercial brokers?

Mickey Baratz: The Eglinton LRT line and upgrades to the York University corridor will have a major, major impact on the Keele, Jane and Downsview areas. It is the areas of future growth where investors should be looking to develop.

CMP: We’ve been hearing a lot about retail mortgage fraud in Canada. Are there the same problems on the commercial side?

MB: Sure, it still happens, but it is so big, and there are so many title searches and lawyers involved, it’s just too much of a risk – especially when you can more easily defraud on a home mortgage loan worth half a million dollars.

CMP: How attractive is the condo market to commercial investors?

MB: Investors are taking a sideline approach now, as there is a great supply of condos available. It used to be that with a 200-unit condo, investors would buy five or 10 units each, and the entire complex would sell out in five or six days. Now you’re only seeing the end users buying one at a time, and it’s over a five- or six-month period.

Pre-sales mean a lot more today than they did a few years ago. If you have a condo project presented to you with 70% already pre-sold, you have an excellent investment.

®

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FEATURE / BROKER LIFESTYLE

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MORTGAGEBROKERNEWS.CA

A BREAKDOWN OF THE AVERAGE

BROKER’S LIFESTYLE Admit it: You compare yourselves to your peers. Whether it be book size, social media presence, referral sources or the kind of suit your competitor is wearing, it’s hard not to compete in such an entrepreneurial industry. So how do you stack up?

We at CMP have, once again, pulled the curtain back to reveal what comprises the average broker’s lifestyle, from money matters – such as how much the average broker has in savings, home equity and investments – to less sensitive subjects, such as vacation habits.

Unlike the Wizard of Oz, we encourage our readers to have a good hard look behind that curtain. Just be warned: What you see may encourage you to work a little harder to purchase that vacation home.

This popular feature has been expanded for 2014, with broker feedback in mind. And, for the first time, brokers have more than just their peers to compare themselves to. This year, our sister publication, Wealth Professional, is running a similar feature on its own pages; we’ve borrowed some of its findings to see how you stack up to your financial industry counterparts.

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FEATURE / BROKERS LIFESTYLE

DEMOGRAPHICS SURVEY PARTICIPANTS: PROVINCE BREAKDOWN

24%

1%

24%

19% 19%

2%

45%

3%

3%

2% 1%

PARTICIPANTS REPRESENT

77 DIFFERENT CITIES TORONTO . . . . . . . . . . . . . . . . . 10 PER CENT CALGARY . . . . . . . . . . . . . . . . . 9 PER CENT OTTAWA . . . . . . . . . . . . . . . . . . 4 PER CENT VANCOUVER . . . . . . . . . . . . . . 4 PER CENT EDMONTON . . . . . . . . . . . . . . . 3 PER CENT WINNIPEG . . . . . . . . . . . . . . . . . 2 PER CENT VICTORIA . . . . . . . . . . . . . . . . . 2 PER CENT REGINA . . . . . . . . . . . . . . . . . . . 1 PER CENT ST. JOHN’S . . . . . . . . . . . . . . . . 1 PER CENT QUEBEC CITY . . . . . . . . . . . . . . 0.6 PER CENT HALIFAX . . . . . . . . . . . . . . . . . . 0.6 PER CENT

87%

OF BROKERS

WORK WITHIN THE CITY THEY LIVE

58%

42%

OF BROKERS ARE MALE

OF BROKERS ARE FEMALE

67%

OF FINANCIAL ADVISORS ARE MALE CMP ANALYSIS The financial industry professions are often thought of as ‘old boys’ clubs’ – and it seems the mortgage industry is slightly ahead of its financial planning counterparts when it comes to gender equality.

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DLCCanadaInc

CANADA’S #1 MORTGAGE COMPANY

2/12/2014 1:27:45 PM

FEATURE / BROKER LIFESTYLE

WORK LIFE EXPERIENCE

Average experience

The most experienced broker has been working in the industry for

YEARS

YEARS

40

9

“No working day is typical for me.

The only things that are consistent are my morning habits before I start working with my referral partners and clients. I do make it to the gym every day and listen to either podcasts that have to do with mortgage brokering (such as ‘I Love Mortgage Brokering”) or any other podcast that helps me learn to become better in my job and for my clients. Days usually start at 8 a.m. and end around 7 p.m., but I am usually at a community event or volunteering four out of five nights of the week, always connecting with new people. Thursdays are the day I do my community-driven podcast, ‘Lunch Out Loud Ottawa,’ where I get to visit our guest’s place of work and meet them and their co-workers.”

-Nick Bachusky, Mortgages in Ottawa, Ottawa, Ont. “For me, [the workday] varies depending on the types of deals I have going at the time. The components are the same: answering phone calls and emails, following up on documents, reviewing and analyzing new deals, connecting with some referral sources, meeting with clients to sign papers, etc. The sequence may vary depending on the day.”

-Ad Lakhanpal, Mortgage Alliance Company of Canada, Oakville, Ont.

WORKDAY

AVERAGE WORKDAY

23% OF BROKERS WORK MORE THAN 8 HOURS A DAY

7

HOURS

+

25% WORK 8 HOURS

30% WORK 6-7 HOURS

14% WORK 4-5 HOURS

7% WORK 3 HOURS OR LESS PER DAY

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professional

SINGLE FAMILY

innovation PRICING

VALUES

YOU

MCAP

rate

MCAP

Single Family it’s all about YOU

it’s all about

ADVICE

partnership

teamwork VALUES

compensation

integrity

Pricing

mortgage

INTEGRITY

advice

ADDS up to

MCAP

Single Family

SERVICE

it all

MCAP

MCAP

Compensation

FUN

TEAMWORK

leadership

solutions

SOLUTIONS

FUN

Single Family

integrity

ADVICE

ORIGINATIONS O RIGINATIONS

VALUES

innovation

MORTGAGE

Want to find out what makes MCAP a better deal?

Visit us at www.mcap.com/brokers to learn more!

MCAP Service Corporation | Ontario Mortgage Brokerage #10515 | Ontario Mortgage Administrator #11692

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FEATURE / BROKER LIFESTYLE

63%

24%

WORK WEEKENDS

76%

of brokers are independent

54%

48%

OF FINANCIAL ADVISORS WORK WEEKENDS

of brokers came from the banking industry

CMP ANALYSIS No rest for mortgage brokers, it seems, as 8% more brokers than financial advisors say they are forced to (or choose to) work weekends.

88%

ARE FULL-TIME BROKERS

work for a broker network

78%

said they would not consider moving over to the banking industry

12% WORK PART-TIME

96%

OF FINANCIAL ADVISORS ARE FULL-TIME

-time

“I like to see that 88% are full-time brokers (at least the ones that filled in the survey).

Hopefully the part-time players are being weeded out with course and certification requirements. The part-time players, for the most part, are not able to offer the same knowledge as a person who does this full-time. Our company’s experience in hiring part-time agents was not successful.”

-Jerome Trail, GreedyMortgage.com, Toronto, Ont.

CMP ANALYSIS It’s an age-old knock on the mortgage broking industry and one that has many questioning whether brokers would be considered more professional if fewer part-timers plied their trade hawking mortgages. The financial planning industry – one that is viewed as a pillar of professionalism – may have something figured out here: A higher percentage of full-time workers means a higher number of fully dedicated professionals.

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FEATURE / BROKER LIFESTYLE

MONEY MATTERS INCOME

SAVINGS

14%

4%

$0-40,000

$0

15%

49%

$41,000-$60,000

$1-$10,000 14%

19%

$61,000-$80,000 11%

$11,000 - $20,000 9%

$81,000-$100,000 26%

$21,000 - $40,000 12%

$101,000-$160,000 12%

$41,000 - $75,000 8%

$161,000-$300,000 3%

$76,000 - $150,000 4%

$300,001+

$150,001+

$132,900 AVERAGE INCOME

$2HIGHEST MILLION INCOME

brokers will be set for 53% ofretirement by 65 16% 31% won’t be are unsure “As a GTA-based independent brokerage, we expect our average transaction to be higher than a brokerage based in a more rural part of the province/country. Coupled with that comes a higher cost/ transaction base.”

-Jerome Trail, GreedyMortgage.com, Toronto, Ont.

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MORTGAGEBROKERNEWS.CA

Average financial advisor’s savings Average amount in investments

$273,000 Average amount in savings

$39,000

$39,000 Average financial advisor’s portfolio

$510,000 CMP ANALYSIS They may take home a higher salary, but financial advisors are equal to mortgage brokers when it comes to saving. Perhaps unsurprisingly, advisors are better (or more diligent) investors.

INVESTMENT PORTFOLIO

$0 - $1,000

13%

$1,001 - $10,000 $11,000 - $40,000

5% 14%

$41,000 - $$100,000

15%

$101,000 - $200,000

21%

$201,000 - $500,000

19%

$501,000+

13%

The FiNANce cOMPANY ThAT TAkeS A “cOMMON SeNSe APPrOAch” TO LeNdiNg.

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

www.tribecca.ca 261 Sheppard Avenue West | Toronto, Ontario | M2N 1N4 Tel: 416.225.6900 | Fax: 416.225.6905 | Licence # 12225

It’s time for a new perspective.™

DECEMBER 2014 | 27

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FEATURE / BROKER LIFESTYLE

REAL ESTATE AND MORTGAGE MATTERS PERCENTAGE OF ASSETS IN REAL ESTATE

0-20%

86-100%

9%

AVERAGE HOME EQUITY:

60%

11% 25%

32% 61-85%

HOME OWNERSHIP

94% OF BROKERS ARE HOMEOWNERS

82% HAVE A MORTGAGE

63% OF BROKERS CURRENTLY HAVE A MORTGAGE THROUGH A BIG BANK

21-40%

23%

41-60%

“As for the 63% who have their mortgage with a bank, I hope that they’ve taken into account the ‘new and improved’ I.R.D. calculation implemented by the banks more than three years ago. If not, they may be in for quite a surprise if they attempt to re-negotiate prior to maturity.”

-Michael Celuch, Mortgage Intelligence, Windsor, Ont. “I’m guessing this is down to history.

Maybe [a big bank] is where their mortgage was before their broker career. Prior to becoming a broker, I had limited understanding of what brokers did.

We need to educate the public as to the benefits of using our services.”

-Kelly Hudson, Dominion Lending Centres, Vancouver, B.C.

37% ARE WITH A MONOLINE

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MORTGAGEBROKERNEWS.CA

Average mortgage rate

2.5%

Average mortgage term

4.4

YEARS

45%

OF BROKERS OWN RENTAL PROPERTIES 45% OF THESE

OWN ONE RENTAL PROPERTY 36%

OWN TWO 9%

OWN THREE 4%

OWN FOUR 6%

OWN FIVE OR MORE

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FEATURE / BROKER LIFESTYLE

EDUCATION SOME HIGH SCHOOL:

2%

HIGH SCHOOL DIPLOMA: 17%

30%

SOME UNIVERSITY:

39%

UNDERGRADUATE DEGREE

60%

OF FINANCIAL ADVISORS HAVE AT LEAST AN UNDERGRADUATE DEGREE

GRADUATE DEGREE:

12%

CMP ANALYSIS With only 42% of brokers holding a college degree, financial planners are the more educated bunch on average – at least when it comes to conventional measures of education.

88% PARTICIPATE IN ONGOING EDUCATION

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2/12/2014 1:29:14 PM

FEATURE / BROKER LIFESTYLE

LIFESTYLE

40 PER CENT OF BROKERS CONDUCT BUSINESS IN A SUIT

60 PER CENT DO NOT WHAT DID YOU PAY FOR YOUR BEST SUIT?

71%

OF FINANCIAL ADVISORS DO BUSINESS IN A SUIT

9%

PAID $100 OR LESS

54%

PAID $100-$500

25%

PAID $500-$1,000

12%

PAID $1,000+

100 PER CENT OF BROKERS DRIVE A CAR 27%

OWN A BESPOKE OR TAILORED SUIT

84% OWN THEIR CAR

53%

DRIVE AN SUV

32%

DRIVE A SEDAN

16% LEASE

15%

DRIVE A SPORTS CAR

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3/12/2014 11:21:03 AM

YOU SEE A DREAM PROPERTY

WE SEE ITS REAL VALUE

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

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18-39_Broker Lifestyle-SUBBED V2.indd 33

AICanada.ca

2/12/2014 1:29:18 PM

FEATURE / BROKER LIFESTYLE

VEHICLE PRICE TAG

27% 21%

OF THOSE WHO OWN A CAR

69% BOUGHT

13%

NEW

PAID LESS THAN $20,000

11%

PAID $20,000$25,000

15%

PAID $25,001$30,000

13%

PAID $30,001$40,000

PAID $40,001$50,000

PAID $50,000 OR MORE

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MORTGAGEBROKERNEWS.CA

VACATION

13% TAKE ONE WEEK PER YEAR 18% TAKE TWO WEEKS 25% TAKE THREE WEEKS 44% TAKE FOUR+ WEEKS

53%

OF FINANCIAL ADVISORS TAKE AT LEAST 4 WEEKS OF VACATION

23% OF BROKERS OWN

A VACATION HOME

CMP ANALYSIS ’Work hard, play hard’ seems to be the mantra of both industry professionals, but financial advisors take a little more ‘me’ time than their brokering buddies.

Of those who own a vacation home

OWN A COTTAGE . . . . . . . . . . . . . . . . . . . . 55 PER CENT OWN U.S. OR INTERNATIONAL PROPERTY . . 36 PER CENT OWN BOTH . . . . . . . . . . . . . . . . . . . . . . . . . 9 PER CENT

20 PER CENT OF FINANCIAL ADVISORS OWN A VACATION HOME

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DECEMBER 2014 | 35

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FEATURE / BROKER LIFESTYLE

SOCIAL MEDIA

DAILY:

60%

“I have never once obtained a deal from social media. However, I feel it’s an integral part of building your brand and legitimizing your expertise and professionalism.”

-Susanna Penning, Oriana Financial Group, Ottawa, Ont.

OCCASIONALLY:

45% OF FINANCIAL ADVISORS USE SOCIAL MEDIA DAILY

31%

NEVER:

9%

CMP ANALYSIS Brokers are a social bunch, and that rings true online as well. They outperform financial advisors when it comes to utilizing the powers of online communication to reach clients.

“I do use it, but it’s easy to be annoying. I follow realtors, but most of it is spam to me. To me, it’s a lazy marketing plan. Maybe I’ve been around for so long and am jaded, but it has to be pretty good to get my attention. Because it’s free, it can be overused.”

-Marvis L. Olson, Mortgage Architects, Calgary, AB

47 PER CENT USE AN IPHONE

67%

FAVOUR FACEBOOK 10%

28 PER CENT PREFER ANDROID

PREFER TWITTER 2%

CHOOSE GOOGLE+

24 PER CENT

1%

PREFER HOOTSUITE 19%

FOCUS ON LINKEDIN 1%

STILL SUPPORT BLACKBERRY

And one broker prefers ‘house parties’

1 PER CENT

ARE CLINGING TO THE DARK AGES WITH A FLIP PHONE

FAVOUR YOUTUBE

36 | DECEMBER 2014

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CMP_

would like to congratulate our 2014 CAAMP Award of Excellence winners

Shawna Macdonald AMP BROKER OF THE YEAR

“My sole purpose is to help my clients. I often say

that being a mortgage broker is the same as winning a personal lottery. I’m lucky to being doing the work that I love. I am proud to receive this award.”

David Larock AMP FINANCIAL LITERACY LEADER OF THE YEAR “A surprising number of Canadians lack basic financial literacy and TMG mortgage professionals can help address this gap in our education system by taking the time to teach financial concepts, one customer at a time. I am honoured to be chosen for this award.”

Brian Gentles AMP

Jim Cook AMP

MENTOR OF THE YEAR

INNOVATOR OF THE YEAR

“When I first became a mortgage broker I accepted a lot of help from some very knowledgeable people; and still do to this day. Helping deliver programs and helping individuals is just one way I give back. It was an honour to be nominated and supported for this award by my TMG family.”

“As the mortgage marketplace becomes aggressively more competitive, brokers need to be more creative in competing for the attention of both consumers and referral sources. To get people’s attention, we have to interrupt normal patterns by doing something that surprises them. It’s a privilege to have been selected to receive this award.”

We are an award-winning Canadian mortgage company with a national team of over 750 qualified and accredited mortgage brokers, agents and associates providing residential and commercial mortgage services. Since 1990, TMG has helped a quarter million Canadians get the best financing solutions and mortgage rates through Canadian mortgage lenders from coast to coast. www.mortgagegroup.com

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FEATURE / BROKER LIFESTYLE

FAMILY LIFE

78% OF BROKERS

71%

69%

OF FINANCIAL ADVISORS HAVE BEEN MARRIED ONCE

ARE MARRIED

22 PER CENT ARE SINGLE

22% 1%

9% NEVER BEEN MARRIED

BEEN MARRIED ONCE

BEEN MARRIED TWICE

80% OF FINANCIAL

ADVISORS ARE MARRIED

19%

BEEN MARRIED THREE OR MORE TIMES

BROKERS WHO OWN A DOG

45% 55%

DO NOT HAVE KIDS

14%

DO NOT OWN A DOG

37%

HAVE ONE KID

OF FINANCIAL ADVISORS OWN A DOG

46%

HAVE TWO KIDS

15%

HAVE THREE KIDS

BROKERS WHO OWN A CAT

28% 72%

DO NOT OWN A CAT

6%

HAVE FOUR OR MORE

21% OF FINANCIAL

19%

OF FINANCIAL ADVISORS OWN A CAT

ADVISORS DO NOT HAVE KIDS

38 | DECEMBER 2014

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2/12/2014 1:29:53 PM

INDUSTRY ICON / KEVIN CONROY

Most of our team have either been a broker or worked for a broker. That makes us highly sensitive to our brokers’ business needs

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MORTGAGEBROKERNEWS.CA

INDUSTRY ICON

Q&A: KEVIN CONROY Earlier this year, Kevin Conroy was installed as Canadiana’s president, bringing with him more than 25 years of experience in the financial services industry.

This is what he has planned for the future of the monoline lender CMP: You scored very well in our Brokers on Lenders survey, finishing in the top five overall. What do you attribute the lenders’ success to?

Kevin Conroy: Our people. Most of our team have either been a broker or worked for a broker. That experience makes us highly sensitive to our brokers’ business needs. We focus our operations with a view to one objective – to help our brokers satisfy their clients with a great experience from Canadiana. We have an outstanding team with expert knowledge and who are focused on service.

CMP: You recently took over Canadiana. Which areas in particular are you focused on improving in the future?

KC: Beyond continued emphasis on delivering quality products and service, we plan to offer more options to our brokers. Customer demand is driving the need for more nimble products, privileges and pricing flexibility. We are constantly working toward finding ways to bring a more robust offer to the market.

CMP: Brokers hoped the recent shakeup of the company would help make Canadiana more competitive in the marketplace. Do you think this has happened?

KC: Yes, we have made great inroads in this area in

the past year. I believe pricing and compensation are important drivers. We know responding quickly to market demands for service is an equally competitive factor. We are devoted to listening to our brokers and responding to what they need for their clients, which is pivotal in earning their business and their trust.

It’s a daily focus for all of us at Canadiana to find ways to improve in areas that matter to our clients.

Our much-improved sales results and the response we received in the CMP survey tell me that we are making headway.

CMP: The lender is fairly new to the industry [founded in 2010]. What do you plan on doing to differentiate yourself from other, more established lenders?

KC: Beyond relationship, product, price, service and compensation, we believe communication will be key – that is, the media and methodology used to communicate with our clients. We are investing in technology and a culture to support change that will allow us to communicate with our broker clients in their medium of preference. The use of video, social media and emerging platforms of communication are very much at the core of our strategy. We want to be timely, relevant and responsive to our brokers. We feel that along with traditional methods of communication, we can use technology to respond to our brokers and DECEMBER 2014 | 41

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News

InternatIonaL

INDUSTRY ICON / KEVIN CONROY

u.s.

U.S. housing market worse than thought

&

90.6% 52.1%

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 Percentage of previously thought. homeownership The private trade group says sales rose four per costs, including cent in October to a seasonally adjusted annual rate of mortgage payments, 4.42 million. That’s below the roughly six million homes utilities and property a year that economists say are consistent with a healthy taxes that take up a housing market. But it’s ahead of 2008’s revised sales, typical household’s now considered the worst in 13 years. monthly pre-tax The trade group revised its sales from 2007 to 2010 income in Vancouver down 14 per cent, from more than 20.6 million to nearly and Toronto, 17.7 million. Among the reasons for the lower figures, respectively (RBC the Realtors group says: changes in the way the Census Economics Housing Bureau collects data, population shifts and some sales Trends and being counted twice.

Affordability Report) The Realtors consulted with government and private housing experts, including the Federal Reserve, their clients with information and service that is the Department of Housing and Urban Development, meaningful to their business. the Mortgage Bankers Association, the National Association of Home Builders, mortgage giants Fannie CMP: Recent rule changes have made it more Mae and Freddie Mac and CoreLogic, a California-based difficult data firm that first raised doubts aboutfor thebrokers annual to fund A deals. What numbers earlier this year. trends do you see going forward in the A CoreLogic has estimated that the Realtors group space?

What can brokers do to ensure their overstated sales in 2010 by atdeals least 15 per cent. are funded?

The changing numbers could affect how economists KC: The regulatory environment has certainly shaped view the trade group’s data. It could also affect companies theexpansion way all lenders that use the figures for hiring and plans. have had to do business in the twoclose years. think it is incumbent upon the broSales are measured whenpast buyers onIhomes. to stay current on policies But many deals are collapsingker-lender before that partnership point.

One-third of Realtors said theyand hadproduct at leastavailability one contract relative to these changes. I’m scuttled in October, up from 18hopeful per centthat in September. most of the changes that affect product Contracts are being cancelled for several and policies arereasons: set for the foreseeable future. I would Banks have declined mortgage applications; home

We feel that along with traditional methods of communication, we can use technology to respond to our brokers and their clients with information and service that is meaningful to their business

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 say that assuring funding for us and our brokers requirements. Even those with excellent credit happens at the time application.

Experienced origand stable jobs areofholding off because they fear inators know prices that having the falling. right conversation at the that home will keep Sales are also beginning, selecting the right productbuyers, with the client being hurt by a decline in first-time who critical to reviving the housing market. andare setting realistic expectations are all at the heart Sales have fallen in four of the five years of our brokers’ professional practice. since the housing boom went bust in 2006.

Declining prices and record-low mortgage rates CMP: We are running our alternative lending haven’t been enough to boost sales. guide At in this issue. Many view B lending as the same time, home construction has thebegun new anormal; youand agree with gradual would comeback should addthis to the sentiment? economy’s growth in 2011 for the first year since KC:the As Great a partRecession of a full service do. I think beganpractice, in 2007. yes, LastImonth, broke ground on an annualAlt rate of B busithatbuilders specialty product development, A and 685,000 homes,more the government recently. ness will become important said to brokers in the That was a 9.3 per cent jump from October andhave next few years. As legislation and policy change the fastest pace since April 2010. tightened on federally regulated lenders, the determiMost economists say home prices will keep nation of all Canadians homes hasn’t falling, by at least five to perown cent, through 2012.waned.

The specialty suite andforesee alternative lending segment Many forecasts don’t a rebound in prices willuntil grow to meet the needs of borrowers who don’t at least 2013. easily qualify traditional lenders.

The highwith ratemore of foreclosures has made resold homes cheaper than new ones. The median price a new home is roughly 30 per CMP: What canofwe expect from Canadiana cent above the price of one that’s been occupied in 2015? before – twice the normal markup. Investors are KC: More. More of everything, more product, taking advantage of the discounts. more pricing.

Creative solutions to submissions The housing market is struggling even andascompetitive meaningful changes the broader economy has improvedto in compensation.

We want to become a broker’s lender of recent months. economy at anthe annual pace of two choice.The We want togrew become destination for cent in quarter.

Many is topper people inthe theJuly-September industry to work.

Canadiana expect slightly better growth in the justeconomists getting started.

October-December quarter. CMP

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Consult with us today.

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2/12/2014 1:07:06 PM

BUSINESS STRATEGY / PSYCHOLOGICAL WELL-BEING

Burning the candle at both ends With great leadership comes great stress, but there are ways to prevent stress from turning into burnout. Dr. Adam Fraser outlines a seven-step guide to sustaining high performance without letting your health suffer The rock star anthem is “It’s better to burn out than fade away.” Sounds extreme, but sadly, it seems that the average corporate employee is trying to emulate them. Ask people how they are, and you will generally get one of two answers: “Busy” or “Tired.” The pace of life is outrageous; most people I talk to say they feel like they are handcuffed to a roller coaster that is stuck on repeat. I was coaching a CEO, and when I asked her how she would describe her life, she said, “I feel like the hamster is dead, but the wheel is still spinning!”

We are jamming more and more into our already crammed lives. An executive recently confessed to me that she gets her eight-year-old to read her four-year-old a story while she sits on the bed and answers emails on her phone. She has outsourced story time.

The fallout of all this haste is that many people have lost the ability to slow down and recharge.

As a result, the burnout rates in business are rapidly climbing. So why is it such an epidemic?

There are two big problems in the way we handle burnout:

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MORTGAGEBROKERNEWS.CA

• Putting it off – Many times in my conversations with people who are burnt out, I will ask, “What are you going to do about that?” Their reply is, “Well, I have a holiday in three months. I will keep pushing until that date, and then I’ll relax!”

You can’t put off addressing burnout.

• Waiting for things to slow down – I have lost count of the number of times I’ve heard the phrase “I will look after myself/relax when things quiet down.” With margins being constantly squeezed and the rise of leaner organizations, that ship has well and truly sailed. Don’t expect workloads to lessen; it’s simply not in our business DNA.

WHAT TO DO? What is a practical solution? For this, we have to turn to the world of elite sports. When I worked with Olympic athletes, burnout was a frequent and very real challenge. Often you hear in the media that athletes get sick just before or at the Olympics.

Why? Because they are always on the verge of overtraining or undertraining.

If you overtrain an athlete, you simply push them too hard for too long. Their immune system starts to decline, they get sick, and their performance plummets. Obviously, this is a significant problem and one we put a lot of resources into solving. What doesn’t work is pushing an athlete until they show signs of burnout and then giving them long periods off to recover. By contrast, our solution was to give them small, regular, consistent bursts of recovery.

This involved a shift in mindset. Instead of thinking about how to help them recover when they were feeling burnt out, we looked at how they recovered each day, each week and each month. Recovery became something they did perpetually rather than something they resorted to when exhausted.

Techniques such as meditation, relaxation and improved quality of sleep were daily rituals that stopped burnout in its tracks.

HOW WE APPLY THIS TO THE BUSINESS WORLD When I transitioned into working with corporations, I found that people talked about trying to address burnout, but they wore exhaustion as a badge

An executive recently confessed to me that she gets her eight-year-old to read her four-year-old a story while she sits on the bed and answers emails on her phone of honour. People would literally compete with each other to be the hardest worker, the most tired, and the one closest to complete physical and mental breakdown. Over the past 10 years, I have run countless programs with corporate executives to prevent burnout. Here are the critical components that have kept people free from burnout: Step 1: Decide if you are serious about avoiding burnout Notice if you are using burnout as a status symbol.

Does exhaustion define you as a person? Unless you are stressed and exhausted, do you feel guilty and think you’re a slacker for not pulling your weight?

Step 2: Develop the capacity to say no Your organization and leaders will always try to get more and more out of you. Don’t expect them to manage your burnout. It sounds cynical, but it’s just the way the world works. You have to be responsible for this. Develop the capacity to have some boundaries, and ways to say no.

Step 3: Do something that relaxes you each day Like shutting down your computer, the brain needs the capacity to turn off and recover. Not only does this let the mind and body recover, but it also builds our capability to put the brakes on when we need it. Often people reflect on their holidays by saying, “It took me a week to unwind. I had a couple of good days and then started to worry about coming back to work.” We have lost the ability to go slow, and in some instances going slow seems to be punishment. The actor Will Ferrell put it best: “Before you marry a person, you should first make them use a computer with slow internet to find out who they really are!” Doing

Dr. Adam Fraser is a human performance researcher and consultant who studies how organizations can adopt a high-performance culture to thrive in this challenging and evolving business landscape. Visit dradamfraser.com.

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LEADERSHIP / PSYCHOLOGICAL WELLBEING

something that relaxes you each day, even if it’s just for five or 10 minutes, builds up that muscle.

Meditation, listening to a relaxation tape, yoga, and deep breathing while stretching before bed are all great ways to recharge your mind and body each day. (Watching TV doesn’t count.)

Step 4: Each week, do something that gives you a shot of vitality This is taking the daily relaxation principle and turning it up to 11. We all have things in our life that fuel our soul, whether it is socializing with friends, going out for breakfast, walking on the beach, doing yoga or being out in nature. It is something that not only relaxes you, but also juices you.

free. Our research shows that a day like this is ideally spent by yourself. Busy couples with kids can get around this by taking turns with their partner and having the other person look after the kids.

Step 6: Every quarter, take a long weekend Four times a year, take a day off on either side of the weekend and have a mini break, whether you go somewhere or simply stay at home. These regular mini holidays are great sanity breaks.

Step 5: Each month, have a day with no responsibilities

Step 7: Have an off season All athletes factor in an off season, when they give their body and mind a complete break. No one can keep going all year. Australians have amassed a concerning amount of holiday leave. Don’t become one of those people who never take a holiday. Aim to wipe out your annual leave each year.

Our lives are so scheduled that there is always something to do. Psychologists report that children are experiencing anxiety in trying to keep up with a vast array of extracurricular activities.

When was the last time you had a day when you woke up with nothing to do and no responsibilities? Days like this are restorative and freeing.

Each month, schedule a day that is responsibility-

There you go: a seven-step process to eradicate burnout from your life. I have used this process with many executives and found that, no matter their external stress, it helps them dramatically reduce their chances of burnout. Go forth and recover.

DO IT TODAY

A WORLD OF OVERWORKERS According to the OECD Better Life Index, Mexicans work more hours per year than any other OECD country, clocking up 2,250 hours annually. That’s 474 hours more than the OECD average of 1,776.

Here’s how the rest of the world shapes up:

MEXICO

U.S.

2,250 hours worked per person per year 29% of employees work “very long” hours

1,787 hours per person per year 11% of employees work “very long” hours

U.K. 1,625 hours per person per year 12% of employees work “very long” hours

CANADA 1,702 hours per person per year, 74 hours less than the OECD average 4% of employees work “very long” hours (compared to the OECD average of 9%)

TURKEY 1,855 hours per person per year 46% of employees work “very long” hours – the highest rate in the OECD

CANADA 1,693 hours per person per year 14% of employees work “very long” hours

FRANCE 1,476 hours per person per year (300 hours less than the OECD average) 9% of employees work “very long” hours

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PROFILE / FAVOURITE THINGS

MORTGAGEBROKERNEWS.CA

Favourite things

Layth Matthews, senior mortgage advisor & CEO, RateMiser Mortgage Advisors Favourite music Jazz. My day is so busy, so I’m either enjoying silence or KPLU (a Seattle jazz station).

Favourite mortgage product Five-year ARM with trailers Favourite thing about working in the mortgage industry Bringing the money.

When I came over from the investment business, I liked not having to chase the money around, and I was struck by how much better positioned mortgage brokers are to give impartial advice. We get to level the economic playing field by sharing principles of financial well-being.

Favourite movies The Grand Budapest Hotel, Wild Target, Star Trek, and Shrek

Favourite place to be On a meditation cushion early in the morning. I started meditating when I was 17, and I have never looked back.

Favourite celebrity Bill Nighy. The guy exudes intelligence and humour.

Favourite book Shambhala: The Sacred Path of the Warrior by Chogyam Trungpa. It’s a guide to connecting with human dignity through meditation, and appreciating the richness of life beyond complaint.

Favourite drink Fine wine – i.e., inexpensive wine; that’s fine!

Favourite sports Squash, golf, running, bicycling, badminton, skiing ... but mostly dog-walking

Favourite food Fine food ... just kidding. Anything Mediterranean; my mom was from Iraq, and an amazing culinary artist. (I know that now.)

Favourite vacation spot San Miguel de Allende, Mexico. It’s an artsy community in the mountains of central Mexico. My cousin has a house there.

DECEMBER 2014 | 47

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SERVICE DIRECTORY

Banks

Optimum Mortgage A Division of Canadian Western Trust www.optimummortgage.ca Ph: 866 441 3775 GUIDE Page 5

B2B Bank b2bbank.com/mortgages Ph: 1 800 263 8349 Inside back cover

Dominion Lending Centres www.dominionlending.ca Ph: 1 888 806 8080 Page 21 & 31

HomEquity Bank www.homequitybank.ca Ph: 1 866 522 2447 Page 11

Peoples Trust www.peoplestrust.com Ph: 1 800 663 0324 Page 17

Mortgage Architects www.mortgagearchitects.ca Ph: 1 877 802 9100 Page 39

National Bank www.nbc.ca Ph: 1 888 483 5628 Page 43

Pillar Financial Services www.pillarfinancial.ca Ph: 613 282 1242 Page 35

RMAI Financial Group www.rmaifinancial.com Ph: 1 866 955 7624 Page 29

Radius Financial www.radiusfinancial.ca Ph: 1 877 369 6398 Inside front cover

The Mortgage Group www.mortgagegrp.com Ph: 877 899 1024 Page 37

Non-Bank Lenders

Canadiana Financial Corp. www.canadianafinancial.com Ph: 1 877 672 7219 Page 25

Commercial Lenders

Tribecca Finance Corporation www.tribecca.ca Ph: 416 225 6900 Page 27

Eclipse Ph: 1-866 260 3786 GUIDE Inside back cover

Equity Financial Trust

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

Equity 1-855-272-0050 www.equityfinancialtrust.com GUIDE Page 9

V.W.R. Capital Corp. www.vwrcapital.com Ph: 1 866 907 5407 Page 34

D+H Limited Partnership www.dhltd.com Ph: 1 866 345 6449 Page 13

Insurance

First National Financial LP www.firstnational.ca Ph: 416 593 1100 Page 7

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

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

Real Estate

Home Trust www.hometrust.ca Ph: 1 877 903 2133 GUIDE Inside front cover

Axiom Mortgage Partners axiommortgagepartners.ca Ph: 1 866 504 0516 Page 3

MCAP www.mcap.com/brokers Page 23

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

Appraisal Institute of Canada www.aicanada.ca Ph: 613 234 6533 Page 33 Canadian National Association of Real Estate Appraisers www.cnarea.ca Ph: 1 888 399 3366 Page 42

48 | DECEMBER 2014

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