cmp 5.1
DESCRIPTION
The magazine for mortgage professionals in Canada.TRANSCRIPT
www.mortgagebrokernews.ca
PUBLICATIONS MAIL AGREEMENT #41261516
January issue 5.01
ProfileDVictor Peca: a broker’s broker
ANAlYSiS Housing bubble? tHe industry weigHs in
feAturewHy canada’s Housing market didn’t go bust
brig
ht b
usiness ideas for
cover story
38 Bright business ideas for 2010
With 2009 over and a brighter outlook in place, it’s a good time to evaluate business models and think outside your current box of sales tools. CMP looks at what some brokers have done to stay a step ahead in 2010
50 why Canada’s housing market didn’t burstThe countries may share a border, but the financial crises in the U.S. and Canada are hardly similar. As James MacGee, an associate professor at the University of Western Ontario and a research associate at the Federal Reserve Bank of Cleveland, explains, a comparison of the two markets suggests Canada may have just “got things right”
5. 01
issue
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TERM BRIDGE CONSTRUCTION
Romspen Investment Corporation is a non-bank mortgage lender specializingin commercial real estate across Canada. We offer customized mortgage
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COMMERCIAL LENDING
2
contents
mortgagebrokernews.ca
regulars28 international
News
30 this time last year
63 CMP Service Directory
54once a broker, always a brokerAfter brokering for 15 years, Victor Peca took a hiatus to work on the lending side. Just three weeks back into brokering, Jesse Kinos-Goodin caught up with this former top seller to see what it’s like to start all over
letterS AND CoMMeNtS8 Readers’ letters, as well as the best stats and
comments from mortgagebrokernews.ca.
iN tHe CoMMuNitY10 Broker Deb White carolling for donations; Invis’
annual Angels in the Night; Mortgage Alliance raises funds for breast cancer research
NeWS12 TMG’s new TV studio; DLC’s latest white-label
offering; Verico’s smartphone strategy; Home Trust’s new president; Scotiabank’s growing mortgage share; CAAMP conference coverage; housing bubble speculation; and more…
NeWS ANAlYSiS32 Bubble. What bubble?: A recent industry report
questioned whether or not Canada was in the midst of real estate bubble. Melissa Kim asked some of last year’s CMP Top 50 brokers to weigh-in on the possibility, and what it means for fellow brokers, their clients and everyone’s future
48 Q&A: fear and optimism in las Vegas: Simon Parker attended the U.S.-based National Association of Mortgage Brokers annual conference and expo, held in early December in Las Vegas, and took the opportunity to speak with the organization’s president, Jim Pair, and CEO Roy DeLoach, about the year just gone, and the 12 months ahead
ProfileS58 insight: White Knights: Since 2008 Dominion
Lending Centres has been building its inventory of white-label products to offer its brokers and has now introduced its first HELOC. CMP caught up with Gary Mauris, president, to find out more
60 Provider: Showing brokers the (commercial) money: Despite a challenging time in the commercial mortgage market, Nexus Investment Corporation remains dedicated to working with brokers to find funds for commercial and construction deals
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Mortgage Investment Trust For Lending Inquiries Please Contact:
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James MacGee is an associate professor at the University of Western Ontario and a research associate at the Federal Reserve Bank of Cleveland. His comparison of the U.S. and Canada’s real estate sectors appears on page 50.
contributors
4
editor’sLetter
mortgagebrokernews.ca
5. 01
issue
Happy holidaysIf your January is anything like mine, it’s not only the month that you make your New Year’s resolutions, but also the month that you give up on them. For instance, this year I told myself that I would eat less sugar - a goal that I failed seven days into 2010.
If, however, your goal is to look at new ways to grow your mortgage business, then this is the issue for you. CMP’s senior writer, Erin Letson, scoured the web and put in some heavy phone time to find some of the best ways for brokers to do just that for our cover story, “Bright business ideas for 2010,” on page 38. The results, which range from using the web to take advantage of things like blogging and social media, to looking at the most effective ways to network, are sure to spark a few more ideas.
I’m sure it’s something our profile subject this month, Victor Peca, will be interested in as well. After taking two years off from brokering to work for a lender, we caught up with him just three weeks back into brokering. When he left his 15-year brokering career he was a top seller, but he now finds himself building his business from scratch. See how he plans to do it on page 54.
When we were putting together this issue there was one phrase that we literally couldn’t escape – housing bubble. It was everywhere, in every newspaper, on every blog and every newscast. Interestingly enough, we also came across a professor from Western University in London, Ont., who was arguing the opposite. In his article on page 50, he actually points out just why Canada’s system, when compared to the American one, won’t bust.
But to really put the bubble talk to rest, we sought out some advice from last year’s Top 50 brokers. In “Bubble. What bubble?” on page 32, we asked these top brokers not only whether or not they thought we were in a bubble, but most importantly, what’s the best thing to tell customers who are convinced that we are?
So if your resolution was to dispel bubble myths, start a blog and look for new business, hopefully this issue helps. However, if it was to cut back on sugar, I’m afraid you’re on your own.
Regards,Jesse [email protected]
“”Talk to your RVP for more details, including how to become
a Street approved mortgage professional.
The word is on the Street.
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Vince Agozzino Jason HumeniukVice President, Eastern Canada Sales Vice President, Western Canada [email protected] [email protected]
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Excellent turnaround time on deals and documents. Supportive broker friendly servicemakes Street Capital my lender of choice.
Rick SekhonMississauga, ON, CEO Status
Street Capital is one of our lenders of choice because of their common sense approach tolending. The support staff are great to work with and the products they offer are fantastic.
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At Street Capital they treat you like a part of their family and they care about the familieswe represent.
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CMP_RecruitAd_Jan10:Layout 1 1/13/10 4:55 PM Page 1
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Quotables
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EDITOR Jesse Kinos-Goodin
SEnIOR WRITER Erin Letson
nATIOnAL SALES MAnAGER Trevor Biggs
AccOunT MAnAGER Andrew Davies
OFFIcE MAnAGER Marni Parker
SuB-EDITOR Rachel Naud
DESIGn MAnAGER Jacqui Alexander
DESIGnER Vivid Design Solution
VIcE PRESIDEnT, OPERATIOnS & EDITORIAL Simon Parker
PRESIDEnT Tim Duce
InTERnS Kaleigh Ambrose Melissa Kim
January 2010
“You have to adopt an ‘if you build it they will come’ attitude and make sure you’re blogging about topics people care about”
- the mortgage centre’s rowan smith on how blogs could save your business in the new year. Page 38
“Canada’s smaller subprime market share and fewer households with high LTV ratios suggest that the country is less likely to see the rapid increase in defaults that helped trigger the bust in U.S. housing prices. Bright business ideas for 2010”
- James macgee, an associate professor at the university of western ontario and a research associate at the Federal reserve bank of cleveland, compares the u.s. and canadian markets to suggest that canada may have just “got things right.” Page 50
“I do believe there is fear-mongering that goes on in the media where people say, ‘Oh, geez. I saw in the Globe & Mail today that interest rates are going to go up and it’s going to cause a crash in the housing market.’ Well yeah, theoretically.”
- dlc broker Peter kinch on why canada’s real estate market is not a bubble ready to pop. Page 32
Choices.AtMacquarie Financial, brokers choose their compensation.
Ask about our commission options. Call 1 877 462 3788We’re on Your Side! www.MacquarieFinancial.com
Macquarie Financial Ltd. (MFL) is not an authorized deposit taking institution for the purposes of the Banking Act (Cwth) 1959. MFL’s obligations do not represent deposits or other liabilities ofMacquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of MFL, unless noted otherwise. MFL is not regulatedas a bank or other financial institution or as a holding company thereof.
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mortgagebrokernews.ca 8
letters and comments
If you have something to say and would like to potentially see it in the pages of CMP, you can either comment on mortgagebrokernews.ca or send a letter to [email protected]. Letters and comment may be edited for length and clarity.
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have you recently been dropped by a lender because you haven’t met volume requirements?
Every month CMP will have a new broker poll on mortgagebrokernews.ca. Here are the results of the latest one.
Yes No50% 50%
total Votes: 68
to trail or not to trail?It was interesting to read the article titled “Money now or later: the trailer-fee debate.” I have been placing a big chunk of my business on the trailer model because I like the even flow of income as opposed to the stress of not knowing what my minimum earnings will be six months from now. However, the biggest issue was not addressed in the article with respect to the trailer model.
As the recently defunct Abode Mortgage Corporation illustrates, when a lender goes belly up, brokers have to chase their commission from the defunct company. This issue is multiplied when a broker takes on a trailer-fee model. In fact, the biggest issue for me right from the start has been what happens to the trailers if a lender gets acquired or goes belly up?
arpad komjathy Mortgage BrokerVerico Dynamic Mortgages
Any mortgage broker not supporting trailer-fee lenders is very short-sighted. If we send our deals to Merix, Macquarie and various white labels hopefully other lenders will be forced to offer similar programs. Why are brokers sending banks (competition) all the business only to have banks renew 90 per cent of these clients? It just does not make sense, and brokers/lenders need to recognize this trend and start making changes – our business and future depend on it. -Jo
I think there seems to be far too much of a “live for today” mentality in our industry. As a financial planner first, I am just boggled that more mortgage associates don’t understand the positive potential that belies these trailer fees. The trailer fee is an income that will come as long as the customer still pays their mortgage. Think long and hard and take it upon yourselves to have the authority to seek win-win for both yourself and your clients. Don’t just give your business to a lender that won’t forward that business back to you. -Victor
If another major lender were to offer trailer fees (or at least payment on renewal) they would probably double their funded volumes within a year and have higher mortgage retention overall. It’s crazy that only two lenders are offering this right now when this is the future. To all you lenders out there - get onboard before it’s too late.-Jason
Hst: just another taxThe HST will no doubt be a nuisance to all that need to pay it but will it really impact the real estate market? Buyers and sellers certainly will not welcome the higher tax costs but will put up with it anyway because sellers want to sell and buyers want to buy. I predict very little negative impact on the market from the new tax structure but do predict a big surge in teeth gnashing.-Dan P.
While the HST will cause some discomfort, it will come and people will deal with it. The government has to pay for all the services we insist on somehow, it doesn’t just grow on trees. And we have control of the government – if you don’t like it, vote them out in three years.-Michael lloyd
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From every corner of the globe, as long as you have internet access, you’re ready to go.
Easy Login (web based)
No contracts (month to month)
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Now instead of wasting all your valuable time sifting through countless matrices, product and rate sheets, spend all that extra time sourcing new clients or looking after the existing ones.
We live in a technologically driven society, don’t get left behind.
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mortgagebrokernews.ca 10
newscommunIty
Above Deb White (pictured left),
broker/owner of DLC White House Mortgages
based in Vernon, B.C., and her friend Dawn raised more
than $2,500 and collected non-perishable food items for the Salvation Army on Dec. 9
by singing Christmas carols in their community.
Bottom Left On Dec. 8, Invis brokers
and partners delivered $250,000 worth of new
clothing and supplies to 65 shelters in 12 Canadian cities.
The event, which was founded by Vancouver
broker Bruce Coleman in 2002, was the result of a
year’s worth of fundraising.
Bottom Right Mortgage Alliance raised
over $10,000 for breast cancer research at a black-tie
gala at the Liberty Grand in Toronto on Dec. 12. The event,
which drew 300 guests, was part of the Weekend to
End Breast Cancer.
In the community
Central & Eastern CanadaSam Kay: 416-904-0458
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in what was described as merely a joke now has a 14-year-old boy under investigation by the rCMP, potentially for such serious charges as inciting hatred and spreading hate crime.
It started when the boy, inspired by an episode of the hit cartoon show, South Park, which stated that Nov. 20 was “kick a ginger day” (ginger being a derisive term used to describe people with red hair), decided to start his own Facebook group called “National Kick a Ginger Day, are you going to do it?”
The group encouraged its more than 20,000 members to “get them steel toes ready,” and while it may have been intended as just a joke, the consequences of it were very real.
In CMP’s 2010 wallplanner, released in the December issue of the magazine, a similar remark unintentionally ended up on the Nov. 20 date. This was followed by several industry members contacting our offices to express their concerns about the issue – one that we do not take lightly. While CMP has made numerous apologies and statements regarding the grave error (for full text of this see page XX), and included an updated version of the wallplanner in this issue, it doesn’t diminish the severity of the real consequence in Canadian schools and workplaces.
One Ontario teacher that CMP contacted, who wished to remain anonymous, said that the anticipation for kick a ginger day this past November was so palpable that the school had to take advance measures, such as morning sensitivity training and public announcements, to try to prevent it.
“Once it caught wind and everyone was talking about it and downloading YouTube clips of South Park, it was hard to ignore,” she said. And despite their efforts, some of the males were still punched and kicked. In other parts of Canada the kicking was so severe that it caused many red-headed children to go home bruised and bloodied, afraid to return to school.
Unfortunately, even though the day falls in the middle of the international Bullying Awareness Week, it doesn’t seem to help matters, and the negative side effects have been far reaching. As recent as last December students at a school in Naples, Florida, started a “kick a Jew day,” the inspiration for the idea being the aforementioned Facebook group.
During the same week as this event, red heads were targeted at a California school, causing one 12-year-old boy so much trauma when he was
kicked in the stomach, head and groin by 15 other boys that he is now afraid to go back to school. The 15 boys in this instance were detained, and two were charged with battery, while the 10 boys who were involved in the Florida kick a Jew day were given a one day in school suspension.
But even mainstream media seems to take the matter lightly, as indicated by the tongue in cheek way it has been reported. One Canwest story started with: “They say blonds have more fun, but it was redheads who might have got a bigger kick on Thursday, dubbed by some as Kick a Ginger Day,” while a headline on U.S. news outlet ABC News simply read “carrot-tops: being red not so easy.”
Fortunately the RCMP takes its investigation of the 14-year-old more seriously.
“We do treat this sort of thing seriously,” said Comox Valley RCMP Const. Tammy Douglas, in the Canwest story. “This is sort of inciting hate. It’s a hate crime really.”
And even with a public apology and the removal of the Facebook page, the boy may still face charges.
On the bright side, when you try to look up the infamous Facebook group now, you are instead diverted to a much more positive one titled “Hug a Ginger day,” with almost 10,000 of its own members already. CMP
Kick a ginger day no laughing matter
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1.866.983.7426 [email protected] your confidential information package:
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IT’S FREESearch Your Client Database
Sort by Mortgage Fields
Schedule Client Tasks Automatically
Send Customized E-mail & Letters
Use Graphic E-mail Templates
Access clients in Outlook
Merge to Microsoft Word
Export to Microsoft Excel
Import from Filogix Expert
Works with:
Registered trademark Microsoft Corporation.
© Verico Financial Group. All Rights Reserved.
mortgagebrokernews.ca 14
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News bitesthe mortgage group opens new tV studioAfter launching a weekly Internet broadcast last fall called TMG TV, The Mortgage Group announced the opening of a green screen studio in Vancouver in December. The studio, called Warp 8, is combined with a training facility so the company can film educational videos for brokers. TMG president Mark Kerzner said it is important the network’s brokers from across Canada have access to “world-class training delivered through leading-edge technology.” CMP
dlc launches white-label Heloc mortgage Dominion Lending Centres added to its white-label product roster in December with a new HELOC mortgage with a trailer-fee payment for brokers (the fees stay with them even if they leave the network). The product is similar to other fully readvanceable mortgages on the market and consists of a fixed-rate portion for the mortgage plus a revolving line of credit tied to prime. It is the eighth white-label product DLC has launched since April 2008. CMP
genworth posts new online video seriesA new series of videos by Genworth Financial Canada have been posted on Homeownership.ca, one of the company’s websites that offers information, tips and tools about the home-buying process. The three videos cover the Canadian housing market (mentioning its high home ownership rate of 68.4 per cent), the necessity of mortgage insurance and how it is paid as a monthly
premium, and purchasing a home as a new immigrant. CMP
mortgage alliance’s rightmortgage reaches the $2 billion markMortgage Alliance’s RightMortgage product reached $2 billion in sales under administration in December after two years on the market. The private-label product – which Mortgage Alliance chose not to brand with its own company name – allows consumers to select the terms, features and rates of their mortgages. It is sold by the close to 1,700 brokers and agents across Canada in the Mortgage Alliance network. CMP
Verico starts smartphone strategyWith the growing popularity of smartphone apps, Verico recently introduced a set of mortgage tools for iPhones and BlackBerry phones. The apps include calculators for mortgage payments, purchase financing and income qualification, as well as a Verico office search with Google Maps, amortization tables and expense and payment charts. Verico COO John Kelly said the tools mark the beginning of the company’s “smartphone strategy” as brokers and consumers evolve their practices. CMP
CMP Wallplanner - Correction and apologyit has come to our attention that in the recently released 2010 CMP Wallplanner, which was inserted with the December issue (4.12) of CMP magazine, that there were a number of regrettable editorial errors in the calendar.
These were the result of an oversight within the production process, which has since been addressed by CMP.
The statement (which appears on the Nov 20 date) is not condoned by CMP, and we sincerely apologize for the error.
As part of our mandate to provide services and materials that are only of the utmost quality, we have reprinted an updated version of the Wallplanner and included it with this issue.
Please disregard the previous version of the Wallplanner, and we hope you find continued use out of the new version.
We apologize for any inconvenience this may cause. CMP
Joining a network shouldn’t mean losing your identity.
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Despite a difficult economic year, CAAMP’s latest survey on the 2009 residential mortgage market in Canada points to reasons for being optimistic, among them a forecast that total outstanding mortgage credit will surpass the $1 trillion mark in 2010.
On another positive note, CAAMP’s report found brokers’ share of the mortgage market has remained stable at 23 per cent (higher among first-time buyers) and 77 per cent of Canadians remain satisfied or completely satisfied with their mortgage. About one-quarter of homeowners with mortgages had some mortgage activity in the last 12 months, the report said, and of those who renewed, 73 per cent received lower rates than their original term.
“Mortgage consumers have been busy and have effectively capitalized on low interest rates to shop and renegotiate,” said Jim Murphy, CAAMP’s president and CEO. “CAAMP’s survey found that, on average, negotiated rates were discounted by 1.23 percentage points lower than typical advertised rates for five-year mortgages, and we see this discounting trend continuing.”
When it came to lenders, survey respondents named the three most important factors for choosing a lender as interest rate, flexibility of payment and credibility. A large majority (88 per cent) stayed with the same lender upon renewal and 56 per cent chose a five-year term mortgage product. However, the report also noted that many people who took out a mortgage in the past year chose a shorter term, with 20 per cent at one year or less. CMP
Mortgage market rebounding, broker share stable, says CAAMP
37%The percentage of people who used a broker last year who heard of them through word of mouth, according to a Maritz research.
Ron Swift, Peter Vukanovich, Hali Strandlund and Jim Murphy at the CAAMP annual conference in November. For CMP’s coverage of the conference, see pages 24 and 25.
mortgagebrokernews.ca 16
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mortgages in the press
Bond and mortgage hikes could come earlier than expectedAlthough the Bank of Canada has pledged to keep rates low until at least June 2010, Bank of Nova Scotia chief economist Warren Jestin said bond yields and mortgage rates could be on the way up before then.
At a briefing held in early December, The Financial Post reported that Jestin warned new homeowners with variable-rate mortgages not to be influenced by the Bank of Canada’s neutral statements about keeping rates low. He added three-year and five-year fixed mortgage rates will be higher before July 2010.
Despite his warnings, Jestin said he did not foresee a “double-dip recession” and that even though expansion will occur in 2010, it won’t be that strong in 2011 “so we don’t see rates continuing up.” CMP
Hot housing activity expected to continue in 2010the Canadian housing market has yet to slow down, signalling a busier time for real estate brokers trying to meet consumer demands in 2010, according to a recent report by Re/Max.
“After one of the most difficult first quarters in Canadian housing history, the market miraculously changed course,” said the report. “Rising like the phoenix from the ashes, real estate activity across the country gained momentum.”
Sales and price growth in 2010 will result from a combination of that momentum, rising consumer confidence, low interest rates and improvement in economic conditions, according to the report. Furthermore, any decline in housing inventory is expected to push prices higher. The number of Canadian houses sold is expected to reach 475,000 units, an increase of two per cent compared to 2009 and average prices are also expected to reach historic highs in 2010, climbing two per cent to $325,000.
With the number of houses exchanging hands growing, real estate brokers can certainly expect to be busy. In another optimistic forecast, the Canadian Real Estate Association (CREA) expects sales to reach 492,300 units in 2010, an increase of seven per cent from 2009 figures, with western provinces expected to lead the way. CMP
1.5%The core inflation rate in November, well below
the Bank of Canada’s two per cent target.
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The number of Canadians who
expect the economy here to improve
over the next year, according to RBC’s
Canadian Consumer Outlook index.
3
5
Home Trust announces new presidentHome trust has named Martin reid, the company’s former treasurer, as its new president following the departure of Nick Kyprianou.
“I am pleased that our focus on strengthening our senior management team through internal development has resulted in Home’s new president coming from within the company,” said Gerald Soloway, CEO of Home Capital Group and its subsidiary, Home Trust. “I am confident that Martin will provide the leadership and guidance to continue Home as a multi-faceted financial institution and as Canada’s one-stop mortgage lender.”
Reid joined Home Trust in 2007 and, according to his appointment statement, helped establish the company’s participation in the Canada Mortgage Bond program. He has been responsible for the lender’s liquidity, market risk, securitization program and banking relationships.
Along with the appointment news, Soloway thanked Kyprianou for his time and commitment to Home Trust.
“We thank Nick for his significant contribution to Home’s success over the past 17 years and wish him every success in his future endeavors,” he said. CMP
Scotiabank sees $8 billion spike in mortgagesScotiabank saw an $8 billion surge in residential mortgages between october 2008 and october 2009 according to its latest financial report, an increase that helped boost the company’s retail banking division.
“Average assets before securitization rose $11 billion or six per cent from the fourth quarter last year, due primarily to growth of $8 billion or seven per cent in residential mortgages,” the bank wrote, adding these numbers “resulted in market share growth of 18 basis points versus the other major banks in 2009.”
The increase in mortgages throughout the year was just one part of an overall growth in Scotiabank’s profits. The bank reported a net income of $902 million for the fourth quarter of 2009 compared to only $315 million from Q4 of 2008, a surge largely attributed to a recovery of $642 million in after-tax charges that were taken from last year’s fourth quarter.
Other banks that saw growth in residential mortgages include National Bank, which saw a one per cent increase in mortgage volume to $23.7 billion between October 2008 and October 2009. Laurentian Bank reported a $1 billion increase in residential mortgage loans for fiscal 2009, something it said was a result of “successful ongoing underwriting initiatives.” CMP
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The average apartment rental vacancy rate for Canada’s 35 major centres in October, up from 2.2 per cent in October 2008, according to CMHC.
2.8%
Canada’s economy ahead of the pack, but not in the clearCanada is expected to outperform other G7 countries in the next two years, according to a new Bank of America/Merrill Lynch investment outlook, but it could also be headed toward a housing bubble.
“We’ve got a long way to go before we could put a bubble label on this market,” economist Sheryl King said, as quoted in the Globe and Mail. “However, with mortgage rates at decade lows - and even more attractive if home buyers choose the variable mortgage option which carries rates as low as two per cent - the seeds of a bubble are definitely in place.”
According to the Globe, King also said that the Bank of Canada overemphasizes new home sales, which could skew inflation calculations because the resale house market is the one that is performing. The amount of financial stimulus also poses a risk for an asset bubble, she added.
Despite the warnings, the investment outlook had positive things to say about Canada, forecasting growth of 3.2 per cent next year and 3.6 per cent in 2011. King said this means the central bank can start removing some of its stimulus policy by the middle of next year. CMP
Growing debt threatens economic stability: BOCWith household debt-to-income ratios in Canada at historical highs, the Bank of Canada is warning both borrowers and financial institutions to practise caution, particularly when it comes to mortgage lending.
“Financial institutions need to carefully consider the aggregate risk to their entire portfolio of household exposures when evaluating even an insured mortgage, since a household defaulting on an insured mortgage would likely be unable to meet its other debt obligations,” the central bank’s financial system review said.
On the borrower side, the bank stressed the need for households to “assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates.” The warnings can be seen as a response to the current views that Canada could be heading toward a housing bubble.
Some good news in the report came on the topic of liquidity, with the Bank of Canada saying Canada’s major banks have increased their stock of liquid assets and reliance on stable funding sources, “bolstering” their ability to provide credit during periods of stress. The report also said market-based funding is improving and that conditions in the international financial system have improved considerably since the last financial system review in June. CMP
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Affordability toughens in CanadaCanadian home ownership costs have become more expensive for the first time in 18 months, according to a report by the Royal Bank of Canada.
Rising property values and a recent pickup in mortgage rates are at cause behind the numbers.
The decline in affordability was true in all major markets and in all types of housing, and follows steep declines since the spring of 2008. Yet despite the latest decline in affordability, it’s still better than it was a year ago.
“The current levels in the RBC measures are in line with those in early 2006 when housing market activity was shifting into high gear in Canada,” the report said.
The average rate on a five-year conventional mortgage went from 5.45 per cent to 5.73 per cent in the third quarter, according to RBC, the first quarterly increase since last year. The overall property market has also picked up.
“In markets such as Vancouver, which had been badly hurt last year, the turnaround has been nothing short of breathtaking,” said the report. “In that market, as well as in parts of the Greater Toronto Area, bidding contests are common again.” CMP
HST to hurt 2010 mortgage marketAn overwhelming majority of members from the Mortgage Brokers Association of B.C. (MBABC) feel the new harmonized sales tax (HST) will negatively affect the 2010 mortgage market.
“It is evident that our membership feel the HST will take a toll on the real estate industry, particularly for new homebuyers,” said MBABC president Joe Santos in a statement.
Despite continuing low interest rates, 75 per cent of respondents felt the HST would have an overall negative effect, with 25 per cent of those saying there will be a negative impact only at first, with a minor one thereafter.
One area in particular concerns the sale of homes over $500,000.
“A $500,000 sale typically generates a commission of approximately $19,000. The HST will add an additional $1,330 in tax,” said Santos. “This affects home sellers perhaps to an even higher degree because the HST will be added to real estate commissions.”
He added that this may force first-time homebuyers, the “main driver[s] in the housing industry,” to make less expensive purchases due to the higher transaction costs. CMP
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Benjamin tal kept an optimistic tone during his talk at the annual CAAMP conference, saying the recession is over, business bankruptcies are down and key interest rates in Canada could remain low well into next year depending on when U.S. rates rise.
“In Canada, there was no need to print money for stimulus during the recession, so when interest rates rise, they won’t go up as much as in the U.S.,” said Tal, senior economist at CIBC World Markets.
Tal also said there was “no indication” of a housing bubble, a theory being debated recently in the media. He then pointed to positive signs in the Canadian economy, including a shorter duration of unemployment among laid-off workers compared to the U.S., excess liquidity among individual investors and soaring consumer confidence. And
despite a forecast of just over two per cent GDP growth in 2010, Tal said Canada “will outperform the rest of the G7 in 2010 for the first time ever.”
When it came to the state of the U.S. economy, Tal spelled out four potential danger signs for the future, including payment option ARMs (adjustable-rate mortgages), which start with very low interest rates that lead to the mortgage principal going up. Wells Fargo was one of the biggest backers of these products with a reported $107 billion in debt tied to them.
Addressing the next wave of alt-A borrowers with payments up for renewal, another concern being closely watched, Tal said the longer five-year teaser rates and the state of the market due to stimulus means there will likely be a less dramatic price jump when clients adjust their payments. CMP
Benjamin Tal
Tal talks recovery, dismisses housing bubble at CAAMP session
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newscaamP 2009
The value of a square foot of office space in downtown Toronto, according to CB Richard Ellis’ list of the 50 most
expensive spaces in the world (Toronto
placed 38th).
$60.7
8
(US
D)
A panel of lenders at CAAMP’s annual conference said they believe mortgage brokers’ share of the market will continue to grow, but also emphasized the need for greater efficiency and speculated that volume bonuses could be scaled back over time.
“There is increasing penetration of the mortgage broker channel because it takes all the grief of getting a mortgage off a person’s shoulders,” said Stephen Smith of First National, adding the under-40 generation has created a culture of using mortgage brokers as opposed to their parents’ generation who turn to banks.
Among the positive outlook there was also critique. Ivan Wahl of Xceed Mortgage Corporation talked about his company’s goal to do 80 per cent of volume with 20 per cent of brokers and speculated there are only a small number of brokers who “do what they say they’re going to do.”
John Webster of Scotia Mortgage Authority said he didn’t think lenders needed to be “all things to all people” in response to one of Smith’s comments about catering to all brokers, not just the ones who send in lots of deals.
On the topic of lender exclusivity, Boris Bozic of Merix Financial said it appeared lenders were after “the same 750 brokers across the country even though there are 14,000,” stating brokers can have trouble gaining direct access to a lender. He also stated volume bonuses have a “shelf life expiry” and warned the industry to prepare for changes.
The panel agreed on a trend toward more screening of brokers (such as Scotia Mortgage Authority’s mortgage scorecard) focusing on efficiency ratios, number of delinquencies and deal quality. And although the panel agreed the economic recovery is underway, their optimism was cautious.
“The last half of 2009 was much better than anyone expected,” said Webster. “But there is still a lot of uncertainty.” CMP
Lender panel plays it safe
if there is anything good to come out of the credit crisis, it’s the opportunity to improve broker/lender relations, industry members heard at the annual CAAMP expo in Toronto.
“I was pleased with the credit crisis because it brought everything to the table,” said Vince Gaetano, vice-president of Monster Mortgage, as part of the mortgage broker panel. “Before it was just a volume game, now it’s a quality game.”
In a discussion that ran the gamut from making more money to getting into the business, a popular topic concerned the changing relationship between brokers and lenders.
“If brokers and lenders wrote down the definition of partnership it would be so different,” said the Mortgage Centre’s Tom Hogg. “I remember speaking a few years ago and saying ‘we have to change the way we do things.’”
Peter Kinch, a DLC broker and this year’s CMP Top 50 broker, concurred. “You have two customers - one is the borrower and one is the lender.”
The general consensus was that keeping lenders happy is equally as important in today’s climate as serving clients, but it’s something that has to be balanced carefully. For instance, while it’s important to give clients the best service and retain them good rates, it’s not fair to receive several commitments from several lenders at the same time. But that wasn’t to say the broker panel, not to mention the audience, didn’t feel it was a two-way street. “Clap your hands if you’ve submitted a deal and then not lost it, but had to compete with the bank branch to keep it,” asked Kinch to the audience.
The overwhelming applause spoke volumes.
Was the crisis a good thing?
five broker panel tips for new brokers
Find a ni1. che and build referrals around it.
Study all the lenders and make sure you know 2. them well.
Make sure your clients have a clear understanding 3. of the mortgage process.
Pick a brokerage that has good training. 4.
Good training is more important than commission in 5. the beginning. CMP
CAAMP’s lender panel included Boris Bozic, Stephen Smith, Ivan Wahl and John Webster.
mortgagebrokernews.ca 26
newsIn memorIam
Bonnie Bell came to Bridgewater Bank in Calgary in 2005 after previous roles at Laurentian Bank, FirstLine Mortgages and Maple Insurance. Colleen Lindsay, manager of underwriting and broker services at Bridgewater, said Bell was one of the most generous people she ever met and brokers who she worked with often commented on her easygoing attitude and level of experience.
“I first dealt with Bonnie in the early 1990s, and for over 20 years we certainly appreciated her decency, fair assessments, professional judgments and especially her sense of humour,” said Croft Axsen, president of Jencor Mortgage Corporation. “Who in our business didn’t enjoy Bonnie’s laugh?”
Bell passed away from cancer on Dec. 2, leaving behind two daughters, three grandchildren and three siblings. CMP
Bridgewater Bank lost two staff members in December – Ken Webb, a business development manager for Toronto and the Atlantic provinces and Bonnie Bell, team lead for mortgage underwriting.
Ken Webb joined Bridgewater in 2004 after working for the Mortgage Insurance Company of Canada, FirstLine Mortgages and CMHC. Along with his wife, Linda, he supported a Toronto-based charity called “Sleeping children around the world” and was a fan of weekends at Lake Simcoe, blues and bluegrass music and the Toronto Maple Leafs.
“Ken had a real way with words and a wonderfully dry sense of humour,” said Tracey Robinson, a fellow BDM at Bridgewater Bank in Toronto, adding he would often sign off his e-mails with ‘thank you very large,’ an expression of former Montreal Canadien Jean Beliveau.
After a battle with cancer, Webb passed away on Nov. 24 at the age of 62. He is survived by Linda and their three children.
Ken Webb
Bonnie Bell
Ken Webb and Bonnie Bell remembered
mortgagebrokernews.ca 27
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CMP1/3CMP_Third_page.indd 1 12/21/2009 8:54:45 AM
appointments
equitable trust recently appointed Vince faustini (left) as the new regional manager, commercial mortgage broker services, for Quebec and Carol Valenti (middle) and Joe flor (right) as single family residential mortgage underwriters.
Stuart irwin has moved from National Bank’s underwriting department to its BDM team. He is covering Ontario’s Golden Horseshoe region.
Benesure Canada recently realigned its senior management team. Steve Van Buskirk, who had been managing the Mortgage Protection Plan, moved into the role of vice-president, distribution. David Self has been appointed to the position of vice-president, product development and marketing and tina Bellavia will take over the role of vice-president, insured services for all of Benesure’s product lines.
Axiom Mortgage Partners has introduced several new brokers to its network: Dale folk (Regina), tyler tost (Calgary), Heather Brooks (Calgary), James Berg (Cobourg, Ont.), tim lacroix (Cobourg, Ont.) and Jackson Middleton (Regina).
Jackson MiddletonTim Lacroix
Vince Faustini Carol Valenti Joe Flor
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the u.K.’s National Westminster Bank, also known as NatWest, is under fire after details emerged that it granted an Albanian would-be terrorist (and illegal immigrant) a mortgage.
According to The Daily Mail, the man in question, Krenar Lusha, applied for a mortgage from NatWest in his real name and was given a 25-year, 93,000 pound loan without putting down a deposit. On Dec. 15, he was sentenced to seven years in jail after being convicted of five out of 10 terror charges against him. During the trial, it was discovered that the house Lusha bought had bomb-making equipment in the cellar and information on how to detonate bombs and carry out other attacks.
“It is extraordinary that a major high street bank gave a mortgage to an illegal immigrant,” Tory MP David Davies told The Daily Mail. “This has only come to light because terrorism charges have been brought against an individual, so can we assume that hundreds of other illegal immigrants have also been given mortgages?”
NatWest has kept tight-lipped on the case, releasing a statement that said,”It would be inappropriate for NatWest to comment on the specifics of this case; however, the bank has robust mortgage account opening procedures in place.” CMP
Non-banks in Australia are expected to capture market share from major banks in the next 12 months as securitization makes a comeback, according to a report by Deloitte.
“In 2010 lenders will seek to position for the opportunities ahead,” said James Hickey, a banking partner with Deloitte Actuaries and Consultants. “Where 2009 was the year of the major banks, 2010 will provide opportunity for the re-emergence of other lenders in the marketplace.”
Deloitte’s findings were based on a roundtable discussion of Australian lenders and distributors.
u.k
australia
Audit Partner and Deloitte Australian Securitization lead Graham Mott said, “The Big Four roundtable participants said they would welcome more competition and the smaller lenders said they intend to tackle them. So the game is on.”
The report found that competition between the Big Four, from regional and non-bank players and from “left-field” participants, such as foreign lenders will drive evolution of the mortgage market.
According to Mott, “We are already seeing solid evidence that the residential mortgage-backed security market is returning and at this rate it will reach ‘break-even’ levels in 2010 - triggering the environment for more competition.”
Further change in the mortgage market is likely to take place in terms of differentiation around brand, strategy, pricing and operating models. The roundtable group named innovation around product design, customer service, delivery channels and operating efficiency as being keys to growth in the mortgage sector in 2010. CMP
Mortgage delinquencies in the u.S. rose to a new record and could remain high due to holiday expenses, according to a Reuters report referencing Equifax data.
“We are about at the peak in terms of delinquencies,” said Myra Hart, senior vice-president of Analytical Services at Equifax. “Things probably won’t improve dramatically until jobs begin to be added. Delinquencies will stay at this level and may improve by small levels but we won’t see any real improvement till 2011.”
Hart also said that because consumers spend a lot more money during November and December, they fall behind on payments. But this year, delinquencies are worse than before. The percentage of mortgages at least 30 days late on payments in November reached 7.91 per cent compared to 5.83 per cent in November 2008.
One good sign, the Reuters report said, is that Americans seem to be paying more attention to credit card bills and attempting to pay off monthly charges. U.S. outstanding consumer debt has dropped five per cent or $575 billion from a year ago.
u.s.
133the total number of U.S. banks seized by
the Federal Deposit Insurance Corporation (FDIC) due to a higher number of property foreclosures.
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ISSUE 4.1
SURVIVING THE STORMHOW THE MORTGAGE INDUSTRY AROUND THE WORLD IS FARING?
MARKETING NEW WAYS TO MARKET YOUR BUSINESS
PROFILERODNEY GREENLAW
SURVIVING THE STORMPLUS:
4
2009Abode’s 2008 results Abode Mortgage Holdings reported losses for its 2008 fiscal year ending Aug. 31, 2009. Although the company saw fourth quarter profits of close to $400,000, the company reported year-end losses of almost $2.5 million. Abode also made a non-binding arrangement with a whole loan purchaser to stabilize cash flow.
one year later, and Abode shut down its mortgage operations on Nov. 30 after the prospective sale of the company by a private investment firm fell through. The sale stemmed from the company’s financier and whole loan purchaser withdrawing from its existing funding agreement.
“Management and the staff of AMC are devastated by the decision to cease operations,” said Abode CEO Mike Linehan in a statement. “However, without a committed mortgage funding and whole loan sale partner, the business of AMC is not viable. We wish to thank our loyal industry partners and deeply regret our inability to carry on in business.”
After the company released this statement, it did say it was shopping around for other buyers. However, at press time the company did not have a deal in place and it also hadn’t revealed how it would handle its existing mortgage portfolio or outstanding finder’s fees for brokers and agents. CMP
Solidifi goes greenSolidifi introduced an option for banks to reduce carbon emissions when underwriting a mortgage by selecting appraisers who also drive fuel-efficient vehicles. The company added a “green metric” to its appraiser quality scoring, with guidelines for green vehicles based on fuel efficiency.
one year later, and Solidifi says its Go Green initiative has been met with enthusiasm by appraisers and lenders with a reported 2,000 kilograms of carbon saved. Guy Bantleman, the company’s executive
vice-president, collateral services, anticipates the number of program participants to “increase exponentially” in 2010.
“Since the launch of the Go Green initiative, lenders now see a green leaf symbol as part of a metric listing, for those appraisers that drive fuel-efficient vehicles,” says Bantleman. “By selecting an appraiser who utilizes an energy-efficient vehicle, lenders and brokers can help reduce our carbon footprint and enjoy mileage cost savings.” CMP
New bonds, more liquidityCanada Housing Trust launched 10-year Canada Mortgage Bonds (CMBs) as a way to add more liquidity to the market and reduce mortgage rates. The bonds are guaranteed by the federal government through CMHC. As soon as they launched, $2 billion worth of the 10-year bonds were sold.
one year later, and CMHC said the 10-year CMBs have been well accepted by investors and mortgage originators, with a total of $9.2 billion being sold since their introduction to the market ($7.75 billion were sold with a maturity date of Dec. 15, 2018 and in November, CMHC sold an additional $1.475 billion with a maturity date of March 15, 2020).
CMHC said the 10-year bonds have resulted in liquidity for mortgages with terms longer than five years because prior to the introduction of these types of bonds, these mortgages were ineligible for the CMB program.
“From my understanding, the product has helped lenders with their multi-family lending in creating liquidity,” said Ron Swift, president of MCAP, a lender that did not participate in 10-year CMBs. “But there has been limited up-take in residential consumers taking 10-year term mortgages, so I don’t think the 10-year CMB helped much with those lenders or consumers.” CMP
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s ince last October, home resale numbers have almost doubled, up 41.5 per cent and setting
new records in Toronto, Ottawa and Montreal, all according to figures from the Canadian Real Estate Association (CREA). It’s stats like these that prompted economists from Scotia Capital, Derek Holt and Karen Cordes, to publish a report aptly titled, “Is there a Canadian Housing Bubble?”
And considering the data, it’s not an unwarranted question. Holt and Cordes plainly put forth that “Canadian house prices are rich no matter how one looks at it, but they are likely to become richer yet before material risks emerge later next year and beyond.”
They even answer their title’s question with the retort, “probably,” but elaborate that the combination of low rates, mortgage innovation and shortage of supply will keep it at bay for awhile.
In the Globe & Mail Holt and Cordes said that “with prices up 20 per cent over year-ago levels and at all-time highs by virtually every measure, this is becoming an over-valued asset class in our opinion.”
As for the argument that increased affordability is driving the market, Scotia Capital claims that using affordability as a valuation measure is not a fair valuation at all, as “affordability is often just an interest rate at play.”
In other words, they believe that a housing bubble is well on its way.
bubble. what bubble?An industry report questioned whether or not Canada was in the midst of a real estate bubble. Melissa Kim asked some of last year’s CMP Top 50 brokers to weigh-in on the possibility, and what it means for fellow brokers, their clients and everyone’s future
choose your words wiselyThe word bubble, especially when it’s used in conjunction with the phrase real estate, has a fair amount of weight behind and shouldn’t be used lightly. When CMP contacted some of this year’s top 50 brokers, for instance, they tended to agree that the so-called bubble was as imaginary as the mortgage monster under your bed, and that what the industry is experiencing is simply a sharp rebound. For them, it’s the difference between performing the pole vault and landing on your back with the crash mat, or without it. In other words, the market will have its ups and downs, but this time when it does go down it won’t hurt too terribly.
Peter Kinch, of the Peter Kinch Mortgage Team in Vancouver, believes that everyone is confusing leftover pent-up demand from 2007-2009 and the current low interest rates as a possible bubble.
He defines the term bubble as “an over-exuberance of activity not founded on any core fundamentals, resulting in irrational buying behaviour of the public.”
In a true bubble it’s not enough that consumers can afford a house, but they have to chase after it like a stock that they know is over-inflated, hoping to make a quick return on it. Kinch calls this chase “the greater fool theory,” in which the consumer hopes to buy an over-inflated priced house in hopes of flipping it in the short term to a greater fool.
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Not only that, but for there to be a housing bubble Kinch finds it imperative that interest rates and unemployment rates increase sharply, resulting in a significant increase in defaults and fear. In turn, many houses need to be unloaded on to the market at once.
“I do believe there is fear-mongering that goes on in the media where people say, ‘Oh, geez. I saw in the Globe & Mail today that interest rates are going to go up and it’s going to cause a crash in the housing market.’ Well yeah, theoretically,” said Kinch.
However, he claims that the Bank of Canada would not drastically increase the interest rates at any given point. This is because of how closely tied the real estate market is to the economy, and more specifically, the Canadian dollar. The lower interest rates we see now are meant to stimulate the economy, and Kinch believes that the Bank of Canada would not arbitrarily destroy such economic stimulus by raising the rates too high or too quickly.
Dwight Trafford, of Mountain Mortgage in Orangeville, Ont., believes that people are currently being very reactionary to the market.
“There is some perception that there are still deals, and some perception that rates will rise,” he said. “With that, people are jumping in and trying to take advantage of both situations.”
He also blames the media for creating something new to report. “Saying that there isn’t [a bubble], that’s not news,” he said, adding that cases of multiple offers also tend to lead people to believe that there is a bubble.
a balanced viewThen there is the opinion that today’s market is simply balanced, and therefore a healthy one. For Paul Gazzola, of Mortgage Architects in Mississauga, Ont., a bubble occurs when prices are inflated over and above what normal level statistics would dictate of supply and demand.
Gazzola believes that the speculation of there being a bubble right now is indebted not only to pent-up demand and bubble-flavoured comments by political leaders and bank governors, but also to consumers investing in real estate in hopes of pushing the market to higher rates of return.
However, he said that affordability will thwart that effort. Because lenders and the Canada Mortgage and Housing Corporation have implemented measures since the economic downturn in regards to maximum loans to value
rations and refinances, the real estate market will stay away from a potential bubble status. That is, as long as interest rates do not increase within the next year.
what to tell the consumerAlthough Kinch does not foresee a bubble in the Canadian real estate market’s future, he is wary that there will be a small secondary recession. However, he finds it normal that there is a downturn in the winter months, so the consumer should not misinterpret it as anything more and overreact to regular market conditions.
“If I’m in my house and I’m making my mortgage payments and I can afford my mortgage payments, then the value of my house on a day-to-day basis is actually irrelevant,” he said. “The value only comes into play the day that I go in to sell that house. Consumers should really focus on measuring peak to peak and not peak to trough.”
For Kinch, lack of consumer confidence is the biggest threat to the housing industry. Not only should consumers change their attitudes, but according to Kinch, brokers should as well. He says that brokers shouldn’t adjust to a market that does not experience double-digit growth in real estate prices. Instead, they should adjust to small ups and downs, and in the end, brokers and consumers should ask the consumer one question: What can you afford?
This question should be asked regardless of what happens to a house’s value or interest rates.
Trafford offers that brokers and consumers in Ontario and B.C. should instead worry about how the harmonization sales tax (HST) will affect the market when it comes in effect July, 2010. He said that rather than focusing on talk of a bubble, brokers should remind clients that the impending HST and the potential for a rise in interest rates make now the best time to buy.
what history tells usTrafford believes that for there to be a bubble, house prices must be artificially and substantially inflated by at least 50 per cent, which is based on his experience as a broker in 1990 when there was a definite bubble. He claims that optimism in the economy, low interest rates and the fear that interest rates will rapidly increase are encouraging people to buy houses more so than if these factors were not present.
Based on current market conditions, Trafford predicts there will be a bit of a slowdown in real
Top: Dwight TraffordMiddle: Paul GazzolaBottom: Peter Kinch
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estate next year. Not only will the refinance market slow down, but so will purchases because consumers will realize that the economy is not what they thought it was. Despite these conditions, Trafford believes that as long as interest rates stay low, consumers will continue, at some level, to buy homes. And while a slowdown in the market is one thing, Trafford says there is nothing scarier than an actual bubble.
“When houses double in 24 months, you know that that’s not going to keep going and everything goes south. People lose homes, people stop buying and everything disappears,” he said. “They can’t refinance because they have no equity. A bubble is the worst scenario, especially when it bursts.” Gazzola even bought his first house in the aforementioned housing bubble of 1990, and as painful as the burst was to the value of his house, by 1997 the value was back in tact.
“People should keep in mind that this is part of everyday economics,” he said. “It doesn’t always go up. When you purchase, purchase for the
purpose of your home as a shelter and good investment versus rent. If rent is cheaper for you, then you should stay in the rental market.”
Gazzola encourages consumers with “tougher credit” to maximize on their interest rates and correct their credit before looking into purchasing a home.
On the other hand, he encourages consumers to truly understand what is affordable to them, especially since the current low interest rates are not likely to be available come renewal time, and stresses that brokers make their clients aware of such possibilities.
While there may not be a bubble now, with things like bidding wars becoming more common in large urban areas, a little caution never hurt anyone.
Perhaps Peter Aceto, chief executive of ING Direct Canada, explained it best to Bloomberg News when he said “When Canadians are waiving conditions and paying 10 per cent more than asking for a home, it does give you some pause.” CMP
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With 2009 over and a brighter outlook in place, it’s a good time to evaluate business models and think outside your current box of sales tools. CMP
looks at what some brokers have done to stay a step ahead in 2010
it’s often said by both economists and historians that tough times breed innovative ideas. An interview with Harvard Business School Professor
Clayton M. Christensen that ran in the Wall Street Journal last year reinforced this train of thought. Christensen told the Journal that in an environment where people have to push innovations out the door fast and keep the cost of innovation low, the probability of success is much higher than if the people have more time and more money.
This theory could help explain why many brokers – a lot of whom are also independent business owners – have turned to the Internet for marketing purposes of late, taking advantage of the immediacy of blogs and social media. Brokers have also looked for ways to connect more effectively with their clients and referral sources, going back to basics (i.e. face-to-face networking) when leads aren’t as plentiful as in times past.
Although the economy appears to be on the upswing for 2010, Christensen’s lesson is a good one to refer back to as people wait for things to return to “normal.” It’s a reminder that even when times are good, there is always room to evaluate, improve and, of course, innovate. Below, we look at different ways brokers have kept on top of their businesses without breaking the bank, showing that even small efforts can turn into something great. We hope these ideas help spark some of your own for the New Year.
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blog for businessWhile it used to be that not having a website put you behind the times – and, don’t get us wrong, it still does – having a blog is now practically a prerequisite for a great website. On top of that, it’s a gateway to social media, the current buzzword of online marketing.
For Rowan Smith, a broker with The Mortgage Centre in Vancouver, B.C., blogging has led to more than a few referrals. After taking a “blog guru” course offered by ReachD.com, an online marketing training company, Smith began posting regularly and estimates close to 30 per cent of his recent business has come from his blog. What are his secrets to success? He updates content frequently and creates posts that are both relevant and keyword-search friendly, for which he spends about three hours a week on.
“You have to adopt an ‘if you build it they will come’ attitude and make sure you’re blogging about topics people care about or that they’re searching for,” says Smith, who makes sure to vary the length of his posts, with some short comments on news stories and other in-depth explanations.
For post ideas, Smith simply looks at client questions, especially ones on lesser-known topics. A recent example was a phone call he took about vendor takeback mortgages. He says the conversation got him “fired up,” so he decided to film a short video with his point of view on the subject for his blog. Smith also posts his videos on YouTube and adds that video content helps his site’s Google searchability.
Other ways Smith optimizes his blog for business includes adding keyword tags, putting his name on all posts to encourage a “call to action” from readers and taking a personal, not formulaic or recycled content, approach to writing.
“The bottom line is that you have to produce your own content,” he says. “I am my own business and I’m the guy who writes the articles. I don’t think a blog works well any other way.”
embrace social mediaAlong with the blogs, Twitter was another online marketing trend that grew in both size and influence in 2009. The site is estimated
“ I find that people want to connect with you based on how you help other people. There’s no real secret – I think of myself as the consumer and what I would want to know. I always try to relate ”
Top: Rowan SmithMiddle: Mark Goode
Bottom: Wayne Kainu
to have reached close to 18 million users, and judging from CMP’s Twitter (@CMPmagazine) following, many brokers and other industry players have embraced the social media tool. One broker who is actually gaining clients through Twitter is Paul Sidhu, who has more than 2,500 followers on both of his pages, @PaulSidhu and @TorontoMortgage.
“Through the knowledge I’ve provided on Twitter, I find I have a lot of people calling me and talking to me about their situations and looking for solutions,” says Sidhu, who works at KTX Financial in Toronto. He gives the example of a post about mortgage penalties and interest rate differential, a hot topic over the past year.
Other topics Sidhu posts (or “tweets”) include rate changes, specials and general housing and mortgage news that links back to his website, where he puts up news roundups once a week. He also sends a weekly e-newsletter that links back to Twitter and includes his phone number and website link on most posts – something he says get him at least one lead a week.
“The whole thing about Twitter is interaction, so if you can start building a relationship with someone, they’ll refer you to someone else and gradually people start telling other people about you,” says Sidhu. “It’s almost like I’m not working anymore on Twitter. I’m just keeping up relationships and letting other people do the work for me.”
Along with his weekly news roundups, Sidhu keeps a Facebook page and creates tools for homebuyers on his website. One recent tool was a closing costs checklist, something particularly relevant to first-time buyers. Sidhu says the document, which is available in a PDF format, gets close to 20 downloads a day. Another popular article on
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AwardsCanadian Mortgage
April 23, 2010 • Liberty Grand • Toronto2o1o
For more information including sponsorship
opportunities please contact Trevor Biggs at
416-644-8740 x 236 or [email protected]
And you thought the 2009 Awards was a blast? We can’t wait to show you what we have in store for 2010!
Visit www.canadianmortgageawards.com
www.canadianmortgageawards.com
Award sponsors
Another event organized by
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his site is titled “The top nine ways to improve your credit score,” which he posted on Twitter to great click results.
go face to face with consumers and referral sourcesThe tools mentioned so far have been online-focused, so it’s fitting that the next topic is face-to-face interaction – something becoming more of a rarity in this increasingly digital age.
Yes, it takes more effort, but face time can be the ticket to gaining new business sources and building a referral base. That’s the approach Wayne Kainu and Christopher Cabel of Verico Boomerang Financial have taken since launching their mortgage business in 2008.
Close to 50 per cent of Boomerang’s business comes from financial planners (both Kainu and Cabel come from that career background) and instead of simply hitting the phones and e-mail to build relationships, the business partners try to attend six to seven financial planning trade shows and conferences a year to make contacts. It also gives them a presence among the big banks.
“There’s an expense to attending the shows with travel and the booth set-up, but they’re 100 per cent worth it for us,” says Kainu, adding the majority of the time at the conferences is spent “running scenarios” with planners who want to find out how mortgage brokers can help free up cash or consolidate debt for their clients. “If we encourage them to send us a lead at the show, right away that’s a warm referral.”
With the success of face-to-face communication at the financial planner trade shows, Kainu and Cabel decided to branch into
survival marketingWhat quickly became apparent during the National Association of Mortgage Brokers conference and expo in Las Vegas was how much business was once handed to mortgage brokers on a platter, and how times have changed.
Asked about what she took from the marketing-focused seminars – which included an online focus on social networking and producing videos – New Orleans-based loan officer Karen Woods, of NewLine Mortage, said they helped in teaching her how to get new business in what is a new environment for her.
“In the past we would deal with referrals,” she said. “But at this point, we have to be out there more directly with the client.”
Steve Higa, senior executive loan officer at Honolulu-based Point Financial, was upbeat about the year ahead.
“The one thing I’ve learned is we’re here to stay, and we’re not giving up,” he said. “You can see we’ve got a pretty good show considering the economic times that we’re in. I think we’re going to persevere.
The other thing I picked up is the people that are here ... are experienced.”
Both mortgage brokers were particularly interested in the idea of posting videos online. Frank Garay, co-creator of Think Big Work Small, was responsible for this presentation. The California-based company, which was started by a group of mortgage brokers in 2007, gives real estate and mortgage brokers assistance with using videos as a means of communicating with their database. Moreover, the company posts a daily video news service of its own.
When it comes to creating a video, some of the key tips Garay recommended mortgage brokers adhere to include:
Don’t waste people’s lives with a video resume about • yourself – while still useful, it’s boring and belongs under the About Us section of your website
For clients, ensure you provide value (i.e. information • they can actually use in their day-to-day life)
Industry news shows are only good for people that work • in or close to your industry (i.e. potential referrers)
Ensure you be yourself – the reality of seeing you behind • a webcam in your office is great
Use a script, otherwise you’ll ramble•
Always ask for the sale in every video•
For more information, see Thinkbigworksmall.com
“ the whole thing about Twitter is interaction, so if you can start building a relationship with someone, he or she will refer you to someone else and gradually people start telling other people about you ”
AwardsCanadian Mortgage
April 23, 2010 • Liberty Grand • Toronto2o1o
For more information including sponsorship
opportunities please contact Trevor Biggs at
416-644-8740 x 236 or [email protected]
And you thought the 2009 Awards was a blast? We can’t wait to show you what we have in store for 2010!
Visit www.canadianmortgageawards.com
www.canadianmortgageawards.com
Award sponsors
Another event organized by
Official publicationCocktail sponsor
book yourtable NOW
Advert_CMP5_2_LastCall.indd 1 19/01/2010 9:50:03 AM
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consumer events and attended the Calgary Home Show in September. Their booth included a consultation desk, where Kainu said his goal was to dispel the common consumer thought that a broker’s role is solely to get a borrower the best interest rate.
“We wanted to show people we’re not just order takers, we’re selling the best possible plan for the client,” he says. “Sitting down with the client for a few minutes and discussing basic numbers and what they can do to save money can lead to an application. We got about 25 hot leads over the course of a weekend and that’s very lucrative for a short period of time.”
Participating in both consumer and trade shows in 2009 didn’t just mean more leads for Boomerang, but also more brand exposure, especially with the company’s offbeat name. Next up for Kainu and Cabel is the Calgary Home and Garden show in February, which attracts close to 50,000 people, as well as a new storefront in northwest Calgary, which they hope will increase their name recognition even more.
use the media Education has always remained a key component of a broker’s job and the media is one of the best tools out there to let people know the role of a mortgage broker and educate them on trends.
Angela Calla, a broker with DLC and the 2009 AMP of the Year, uses radio to share her knowledge of mortgages and real estate while boosting her community profile. She hosts The Mortgage Show, a spot on CKNW AM980 in Coquitlam, B.C., once a week and has also appeared on local television stations.
“The two biggest topics, in my opinion, are real estate and weather, so there’s no shortage of
“ sitting down with the client for a few minutes and discussing basic numbers and what they can do to save money can lead to an application. We got about 25 hot leads over the course of a weekend ”
Networking tips Important facts to remember in regards to Networking:
The emphasis is on relationship building (getting to know people, finding out • how you can help them and determining what they can do for you) -Source: Genworth Financial Canada
Networking is about developing and maintaining relationships with people • who may or may not be clients, but who may be able to help you in the future.
effective Networkers Have excellent communication skills •
Show genuine interest in others •
Are willing and enthusiastic to provide help and support •
Follow through when they say they are going to do something •
Making introductions We meet and greet people all the time •
Important to be confident and genuine •
Show interest in the individual you are speaking with •
Eye contact and body language are important •
Handshake tips Stand up or walk towards an individual, offer a handshake and introduce • yourself and your role at your company. Not shaking hands can be interpreted as a clear form of rejection and can be insulting to the other individual.
A good handshake is held for three to four seconds and involves three or • four shakes. The motion is from the elbow, not the shoulder or wrist.
Know when to shake hands (all the time). •
Eye contact and a smile is key (you want to express that you are pleased to • meet the individual or pleased to greet the individual you are shaking hands with)
Shake hands to greet someone and to end a conversation •
Ask open-ended questions They can be simple questions. Remember you are probing, trying to ask questions that will initiate conversation
What can I do to help you? •
Tell me how long have you been a client with our Financial Institution? •
What are your plans for the weekend? •
Tell me about... •
What line of work are you in? How is work? How is business? •
What do you do? What company do you work for? How long? •
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content for the show and I find that people want to connect with you based on how you help other people,” says Calla, who dedicates about five hours a week to the program. She gets topic ideas from her own clients’ questions and
concerns and also reads up on CAAMP surveys and Bank of Canada reports to stay on the pulse of listener interests.
“There’s no real secret. I think of myself as the consumer and look at what I would want to know, always trying to relate.”
Mark Goode, a Mortgage Architects broker in Orillia, Ont., also looks to the media to promote his services and knowledge. He approached the local newspaper and provided the editor with a few educational articles, which they run when there is extra space. Goode says the editorial content reinforces the messages in his print ads.
“The No. 1 lead for us is word-of-mouth referrals, but the next best thing has been the newspaper, which has helped us establish
Angela Calla
“ education has always remained a key component of a broker’s job and the media is one of the best tools out there to let people know the role of a mortgage broker and educate them on trends ”
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ourselves as experts in the area,” he says. He adds that having smart advertising is also important, which is why he makes sure his ads change with the seasons to remind readers of the services brokers provide.
“We design ads based on what we think clients are going to be looking at certain times. For example, in January people have lots of bills so it’s a re-fi month and in April people are looking to
buy. Changing the ads gives people something fresh and new to look at because if you see the same ad over and over again, you tune it out.”
With the beginning of the New Year comes the desire for a fresh start, both in lifestyle and in business. The simple ideas shown above – blogs, Twitter, media presence, face-to-face networking – fall in line with Christensen’s argument that innovation doesn’t require a lot of time or money. It doesn’t always require commitment, either, as you can try to implement small things and if you don’t get the desired results, there is not a lot to lose by dropping it.
In the end, looking for small ways to improve your business and trying new things could make for a more successful 2010. Let’s raise a glass to that. CMP
“ you have to adopt an ‘if you build it they will come’ attitude and make sure you’re blogging about topics people care about ”
Paul Sidhu
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You live life in 3D.
www.equitabletrust.com
Equitable Lending Teamssee mortgages the same way.
in Ontario call us at:416.515.7000 1.866.407.0004
in Western Canada call us at:403.440.1200 1.866.940.1201
Everyone talks about service. Equitable delivers.It’s a team approach to lending.Open conversation. Partnership success. Unique, in an otherwisecompartmentalized world, meansEquitable Teams can see & hearwhat others often miss . . .
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ET_3D_CMP_Jan2010a3.pdf 1/13/10 5:10:34 PM
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Las vegas Fear and optimism in
Canadian Mortgage Professional: How would you evaluate the role of u.S. mortgage brokers in today’s economic environment?
Jim Pair: There is still a need for the mortgage broker. The consumers have always relied upon mortgage brokers ....We’ve developed relationships with the consumer, and most of our business comes from referrals. If we don’t do a good job for customers, they’re certainly not going to go out and refer to their family and friends. I think the role of the mortgage broker is definitely needed, and will continue to be needed to better serve the consumer. We’re 24-7, they can call us on a Saturday night if they’ve got a question. The retail lenders aren’t like that - they’re strictly eight to five-type operations. They don’t tend to service the consumer in the same way that we do because they have big deposits and a lot of depositors, and a lot of business can come from that and they don’t have to do the things that we do.
Was there ever a threat to mortgage brokering in the u.S.? Were they being overly blamed for what was happening?
roy Deloach: Our job was to explain to the media and Congress the mortgage process. We had to teach everybody what we could about what our role was. It came out that we were basically giving the information to lenders, they were running through the automated underwriting systems and they were collecting the data. [The lender’s] job was to...check the data and underwrite. That’s come out now, and we’ve been vindicated. One thing our members do need to know more about because of all of this is the chain from Main Street to Wall Street, [particularly] if the pull through (high-efficiency ratio) doesn’t happen. What we’re committed to doing is teaching brokers on why the pull through rate is very important, and [how] in the future it’s
Membership may have slid from a high of 27,000 to just under 10,000, and loans originated through mortgage brokers has slumped from around 65 to 25 per cent, yet the U.S.-based National Association of Mortgage Brokers (NAMB) remains bullish about the year ahead. Simon Parker attended the NAMB’s annual conference and expo in Las Vegas and took the opportunity to speak with the organization’s president, Jim Pair, and chief executive officer, Roy DeLoach
going to count against you if you can’t make sure the loan you start with the lender gets to close. The role of the broker is that they understand all the information they have from the borrower and the particular lender that he picks.... Then the probability of it closing is pretty high. That’s the new value-add for mortgage brokers.
JP: Five years ago, mortgage brokers and wholesale lenders were guilty of this, the market was that good, the wholesale lenders were not that concerned about pull through rates. They knew there was so much business out there and they were going to get it, that they could take the risk of [low] pricing. We all need to recognize that you can’t shop that loan. We’ve got to select one, and we’ve got to stay with that one.
How tough is it now for u.S. mortgage brokers running their businesses?
JP: The major problem brokers have right now is the underwriting has become so strict that so many people cannot qualify for loans. It makes it very difficult. And the mortgage insurance companies, where in the past you were able to do high-ratio loans up to 95 per cent and get them insured, they’re struggling and [now] they have raised their requirements from 720 to 740 credit scores before they’ll even think about insuring a high-ratio loan. It’s harder for the consumer to understand that they cannot get the 95 per cent [LTV] conventional loan. That’s the reason the Federal Housing Agency’s (FHA) role has increased from around eight to 10 per cent five years ago to almost 40 per cent of total originations now because it has a minimum down payment of 3.5 per cent. More and more of the loans are going to the FHA, as we cannot service the consumers with the high-ratio loans unless we do it through the FHA.
The frustration is not being able to get a consumer qualified just because there’s one little thing that really shouldn’t play much of a factor in whether he has the ability to pay the loan. The pendulum has swung that far.
is the mortgage broker market at the bottom of the cycle? for instance, are you expecting more members to join NAMB next year?
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SAFE Mortgage Licensing ActAccording to the U.S. Department of Housing and Urban Development (HUD) website, the SAFE Act forms part of the Housing and Economic Recovery Act of 2008 (HERA), which was signed into law on July 30, 2008. The law sees the federal government enter what was once solely a state government preserve – mortgage originator (broker) licensing.
“The SAFE Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators and for the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a nationwide mortgage licensing system and registry for the residential mortgage industry,” it says.
All states must have minimum standards in place by July 31, 2010, unless HUD has agreed to defer the deadline for a state that is making “a good faith effort” to establish laws.
“If HUD determines that a state’s mortgage loan originator licensing standards do not meet the minimum requirements of the Act, HUD must implement and administer a licensing system for that state,” the department says. “A loan originator in such a state would have to comply with the requirements of HUD’s SAFE Act-compliant licensing system for that state as well as with any applicable state requirements.” CMP
JP: I think so. One of the good things right now is that there is something we’ve advocated for a number of years - national licensing of all [mortgage] originators. We were not able to get the banks included but mortgage bankers were. We’re going through a period now where [mortgage originators] have to have 20 hours of education and take a test, so education has become a key recruiter, you might say, for NAMB.
rD: You’ve got the five distribution channels out there - the banks, the credit unions, the federally chartered entities, state lenders and the mortgage brokers. For the lenders and the mortgage brokers, they’re going to be tested, have education and have background checks. Now you have one channel, the banks, that don’t do that. It’s actually a very good competitive advantage - is there a risk going to a bank, where that person didn’t pass a test, they don’t have the educational requirements, they didn’t have to submit their fingerprints for an FBI background check? Why would you want to go there when there are other channels that have all these protections for you?
Your conference had a strong marketing and selling focus. What do you hope brokers take from your conference?
JP: It comes back to my philosophy that brokers are now going back to the things that we [once] did. We had to be innovative, creative and we had to learn how to market. We’ve kind of forgotten some of this. What we hear from the members is we need help in relearning some of this, and getting back so we can be more creative.
You included a “speed dating” session with lenders. What is product knowledge like amongst u.S. brokers?
JP: Speed dating is something we started in Texas. Some of the [NAMB] chapter heads did these three or four years ago, and they went over [well]. And it’s just a matter of having face-to-face with different lenders. Maybe taking a file you have and getting their input what’s going to be the best way of making it work out. You can do stuff like that. It gives the lender and the broker the opportunity to have a lot of good face time together, and create a relationship that will go beyond this conference.
in 12 months’ time, what would you hope you’ve achieved as an organization?
JP: That we’ve been able to protect our industry, and make sure that there are not laws or regulations which are overreaching and force us out of business. Two, I think we’re going to see membership increase. The people that are remaining right now are truly professional brokers - we’ve survived the last two years, and if we can survive one more year there’s going to be a great opportunity. Real estate and mortgages will be back, there’s going to be fewer brokers then there were about five years ago. The ones that are here are truly professional brokers, and will be able to take advantage.
if you could pinpoint what makes for a good broker, what are some of the traits they would have?
rD: I think going forward, the value-add for a broker now is going to be stepping back and asking, what are the advantages for the consumer to use a broker versus taking a crapshoot at whatever bank to get a loan. The problem for the consumer is, they don’t know for sure if bank A has a program that the consumer will fit into. The value-add for a broker is, he has got what Bank A, B, C, D and E has, and he knows that if you’re a clean-as-a-whistle borrower with good credit, that’s the [bank] to go to. The broker’s value is to send you to the lender that one time that’s going to close that deal. Mortgage brokers are going to be more valuable in the future because of all the things the entire market has gone through. A broker will have more expertise, so when that loan file is ready to go, it goes to the right bank the first time.
JP: Brokers are very patient. It takes time to find out what the consumer needs, and to put the package together for that lender so it can get through. We’re willing to take the time to work with them, go through the steps, so you need to do this, this and this in order to be here. And you don’t find that through other channels of [loan] distribution.
rD: The value-add for brokers for the entire market is lenders are able to tap into a lower-cost distribution [channel]. It’s like they can turn that valve up on that channel to handle the increased demand. If you did the math and said, ‘you know what, let’s get rid of the mortgage broker channel,’ that would be OK for maybe six months but as soon as there’s any kind of uptick in the market on refinances or purchases, the capacity of the banks wouldn’t cope. All the distribution channels know you have to have the mortgage broker.
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featureeconomy
The countries may share a border, but the financial crises in the U.S. and Canada are hardly similar. As James MacGee, an associate professor at
the University of Western Ontario and a research associate at the Federal Reserve Bank of Cleveland, explains, a comparison of the two markets
suggests Canada may have just “got things right”
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didn’t burstwhy Canada’s housing market
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Housing markets in the United States and Canada are similar in many respects,
but each has fared quite differently since the onset of the financial crisis.
Unlike the U.S., Canada has not experienced a dramatic increase in mortgage defaults, nor has any Canadian bank required a government bailout. As a result, observers such as The Economist have pointed to Canada as “a country that got things right.”
The different housing market outcomes in Canada and the U.S. can tell us something about the underlying causes of the housing boom and subsequent bust in the latter. In particular, they can be used to evaluate the roles that low interest rates and relaxed lending standards played.
monetary Policy and the u.s. Housing bustSome observers blame monetary policy for lowering interest rates over 2002–2005, pushing up housing demand, increasing residential investment and raising housing prices. In this view, the monetary-policy-induced housing boom thus set the stage for an inevitable housing bust.
The low interest rate policy of the Federal Reserve over 2001–2005 is often cited as a key factor in the U.S. housing bust. The main narrative is that by lowering short-term interest rates, longer-maturity mortgage interest rates are pushed down. This increases the demand for housing, puts upward pressure on housing prices and encourages builders to ramp-up construction of new homes. This leads to an “oversupply” of new homes, which triggered the housing bust in the U.S.
There are also claims that interest rates were too low over 2001–2005, when looked at by both historical standards, as well as compared to those predicted by the Taylor rule (a monetary policy rule which relates U.S. Federal Reserve’s ideal target rates to inflation and GDP).
The Bank of Canada made dramatic reductions in its target interest rate over 2001–2002, but one might argue that Canadian monetary policy was not quite as “loose” as that in the U.S. as it maintained a higher overnight rate over 2002 to 2004.
But a case can be made that Canadian and American monetary policies were very similar, at least in terms of the housing market. Estimates put the deviations from the Taylor
rule for Canada and the U.S. over 2001–2006 to be nearly identical. In fact, the two benchmark mortgage interest rates move closely with one another until after the beginning of the U.S. housing market crisis, when U.S. rates fell significantly below Canadian rates.
Mortgage interest rates—the main direct channel through which monetary policy impacts the housing market—tracked each other closely in the two countries, but unlike the U.S., where the mainstay of the mortgage market is the 30-year fixed mortgage, the most common mortgage product in Canada is a five-year fixed-rate mortgage (with a 25-year amortization period).
relaxed lending standards: different subprime lending boomsAnother leading explanation of the housing boom and bust relies critically on relaxed lending standards. This story is linked to the dramatic rise in subprime lending and high levels of loan securitization, which some commentators have argued reduced the incentives for mortgage originators to maintain underwriting standards. This is one area where there was a significant difference between the two countries, both in the size and nature of the subprime market and in the fraction of mortgages securitized.
Subprime lending has grown rapidly in both countries, though the magnitude has been far more striking in the U.S. While subprime mortgages accounted for less than five per cent of mortgage originations in the U.S. in 1994, one-fifth of all mortgages originated between 2004 and 2006 were subprime.
“ unlike the U.S., Canada has not experienced a dramatic increase
in mortgage defaults, nor has any Canadian bank required
a government bailout. The Economist has pointed to Canada as ‘a country that
got things right’ ”
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But while subprime lending also increased in Canada, it remained much smaller than in the U.S. The most cited estimate is that subprime lenders had a market share of roughly five per cent in 2006, compared to 22 per cent in the U.S. Moreover, the Canadian subprime market never expanded significantly into newer products, such as interest-only or negative-amortization mortgages, whose popularity grew rapidly in the U.S. from 2003 to 2006. Instead, the Canadian subprime market mainly offered products popularized in the U.S. during the 1990s, such as longer amortization periods for loans (from 25 to 40 years), and mainly targeted near-prime borrowers.
Securitization has also been less common in Canada than in the United States, with roughly 25 per cent of Canadian mortgages securitized in 2007 versus nearly 60 per cent in the U.S. The Canadian securitization market has grown rapidly over the past decade, rising from roughly five per cent of mortgages in 1998 to over 25 per cent in 2008. However, in many ways, the Canadian market resembles the early stages of the U.S. mortgage securitization market, as most securitized mortgages in Canada are backed by an explicit government guarantee. This government guarantee requires limits on borrowers’ debt-service ratios and amortization periods, which makes it more difficult for lenders to offer some types of subprime loans.
The subprime story is also consistent with the different pattern of mortgage delinquencies in Canada and the U.S. In the U.S., mortgage delinquencies for both prime and nonprime mortgages began to rise before the recession began and unemployment rates began to climb. In contrast, mortgage delinquencies in Canada have only recently begun to increase, after unemployment rates started rising and the Canadian and world economies slowed sharply in the fall of 2008.
Finally, the relaxed lending story is consistent with the fact that the U.S. experienced a housing bust over 2007–2009 while Canada did not. While the expansion of subprime lending provided a temporary boost to housing price growth rates, when prices stopped rising, the inability of some borrowers to refinance homes they could not afford led to a spike of delinquencies. The resulting increase in liquidation and foreclosure sales put additional downward pressure on house prices, which, in turn, pushed more borrowers into default. This negative feedback cycle helped push a correction
distribution of Mortgages by Loan-to-Value Ratio
Canada has significantly fewer households with LTV ratios above 80 per cent than the U.S. Before the housing bust, roughly 21 per cent of American households with mortgages had LTV ratios above 80 per cent, versus only 15 per cent in Canada.
Sources: Bank of Canada Financial System Review December 2007; American Housing Survey. The American Housing Survey reports the ratio of all outstanding mortgages (excluding home equity lines of credit) to the value of the house.
United States Canada
LTV ratios 1999 2005 2007 2006
0–80 76.48 79.14 78.12 84.79
80–90 10.55 8.98 9.66 8.81
90–100 7.56 6.37 6.93 1.53
100+ 5.41 5.51 5.28 4.87
in the housing market into a housing bust.One possible critique of this argument is
that while Canada has not yet experienced a housing bust, it is likely to experience one in the next year. Indeed, a recent Merrill-Lynch-Canada report noted that Canadian house prices over the past decade closely resemble U.S. house prices with a two-year lag. Based on this, they concluded that Canada was also likely to experience large decline in house prices over the coming year. Canada’s smaller subprime market share and fewer households with high LTV ratios, however, suggest that the country is less likely to see the rapid increase in defaults that helped trigger the bust in U.S. housing prices. So far the incoming data suggest that the Canadian housing market is likely to experience a housing market slowdown rather than a bust.
why was the subprime market in canada smaller?Given the key role played by the “subprime” market, the question is why the Canadian subprime market was both smaller and levels of securitization were lower than in the U.S.
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While it is difficult to disentangle the reasons why Canada avoided the subprime boom, some factors can be identified that may have contributed to the differences in the Canadian and U.S. subprime markets.
Perhaps the simplest story is that Canada was lucky to be a late adopter of U.S. innovations rather than an innovator in mortgage finance. While the subprime share of the Canadian market was small, it was growing rapidly prior to the onset of the U.S. subprime crisis. In response to the U.S. crisis, some subprime lenders exited the Canadian market due to difficulties in securing funding. In addition, the Canadian government moved in July 2008 to tighten the standards for mortgage insurance required for high LTV loans originated by federally regulated financial institutions. This further limited the ability of Canadian banks to directly offer subprime-type products to borrowers.
There are also several institutional details that played a role. For one, the Canadian market lacks a counterpart to Freddie Mac and Fannie Mae, both of which played a significant role in the growth of securitization in the U.S. Secondly, bank capital regulation in Canada treats off-balance sheet vehicles more strictly than the U.S., and the stricter treatment reduces the incentive for Canadian banks to move mortgage loans to off-balance sheet vehicles. Finally, government-mandated mortgage insurance for high LTV loans issued by Canadian banks effectively made it impossible for banks to offer certain subprime products. This likely slowed the growth of the subprime market in Canada, as nonbank
intermediaries had to organically grow origination networks.
The Canada-U.S. comparison suggests the low interest rate policy of the central banks in both countries contributed to the housing boom over 2001–2006, but that a relaxation of lending standards in the U.S. was the critical factor in setting the stage for the housing bust.
A caveat worth emphasizing, however, is that it tells us little about what would have happened if U.S. monetary policy had been tighter earlier, as tighter monetary policy in the early part of the decade may have helped to limit the subprime boom by slowing the rate of house price appreciation over 2002–2006. One thing the comparison does highlight, however, is the practical challenge facing policy-makers in assessing whether a rapid run-up in asset prices is actually a bubble, or just a sustainable movement in market prices. CMP
“ Canada’s smaller subprime
market share and fewer households with high LTV ratios
suggest that the country is less likely to see the rapid increase in defaults that helped trigger
the bust in U.S. housing prices. Canada is likely to experience a
housing market slowdown rather than a bust’
”
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Quick Q&A with Victor Peca
+ toughest challenge? To adjust from being a broker to working for a lender.
+ Unfulfilled ambition? Playing professional soccer. Hockey is my passion, but I’m better at soccer.
+ Greatest risk? Leaving brokering to go into lending.
+ if you were not in the mortgage industry what would you be doing? I would be a police officer if I wasn’t colour blind. It was actually the first thing I wanted to ever pursue.
+ Hobbies? Hockey, soccer, my family and art – mostly sketching animals and people
+ What words would you use to describe yourself? Honest, caring, devoted, educated and a hunter, because it’s best when you’re out there, educating people and bringing in deals.
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once a broker, always a brokerAfter brokering for 15 years, Victor Peca took a hiatus to work on the lending side. Just three weeks back into brokering, Jesse Kinos-Goodin caught up with this former top seller to see what it’s like to start all over
one of the first things Victor Peca, a broker at Morcan Financial in Concord, Ont., does
when he greets me is to reach behind my back and check the tag on my vest. Mind you, he does ask where it’s from first, but before I can blurt our “I don’t know,” there he is, flipping the back of my collar inside out to read the tag aloud.
“Club Monaco, not bad,” he says, hitting me on the chest. “Good stuff there.”
While we literally just met a few seconds ago, the casualness in which he breaks down the private space barrier makes it feel more like getting together with an old friend from school, which sets the tone for the rest of the interview.
Incredibly personable and open, most of the time is spent telling stories, hamming it up for the camera or in a constant good-natured banter with his colleague, Colin Mason, vice-president, sales and marketing. In fact, the way they go back and forth leads me to ask if they’ve known each other for a long time.
“No, we just met three weeks ago,” says Peca. “You have to admit it though,” interrupts
Mason, “we didn’t click at first, right? But now we’re actually pretty close.”
At this they both laugh, and it’s hard not to see that Peca’s personality is just the type that constantly makes you comfortable with him. Perhaps that would be due to the frankness in which he talks about himself and the people around him, like someone who is confident in his own shoes as well as putting himself in the shoes of others. Peca chalks this up to a “tough childhood,” which forced him to deal with heavy things at a young age, ultimately making him aware of his place in the greater scheme of things.
a salesman from the beginningSpending a part of his childhood in the now infamous Jane and Finch area of Toronto (“back then it wasn’t all that rough, just a bunch of Italian families” says Peca), he was born with the umbilical cord around his neck. This was just the start of a young life where Peca would see enough terrible things for a least a few made-for-TV movies, such as losing a house in a fire, almost losing his life in a drowning accident and dealing with abuse. But rather than letting the negativity build up inside him, Peca created an outlook on life focused on always trying to help people and staying positive.
“I always say you get by giving,” he says - a mantra he started telling himself about five years ago.
Eventually moving with his family to Brampton, Ont., Peca’s first sales job was when he was 14 years old, selling suits at Petrocelli’s.
“I loved it because it taught me how to bond with customers within seconds,” he says before adding, like any natural salesman would, “It also taught me how to upsell from not just a suit, but to also buy a shirt and tie to go with it.”
Being colour blind, he’s surprised no one ever complained about the colours he picked.
“It goes to show that if the customer buys in to you, they are willing to listen with an open mind.”
Peca continued with that approach throughout his life right into when he started selling mortgages in 1994 with The Mortgage Department Corporation, in Oakville, Ont. There Peca would work with broker/owner Jim Panasiuk, and says he learned everything he needed to start selling mortgages from him.
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“He was brand new to the business when he started with us – he was green, I guess,” says Panasiuk. “I always thought he had good potential though because of his enthusiasm to always be helpful, whatever it was I was doing.”
In fact, Panasiuk recalls a time when he had acquired a power of sale home in rough shape and it needed to be drywalled.
“[Peca] helped me out with no question,” he says. “He actually taught me how to muck. You know, the taping of the drywall? I always said he was an artist at that.”
After that Peca spent the next 14 years brokering, with equal time spent at Assured
Mortgage Services and Mortgage Intelligence, and he specifically remembers funding his first million-dollar deal in 2003.
“That was with [NHL Columbus Blue Jacket’s forward] Rick Nash,” he’s quick to say. “My cousin is Michael Peca [also with the Blue Jacket’s] and is close to a bunch of those guys so he hooked me up. I also did [Toronto Maple Leaf] Jason Blake’s mortgage. I wouldn’t say that is my niche, but [Michael Peca] is my NHL hookup.”
Between 2003 and 2007 Peca would grow his mortgage business to reach $273 million, simply using what he calls straight-forward brokering – “I
worked my database and educated people on what a mortgage is, not just give them a rate.”
to lending and back againHis success as a broker made it that much harder for him to cross over into the lending side of things, where he used the skills he acquired to become a top selling national BDM at a non-bank lender for two years.
“Victor would always be sending us helpful, non-business related articles,” remembers Morcan’s Colin Mason. “He wasn’t looking for business, but actually just sending us very useful stuff that we were even able to put up on our internal site.”
But perhaps spoiled by being able to set his own schedule for so long, Peca longed to get back into brokering. “I’m free-spirited, so I don’t like to have bosses,” he says.
And while it was a decision he felt he needed to make, it was also, as he put it, one of the scariest decisions to make as well.
“I gave up a good fixed income, but then again, I didn’t like being supervised,” he says. To add to the trepidation of going back to being a broker, he was also left with the task of starting a database from scratch. What was 2,100 clients had become zero in the course of two years, so he did what most people would do in this case – he went over his e-mail contact list with a fine tooth comb. The result was a small but still respectable list of names that he could start building a business from, and three weeks and six mass e-mails later, he’s looking to close nine or 10 deals.
“I basically just had to let these people know I was back, send them an interesting article, something that could have an effect on them, mention consolidating debt before the holidays, and then things started getting busy again,” he says.
While far off from his 2007 levels, it goes with the territory when you are starting from scratch again.
“If I continue at this pace I will need an assistant again,” he says, showing the same confidence that has given him so much success in the past. “Confidence in myself is a big thing, and selling is selling. You sell yourself, it sells the product.”
And while selling might be selling, one thing is for certain – Peca certainly is happy to be back on the broker side of things.
“You know what you should call this article?” he laughs, just before leaving to another meeting. “Once you go broker, you always go back.” CMP
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Quick facts DlC White label
+ HeloC commission: three portions – locked in, revolving and renewal, with a possible upfront commission of 95 bps.
+ other white-label products: High-ratio mortgage, conventional mortgage, new-to-Canada mortgage, no frills mortgage, investment/rental mortgage, business-for-self mortgage, 50/50 balanced mortgage (50 per cent fixed/50 per cent variable) and a HELOC.
why is dlc launching a Heloc white label right now?Our Dominion Mortgage branded white-label line of products already includes a full offering of mortgage products, and the addition of our HELOC really rounds it out. Our brokers have been requesting a Dominion Mortgage
HELOC essentially since we launched our white-label line in April 2008, and once the network made a commitment to the Dominion Mortgage line and really increased volume nationally, we were able to answer their requests.
what makes this Heloc different than other ones on the market?The major benefit for our agents of having access to the Dominion Mortgage HELOC is that it’s branded to our company, and every time there is any action – such as a request by the customer to pay out the mortgage – the agent who funded the deal is automatically notified. This means they do not lose the customer without their knowledge, as is currently the case when they fund deals through other lenders. Statistically, 84 per cent of all consumers renew with the original lender, so the entire Dominion Mortgage line helps our agents build customers for life. So, while it may be similar to HELOC products available through the banks, this line helps our agents build customers for life and build a continual stream of ongoing revenue for their businesses through trailer fees.
will it be available to brokers outside the dlc network?
Since 2008 Dominion Lending Centres has been building its inventory of white-label products to offer its brokers and has now introduced its first HELOC. CMP caught up with Gary Mauris, president, to find out more
white knightsNo, all Dominion Mortgage offerings are exclusive to the DLC network.
it’s also a trailer-fee model. do you think this is the future of all lending products?We believe that the trailer-fee model should definitely be the wave of the future. Through all Dominion Mortgage products, not only do brokers make a generous upfront commission, but they also receive a trailer for as long as the mortgage stays on the books.
do you have any specifics on the commission structure of it?The HELOC commission is split into three portions: locked in, revolving and renewal. Upfront it pays 65 bps on the locked-in portion, plus 20 bps in volume bonus and up to 10 bps in funding ratio bonus – a total possible upfront commission of 95 bps. The revolving commission is calculated on the outstanding balance monthly but paid annually at a rate of 10 bps, and on renewal, regular renewal commission and trailer commission applies on locked-in portions as well as the 10 bps in trailer fees on the revolving portion continues.
what is dlc planning for the immediate future?We expect 2010 to be a very strong year for our industry. Consumer confidence is growing again, the housing industry is stabilizing and the overall economy continues to improve. From a network perspective, we will continue to identify and implement new revenue streams for our agents and owners, and focus on cross-selling opportunities. We also plan to continue to focus on our aggressive brand awareness campaign with our nationwide television campaign making more than 200 million viewer impressions to Canadian viewers in 2010. We also have an enhanced CRM in the works that will be rolled out in Q1 of 2010 free of charge to our agents. CMP
Gary Mauris
www.invis.ca1.866.854.6847
Invis.Right where I want to be.
Hi everyone, Gerri here.
Running a successful brokering business takes time and effort, and so does raising a family. And with Invis on my side, I can balance my business and my life.
My work days are busy. I’m focused on my mortgage clients… and doing everything it takes to make sure they stay satisfied clients.
But life’s busy, too. Caring for my family keeps me on the go. Being there at my kids’ ball games. Checking homework. Serving in my community.
With all this on my plate, Invis is a fantastic team to have working for me.
I love it that brokers have a strong voice at Invis. Managers at all levels are just a phone call away. They get what we as brokers need. They get problems solved.
At Invis, they make it easy for me to work with my colleagues. We don’t solicit each other’s referral sources. We share information and best practices. We share our successes. We know that we’re in this together.
Invis gets the value of a solid reputation. They’re leading the charge for greater professionalism in our industry. Quality matters, and I benefit directly from the respect and credibility Invis has with lenders.
I have choices and I choose Invis. I’m right where I want to be.
Gerri VaughanSenior Mortgage Associate Invis Inc.Edmonton, AB
Making her home in Edmonton, Gerri Vaughan is the number one individual mortgage associate with Invis in Canada. At her kids’ softball games, Gerri can be found in the bleachers firing up the cheering section.
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Andrew Bennett
Despite a challenging time in the commercial mortgage market, Nexus Investment Corporation remains dedicated to working with brokers to find funds for commercial and construction deals
commercial mortgages are work-intensive at the best of times, but last year’s tightened
lending landscape and plummeting property values made closing these types of deals even more daunting. Fortunately, Nexus Investment Corporation, a commercial mortgage banker and underwriting agent, had experience on its side to get through the tough times and is closing in on $400 million in volume for 2009.
“We provide a good value-added service to our clients because of our access to various sources of capital,” says Nexus president Andrew Bennett, who was nominated for commercial mortgage broker of the year at the 2009 Canadian Mortgage Awards. “The rates we’re doing our mortgages at are as good if not better than what you’re going to find at the bank and we’re not a B lender so we aren’t doing loans that are riskier.”
The sources of capital Bennett refers to are Nexus’ access to more than 300 institutional lenders, including banks, mutual funds, pension funds, life insurance companies, trust companies and private investors. What makes the company unique from a brokerage or a lender is its underwriting services. It handles the approval and due diligence process of commercial mortgage loans on investors’ behalf and is a CMHC-approved correspondent for commercial deals.
tips of the tradeMortgage brokers can send commercial and construction deals to Nexus to find a funding source. The Richmond, B.C.-based company mostly deals in Western Canada, but is open to deals from other parts of the country (excluding Quebec).
Bennett says the first thing he asks a mortgage broker when they send him a prospective deal is the property’s current rent roll and an income expense statement for the last 12 months.
“Commercial mortgages are all about the cash flow – while you have personal covenants involved,
Company Quick facts
+ Number of lenders Nexus works with: 300+
+ Number of years in business: 25
+ Number of underwriters: 5
+ Areas covered: All provinces except Quebec, with a focus on Western Canada
showing brokers the (commercial) money
beacon scores don’t carry the same weight as they do in residential mortgage application,” he says. “The cash flow is going to determine if the property can support the required loan amount.”
Bennett adds the “advance to value” ratio for commercial mortgages is also dependent on cash flow. This means that if, for example, a property like an apartment building is being rented, the loan amount is going to be based on the rental income value, not the estimated future sale price of the property as a strata-titled condo.
After Bennett crunches numbers on a property’s cash flow, he drafts a term sheet based on a review of preliminary information from a broker and tells them what information is needed to proceed with the deal.
broker-friendlyBennett says if brokers go directly to a financial institution for funding, there is a good chance they will be cut off from the deal process, whereas at Nexus, brokers are kept in the loop until the deal is approved and funded. They are also contacted at the time of their client’s renewal.
“Brokers do not have access to CMHC for commercial loans, but we can submit directly to CMHC because we’re an agent for the lender and that’s one way we keep brokers involved in the deal,” he says.
After the tightened lending and insurance guidelines that came into play last year, Bennett says brokers have to stay on top of thorough document collection, particularly for insurance purposes. Looking to the future, he is staying cautious about the positive outlook for the property market.
“I think until we are far from being out of this economic downturn and we’re not going to see much change for some time,” he says. “In this kind of marketplace, I think lenders are still going to be extremely cautious with what they do and how they do it.” CMP
As well as providing innovative products and lending programs, Merix Financial offers an industry-leading compensation structure that builds a book of business with ongoing value. Originators earn XREWARDS credits on every deal funded, whileour Xtended Compensation Plan continues to compensate Originators for as long as the customer remains with MERIX.
Find out how rewarding partnering with MERIX can be
Call 1-877-637-4911 or email [email protected] today.
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With Ontario’s new mortgage brokering legislation now in effect, not even two thirds of the province’s mortgage professionals were registered with the Financial Services Commission of Ontario (FSCO) by the July 1 deadline
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As of the Canada Day deadline, almost 3,300 mortgage agents from across Ontario found themselves
in contravention of the new provincial act, putting themselves at risk for reprimand by the provincial regulator.
With an estimated 9,000+ agents in Ontario, this translates into approximately 37% who failed to hold approved licences by the deadline.
Ontario’s mortgage agents were bombarded with stern notifi cations CAAMP, IMBA and FSCO in June, enforcing the fact that, after July 1, mortgage agents not registered under the new Mortgage Brokerages, Lenders and Administrators Act 2006 are forbidden to practice in Ontario.
� e low number was a surprise to some. After all, the act was designed to improve the mortgage brokering profession by implementing educational requirements, mandatory errors and omissions insurance, and introduce a whole slew of other factors to ensure the safety of consumers and, consequently, improve customer confi dence.
� e fact that such a low number of agents took the steps to proactively stand behind it led some to believe that a large percentage of Ontario’s mortgage agent population didn’t care about the best interests of the industry. Others said there were a number of factors at play.
Agents being agentsUp until a week before the deadline, Jeff Atlin, vice president and chair of government relations for IMBA, had only received a handful of queries regarding the new act. � at number escalated in the week leading up to the mandatory changes – signifying that many mortgage agents weren’t apathetic, they were merely disorganized.
“It seems mortgage professionals tend to do things last minute – so, in many ways, it doesn’t surprise me,” he said. “On the other hand, I am surprised that there isn’t a stronger sense of urgency.”
While the lack of urgency might be disturbing, Phil McDowell, president of AMBA, said it’s not uncommon. Alberta
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Capital Directwww.capitaldirect.caPh: (780) 868-0550Page 28
HomEquity Bankwww.homequitybank.caPh: 1 866 522 2447Page 19
Non-Bank Lenders
Insurance
Macquarie Financialwww.macquariefinancial.comPh: 1 877 462 3788Page 7
Firm Capitalwww.FirmCapital.comPh: 416 635 0221Page 2
Home Trustwww.hometrust.caPh: 1 877 903 2133Page 31
Broker Networks
Axiomwww.axiommortgage.caPh: 1 866 504 0516Page 23
Home Loans Canadawww.hlcmortgages.caPh: 1 866 452 1821Inside Front Cover & Page 23
INVISwww.invis.caPh: 1 866 854 6847Page 59
Financial Tieswww.finties.comPh: 905 793 3393Page 16
Equitable Trust Companywww.equitabletrust.comPh: 1 866 407 0004Page 47
Merix Financialwww.merixfinancial.comPh: 1 877 637 4911Page 61
Moskowitz Capitalwww.moskowitzcapital.comPh: 416 781 6500Page 18
FirstLine Mortgageswww.firstline.comPh: 1 800 387 2020 ext. 6044Inside Back Cover
Fisgard Capital Corporationwww.fisgardmortgage.comPh: 1 866 382 9255Page 27
Dominion Lending Centreswww.DominionLending.caPh: 1 888 806 8080Page 29
Centum Financial Group Inc.www.centum.caPh: 1 604 257 3940Page 11
Street Capitalwww.streetcapital.ca
Ph: 877 416 7873 Page 5
National Bankwww.nbc.caPh: 1 888 483 5628Page 33
Banks
Bridgewater Bankwww.bridgewaterbank.caPh: 1 888 837 2326Page 17
ING Directwww.ingdirectbrokerteam.caPh: 1-800-574-5629Page 35
Genworth Financial Canadawww.genworth.caPh: 1 800 511 8888Outside Back Cover
The Mortgage Centre Canadawww.mortgagecentre.comPh: 1 800 423 0107Page 3
The Money Sourcewww.mymoneysource.ca
Ph: 416 699 2274 Page 46
Peoples Trustwww.peoplestrust.comPh: 1 800 663 0324Page 24
Home n Work Mortgageswww.homenwork.com Ph: 1 866 658 0492 x 100Page 36
Mortgage Intelligencewww.mortgageintelligence.caPh: 1 877 667 5483Page 21
Credit Union
Concentra Financialwww.concentrafinancial.ca
Ph: 1 800 788 6311 Page 22
64
service directory
mortgagebrokernews.ca
Canadian National Association of Real Estate Appraiserswww.cnarea.caPh: 1 888 399 3366Page 20
Real Estate
Appraisal Institute of Canadawww.aicanada.caPh: 613 234 6533Page 41
For service directory listing please contact Trevor Biggs:[email protected]
TDMP.comwww.tdmp.comPh: 1 866 500 8886Page 37
Tax-Deductible Mortgages
Technology/Software
Applied Business Softwarewww.absnetwork.comPh: 1 800 833 3343Page 53
Filogix Limited Partnershipwww.filogix.comPh: 1 866 345 6449Page 45
Reach your target market with affordable advertising solutions
Please contact Andrew Davies at 416-644-8740 x232
ROMSPEN investment corporationwww.romspen.comPh: 1 800 494 0389Page 1
Verico The Mortgage Practice [email protected]: 905 458 4222Page 14
Commercial Lenders
Nexus Investment Corpwww.nexusinvestment.caPh: 1 604 664 7079Page 26
RMAI Financial Groupwww.rmaifinancial.comPh: 1 866 955 7624Page 15
VERICOwww.verico.caPh: 1 866 983 7426Page 13
Adunatiowww.adunatio.comPh: 1 888 312 3757Page 9
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