cmp 5.3
DESCRIPTION
The magazine for mortgage professionals in CanadaTRANSCRIPT
satisfied?2nd Annual Broker Sentiment Poll
www.mortgagebrokernews.ca
PUBLICATIONS MAIL AGREEMENT #41261516
MARch 2010, 5.3
MORTGAGE AWARDS 2010A coMPLETE LISTIng of ALL youR fInALISTS
FEATURE hoW To hELP youR cLIEnTS AT TAx TIME
PROFILEDDuSTAn WooDhouSEMAkES uS EAT DIRT
businessHow to protect
clients and lenders while
businessclients and lenders while
building your
PUBLICATIONS MAIL AGREEMENT #41261516
www.mortgagebrokernews.ca
NO. 10
Guide to
insurance
TITLE INSURANCE, MORE
THAN JUST FRAUD
THE CHANGING FACE OF
DEFAULT INSURANCE
THE INS AND OUTS OF
CREDITOR INSURANCE
GuIDE To INSurANCE
ISSuE
cover story
42 Satisfied? the 2nd annual broker sentiment poll
During December and January, CMP conducted its second cross-Canada broker sentiment poll to gauge what’s on brokers’ minds. Erin Letson uncovers the results, which may surprise you – take a look
50 Canadian Mortgage Awards 2010 The planning started literally the week after last year’s Canadian Mortgage Awards, and the time has finally come to announce the finalists for 2010
5. 03
issue
satisfi ed?Brokers on Aggregators 2009
www.mortgagebrokernews.ca
PUBLICATIONS MAIL AGREEMENT #41261516
MARCH 2010, 5.3
MORTGAGE AWARDS 2010A COMPLETE LISTING OF ALL YOUR FINALISTS
FEATURE HOW TO HELP YOUR CLIENTS AT TAX TIME
PROFILEDDUSTAN WOODHOUSETHIS TOP BROKER MAKES US EAT DIRT
www.mortgagebrokernews.ca
PUBLICATIONS MAIL AGREEMENT #41261516alternative options
NO. 9
Guide to
alternative
lending
TOP ALT
LENDING TIPS
WHAT YOU NEED TO
KNOW ABOUT HOME
EQUITY LOANS
Q AND A
LESTER SHORE
NICK KYPRIANOU
10
ALTLENDING
GUIDEISSUE
2
contents
mortgagebrokernews.ca
49 Insight: Brokerage points: Bryan Devries, executive vice-president of sales and operations at Invis and Mortgage Intelligence, talks to CMP about how brokerages can make all the difference in helping brokers and agents build a strong business
62 Favourite things: Kevin Joseph, mortgage agent,
VP of operations, Verico AnnTeam Mortgage Services Barrie, Ont.
regulars30 International News
32 This time last year
63 CMP Service Directory
INSIDEGuide to Insurance
In CMP’s continuing series of guides, we look at the business of insurance and the growing possibilities it presents to brokers. Whether it is understanding what mortgage insurers are dealing with right now, understanding the pros and cons of creditor life insurance, or simply knowing what to tell clients about title insurance, this guide is not to be missed.
NEWS8 Mortgagebrokernews.ca: Some of the best stats
and comments from CMP’s website.
10 Housing starts; Budget cuts; The U.S. praises Canada; Canada praises Australia; credit report analyzer launched; ING Direct puts support behind the CMAs; everyone reacts to new mortgage rules; and more…
NEWS ANALYSIS34 Mixing faith and finances: A recent CMHC report
concluded that Shari’a-compliant mortgages would pose no accounting or legal difficulties in Canada, even though it has no plans to insure it. CMP spoke to some experts to see what the major differences and hurdles would be
BUSINESS36 Knowing the tax tips and avoiding the traps: As a
mortgage professional, it’s not your job to give tax advice, but there are a few mortgage scenarios where a little bit of tax knowledge can go a long way to helping your clients – especially if they do not use the services of a fully qualified tax professional. Sandy Aitken shows you how
PROFILES56 Going up: Not yet two years into the business, B.C.
broker Dustan Woodhouse is racing his way to the top of the sales pack through a combination of hard work and dedication. He took some time out of his busy schedule to talk to CMP about what makes his engine run
61 Provider: Making your clients’ mortgage tax deductible: The Tax-Deductible Mortgage Plan (TDMP) recently opened its broker services to all mortgage agents. CMP spoke with Sandy Aitken, CEO and founder, to find out more about how agents can offer their clients a tax-deductible mortgage
Sandy Aitken is founder and CEO of TDMP.com, which provides managed Smith Manoeuvre and Tax-Deductible Mortgage Plan (TDMP) services to homeowners. These advanced mortgage strategies are distributed exclusively through independent mortgage professionals, and the company offers Certification training, marketing and sales support to mortgage agents through its website.
contributors
Follow us on TwitterTwitter.com/CMPmagazine
Alberta North: Moe Haymour | Phone: 780.919.9211 | Fax: 780.665.6010 | Toll Free: 800.959.9290 | Email: [email protected]
Alberta South: Paula Hutton | Phone: 403.278.6200 | Fax: 403.278.6296 | Toll Free: 800.959.9290 | Email: [email protected]
Ontario: Carmello Buttice | Phone: 905.605.1626 | Fax: 905.279.4579 | Toll Free: 800.814.2578 | Email: [email protected]
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MC_Ad4_Recruit_Nov09.indd 1 11/16/09 3:22:04 PM
4
editor’sLetter
mortgagebrokernews.ca
5. 03
issue
Awards SeasonIt feels like spring came early this year, and I’m not just speaking about the weather. Sure, it’s been weeks since it snowed in Toronto (fingers crossed that by the time you read this there won’t be one last major dump), but with new mortgage rules set to take effect in April and the HST coming in July, the market is a bit insane. In fact, I just heard about a property that sold for $170,000 more than the asking price, and let’s just say it was definite fixer-upper.
While brokers are likely scrambling to appease frantic buyers who are caught up in bidding wars, the CMP office is in full planning mode for the upcoming awards. We’ve been slowly leaking the finalists on our website, Mortgagebrokernews.ca, but this is the first issue to show all the finalists in one place. Check them out on page 50, and don’t forget to take advantage of a new feature this year that allows you to vote online for your favourites. For more info go to our awards website, canadianmortgageawards.com , and look for the online voting tab.
This is also the issue where we bring you the results of the second annual Broker Sentiment Poll, where we survey brokers across the country on issues ranging from future prospects to how the government is handling the economy. Unlike last year, in which the respondents were overwhelmingly positive, this year we received more of a mixed message. Find out what I mean on page 42.
The next issue is going to be even more awards focused, introducing you to the broker of the year finalists. Expect to see it shortly before the awards begin April 23. Hope to see you there.
Regards,Jesse [email protected]
Advertising enquiries [email protected]
editoriAl enquiries [email protected]
Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as CMP magazine can accept no responsibility for loss
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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
cEO Mike Shipley
March 2010
“”Talk to your RVP for more details, including how to become
a Street approved mortgage professional.
The word is on the Street.
TM Trademark of Street Capital Financial Corporation. FSCO License No. 11428
Vince Agozzino Jason HumeniukVice President, Eastern Canada Sales Vice President, Western Canada [email protected] [email protected]
www.streetcapital.caClick Contact Us – National Sales
Street Capital works with us to get our deals done. They make us feel like valued clients and partners.
Andrea WaddenBedford, NS, CEO Status
Street Capital is broker friendly and broker exclusive, they are very supportive and a valued partner for INVIS.
Kevin BoucherNewmarket, ON, CEO Status
Street Capital is a big reason for our success during our first year and will be an integral part of our brokerage’s aggressive goals for the foreseeable future. Whether it’s underwriting, sales support or the efficiency of the closing department, Street Capital truly understands how to help us grow our business. Bottom line: Street Capital gets it.
Glenn May-AndersonBelleville, ON, President Status
CMP_RecruitAd_Oct09:Layout 1 10/1/09 9:50 AM Page 1
mortgagebrokernews.ca 6
newscommunIty
Above The Alberta Mortgage
Brokers’ Association held its annual curling bonspiel
in February. From left to right: Bob Edwards,
Barbara Hale, Cathy Johnson and Sid Chorney.
Bottom Left More than 60 mortgage
agents, brokers and lender and service provider
employees attended IMBA’s 2010 WinterFest in Jamaica
at the end of January. Several formal networking sessions
were held throughout the week, as well as group
dinners and receptions, a golf tournament and wrap-up
dinner celebration. .
Bottom Right Equitable Trust recently ran
educational workshops for brokers in Eastern Ontario, followed by an appreciation
reception in Ottawa and a Senators game at Scotiabank
Place. From left to right: Ramesh Rangarajan and Chad
Miller from Equitable Trust and Jeff Cody from Mortgage
Brokers City in Ottawa.
In the community
mortgagebrokernews.ca 8
reader’s write web 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.
which new mortgage rule surprised you the most?
Every month CMP will have a new broker poll on mortgagebrokernews.ca. Here are the results of the latest one.
80 per cent LTV on non-owner occupied properties
Qualifying borrowers at the �ve-year �xed rate
Re�nancing only up to 90 per cent
68%
15%
17%
Rate watchWith the Gross Domestic Product performing modestly and future speculation of higher unemployment rates, I believe the rates might have to stay put. Inflation is still holding below the benchmark two per cent. That tells me that rates should not be a concern.-Jim Fitzgerald
Sales coachA great sales person believes in themselves and in helping others, plus you have to love doing what you do. This way, when you speak to someone face-to-face or on the phone, they can hear it in your voice that you are giving them the best advice for them in their situation. Each person is different and you have to learn to bond with them within seconds and find the similarities that you have, this way they will quickly like you and believe in you.-Victor Peca, in response to questions about sales tips
Roundabout rulesVariable-rate mortgages should have payments based on the current five-year best discounted rate in effect at the time of purchase so clients have no payment risk, as well as the benefit of a potential reduction in their amortization as more payment is contributed to principal during low rate periods. Instead we now have lenders debating to approve based on posted rate or discounted rate – let one decide to approve on posted and others on best discounted and we have a mortgage broker’s dream.-Brian Matthey
It looks like the banks have successfully convinced the government to take investment property mortgages away from mortgage brokers. Mortgage brokers cannot offer their clients a loan or line of credit for a down payment like the banks can. As a result, banks will get more business by having a wider product offering.-James Shinners
Maybe Flaherty should take a look as to why many Canadians are getting more in debt....how about our high taxes, from federal income taxes, to provincial income taxes (new HST) and property taxes continually getting higher and higher. Instead of stopping Canadians from purchasing their dream or using equity to pay out high debt loads, Flaherty and all other levels of government should learn to curb their spending.-Chris
I agree with the changes. As a broker commented last week, any reputable broker has their variable clients set up on a fixed payment based on a fixed rate of around five per cent anyway. Pounding down the principal and taking out any payment shock once the rates move upward.-Anonymous
Credit score calculationsAs mortgage professionals, providing free advice on credit will lead to many deals in the future. My pipeline is constantly filled with clients who I’ve counselled on their credit. Charging small fees for this is short-sighted, and doesn’t add much to the bottom line anyway.John White, in response to the new Scoremaker product launched on MorWeb
YES, at Equitable it’s a Team approach to Lending.
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Federal budgets cuts IMPP, standardizes prepayment disclosureThe latest federal budget included moves that will affect the mortgage industry, including new regulations to standardize mortgage prepayment disclosure and the elimination of the Insured Mortgage Purchase Program.
The government also said it will allow credit unions to operate as federal entities, which would give them national reach and is introducing legislation to set out a framework for covered bonds, a type of bond that remains on a bank’s balance sheet and can be backed by assets like mortgages.
“If the use of covered mortgage bonds increases, it will create more liquidity and that should translate into cheaper funding for mortgages,” said Martin Reid, president of Home Trust, adding that covered bonds are commonly used in Europe. “It would be one more tool in the arsenal along with the MBS (mortgage-backed securities) and CMB (Canada Mortgage Bond) programs.”
As one of its measures toward greater consumer protection, the federal government said it would bring forward regulations to standardize how lenders disclose and calculate prepayment penalties to borrowers, which Reid said is a good way for lenders to increase transparency.
And, as speculated, the Insured Mortgage Purchase Program, in which CMHC bought insured mortgages from lenders to help them free up credit, is wrapping up.
“The need for that program has been diminishing quite significantly, so I don’t think that was a big surprise,” said Reid. CMP
Martin Reid
newsIndustry
11Months the Bank of Canada’s overnight rate has been at 0.25 per cent.
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.
mortgagebrokernews.ca 12
newsIndustry
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A U.S. scholar recently has lavished praise on Canada’s “marvelous” mortgage and banking system in an article published for the American Enterprise Institute.
Mark Perry, a visiting scholar at the institute, says Canada’s system proved “more prudent, more resilient and much less prone to excesses.” He says examining the differences between the U.S. and Canada might lead to more insight as to how America’s difficulties started and what reforms are necessary.
He outlines eight major advantages to Canada’s system: full recourse mortgages, shorter-term fixed rates, mortgage insurance is more common in Canada, no tax deductibility of mortgage interest, higher repayment penalties, public policy differences on low-income housing, a more concentrated bank system and a lower rate of loan originations.
“While Canada’s banking system has promoted responsible borrowing and prudent lending and underwriting practices with little politically motivated interference, the U.S. banking system seems to have encouraged excessive lending to risky borrowers because of the political obsession with homeownership,” Perry writes. CMP
Canadian mortgage industry gets praise from southern neighbour
Fraser Institute endorses Australian model of mortgage insuranceThe CMHC should be privatized to minimize taxpayer risk if a housing crisis occurs, conservative think-tank The Fraser Institute argued in a report released in February.
“The Canadian government should reduce taxpayer exposure by allowing the private sector to take responsibility for insuring and securitizing Canadian residential mortgages,” said Brett J. Skinner, the Institute’s director of insurance policy research, adding Canadian taxpayers could face a future liability similar to the U.S. bailout situation because of the federal government’s involvement in the CMHC.
The report compared Canada’s mortgage insurance market with Australia’s, where the federal government exited the mortgage insurance market and privatized its mortgage insurer more than a decade ago.
Skinner said the Australian experience, where homeownership did not drop after privatization, “shows that a market for mortgage insurance can operate effectively without any form of government guarantee.” CMP
171,
250
The number housing
starts will rise to across Canada in
2010, as predicted by CMHC.
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AwardsCanadian Mortgage
April 23, 2010 • Liberty Grand • TorontoApril 23, 2010 • Liberty Grand • Toronto2o1o
For more information including sponsorship opportunities
please contact Trevor Biggs at 416-644-8740 x 236 or
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
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newsIndustry
AwardsCanadian Mortgage
April 23, 2010 • Liberty Grand • TorontoApril 23, 2010 • Liberty Grand • Toronto2o1o
For more information including sponsorship opportunities
please contact Trevor Biggs at 416-644-8740 x 236 or
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 sponsorsPlatinum sponsor
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Marlborough Stirling launched the anticipated American-made credit score analyzer Scoremaker to MorWeb users on March 2 and said it’s been met with a big response so far.
The tool allows brokers to run clients’ credit report (Equifax only) through an analyzing system, which then gives them a preview on how to improve the score in both the short and long term. If the broker wants detailed instructions on how the client can up their score, including exact payments that should be made, they can purchase the report for $49.95.
“Most brokers are looking for a short-term solution for their clients and with this program they can have someone ready for a mortgage in 45 to 60 days,” said Doug Mitchell of True Business Solutions, the company that brought the product to Canada.
After unforeseen delays in getting the product here last year, Mitchell says the Canadian version is “very simplified” for users. Axiom mortgage broker Bob Woods has been testing the product for the past two weeks and says he has already gotten reports for 20 of his clients.
“There might not be an immediate fix for the client, but giving them a way to improve their credit score establishes a relationship and will hopefully lead to more mortgages,” said Woods, adding he plans to charge clients $200 for the detailed Scoremaker report and refund them the $150 if they come back to him for a mortgage. “If I can show these clients how little actions can make such a difference, hopefully that behaviour will change once they see how it can impact them.” CMP
Credit report analyzer launches through MorWeb
mortgagebrokernews.ca 16
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Home Capital Group maintained its reputation for growth after releasing its year-end results for 2009.
The lender saw earnings for the year reach $144.5 million, up 32.9 per cent from 2008, thanks, in large part, to a successful fourth quarter. On-balance sheet residential mortgages increased 33.9 per cent in 2009 and total originations grew by almost a quarter.
“Looking ahead, we are confident that Home Capital remains well-positioned to continue generating robust earnings and growth in 2010,” the company said in its fourth quarter report, adding it has set objectives of 15 to 20 per cent growth in earnings and assets for the year ahead.
Home Capital has gone through a number of recent changes, including the December departure of long-time president Nick Kyprianou and the appointment of Martin Reid, the company’s former treasurer. In January, the company announced its investment with National Energy Corporation, which operates as National Home Services, and its plans to finance current and future residential water heater installations by NHS to the tune of $90 to $100 million in 2010.
In its report, the lender also emphasized its pull-back from non-residential mortgages to “reduce the company’s exposure to this sector in light of the uncertainty in the commercial real estate markets.” CMP
Home Trust clocks another successful year
Equitable Trust sees success with single family mortgages in ‘09Equitable Group (and its subsidiary,
Equitable Trust) saw its net income grow by 33.2 per cent in 2009 after improving its return on equity and productivity ratios and seeing a pick-up in single-family mortgage lending in the fourth quarter of the year.
“The real highlight of 2009 was that we substantially built our capital in preparation for long-term growth and improvement,” said Andrew Moor, the mortgage lender’s president and CEO.
“With the best capital ratios in our history, Equitable has capacity to capitalize on the many opportunities available to us, particularly in single-family mortgage lending.”
Some of the company’s mortgage portfolio highlights in 2009 included fourth quarter growth of $64.7 million in single-family mortgages and $1.8 billion of commercial mortgages funded for the year. It also grew its securitized mortgage portfolio from $2.8 billion to $4.1 billion from 2008 to 2009.
“The credit market and economic environment in our lending regions improved again in the fourth quarter and we continue to respond to this recovery with targeted sales efforts and strong underwriting processes aimed at growing our mortgage portfolio and improving returns without excessive risk-taking,” said Moor.
The company’s earnings report also said that at year-end, fixed-rate mortgages represented 70.1 per cent of the mortgage portfolio, a 20 per cent increase over 2008. CMP
Andrew Moor
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mortgagebrokernews.ca 18
newshousIng market
competition bureau aims to make property listings cheaperThe Competition Bureau said it will try to make it cheaper for sellers to list their homes on the Multiple Listings Service (MLS).
Consumers are now forced to pay for services on the MLS site imposed by the Canadian Real Estate Association they may not want or need, the bureau said.
“Consumers should be able to choose which services they want to buy in order to facilitate that transaction, including lower-cost options,” said Melanie Aitken, commissioner of competition.
Before listing on the MLS system, which accounts for the vast majority of real estate transactions in Canada, agents must agree to comply with the Canadian Real Estate Association’s restrictions. For example, the Competition Bureau says agents are prohibited under CREA’s rules from offering consumers the option of simply paying a fee for an agent to list a home on the MLS system.
Instead, all consumers looking to list a property must purchase a pre-determined set of additional services from an agent, such as presentation of offers and negotiation of a final deal. CMP
Report says low inventory, high demand to squeeze spring marketAlmost 90 per cent of major Canadian markets saw home sales increase in January, a sign that spring activity will be challenged by a lack of inventory, according to a new Re/Max report.
The Market Trends Report 2010 found the jump in sales activity in the usually slow month of January has led to a sharp decline in active listings. In addition, threats of higher interest rates, HST and tighter lending rules have prompted buyers to act quickly. Canadian markets seeing the tightest inventory levels include Toronto, Kitchener-Waterloo, Ottawa, Victoria, Greater Vancouver and Halifax-Dartmouth.
“There have never been so many motivating factors in play at once,” said Michael Polzler, executive vice-president, Re/Max Ontario-Atlantic Canada.
“We’re in for a heated spring market that will, in all probability, spill over into the summer months as the window of opportunity draws
to a close.”He added that as pent-up demand builds, frustration levels are also bound to grow.
“For every successful offer, there are those that will walk away empty-handed. They’re thrust back into
the buyer pool and the process starts all over again,” he said, pointing out that most
purchasers are remaining cautious in their bids. CMP
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news mortgage Insurance ruLes
Federal Finance Minister Jim Flaherty announced three new rule changes connected to government-backed insured mortgages on Feb. 16, saying the government is “taking proactive, prudent and cautious steps” to prevent a housing bubble.
The broadest change was the requirement that all borrowers be qualified at a five-year fixed-rate mortgage even if they choose a shorter-term, lower-interest product.
The government also lowered the maximum amount Canadians can withdraw in refinancing their mortgages from 95 to 90 per cent, and introduced a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner occupied properties purchased “for speculation.”
George Hugh, vice-president of lending sales at ING Direct, said the rule changes won’t be a big adjustment for ING because it already qualifies borrowers at three-year terms even if they’re taking out a mortgage with a shorter term.
“I think it’s proactive behaviour - the changes will have more impact on some lenders compared to others, but I think overall they’re very good for the market,” said Hugh.
Don Bayer, president of the Toronto-based independent brokerage Monster Mortgage, said he expected the rule changes to be tougher, adding he would have liked to see a more across-the-board rate for mortgage qualifications.
“Some banks have posted rates and some don’t, so what they should’ve done is put a prescribed rate out there so that the whole industry had to follow one rate - for example if the variable rate is two per cent they have to qualify borrowers at five per
Industry not surprised by Flaherty’s mortgage rule changes
“The changes reflect reasonable public policy. Our government has taken the opposite tack to what has happened in the United States, where they have tried to attract the maximum number of people to make financial commitments regardless of ability to pay.” - Phil Soper, president and CEO of Royal LePage (Toronto Star)
“It’s a fine line he (Flaherty) is walking. You have to act in a responsible way in a hot real estate market, but you don’t want to overdo it and derail it. What he’s done is very surgical, directed to where it hurts rather than an umbrella response.” - Benjamin Tal, chief economist, CIBC World Markets (Montreal Gazette)
“Are we going to see the odd borrower have to come up with more money or not to buy the house they want? Absolutely. But will it have a dramatic effect? No.” - Peter Majthenyi, mortgage planner, Mortgage Architects (Globe and Mail)
“How the government can go from 100 per cent rental financing (17 months ago) to 80 per cent today is confounding. The intent is understandable, but the government could have increased net worth requirements, increased Beacon minimums, tightened debt-servicing guidelines, or limited the number of insured rental mortgages a person can qualify for. Instead, the solution was near-draconian, and it will have an effect on the rental stock in Canada.” - Canadian Mortgage Trends
“The Canadian bond market will probably catch a bid [from the policy changes]. So long as you can take any residual Bank of Canada tightening out of the Canada curve, that will be more beneficial than detrimental towards bond yields.” - David Rosenberg, chief economist, Gluskin Sheff & Associates (Bloomberg)
“Canada’s economy has been doing relatively well when compared to other countries. Minister Flaherty’s decision is aimed at ensuring the soundness of the real estate market, which is a cornerstone of the economy. We stand behind that decision.” – Sheila Young, president, Appraisal Institute of Canada
what people said about the new mortgage rules
cent,” said Bayer, who also questioned the motive behind banks requesting the rule changes.
“What I find a little ironic is that it’s the banks that wanted the government to intervene, yet it’s the banks that control 90 per cent of the mortgage market - so is this being done to eliminate third parties from originating mortgages in Canada? I don’t know. The majority of the banks are our customers as well, so I don’t know why the banks are suddenly so concerned over this.”
The rule changes are set to come into effect on April 19 and clarifications around the five-year qualification are expected to be revealed by the end of March. CMP
mortgagebrokernews.ca 22
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CMP is happy to announce ING Direct has been named the title sponsor for this year’s Canadian Mortgage Awards taking place April 23 in Toronto.
“The sponsorship is a way of giving back to the broker community for their support over the last year,” said George Hugh, ING Direct’s vice-president of lending sales. “We really want to thank the people who have made us successful.”
This year’s awards include 20 categories covering all facets of the mortgage industry. The theme is early 1960s with a Mad Men slant. Last year, more than 400 people attended the black-tie event.
“The Canadian Mortgage Awards have great participation and the event is valued by a lot of people – I call it the Grammys for the mortgage broker industry,” said Hugh. “Anyone who is somebody in the industry is there.”
For a complete list of nominees for this year’s awards, turn to page 50. CMP
ING Direct named title sponsor for 2010 CMAs
mortgagebrokernews.ca 23
news awards
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Like every year, CMP asks a number of industry representatives with a broad range of backgrounds to judge the Canadian Mortgage Awards. We feel this leaves the results in the hands of those who know the industry best, as well as makes the process as transparent as possible.
While this year we introduced some awards that are also going to be incorporating a popular vote system, all of the categories will also be closely reviewed by our panel of judges.
It is important for us that the judges come from within the industry, but as such, this obviously creates a chance for any conflicts of interest to arise, which is unavoidable. In these instances where a direct conflict does exist (i.e. a member of their own company is a finalist) that judge will not be voting in that category.
Which brings us to the judges, a strong group who we are confident will use their good judgment to make the best choices, and who we couldn’t have the awards without.
They are: Jeff Atlin, a broker at the Toronto-based Abacus Mortgages and president of the Independent Mortgage Brokers Association (IMBA); Hali Strandlund, president of the
CMAs 2010: Meet the judges Fisgard Capital Corporation, and past president of the Mortgage Brokers Association of British Columbia (MBABC), among many other associations; Todd Fralic, the owner of Calgary-based Quantus Financial, as well as president of the Alberta Mortgage Brokers Association (AMBA); Joanne Vickery, director of training and development for Dominion Lending Centres, as well as current MBABC vice-president and president elect; and William McCarthy, founder, president and owner of the W.P.J. McCarthy and Company, and president of the Real Estate Institute of Canada (REIC). CMP
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mortgagebrokernews.ca 25
newshousIng market
A new study released by the Vanier Institute of the Family suggests average household debt is rising at an alarming pace and Canadians’ mortgage and credit card payments are suffering.
“At the household level, this recession is not over,” said Clarence Lochhead, executive director of the Ottawa-based Vanier Institute. “For far too many, there is too little income, too much spending, too little saving and too much debt.”
The study found that average household debt in Canada climbed to $96,100 in 2009, creating a record-high debt-to-income ratio of 145 per cent. Another finding was a 50 per cent increase in mortgages running 90 days or more in arrears in 2009 compared to 2008. However, as the Canadian Bankers Association reported in December, the national rate of mortgage arrears is still at a relatively low 0.45 per cent.
The report’s author, Roger Sauvé, also flagged concerns over a housing bubble. He said in the past 20 years, house prices have averaged 3.7 times household earnings and now that number is at five times earnings, with real estate providing 48 per cent of the net worth of Canadian households. CMP
housing activity to stay strong throughout 2010: CMHCA spillover of demand from the resale to the new home market will help strengthen Canadian housing activity throughout 2010, says Canada Mortgage and Housing Corporation’s (CMHC) first quarter Canadian Housing Market Outlook.
Housing starts will rise to over 171,000 units in 2010 thanks to the relative lack of new listings for existing homes pushing consumers to buy new homes. However, sales of existing homes through the Multiple Listing Service (MLS) are also expected to rise. After steadily strengthening through 2009, MLS resales will reach 486,700 units in 2010, up 20,000 from last year.
“We’ve been so busy over the last month or two – it’s been ridiculous,” said Ontario-based Mortgage Intelligence broker Paula Roberts. “I think a lot of people are worried about the rates and they’re locking in.”
Despite the recent boost, housing starts are still down 60,000 units since 2008. CMHC expects Canada to potentially break the 200,000 mark again in 2011.
“The swings in market conditions explain the decline in resale house prices in 2008 as well as the rebound in 2009,” the report said. “In 2010, as new listings catch up to sales, market conditions are expected to be more balanced.” CMP
Canadians’ household finances in trouble, says Vanier Institute
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Dominion Lending Centres is mourning the death of 34-year-old Aaron Theodorou, owner of DLC Secure Line in Richmond Hill, Ont., who died in a tragic accident on Feb. 18.
Theodorou’s car drove into a ravine at around 10 p.m. on the night of the accident, but he and a passenger – Cherity Goerk, 30, who was Theodorou’s best friend and business partner – left the vehicle unhurt and walked back up to the roadside.
They both stood on the gravel shoulder while using cellphones to reach family and friends for assistance. That’s when a vehicle fatally struck Theodorou and fled the scene. The driver turned himself into Toronto police the next morning and was transferred to the York Regional Police for questioning. He has been charged with hit and run causing death.
Theodorou will be remembered as a happy, energetic entrepreneur with a zest for life, who worked long hours, yet still found time to play hockey, work out at the gym and spend time with family and friends.
He opened his DLC franchise in November 2009 with the support of Goerk, his sister and his uncle, who all became licensed mortgage professionals. It was Theodorou’s goal to grow his business and Goerk says the remaining members of the team are working hard to bring this expansion to fruition in his memory.
“The strength and confidence I gained from Aaron has left me well-equipped,” said Goerk, adding that his strong positivity will be greatly missed. “Aaron was the type of person who wanted to help everyone and give everyone the best. He always did everything he could to get his clients a mortgage – and if for whatever reason he could not assist them, he would steer them towards someone who could.” CMP
Remembering Aaron Theodorou
Aaron Theodorou
appointments
Commercial lender Rompsen announced two new appointments in February – Bonnie Bowerman as vice-president, underwriting and Ronald Lloyd as a managing partner.
Equitable Trust has three new appointments to announce: John Tzortzis as senior account manager with commercial mortgage broker services, Chitra Sharma has been promoted to senior mortgage underwriter, commercial lending, and Justin Smith has been appointed regional business manager, GTA North for single-family residential.
Axiom recently announced a number of new brokers to its network: Byron Daily (Orillia, Ont.), Dan Wowk (Oakville, Ont.), Lesley Krawiec, The ‘Get ‘Er Done Girls’ (Red Deer, Alta), Thomas Antonick (Winnipeg, Mb.), and Merryl Du (Calgary, Alta.).
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mortgages in the press
New OFSI rules create “unfair advantage” for unregulated mortgage market playersA new rule around mortgage-backed securities is causing dismay among lenders that are invested in the securitization market, according to a report in the National Post.
The report outlined a new rule drafted by the Office of the Superintendent of Financial Institutions, which states that as of Jan. 1, 2010, National Housing Act mortgage-backed securities will move from being an off-balance sheet item to a balance sheet item.
This has prompted the Trust Companies Association of Canada, which counts Equitable Trust and Home Capital as members, to write a letter to the OFSI saying the potential accounting and regulatory implications of the rules will create “profound implications on mortgage lending and consumers in Canada.”
“Many trust companies and other regulated financial institutions will have no effect but to exit or significantly reduce MBS/CMB program activity as the cost of incremental capital required to meet ACM constraint will make these activities unprofitable,” the letter continued. “Unregulated companies may seek to increase their presence to fill some of the void in the supply of mortgages for the MBS/CMB program.”
One unnamed scholar told the Post that the OFSI is creating an unfair advantage for unregulated mortgage players and said it’s “better to have large-scale lending operations in line of sight of the regulators and for borrowers to have the capacity to balance sheet their production [using deposits] if capital markets become shaky.” CMP
BMO loses out on mortgagesDespite a first-quarter profit of $657 million, BMO’s mortgage market share has been dropping, according to the Globe and Mail, in part because of its decision to drop mortgage brokers in 2007.
BMO’s mortgage market share fell to 9.2 per cent for the last quarter of 2009 from 9.9 per cent a year earlier. But, the Globe reports, BMO’s profits were still up $225 million from 2009 making it the third Canadian bank to beat analysts’ predictions. Its cash earnings per share were reported at $1.13, a dime above expectations. BMO’s insurance and wealth management businesses, as well as their investment dealer, all posted increased profits.
To beef up its presence in the mortgage market, BMO’s Canadian banking arm head, Frank Techar, said it has been building up its sales force of mobile mortgage specialists and announced a 3.75 per cent five-year fixed-rate mortgage on March 2.
“We knew we had to improve our offers and this was the first fantastic offer that we’ve come up with,” Trechar told the Globe. CMP
30
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A new report issued by the U.K.’s Office of Fair Trading (OFT) has called on the government to ban mortgage brokers from paying referral fees to real estate agents.
The OFT wants additional rules on fees received by real estate agents for referring buyers to providers of ancillary services such as mortgage advice and surveys, Mortgage Strategy reported.
The OFT report said: “The prospect of additional income may give estate agents a financial incentive to prefer some buyers over others….We recommend that, as part of its work on the future of estate agency regulation, the government considers further whether the potential for conflicts of interest should be removed, including a ban on such payments.”
A report in Mortgage Strategy on the proposal highlighted concerns that some real estate agents were forcing buyers to go to a particular broker, then using the information the broker gathered to assess the borrower’s affordability and to push up a property’s asking price. CMP
One in 10 borrowers is seriously delinquent on their U.S. mortgage, with their payments at least 90 days past due or in foreclosure. That compares to one in 16 borrowers a year ago and one in 33 two years ago, according to the Mortgage Bankers Association.
The U.S. Treasury Department last week issued figures showing that under the Home Affordable Modification Program, the number of permanent loan modifications has increased to 116,000. In late February, President Barack Obama has announced plans to provide $1.5 billion to the five states hit hardest by foreclosures.
California, Arizona, Florida, Michigan and Nevada will split the allocation based on need, to be administered by the state Housing Finance Agencies. The Mortgage Bankers Association says 17 per cent of all loans in California are past due, for example.
Some in the mortgage industry had hoped for more additional broad measures.
“The industry’s own figures attest to the fact that the damage from the bad lending that’s brought down the economy continues virtually unchecked,” says Michael Calhoun, president of the Center for Responsible Lending. “We hope Congress will keep these figures in mind and agree that American families deserve a fair shake on their finances, including more aggressive foreclosure prevention and a strong watchdog to prevent another lending debacle in the future.” CMP
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2009Foreclosures on the rise out WestAn increasing number of mortgage defaults and home foreclosures were reported in Alberta, in part due to falling prices. However, the Alberta Real Estate Association (AREA) told the CBC there would be no rock-bottom prices on foreclosed homes because in Canada, unlike the U.S., these properties have to be sold at market value. The association also said Albertans were managing their mortgages in an “exemplary fashion.”
One year later, and Alberta still has the highest number of mortgages in arrears in the country – 0.75 per cent compared to the national arrears rate of 0.45 per cent, as reported by the Canadian Bankers Association in December.
Bill Fowler, director of industry and government relations at AREA, said arrears are still high in the province, but are stabilizing and starting to head downward.
“We’re looking at more maturing mortgages and we’re seeing a re-establishment of the employment force in Alberta and certainly a greater confidence,” Fowler said. “I think the reason we saw higher arrears numbers here as opposed to the rest of Canada is that other provinces got into the recession earlier than we did and there was a lag.”
For 2010, Fowler predicts a slight increase in prices and volume and says there is probably “another year’s worth” of absorption in the housing market, especially for condos. CMP
Housing rebound in the cardsThe Canadian Real Estate Association predicted home sales to drop 16.9 per cent in 2009 before rebounding 9.9 per cent in 2010.
One year later, and CREA reported annual home sales activity went up by 7.7 per cent in 2009 compared to 2008 levels, making last year the fourth highest level on record for annual activity. The national housing price was also up 19 per cent on a year-over-year basis in December.
In January 2010, sales dropped slightly compared to December, but year-over-year sales activity was up almost 60 per cent compared to the
same month last year and the average price also stayed high, up nearly 20 per cent compared to last year’s number.
“January results suggest that the national resale housing market may be past the recent peak,” said CREA chief economist Gregory Klump, adding it could be a few more months before talk of a Canadian housing bubble fades. “It could take until the second half of the year before a cooling trend becomes evident, since home-buying activity may continue to be accelerated in the first half of 2010 by expected interest rate increases, and by the introduction of the HST in Ontario and British Columbia on Canada Day.”CMP
Mortgage renegotiations on the riseThe decline in interest rates meant more consumers were looking at renegotiating their mortgages to get better deals. This caused confusion around the interest rate differential (IRD), which many lenders charged clients for breaking their mortgages.
One year later, and mortgage renegotiations are still popular because of low rates, and IRDs are still high for many borrowers because lenders will not bend on the penalty.
“I don’t know when we’re going to see some release in that department – a lot of people don’t do the re-fis because the IRD is very high,” said Invis broker Hein Moes, who is based in Victoria, B.C. “If you can’t save your penalty before the original maturity date of the mortgage, then you really have to have a hard look at whether you want to do it or not.”
Although fixed-rate mortgages have gone up and down in the past few months, Moes said lenders are still sticking tightly to IRDs, even if the borrower takes a new deal through the same lender.
“Even if you take the best discounted deal with the same lender, they’re going to want to see compensation from that,” he said. “There are no breaks.” CMP
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A recent CMHC report concluded that Shari’a-compliant mortgages would pose no accounting or legal difficulties in Canada, even though it has no plans to insure it.
CMP spoke to some experts to see what the major differences and hurdles would be
Representatives from the Islamic financing (IF) community welcomed the news that a
CMHC report concluded there is a place for IF in Canada, saying in a press release that it was a “source of great confidence for Canada’s financial institutions and allows them to work towards serving Canada’s one million Muslims.”
But if the mortgagebrokernews.ca comment forum is any indication, there still seems to be a lot of misinformation amongst Canadian brokers about exactly how IF is different from conventional lending.
The basic difference, according to the report, is that “while Shari’a-compliant financiers are not allowed to receive a guaranteed return, such as interest, they can invest in profit-sharing ventures that involve business risk, or lease transactions without interest.”
There are also several other considerations, including the use of a board of scholars, “additional investment risks (that, in turn, lead to higher transaction and/or funding costs), the involvement of third parties in order to facilitate transactions, and the effects of certainty and transparency on both payment schedules and profit margins,” said the report.
Canadian lenders who opt to offer IF, however, “are generally subject to the same credit exposures as conventional mortgage lenders,”said Guy David, head of Gowlings Islamic Finance practice, who prepared the report with the law firm Gowling, Lafleur Henderson LLP.
A coalition of Islamic and Christian groups has also created a new association devoted to promoting interest-free finance, the Usury-Free Association of North America (UFANA).
Omar Kalair, one of the founding members of UFANA and president and CEO of Canada’s largest IF lender, Um Financial Group, told CMP there are other key differences as well.
“First of all, there is the matter of distress,” he said. “You can’t take advantage of the borrower, and you can’t penalize them for missing a payment.”
mixing faith and financesHe also disagrees with the perception that in
order to be relinquished of an IF loan, borrowers face abnormally large penalties.
“Anytime a homeowner can exit by giving the lender the money it has invested.”
Many of the other differences come down to a case of semantics, which may sound simple enough but prove to be difficult for lenders to implement.
“The bank clearly states the word interest, where we say trade or partnership,” said Kalair. “The intent of the contract is specific. There is also a monthly fee, rather than an interest payment, and the legal documents also say zero per cent interest.”
Even though the CMHC report notes that several IF firms have operated for several years in Canada “without intervention or facilitation from regulatory authorities,” suggesting IF products could be successful under “existing legal, regulatory and administrative framework,” there are some hurdles for large lenders not already set up to offer IF.
“We spoke to some banks about changing the words they use,” said Kalair. “One said it would cost them $4.1 million to change the system to change the word interest to something like rate, and another said it would take three-and-a-half years into the future to get a window to even look at changing it.”
But he’s still positive, saying he has identified a few lenders “who are nimble enough to do it,” declining to go into any further details of whom that might be.
Despite the hurdles, it does look like IF could make some headway into the Canadian marketplace, and with a growing Muslim population, it’s a niche that will be well-served by it.
“Islamic and conventional financing is essentially the same product,” said Kalair. “But like Kosher or Halal meat, if someone wants to pay the additional fee so that it satisfies their spiritual beliefs, then it’s an option.” CMP
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knowing the tax tips and avoiding the trapsAs a mortgage professional, it’s not your job to give tax advice, but there are a few mortgage scenarios where a little bit of tax knowledge can go a long way to helping your clients – especially if they do not use the services of a fully qualified tax professional. Sandy Aitken shows you how
It’s that time of year again - tax time. As mortgage professionals, we realize the value of a
good tax accountant when it comes to planning and filing tax returns, but many homeowners tend to do a poor job of it, which can cost tens of thousands of dollars in the long term.
There are three types of homeowners, and as such, they each have their own set of tax tips. They are the entrepreneur, the T4 investor and the Donald.
The entrepreneurThe entrepreneur is a familiar breed. Self-employed by definition, entrepreneurs typically enjoy a plethora of tax benefits and write-offs. Whether they have a relatively small home-based business selling handbags on eBay, or a more established enterprise such as a lucrative
consulting practice, these homeowners can benefit significantly from a multi-component mortgage that is set up to cash dam their revenue and expenses.
Cash damming is a Canada Revenue Agency-approved technique whereby a non-deductible mortgage can be aggressively converted into a tax deductible business loan to oneself. This technique is becoming more and more popular among entrepreneurs who usually seek every tax break under the law to maximize their cash flow and keep their hard-earned dollars in their own pockets. When originating mortgages for entrepreneurs, the tip here is simple. Set up a re-advanceable line of credit with at least two components. One component is the amortizing mortgage that replaces all existing mortgage and consumer debt, the other is a line of credit to be used only for business purposes.
Most entrepreneurs understand basic cash flows: revenue comes into the business bank account as deposits, expenses go out of the business bank account using cheques. Setting up a cash dam for the mortgage in this scenario is not as complicated as one might think, and the entrepreneur just has to add two simple steps.
Firstly, before revenue is deposited to the business account, it should be applied to their mortgage as a pre-payment and then re-advanced from the line of credit using the proceeds for a “business loan” to be made from the taxpayer to themselves. This is the essence of cash damming –
tip summary: the entrepreneur They should have a multi-component line of credit where they can:
routinely apply business revenue to pay down their 1. personal mortgage;
borrow back a matching amount in the 2. re-advanceable line of credit;
lend the proceeds to themselves as a business 3. loan that will only be used for paying legitimate operating expenses.
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a very powerful strategy for the unincorporated entrepreneur and a no-risk strategy to build wealth through tax benefits (note: this does work the same for incorporated businesses, as an incorporated entity is its own “person” under tax law).
There may still be benefits to lending to your own company, but that requires a tax advice from a professional and is outside the scope of a simple cash dam that can be set up through a mortgage professional.
The Donald (Trump, that is) The Donald is the consummate real estate investor that owns three or more properties - one of which will be the principal residence, the others all investment properties. Mortgage professionals love these clients as they are eternal optimists in the
real estate market and are usually highly leveraged with mortgages on all properties.
The tax tip for the Donald who has a non-deductible mortgage on their principal residence is
also to set up a cash dam, but this time it will be a special purpose vehicle. It will flow through the rental income from the investment properties as
a pre-payment on the principal residence mortgage, and then re-advance the proceeds into their “landlord business” bank account from where all expenses
are made. Legitimate expenses for use of
proceeds on the business loan clearly extend to mortgage interest,
property taxes, insurance and management fees. However, principal payments on the investment property mortgages
are not a valid expense and the Donald needs to ensure that any principal mortgage payments are funded separately and specifically not funded through the
rental cash dam.
tip summary: the Donald This client is an avid real estate investor with multiple properties all mortgaged. A rental cash dam on the principal residence will allow this investor to convert his only non-deductible mortgage into a business loan to himself for the purpose of running his landlord business. Once again, this only works where the properties are all held in the personal name of the taxpayer and not by an incorporated entity.
Another tip is to finance the investment properties with interest-only mortgage payments as long as principal residence mortgage debt exists. This will accelerate the paydown of non-deductible principal residence debt and prevent having to adjust the cash dam for the principal component of the investment property debt.
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The T4 investorThis is your favourite client. These are fully qualified deals, easy to place at any lender, and the homeowner has strong credit and excellent debt-service ratios. T4 investors are also your typical Smith Maneuver and Tax-Deductible Mortgage Plan (TDMP) clients.
Conventional wisdom has changed and financial advisers are increasingly advising homeowners that they can generate more wealth over the long term by investing early – long before the mortgage is paid off – as opposed to paying off the mortgage first and then starting to invest. The definition of a T4 investor is a taxpayer with a mortgage and a J-O-B, hence the T4.
Advanced mortgage strategies have gained popularity since a 2009 Supreme Court ruling effectively blessed many of these approaches including the Singleton Shuffle, the Smith Maneuver and TDMP. Furthermore, the distribution of multi-component, re-advanceable mortgages and lines of credit have made these tax strategies widely available to all qualified homeowners through their independent mortgage professionals.
Homeowners aged 35 – 55 in this category can effectively pay off their mortgages sooner and generate significant wealth through a properly managed tax-efficient mortgage plan. Since these borrowers are not self-employed or business owners, they will often be unfamiliar with the cash flow and tax issues that go along with an advanced mortgage strategy and are usually better off in a fully managed plan, where all the administration and cash management is handled on their behalf.
Tax traps: the tourist For every great customer that can benefit from your tax advice, there is also the trap to watch out for. The tourist is the first one of these, and it’s the label we apply to multiple property owners who just can’t stay put, insisting on changing their principal residences to one of their investment properties. At first blush, you wouldn’t see anything wrong with this, but one needs to be careful.
Take the curious case of Nina Sherle. In a landmark court decision last year, Sherle, a dual homeowner, decided to do such a move. Prior to changing her principal residence to her investment property, she enjoyed the benefits of a tax-deductible mortgage on her investment property and her principal residence was free and clear. In an attempt to keep her situation the same as she switched houses, Sherle mortgaged her current principal residence and used the proceeds to pay off the mortgage on the current rental, then moved into the current rental and legally made it her new principal residence. Sherle proceeded to rent out the old principal residence, effectively turning it into an investment property and deducted the mortgage interest as before. The desired result was to end up in the same situation – a tax-deductible mortgage on the investment property and the principal residence free and clear. The Canada Revenue Agency reassessed Nina on the basis that “use of proceeds” of the mortgage on the investment property was ineligible and the court agreed, the moral of the story being that regardless of good intentions, the legal effect of doing this without proper planning is to make your tax-deductible mortgage no longer tax deductible. (For a full explanation of this and to learn how to avoid such scenarios, visit the “mortgage professionals” portal at TDMP.com).
The double-dipper This term applies to accelerated Smith Maneuver and TDMP clients. Double-dipping, as you might infer from the name, is a big no-no under Canada Revenue Agency rules. It most commonly occurs when the homeowner invests in tax-efficient mutual funds for their mortgage strategy, the most common of these known as ROC (Return Of Capital Funds). ROC investments are very popular for advanced strategies because not only is the cash flow tax-efficient, it is consistent month over month, which mitigates cash flow risk and reduces the administration required in many debt conversion strategies.
The problem is that if an investment returns capital to the investor instead of providing some form of income, there is corresponding erosion in the tax deductibility of the original investment
tip summary: the T4 investor This is your most highly qualified conventional mortgage customer with provable income, good credit and a low LTV ratio. These discriminating clients demand more from their mortgage than 25 years of inefficient after-tax monthly payments. They will actively seek and respect good mortgage and investment advice and they make ideal candidates for refinancing into managed mortgage plans.
trap summary: the tourist This is a multiple homeowner with itchy feet. Desirous of moving into one of their rental properties, the tourist runs the risk of turning a tax-deductible mortgage into a non-deductible mortgage if they don’t plan and paper the mortgages properly.
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Sandy Aitken
Peoples Offers a Choice:CMHC & Conventional Mortgages for:
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loan that has to be dealt with properly and reported to CRA. If this ROC distribution is used to pre-pay a mortgage (before being re-advanced and re-invested), CRA has advised that, even though the monies are ultimately reinvested, the initial use of proceeds (which
trap summary: the double-dipper This is a unique problem to advanced mortgage strategies that employ ROC mutual funds such as the fully accelerated Smith Maneuver and TDMP. The Canada Revenue Agency has ruled on this issue and the erosion of deductibility of investment loans must be calculated and reported.
- Sandy Aitken is founder and CEO of TDMP.com, which provides managed Smith Maneuver and Tax-Deductible Mortgage Plan (TDMP) services to homeowners. These advanced mortgage strategies are distributed exclusively through independent mortgage professionals, and the company offers Certification training, marketing and sales support to mortgage agents through its website.
was to pre-pay the mortgage) is ineligible for tax deductibility. Homeowners in managed strategy programs will be covered for this situation as the calculations and tax reporting prevents inadvertent double-dipping. However, do-it-yourself Smith Maneuver clients will rarely go the trouble of making this calculation and tend to tax deduct everything, inadvertently or intentionally.
As a mortgage professional, make sure your clients double-dip at their own risk – not at yours.
While most mortgage professionals should not be putting themselves out there as tax experts, it is prudent to have a decent background and understanding of the tax implications of a mortgage transaction. All homeowners should be encouraged to employ a tax professional both in planning complex transactions and for filing tax returns. However, such advice comes at a price that may deter some borrowers. Having a keen eye on the mortgage transaction and advising customers of potential tax advantages and pitfalls is a welcome service. CMP
Winning marketing campaigns. Simplified.
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At Mortgage Intelligence, our consultants have free access to the resources they need to execute winning marketing campaigns: hundreds of marketing templates, professional graphic designers and copywriters, expert marketing advice. Get our team of marketing experts behind you.
Better support can be yours.
Central Office: 5770 Hurontario St, Suite 600, Mississauga, ON L5R 3G5. © Copyright 2009, Mortgage Intelligence Inc., all rights reserved. ® Registered trademark of Mortgage Intelligence Inc. FSCO Lic.10428
Ontario (Toronto West)Mary Gronkowski647.299.6427
Ontario (South/Central)Gerald Krahn905.984.0931
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Winning marketing campaigns. Simplified.
In today’s tougher marketplace, driving new business demands marketing materials that are professional, focused, and on-message.
At Mortgage Intelligence, our consultants have free access to the resources they need to execute winning marketing campaigns: hundreds of marketing templates, professional graphic designers and copywriters, expert marketing advice. Get our team of marketing experts behind you.
Better support can be yours.
Central Office: 5770 Hurontario St, Suite 600, Mississauga, ON L5R 3G5. © Copyright 2009, Mortgage Intelligence Inc., all rights reserved. ® Registered trademark of Mortgage Intelligence Inc. FSCO Lic.10428
Ontario (Toronto West)Mary Gronkowski647.299.6427
Ontario (South/Central)Gerald Krahn905.984.0931
B.C. / Prairies Stan Falkowski877.667.5483 ext.580
Ontario (East)Line C. D’Amour888.697.1735 ext.101
QuébecRobert Perrier877.775.3324
AtlanticMichael Lawless877.813.7283
Contact one of our RM’s today:
Canada’s Trusted Source for Mortgage Solutions
9:05amHAD IDEA FOR CAMPAIGN, CALLED MI MARKETING TEAM
Hit send – final flyers off to printer
11:45am
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satisfie d?2nd Annual Broker Sentiment Poll
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satisfie d?
During December and January, CMP conducted our second cross-Canada broker sentiment poll to gauge what’s on brokers’ minds. Erin Letson uncovers the results, which may surprise you – take a look
When CMP conducted its inaugural Broker Sentiment Poll in early 2009, the results
were overwhelmingly positive despite it being a period of uncertainty. This time around, the Canadian market is in a much stronger place than it was a year ago, and the results of our poll are a bit more reserved, with lingering economic concerns and renewed fears of the big banks taking aim at the brokers’ share of borrowers.
In fact, one of the most surprising findings of this year’s survey was the response to the question, “Do you think you might be leaving the brokering industry in the next 12 months?” Last year, 95 per cent said no, but this year, 49 per cent of respondents said yes – a sign that some brokers may still be feeling the pinch of the economic downturn or re-thinking their choice to be an independent businessperson.
“I haven’t had any time off in over three years and no one to leave my files to. A salary at a bank and holiday and benefits is very attractive,” said one B.C.-based broker. Others pointed to increased competition from banks and the difficulty to stay independent as reasons to exit the brokering industry.
But enough with the not-so-good news. The above statistic aside, the results from this year’s poll were far from full-out negative or discouraging to industry newcomers. Almost 50 per cent of respondents said they would be hiring new staff in the next year (only two per cent said they would reduce staff) and close to three-quarters of those
The Broker Sentiment Poll puts out an open call to the Canadian broker community to participate in an online survey where comments are invited. This year CMP received more than 300 responses from brokers across the country.
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polled said they would increase or keep their marketing budgets the same as they did in 2009.
Here are some more findings from this year’s poll results.
Economic concerns While last year’s results showed brokers’ main concern was fewer lenders operating through the broker channel, economic conditions took the lead in 2010 with 23 per cent of brokers listing it as their top worry.
“Middle-class, mid-paying jobs are eroding in our country and they are not being replaced,” said Anthony Spadafora, an agent with Assured Mortgage Services in Burlington, Ont. “With the low rates, people are budgeting unrealistically, spending more than they make and not saving.”
Don Stoddart, a broker with Mortgage Architects in Brampton, Ont., summed it up when he said economic conditions were the only thing not within his control as a business owner.
“If you run a good brokerage company, other issues will not be a concern,” he said.
Although there were plenty of viewpoints on economic instability, more than half of those surveyed (55 per cent) said they don’t think Canada is on the cusp of a housing bubble – a topic that’s been debated in the press since the beginning of the year. For those respondents that
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what are your biggest concerns over the next 12 months?
did see a bubble forming, many of them said they think it’s happening on a regional basis, particularly in urban centres where prices tend to fluctuate most.
After the recent federal government changes to mortgage-borrowing criteria, there were mixed views on whether the government was handling the economic situation properly. Just over one-quarter of respondents gave the federal government a seven out of 10, while 35 per cent scored them five or lower.
“[The] changes set for April 19 are good, I feel, as long as lenders do not layer more conservative requirements on top of these,” said Maury Lum, a Vancouver-based broker.
Ann Turner of Waterloo, Ont., was more critical. “Default rates are very low and Canadians do not think of homeownership like the Americans do nor do they take risks with their homes like they do, so why this sudden push to make homeownership more difficult?” she said.
Vittorio Oliverio, a Centum broker in Lethbridge, Alta., voiced a similar concern.
“The government announces buying back mortgages so more people can borrow, but then they put in restrictions so that less people qualify,” he said.
Some respondents also questioned the big banks’ motives in pushing for the federal
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government to impose the new mortgage rules when the institutions could have tightened the standards on an individual basis.
“The pressures [the banks] are trying to apply to the finance minister are nothing more than a disguised attempt to curtail the growth of mortgage brokers’ market share,” said Jim Solomon, a broker from Medicine Hat, Alta., while Ritchie Simpson of Charlottetown, P.E.I. said he thinks banks are “pushing back against the mortgage broker channel” due to a loss of branch-originated business in the past few years.
LendersOn the topic of lenders, 20 per cent of those polled said their biggest concern over the next 12 months is fewer lenders working through the broker channel. Minimum volume requirements for brokers received a lot of commentary from poll respondents as well, many who cited problems with this increasingly common lender practice.
“I’m worried about the service we are getting from the lender if we don’t make their top 100 list
No
Yes
It could go either way
55%
18%
27%
do you feel that Canada is at the beginning of a real estate bubble?
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or bring in $5 million,” said Valerie Whissell, a Mortgage Architects broker based in Gatineau, Que.
Another anonymous broker from Dartmouth, N.S., said it was becoming increasingly difficult to meet lender requirements without resorting to deal-pooling or “losing one’s ability to work with all the lenders.”
When asked what percentage of their loans brokers fund through banks versus non-banks, the results skewed toward the latter. Twenty-nine per cent of respondents said they do more than 50 per cent of their business with banks, while almost double that number – 60 per cent – said they send more than half of their business to non-bank lenders. The reasons to go with non-banks included good client care and competitive rates.
“The more mortgage brokers build their market niche without the banks that operate through storefronts, the better the industry will be,” said Jim Solomon. “The key will be to develop a number of lenders with diversified product lines that will work only through brokers.”
Another Ontario broker who wished to remain anonymous said he has made a conscious decision to not send business to banks if he can avoid it. “Brokers who send business to a big bank and expect to have those clients in the future are deluding themselves,” he said.
These comments went hand-in-hand with the responses to the question of what is the biggest change the industry will see over the next 12 months. Twenty-one per cent
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1 2 3 4 5 6 7 8 9 10 (ANSWERS)
on a level from 1 to 10 (1 being the lowest), how do you feel the federal government is handling the current economic situation?
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Big bank remote sales teams competing more heavily with brokers
Lenders moving to e�ciency bonuses as opposed to volume bonuses
Remaining big banks dropping mortgage brokers
New commission structures
Brokers as multi-product sellers
A drop in overall broker numbers
Brokerages to merge
Other
21%
18%
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what do you think will be the biggest change in the industry over the next 12 months?
said more competition from big banks’ remote sales teams will be the most significant change (something brought up publicly by the Bank of Montreal in March, see news page 29), and 17 per cent believed that some or all of the remaining big banks who work through the broker channel would cut brokers off in the next year. Another 18 per cent said the biggest change will be lenders implementing efficiency bonuses instead of volume bonuses and 16 per cent believed new commission structures from lenders are on the way in 2010.
Business strategyIn last year’s Broker Sentiment Poll, 64 per cent of respondents predicted more than 50 per cent of their business would come from new clients. This year, the emphasis on new clients seems to have gone down – only 38 per cent said more than half their deals would be from this category (although 44 per cent said between 26 to 50 per cent of their business would be new). These numbers signal a return to the database and brokers seeking out repeat business.
“New clients will continue to be a major share of the business but I expect the CRM program and target marketing I’m doing to have more impact all the time,” said one Ontario broker.
Another respondent said that after being in the industry for a long time, they had a “huge database and a great deal of repeat business.”
Like last year, the large majority of respondents said residential mortgages would be their focus, with 93 per cent saying this category counts for more than half of their business. Many respondents didn’t see a huge amount of business coming from HELOCs, insurance, reverse mortgages or leasing, but 64 per cent said they would be looking to take on at least one of those services over the next year.
Another interesting finding on the topic of business strategy was the question of brokers amalgamating their businesses with other businesses in their area. The response was an almost even split of yes and no, showing that working together might be a solution for brokers who want to stay competitive in their communities, particularly during tougher times.
With the mix of responses and concerns we gauged in this year’s survey, it will be interesting to see what plays out this year and what major changes we’ll be seeing. Will we see a housing bubble form? Will the new government-imposed rules make a big splash when they come into play? Will several brokers decide to go into another industry? Only time will tell.
And as the year progresses, don’t forget that CMP likes to hear your comments and concerns anytime, so let us know if you think there’s an issue we’re missing out on or should be covering more in depth. We’re happy to hear from you. CMP
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contentscmP guIde no.10
2Weighing mortgage creditor life insurance
Mortgage creditor life insurance is becoming an increasingly common ancillary business for mortgage brokers, but there is still confusion on how to offer it and how it differs from term life insurance. CMP cuts through the clutter to clarify the pros and cons
6Access to informationClient education is a big part
of Genworth Financial Canada’s mandate and the insurer has created several online tools to help potential buyers navigate homeownership. CMP spoke to Genworth president Peter Vukanovich about this strategy and how it can help brokers develop better relationships with clients
12Title insurance: more than just fraud
While so many people associate title insurance strictly with something to fight the cost of fraud, it has become a key product in helping the entire mortgage process go more smoothly. CMP explains
16 Covering the cost of fraud
Mortgage fraud has been more prevalent in the last two years, and statistics indicate that it costs Canadians $300 million a year. CMP spoke with Lorne Shuman, the legal services director at First Canadian Title, about an easy way to be sure it doesn’t cost your clients anything
NO. 10
guide to Insurance
Keeping the wheels turning: After a tumultuous year, the mortgage loan insurance industry in Canada has stood its ground. CMP looks back on the lessons learned in the financial crisis, and what criteria changes and tightened guidelines have meant for the industry 8
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life insu ranceMortgage creditor life insurance is becoming an increasingly common ancillary business for mortgage brokers, but there is still confusion on how to offer it and how it differs from term life insurance. CMP cuts through the clutter to clarify the pros and cons
up until a couple of years ago, Gord McCallum of First Foundation Residential Mortgages in
Edmonton says he was hesitant to offer his clients creditor mortgage life insurance. It wasn’t that he didn’t believe in insurance or didn’t want to provide his clients options for coverage. It’s that many policies, as he puts it, “left a lot to be desired.”
The problem we’ve had is that many creditor life insurance policies can be limited in a lot of ways – not transferrable from lender to lender or from property to property,” says McCallum. “We also found that most policies are underwritten at the time of the claim rather than at the time of application.”
McCallum’s concerns are not new – many consumer complaints about mortgage creditor life insurance policies come up as soon as you do a Google search on the topic. The CBC’s consumer advocacy show, MarketPlace, also did an exposé on it in February 2008, focusing on the pitfalls of post-claim underwriting (also known as how an insurer will look for ways not to pay out a policy.)
But there are some good things to be said about mortgage creditor life insurance, particularly policies that come from third-party providers or insurance companies as opposed to financial institutions. It’s also a good way for brokers to offer clients more of a “one-stop” service, especially because a licence isn’t needed to sell creditor life insurance (the same can’t be said for term life insurance) and because it can offer clients immediate protection.
mor tgage creditorweighi ng
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Top: Gord McCallumMiddle: John BargisBottom: Paolo Abate
There is also a referral fee for brokers who direct clients to the policy-providing company.
Almost two years ago, McCallum decided he wanted to make a more concerted effort to offer the insurance to his clients, even if it was just a starting point for them to explore other types of coverage.
“I had a week where I heard three stories from three close friends about claims and that really got me thinking about trying to get something in place for our clients,” says McCallum, who now offers policies through Mortgage Protection Plan.
Lynn Moroz, a Calgary-based mortgage and life insurance broker, also saw the value of life insurance first-hand when a client died suddenly in her home in 2007, just after she had put a policy in place for him.
“A lot of mortgage brokers aren’t comfortable like they should be explaining life insurance, but when you have someone die, it changes things. People listen to you,” she says.
Both McCallum’s and Moroz’s experiences illustrate the sentiment of many brokers toward mortgage creditor life insurance – the desire to offer clients some level of protection, but not in the form of a lacking or restrictive policy. Fortunately, both have found a balance they’re comfortable with.
Why it’s importantMortgage creditor life insurance is a policy that pays off the balance of a mortgage to a lender upon the death of a person listed on the mortgage. It differs from term life insurance in a number of ways, most notably in that it pays out the lender instead of a beneficiary and it’s easier to obtain upfront because there are no health checks beforehand (the flip side is the aforementioned post-claim underwriting).
“The creditor life insurance product is always tied to the mortgage, so it’s really designed to protect the lender more so than it is to protect the client,” says Paolo Abate, director of financial services at FC Financial. “Also, if a client does make a successful claim, they have no choice as to where the money goes and they may have other debts besides the mortgage.”
Abate is one of many people who argue that term life insurance provides more effective coverage than creditor life insurance for a lower price to borrowers. Moroz, who is licensed to offer term life insurance, agrees with this argument, but says there is still a place for mortgage creditor life insurance and thinks it’s a smart idea for mortgage brokers to offer it to their clients.
“If customers aren’t pushed and followed up on, they might never get around to talking to a life insurance agent and then they walk away from a
mortgage office underinsured,” says Moroz. “So mortgage brokers are really doing the right thing by starting them out on coverage and then it’s the clients’ onus to get their own term life insurance in place.”
For John Bargis, mortgage agent and vice-president of Mortgage Edge in Richmond Hill, Ont., offering creditor life insurance is an important step in serving clients. He also points out that if a broker firm offers an insurance product but doesn’t mention it to clients during the mortgage process, the clients could come back and sue for a potential liability.
“The standard in the industry is that you do offer it,” says Bargis, adding that with creditor life insurance, clients can either be covered from the day of mortgage application or the day the funds are advanced from the lender, which means the coverage starts right away.
This is a feature of creditor life insurance that McCallum is also a fan of.
“We use Mortgage Protection Plan and with it we can have coverage in place before the mortgage funds and that’s been helpful because sometimes a term life insurance policy takes more time to get in place,” he says, adding if the MPP coverage is cancelled within the first 60 days, a client’s premiums are refunded. “It’s just good business practice to offer some form of coverage and it can act as a stop-gap until a client has time to make other arrangements with a professional.”
how to offer itMost of the bad press surrounding mortgage creditor life insurance has been related to policies that come from financial institutions. The criticisms have been that these policies are not transferrable if a client moves or chooses to refinance their mortgage with a different lender. This is why most mortgage brokers who offer creditor life insurance refer clients to a third-party insurance provider (for example, Mortgage Protection Plan, BrokerPlus or Affinity Assurance Marketing and Management).
“Independent creditor life insurance offered through third-party providers or insurance firms is a much better way to go than taking any of the creditor life policies offered through the financial institutions, especially because third-party policies are portable,” says Bargis.
In fact, the benefits of creditor life insurance offered outside of a financial institution can be considered as another reason that borrowers should seek independent advice from a mortgage broker. If they go directly to a bank, they are likely to be sold the bank’s creditor life insurance alongside their mortgage without realizing its limitations or other available options.
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Most of the major brokerages in Canada have creditor life insurance referral programs set up so that broker members can set clients up with a policy. Some examples include Invis, which has a program set up with Great-West Life Insurance, and DLC and Mortgage Architects, which offer insurance through Mortgage Protection Plan.
For brokers who are unfamiliar with offering creditor life insurance, Bargis recommends talking to someone at a third-party provider who can offer training and literature about the product. He says the process of talking about it to clients is very straightforward, especially because the policy is initiated straight from the origination system (either Filogix or Marlborough Stirling), where information from the mortgage application is fed directly onto the creditor life insurance application.
“It’s a very quick because it’s a point-of-sale product and you’ve already got the client in front of you – plus, it’s a relatively cheap insurance program,” says Bargis.
And although there are disagreements about whether creditor life insurance or term life insurance is better, he says that having both types of coverage can be a good idea.
“I’m a believer in having both creditor and term life insurance because the one is tied to the actual debt and the other basically provides a lump sum of cash, so as long as it fits the client’s budget, I would take the time to understand and develop a method of trying to sell the creditor life and referring them to a professional to get life insurance,” he says.
Suggesting alternativesAlthough mortgage brokers are not licensed to sell term life insurance, it doesn’t mean their clients won’t be interested in the product. That’s why it’s a good idea for brokers to build relationships with insurance agents so they can refer clients to them as needed.
“It’s great for us to be able to offer clients protection, but there are definitely going to be circumstances where you want to be able to send
“ it’s a very quick because it’s a point-of-sale product and you’ve already got the client in front of you – plus, it’s a relatively cheap insurance program ”
them to somebody who you know will take care of them for the term of the life insurance,” says McCallum. “Personally, I’m a fan of independent insurance agencies. I’m an independent mortgage broker and I like that opportunity to go to multiple sources for a client.”
Abate also recommends that mortgage brokers establish a connection with an independent insurance agent, especially because he thinks term life insurance is a better overall product. He has even seen situations where insurance agents give mortgage brokers a “nominal” referral fee in the range of $50 for sending clients their way. At the very least, brokers can suggest a “client swap” with insurance agents so there is a two-way referral system happening.
“It’s important for people to get the right insurance product, and they can get better advice and a better product from an independent insurance agent,” he says.
For many brokers, offering mortgage creditor life insurance to clients has become a routine step and business add-on in the mortgage application process, while others might still be figuring out if they want to move into the realm of insurance. As a starting point, it’s important to look at the policy options that are out there and make sure to find a product you feel comfortable recommending to clients.
Since McCallum found an insurance product he felt good about, he says he has been happy with his decision to offer creditor life insurance policies to all his clients.
“Last year, we insured over 20 per cent of our funded mortgage volume –that means we’re getting 20 per cent more coverage out there, so we feel like we’re doing a better job and I think we can sleep a little better at night knowing our clients are better protected.” CMP
TERM LIFE INSURANCE CREDITOR LIFE INSURANCE
A licence is needed to offer/sell, so • mortgage brokers have to refer clients to an insurance company or agent if they want this type of coverage
Medical background check, including • tests, are required prior to approval
Only the client can make changes to • the amount of coverage once a policy is issued
If a claim is made on the policy, the • beneficiary gets the payout and can choose how much they want to put towards the mortgage
Non-taxable•
Brokers do not need a licence to offer • this type of insurance
No medical background check required • – the policy is usually underwritten at the time a claim is made
Works on a declining balance, so • premiums stay the same even though coverage decreases (because the mortgage balance is decreasing)
If a successful claim is made on the • policy, the bank gets the payout (the mortgage is paid out in full)
Taxable (subject to provincial sales tax)•
- John Bargis
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Peter Vukanovich
access to informationAs the private mortgage insurer that tags
itself ‘The Homeownership Company,’ Genworth Financial Canada has been ramping up its programs in the past year to help potential buyers understand exactly what it takes to purchase a home and manage a mortgage.
“I think there’s quite a bit of room for Canadians to become more aware of the home-buying process,” says the company’s president, Peter Vukanovich. “We’ve got a quiz on our website where we’ve been asking questions about buying a home and we can tabulate responses, and it clearly indicates that the Canadian first-time buyer would benefit from more education. The scores are not what you might expect them to be.”
To help educate Canadians, Genworth launched a site for first-time buyers called Homeownership.ca in September 2008 after the government introduced new rules that eliminated zero-down mortgages and 40-year amortizations. The site has been expanding ever since and includes quizzes, rent versus buy calculators and other tools to help first-timers navigate the buying process. Last November, a video series was added to the site to explain the benefits of mortgage insurance and break down the housing market in Canada.
online educationFollowing the positive feedback from Homeownership.ca, Genworth launched YourMortgagePlan.ca last September as part of the “Genworth Edge” suite of tools for mortgage professionals. The site includes budget planners, a financial check-up tool and mortgage payment calculators to help brokers counsel their clients to make informed mortgage decisions. There is also the Genworth Development Centre, which offers training courses on topics like appraisals, credit reports and networking skills.
Client education is a big part of Genworth Financial Canada’s mandate and the insurer has created several online tools to help potential buyers navigate homeownership. CMP spoke to Genworth president Peter Vukanovich about this strategy and how it can help brokers develop better relationships with clients
“We’ve got a whole raft of information we’ve been trying to get out to people – our first line of communication is through the lender and the broker, so these online tools are aimed at providing more information that can be delivered through our partners and help consumers,” says Vukanovich, adding the web components are a complement to many of the other resources Genworth provides for the mortgage industry.
“We have the online stuff and then we put on thousands of presentations a year so people in the industry know what’s going on and have the latest market information,” he says.
helping handAnother initiative that has proven successful for Genworth is its Homeownership Assistance Program, which the company expanded last year in the middle of the financial crisis, adding an online component where homeowners can assess their financial situation and then work with the lender and mortgage broker to find ways to manage mortgage payments in tough times. Examples of solutions include a longer amortization period or a line of credit.
“We’ve had a huge response to the Homeownership Assistance Program – we helped more than 4,600 families last year, a six-fold increase from 2008,” says Vukanovich. “We also find the lenders have really embraced this as a program to help consumers creatively get through their financial difficulties.”
For 2010, Vukanovich says Genworth Financial Canada is looking for opportunities to expand and build its offerings, such as its Homebuyer Privileges program, an online discount program for Genworth-insured homeowners, who receive discounts for things like appliances and moving services.
He adds Genworth is also re-evaluating its product line and, in particular, looking for ways to streamline products and make them easier for Canadians to understand. CMP
Homeownership.ca – a site for potential homebuyers and homeowners. Includes the Homeownership Assistance Evaluator and a video series.
Yourmortgageplan.ca – a site for mortgage professionals to help their clients plan for a mortgage.
Genworth Development Centre (at Genworth.ca) – Training sessions for mortgage professionals (some qualify for AMP credits).
Genworth Financial Canada’s online toolbox
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Guide Featuremortgage Loan Insurance
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After a tumultuous year, the mortgage loan insurance industry in Canada has stood its ground. CMP looks back on the lessons learned in the financial crisis, and what criteria changes and tightened guidelines have meant for the industry
The Canadian mortgage loan insurance market, like the rest of the industry, has been through a lot in the past 18 months. As the
country’s safety net for mortgage defaults – and, in turn, a contributor to economic stability – mortgage insurers now find themselves in a position where they must work harder than ever to balance being cautious with being supportive of mortgage market growth.
After the elimination of 40-year, zero-down mortgages at the tip of the financial crisis, some borrower criteria faced more restrictions, but the tide shifted as the housing market soon picked up beyond expectations in mid-2009. Genworth Financial Canada president Peter Vukanovich says that while borrower criteria tightened throughout the financial crisis, the improving housing market has helped change industry outlook.
“Back in 2009, we went through a pretty bleak period and we had really slowed down because lenders were having trouble with liquidity and delinquencies,” he says. “It was a tough period, but with the housing market stabilizing, it has normalized quite significantly here so it’s been more business as usual.”
Along with economic changes – including the new mortgage insurance rules announced by the federal government in February – there has also been a small but noticeable shift in the way mortgage insurers are interacting with lenders, consumers and, perhaps most notably, in marketing efforts, mortgage brokers.
turning
keeping the
wheels
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“I had CMHC in here last week and for the first time I can remember their marketing materials included the word ‘broker’ and the phrase ‘contact your broker,’” says Debbie Thomas, a broker and partner at The Mortgage Group in Vancouver, where she oversees compliance and training. “I think they’re feeling really strongly that we as brokers have a positive influence in the industry and it’s taken a long time to change that attitude.”
Tightening upThe overarching trend across the mortgage insurance market during the financial crisis was no surprise – tighter borrower criteria and an atmosphere of caution. The prudence has been generally well-received.
Along with the Canadian banking rules that have been oft-praised for saving Canada from deeper recession woes, the fact that most mortgages face strict underwriting standards in the mortgage insurance process and are backed by the federal government has been another boon to the industry.
While some borrower restrictions imposed last year have loosened since the gradual economic recovery has been underway, there is still a greater emphasis on borrower quality. For example, proof of income might now be examined in greater detail beyond a letter of employment and also require a pay stub and a notice of assessment.
“We’ve certainly seen a tightening with more restrictions being imposed on the lenders with an emphasis on portfolio quality, which is a sign of the economy and where we’ve come from in the past 12 to 18 months,” says Dave Terletski, director of risk management at Bridgewater Bank, one of only a few lenders that work with all three Canadian mortgage insurers. “We’ve seen all types of income
of a borrower being questioned further than before and requests for more supporting documentation.”
Terletski also says that because refinancing has become so popular over the past few years, especially due to record-low interest rates and more demand from consumers to consolidate debt by leveraging their mortgage, insurers are looking at refinance guidelines more cautiously. This is especially relevant with a recent Bank of Canada warning that consumer household debt is at a record high.
One of the main borrower categories Thomas has noticed as a broker are tightened insurer guidelines for self-employed individuals, who often write off a large portion of their income for tax purposes.
“The whole issue of reasonability has now been forced back and self-employed deals that used to be approved are not even close to being approved today,” says Thomas. “It hasn’t been an announcement or anything that has come out from the lenders or insurers, but it’s something we’ve definitely noticed.”
Among some rules getting tighter, both Genworth and CMHC have become more accommodating in helping out struggling borrowers. Both companies introduced homeowner assistance programs, which have received a positive response from lenders. These programs help borrowers understand some of their options when they lose a job or encounter other financial difficulties.
Genworth says its program has helped more than 4,600 Canadian families. As for CMHC, approximately 36,000 people have viewed its report since it launched its consumer outreach campaign in March 2009, namely its Homeowner Default Management Guide.
The new rulesThe unusually strong housing market has brought on newer fears of a housing bubble, which led to the recent changes in mortgage insurance criteria as imposed by the federal government. This included the requirement for lenders to qualify borrowers at a five-year, fixed-term rate, 80 per cent maximum LTV on non-owner occupied rental properties, and refinancing up to 90 per cent of a home’s value instead of the previous 95 per cent.
Vukanovich says Genworth Financial Canada was “heavily involved” in the consultation process with the government and wanted to make sure the rules would have minimal impact on housing demand, which has been unusually strong since last spring.
74%
72%
Number of Canadian mortgage consumers
who believe that mortgage loan
insurance provides an important benefit to the financial system.
- Source: CMHC
Number of Canadian mortgage consumers who recognize that
mortgage loan insurance helps them
buy a home with a down payment of less
than 20 per cent.
- Source: CMHC
“ I had CMHC in here last week and for the first time I can remember their marketing materials included the word ‘broker’ and the phrase ‘contact your broker’ ” - Debbie Thomas
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Top: Dave TerletskiMiddle: Debbie ThomasBottom: Peter Vukanovich
“Over a couple of months, we provided a lot of data and analysis on why it would be better to be surgical in these changes versus broad changes like eliminating the five per cent down program, which wasn’t warranted,” he says.
While there was initial confusion over whether the changes would only apply to CMHC-backed mortgages, insurance under the private insurers is also subject to the new criteria due to their 90 per cent guarantee by the federal government.
Although the rules have faced some criticism, the overall response has been favourable, particularly amongst lenders (before the rules were imposed, most lenders already qualified borrowers at a slightly higher rate if they opted for a low-interest variable product). It was also rumoured that several of the major banks were pushing Finance Minister Jim Flaherty to introduce tighter guidelines.
“We’re all affected by the new mortgage insurance rule criteria – it’s tightening the aperture and focusing on bringing better quality business to the banks,” says Terletski. “We still maintain there is a strong marketplace with relatively low delinquencies, and it’s healthy to be doing things like this that focus on quality.”
The broker’s roleWhile mortgage insurers deal primarily with lenders, all three have been putting emphasis on targeting brokers and looking to create new lines of communication. This is despite the fact that brokers, as Debbie Thomas points out, can no longer choose which insurer they want to work with, although they can make suggestions to the lender.
“We can’t request what insurer we want to use because a lot of times it’s all being driven by the investor on the other end, so oftentimes a lender will have a quick-close special but it has to be CMHC-insured because the investor is
April 19, 2010The day the new parameters for mortgage
loan insurance come into effect.
more comfortable with that,” she says, adding that it’s also not uncommon for clients to request a specific insurer.
And although lenders make the final call on what mortgage insurer will be used, brokers are still the main point of contact for consumers to learn about mortgage insurance and explain its benefits and premiums. Terletski recommends brokers establish a good rapport with their BDMs who can supply them information from the insurer. He also recommends face-to-face contact to explain everything effectively.
As the mortgage insurance market continues to see changes – the most buzzed-about one is the upcoming sale of AIG’s Canadian arm to the Teachers’ Private Capital – the focus will remain on prudence. One aspect of this is risk-mapping, an important step for lenders in the mortgage process.
“Electronic current market data is paramount,” says Terletski, adding there has been “concerted efforts” to improve relationships between lenders and insurers with more transparency and education being offered, including insurers doing more visits to lenders in addition to their regular portfolio reviews.
“There is a much greater interest with the insurers developing a partnership compared to the way it was several years ago,” he says.
Vukanovich says as the economy repairs itself, the main focus for Genworth will be the size of the market and the level of defaults, which still remain at a relatively low national rate of 0.45 per cent. These factors will determine if further borrower guideline changes are required.
But for now, there is calm after the storm. “I think Canada still has a very competitive
mortgage market,” says Vukanovich. “It offers great choice.” CMP
“ we’re all affected by the new
mortgage insurance rule criteria – it’s tightening the aperture
and focusing on bringing better quality business to the banks
” - Dave Terletski
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title insurance:more than just fraud
GuidetItLe Insurance
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A fter going through the sometimes migraine-inducing process of purchasing
a new condo, the Smiths (not their real name) were elated that it was finally time to move in. That elation soon turned to shock when they were told that not only had a special assessment on the condo unit been performed, but they were responsible for the cost of it.
It was the first they had ever heard of any special assessment, and there was no mention of it on their status certificate when they purchased the property. In fact, it was levied by the condominium board after the agreement was signing, but before their actual closing date. Fortunately for the Smiths, when they were singing the agreement one thing they were sure to include was title insurance, and as such all of the expenses associated with the unexpected levy were covered.
Ask any title insurer and they should be able to tell you similar stories about how their products made the best of a potentially disastrous home-buying experience. As a mortgage broker, if you were the one to inform that homebuyer about the possibility of title insurance and what it can cover, then that obviously increases your chances that your client will be singing your praises and sending you those coveted referrals.
In fact, most only associate title insurance with mortgage fraud, which is really no surprise given the media attention that was given to several high-profile cases. These usually involved innocent homeowners who had the title to their properties sold unbeknownst to them or refinanced, only to find out about it when they received the bank letter congratulating them on their mortgage (for more on title fraud, see page 16 of this guide). But title insurance covers a lot more than just that.
While so many people associate title insurance strictly with something to fight the cost of fraud, it has become a key product in helping the entire mortgage process go more smoothly. CMP explains
“It’s called title insurance because we insure title - fraud is only one component of it,” says Pat Squire, vice-president at the Chicago Title Insurance company, which is distributed through Fidelity National Financial (FNF) in Canada. “Fraud is just the most newsworthy, but if you’re looking at it from a mortgage broker’s perspective, you’re looking at a loan policy and there are three heads of coverage there – fraud is just one of them.”
The amount of insurance should be the amount • that was paid for the property, except for existing homeowner policies where the amount of insurance will be the fair market value at the time the policy is obtained
The policy’s effective date will be the same as the • property’s closing/deed registration date for policies obtained at the time of purchase
Standard exclusion from title insurance include: title • or other defects created, allowed or agreed to by homeowner; title or other defects known to homeowner but not the insurer prior to the policy date; environmental matters; native land claims; matters that result in no loss to homeowner; matters disclosed in home inspection or building inspection reports obtained by homeowner; any property-specific exceptions that could arise after searches by lawyer/notary
Title insurance can often satisfy the lender’s • requirement for an up-to-date property survey/RPR/Building Location Certificate
- Source: Stewart Title Guaranty
know what to tell your clients about title insurance
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Lorne Shuman, the legal services director at First Canadian Title, agrees, saying that “People gravitate towards the fraud because it’s more juicy and sexy, but there is much more to title insurance than just fraud.”
He goes as far saying that calling it title insurance is a misnomer. “It’s much more than
just the numbers
Cost snapshots for title insurance premiums (owner and loan policies). Please consult the insurance company or a lawyer for more specific pricing.
FIRST CANADIAN TITLEFirstcanadiantitle.com(Properties costing between $201,000 and $500,000, six units or less)New property: $200 to $350Resale property: $229 to $350New condo: $150 to $200Resale condo: $150 to $179For properties over $500,000, the premium is the previous value’s premium plus $1 per every $1,000 over $500,000Existing homeowner policy: $200 to $250
STEWART TITLEStewart.ca(Properties costing between $201,000 and $500,000, six units or less)New house ($201,000 to $500,000): $200 to $300Resale house ($201,000 to $500,000): $225 to $325Resale or new condo ($201,000 to $500,000): $150 to $175
TITLE PLUSTitleplus.ca(Properties costing between $200,000 and $500,000, four units or less)Home purchase: $238 to $348Condo purchase: $179 to $263For properties over $500,000, the premium is the previous value’s premium plus $0.90 per every$1,000 over $500,000Existing homeowner policy: $179 to $262
title. It’s almost title, plus survey, plus everything. It’s more than just ‘we protect your title.’ We do a lot more than that.”
What is title?Title refers to the legal ownership of a property, which is registered in the government’s land registration system when home ownership is obtained. Title insurance was first introduced in Canada as a replacement for an up-to-date land survey and has gained popularity, particularly in the past few years, because it protects both homeowners and lenders from any loss or damage related to fraud and other title-related issues.
According to the Financial Services Commission of Ontario (FSCO), for a one-time fee, also known as a premium, a title insurance policy can provide coverage from losses related to several things: unknown title defects that prevent the homeowner from having 100 per cent ownership; any errors that may appear in surveys or public records; encroachment issues (this pertains to things like if a structure has been built that encroaches onto a neighbour’s property and needs to be removed); any existing liens against the property that are leftover from the previous owner, including things like utilities, mortgage arrears and taxes; any “other title-related issues that can affect your ability to sell, mortgage or lease your property in the future.”
“We call that marketability, which means the homeowner can sell it to a third party, and it’s one of the things that title insurance covers,” says Shuman, explaining what happens in the event that a property is not marketable.
“The policy responds in a number of different ways,” he says. “It can fix the problem via a cash settlement, it can remove or rebuild any encroachment, and in the event that a title is being attacked because a neighbour is making claims based on an old fence line or something, the policy will retain a lawyer and fight on the homeowner’s behalf. In the event that the property is lost, then we have an obligation to compensate that loss because we insured that the title was good.”
There are three types of residential policies available through title insurance companies: policies for new homeowners, existing homeowners and lenders. The homeowner policy and the lender policy (which can also be called a
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Unknown title defects (title issues that prevent • homeowner from having clear ownership of the property)
Existing liens against the property’s title (e.g. the • previous owner had unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property)
Encroachment issues (e.g. a structure on the • property needs to be removed because it is on a neighbour’s property)
Title fraud•
Errors in surveys and public records•
Other title-related issues that can affect the ability • to sell, mortgage or lease a property in the future.
- Source: Financial Services Commission of Ontario
what does title insurance cover?
loan policy) are packaged together because the owner’s policy – which lasts as long as someone owns a property – protects the actual title and any liens against it while the loan policy safeguards the mortgage.
Residential title insurance can provide several different types of coverage, such as: comprehensive, which covers losses related to title, including a negligent lawyer and errors made; gap, which insures homeowners for the time it takes them between the home closing date and the time the title is registered; survey, which takes the place of requiring an up-to-date survey. Many lenders will also accept this as an alternative to a survey or Real Property Report (RPR); legal, which covers legal expenses accrued when homeowners are forced to defend their title.
The three largest title insurance companies in Canada – First Canadian Title, Stewart Title and Title Plus – all provide these bundled policies at one-time premiums ranging from approximately $150 to $350 (for properties up to $500,000). Premiums depend on the location (province), price and type of property and if it is a new home or resale.
For new homebuyers, however, title insurance has become a standard – in fact, many lawyers add an owner’s policy directly into a
legal fee for home-related transactions. Title insurers also offer existing homeowners’ coverage for those who didn’t buy title insurance when they purchased their property.
“There are very few lawyers who would close a deal without title insurance these days,” Michael Maguire, a broker with Mortgage Intelligence in London, Ont. told CMP. “The lawyers like it because it limits their liability and because it simplifies the legal process.”
As a standard, lenders are also purchasing title insurance policies as fraud protection, especially because these companies are no longer protected by the legal system (it has placed the onus to pay fraudulent mortgage on lenders as opposed to victimized homeowners).
EvolutionTitle has actually come a long way from its first intentions, and more and more homeowners, once educated about the benefits, are opting to buy in.
“The original purpose of title insurance was covering title and fixing title-related issues,” says Squire. “We would see things where you have a fence this way or that way, or there are historic registrations on title that could prevent a deal from closing or slowing it down enough that the buyer would walk. But it’s evolved from there, and actually become a prerequisite for some lawyers before even considering signing the final papers.”
A lot of this has to do with the amount of time it can save at the point of closing.
“It’s actually gotten to the point where we provide efficiencies at closing,” he says, adding that “about 90 per cent of transactions in Ontario are using title insurance now.”
Beyond the time of purchase, it also speeds up any legal processes that would regularly tie up the homeowner.
“Once someone has the policy, there is no need to prove anyone was at fault, no need to go after somebody and start a lawsuit,” says Shuman. “It’s a no-fault mechanism to resolving disputes and it’s more direct than going to the courts, getting lawyers involved and accruing all those costs. So it’s quicker, less expensive, more efficient and a better process for the buyer in the event that there is a problem.” CMP
Lorne Shuman
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FraudQna
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Lorne Shuman
Canadian Mortgage Professional: How does fraud affect the mortgage industry?
Lorne Shuman: Fraud is one of the most difficult things in the business for everyone in the real estate process to grapple with – lenders, lawyers, insurers, brokers and agents. It’s affected everybody because the bottom line is that you can’t really protect yourself from becoming a victim of it, but can protect yourself from the financial consequences of being a victim.
CMP: How does title insurance protect people from that?
LS: It doesn’t stop it from happening, but it does make all those problems go away. As title insurers, what we do is investigate it, pay off the mortgage, and if the title has been stolen we put it back in the victim’s name. The whole idea is that it protects people against the cost of fraud and nothing else can.
In 2009 we actually stopped $25 million worth of potentially fraudulent deals. These were deals that we were asked to insure and they were a bit on the edge in terms of some of the warning signs that we know of. Because of that we investigated further and determined that these were deals that we did not want to insure because we weren’t comfortable with them. Everybody involved would have been dragged into this mess, but because of our underwriting, which is very aggressive and unique, we were able to stop them from happening.
CMP: You mention your unique underwriting. What is unique about it?
LS: All the transactions that come to us go through vigorous underwriting. We ask the lawyers submitting the deals a number of questions to
covering the cost of fraud
Mortgage fraud has been more prevalent in the last two years, and statistics indicate that it costs Canadians $300 million a year. CMP spoke with Lorne Shuman, the legal services director at First Canadian Title, about an easy way to be sure it doesn’t cost your clients anything
uncover potentially fraudulent transactions, and in working with them for so long we are able to detect the warning signs early. The underwriting is unique in that, unlike other insurers, we are very much involved in the fraud underwriting. We don’t delegate that responsibility to anybody else. We are fully responsible for it.
CMP: The government also passed legislation to help protect homeowners from fraud. How is that different from purchasing title insurance?
LS: It was Bill 152 and was passed when a lot of people were having their houses stolen, so a public outcry made the government respond with legislation to create a law that said, as a homeowner, you can never lose your home if it is established that a fraud has occurred. The way it works is that if you are a victim you apply to a government fund and, provided there is coverage, the government will compensate you. What’s really difficult about that though is you have to make an application to the fund, and you will likely need to hire a lawyer for that. The outcome, because the fund is discretionary, is not foolproof, so it could end up costing you.
CMP: What is the broker incentive to tell their clients about title insurance?
LS: There is nothing in it from a financial cross-selling standpoint, but as a broker, you will look more professional in front of your clients when you’re knowledgeable about things like title insurance. You can steer your client in the right direction and provide them with protection on a number of fronts for a one-time fee. What better way to build a loyal client base that refers more business to you? CMP
Insurance by FCT Insurance Company Ltd., with the exception of commercial policies by First American Title Insurance CompanyServices by First Canadian Title Company Limited. This material is intended to provide general information only. For specific coverage and exclusions, refer to the policy. Copies are available upon request. Some products/services may vary by province. Prices and products offered are subject to change without notice. ® Trademark of The First American Corporation.
�ey paid o� the mortgage so they own it… right?
Not necessarily. Real estate title fraud doesn’t discriminate between a mortgaged property and one that’s mortgage free. If you think title fraud can’t happen to your clients, unfortunately, it can. Are your clients prepared?
Protect your clients from becoming victims of title fraud. For a low one-time premium, your clients can avoid the stress and expense of resolving title issues.
Get informed. Protect your clients. Recommend First Canadian Title.
To discover how First Canadian Title insurance can protect your clients call 1.866.804.3122 or visit www.FirstCanadianTitle.com.
Help your customers do their homework.
© 2010 Genworth Financial
Homeownership is often the biggest investment of a lifetime, so it’s important to educate your customers about
the various costs of homeownership. Make sure they understand all the available mortgage options, the impact
of rising interest rates and that purchasing within their means are the keys to success. We provide easy to
understand homebuyer information about purchasing responsibly at www.HomeownershipHelp.ca
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In your opinion, what is the brokerage’s main role in helping an agent or broker become a successful salesperson?
Within our company, we believe the role of the brokerage is to allow agents to grow their business without them having to worry about many of the operational aspects of being in business. So the strength of a good brokerage company is to enable an agent to focus on sales without feeling the impact of day-to-day business items like payroll, compliance, IT support, building a marketing plan, dealing with marketing companies or figuring out other income opportunities. We’re able to do that for them.
Aside from the back-end support, what other tools do you give agents and brokers to succeed in running an independent business?
We’re always providing education and training to help people improve their business, and that means different things to different people. For some, it’s all about the transaction and for others it’s about doing more with their business and managing that growth. We also have 17 dedicated sales professionals at Invis and MI across Canada to help agents grow their businesses, from deal support to coaching on team management issues. The most successful agents understand their strengths and weaknesses and they understand where they’ll have success in their community. We assist with their growth strategy, be it through a wider range of product offerings or more revenue opportunities like insurance.
Why is it important to have a sense of community within a brokerage?
It’s great when you can work with people who are in a similar position as you and understand what
Bryan Devries
brokerage points
Bryan Devries, executive vice-president of sales and operations at Invis and Mortgage Intelligence, talks to CMP about how brokerages can make all the difference in helping brokers and agents build a strong business
you go through day to day. This business can be very internal in nature and your success depends on your own ability, so it’s good to be able to feel connected and to be part of a brokerage where you can talk about the good and the bad. We encourage people to come to social events like awards galas or pub nights as well as networking and partner-sponsored events. We also like to emphasize corporate responsibility and we support two primary organizations: one is our own charity, the Angels in the Night homeless shelter project, and the other is Habitat for Humanity.
What is your perspective on helping brokers improve their efficiency ratios?
We understand in dealing with our lending partners that our job, in part, is to help reduce their operational costs while they, in turn, provide a financial incentive to us for creating those savings. Traditionally, the broker market has been overwhelmingly sales-oriented, whereas within our organization, we understand the cost structure of the lenders along with the challenges of agents. As a result, we’re able to run our business in a way that respects both.
With Invis and Mortgage Intelligence being separate brands under the same company umbrella, how do you differentiate the two?
We have two brands that have two distinct cultures. Both brands are the result of many years of history and each business has been built somewhat differently. At MI a mentorship-type structure has been established where new agents work with established agents to bring together information and knowledge. At Invis, new agents and established agents also work together yet we tend to have more agents that work independently and build their business on their own. CMP
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The planning started literally the week after last year’s Canadian Mortgage Awards, and the time has finally come to announce the finalists for 2010
To start, we would like to thank the record number of people who took the time to submit
their nominations this year, and after a careful vetting process the results are finally in. And with over 160 finalists from over 60 companies and seven provinces, this promises to be the largest awards yet.
Due to the immense popularity and overwhelming response we received last year for the Lender BDM and Underwriter categories, we introduced two new awards this year: Best Newcomer Lender BDM and Best Newcomer Lender Underwriter, both intended for recipients with three years experience or less. As was expected, these four lender categories continued to receive the highest amount of nominations, and like all categories, only those individuals with the most nominations were considered finalists. In fact, these four categories alone make up for 46 of the grand total number of finalists – more than 25 per cent.
In terms of nominations, Dominion Lending Centres and Verico lead the pack this year with 13 and 12 total nominations, respectively, while Mortgage Architects and Invis had the next highest amount at six a piece. For the Lenders, MCAP tops the list with nine nominations, closely followed by First National and Street Capital at eight each. ING and Merix weren’t far behind with seven each.
Like every year, our nominees are selected by industry members through an online, phone and e-mail campaign conducted by the CMP team. The only criteria were that you couldn’t vote for your own company, and that you had to be within the industry to vote.
We have also added a brand new stage to the judging process this year, giving our readers even more chances to be involved. It is in the form of a popular vote campaign, and it will apply to select categories: Best Internet Presence, Best Advertising,
Best Lender BDM and Best Newcomer Lender BDM, Best Lender Underwriter
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and Best Newcomer Lender Underwriter, Best Industry Service Provider and Best Community Service. The reader poll, which can be found at MortgageBrokerNews.ca, will ask you to pick who you think best deserves to win each category, and after it closes the judges will be given the results and asked to make their decisions, with the winners being chosen by combining the two results.
All of the other categories will be based solely on the judges’ deliberations, which is why it was important for us to ensure this year that only industry members were asked to participate. Obviously this creates a chance for any conflicts of interest to arise, so in these instances where a direct conflict does exist (i.e. a member of their own company is a finalist) they will not be voting in that category.
Which brings us to the judges, a group of esteemed professionals from all aspects of the industry who we are confident will use their good judgement to make the best choices.
They are: Jeff Atlin, a broker at the Toronto-based Abacus Mortgages and president of the Independent Mortgage Brokers Association; Hali Strandlund, president of the Fisgard Capital Corporation, and past president of the Mortgage Brokers Association of British Columbia (MBABC), among many other associations; Todd Fralic, the owner of Calgary-based Quantus Financial, as well as president of the Alberta Mortgage Brokers Association (AMBA); Joanne Vickery, director of training and development for Dominion Lending Centres, as well as current MBABC vice-president and president elect; and William McCarthy, founder, president and owner of the W.P.J. McCarthy and Company, and president of the Real Estate Institute of Canada (REIC).
The lifetime achievement award is the only award that will not be announced until the big night on April 23 at the Liberty Grand, but as for the rest, your Canadian Mortgage Awards 2010 nominees are …
the 2010 CMP Canadian Mortgage AwardsDate April 23, 2010Venue The Liberty Grand, Toronto, Ont.Number of Awards 20Dress Black tieService Four-course gourmet dinner and unlimited barTable bookings $2,750 for table of 10 or $300 per person. Go to CanadianMortgageAwards.com for detailsHost Jessica Holmes, formerly of the Royal Canadian Air Farce and the Holmes ShowTheme Early ‘60s. Think Mad Men
mortgagebrokernews.ca 52
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ING DIrect MortGaGe BrokeraGe of the Year More thaN 25 eMploYees
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Invis, Langley, B.C.
Mortgage Intelligence, Mississauga, Ont.
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ING DIrect MortGaGe BrokeraGe of the Year less thaN 25 eMploYees
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Chad Wilson, Axiom, Winnipeg, Man.
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Dale Bridges, Bridges Mortgage Services, Saskatoon, Sask.
Kevin Boucher, Invis, Toronto, Ont.
Diana Zitko, Meridian West Coast Mortgages, Coquitlam, B.C.
Peter Majthenyi, Mortgage Architects, Toronto, Ont.
Gary Meger, Neighbourhood DLC, Barrie, Ont.
Faye Drope, Verico First Canada Mortgage, Parksville, B.C.
Ian Rundle, Verico the Mortgage Professionals, Kingston, Ont.
MacquarIe MortGaGe Broker of the Year - less thaN 25 eMploYees
Lance Cook, Canada’s Best Mortgages, Victoria, B.C.
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Lou Perotta, Domus Financial, Oakville, Ont.
Andre Glockl, Home Mortgage Canada, Tsawwassen, B.C.coMMercIal
MortGaGe Broker of the Year
Tom Marcantonio, Canada ICI, Montreal, Que.
Andrew Odd, CB Richard Ellis, Toronto, Ont.
Graham Thom, Gatland Financial, Vancouver, B.C.
Dale Bilton, Mortgage Intelligence, Kitchener, Ont.
Randy Buckley, Murray and Company, Toronto, Ont.
Andrew Bennett, Nexus Development Corp, Richmond, B.C.
Tony Kalla, Westbridge Mortgage Services, Vancouver, B.C.
hoMe trust alterNatIve Broker of the Year
Dave McKitrick, Alta West, Calgary, Alta.
Kevin Bownick, Ambro & Associates, Vancouver, B.C.
Linda Colpitts, Dominion Lending Centres Valley Financial, Langley, B.C.
Harvey Wood, Mortgage Intelligence, Troy, Ont.
Kam Brar, Verico Select, Victoria, B.C.
street capItal, Best NeW coMer - MortGaGe Broker fIrM
Mike Cameron, Axiom, Sherwood Park, Alta.
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Dominion Lending Centres, Coquitlam, B.C.
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Best NeWcoMer - leNDer uNDerWrIter
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mortgagebrokernews.ca 54
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MortGaGe ceNtre caNaDa Best NeWcoMer - leNDer BDM
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eMploYer of choIce
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Michael Sjerven, Dominion Lending Centres, Vancouver, B.C.
Julie Stamp, Dominion Lending Alliance, Oshawa, Ont.
Robert Hooper, Verico Fair Mortgage Solutions, Oakville, Ont.
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Harry Singh, Equitable Trust, Toronto, Ont.
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David Neville, Home Trust, Lower Sackville, N.S.
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Frank Giacomini, ING Direct, Toronto, Ont.
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Dan Pultr, Macquarie Financial, Vancouver, B.C.
Daniela Perciballi, MCAP Mortgage Corp, Windsor, Ont.
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Barb Morgan, Merix Financial, Kitchener, Ont.
Cynthia Kramer, Paradigm Quest, Toronto, Ont.
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MerIx fINaNcIal Best custoMer servIce, INDIvIDual offIce
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David Armstrong, River City Financial, Edmonton, Alta.
Mike Averbach, The Mortgage Group (Averbach Mortgages), Vancouver, B.C.
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mortgagebrokernews.ca 55
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hoMe loaNs caNaDa Best coMMuNItY servIce effort
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the MortGaGe Group Best INDustrY servIce provIDer
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P icture being out in the middle of the B.C. wilderness with nothing but the thick swath
of trees around you, trickling light in from an otherwise clear day, the occasional sighting of some wildlife, and, of course, the smell of burning oil and gasoline that spews from the exhaust of your dirt bike. It’s something Dustan Woodhouse, a broker based outside of Coquitlam, B.C. experiences every weekend, first thing in the morning.
Sometimes he rides in what is called a hare scramble, which is a particular type of challenging off-road motorcycle race that cuts a narrow path through the wooded and rugged terrain, testing the overall skill of the rider, as well as their patience. Not only is it a 40 km track that leaves very few options for those that want to quit early, but in order to complete the full race you must complete two full laps of it, and in the quickest time possible.
“I do one full scramble a year to convince myself I’m not that old,” says the 38-year-old Woodhouse. “It’s brutal though, mentally and physically. While you’re out there you wonder to yourself ‘why am I doing this?’ Once you finish it though the feeling of satisfaction makes it all worth it.”
Not yet two years into the business, B.C. broker Dustan Woodhouse is racing his way to the top of the sales pack through a combination of hard work and dedication. He took some time out of his busy schedule to talk to CMP about what makes his engine run
Woodhouse takes that same dedicated approach to brokering, riding non-stop through it all with a clear end target in his focus. In the case of the race, that goal is obviously the finish, but in terms of business, that goal is financial success. After just two years in the business, he is well on his way to realizing that goal, not only being awarded the Invis Rising Star Award in 2008, but also bringing home its No. 1 individual sales award for B.C. in 2009.
“It’s all a numbers game,” he says, before explaining, deadpan, that he “didn’t exactly get the award for most balanced life.”
What that means is Woodhouse is working from 9 a.m. to 9 p.m. during the week, 10 a.m. till 2 p.m. on Saturdays, and always on call.
“I remember it was Jan. 16, 2009, and I worked my goal backwards to see what I would need to meet it. Each month I knew what I needed to achieve the target, so I never said no to any event that was mortgage-related, and I just got out there, to investment groups, corporate events, you name it, aligning myself with excellent referral clients.”
Woodhouse worked the numbers, saw 700,000 existing mortgages in B.C. alone and 1.1 million privately owned properties, and thought
goingup
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Quick Q&A with Wayne Kainu
+ What has been your biggest challenge? Trying to communicate all the changes that are happening in the market to clients. There are very complex subjects, like rental add backs and offsets, that aren’t just 10-second sound bites, and they need to understand what they mean. Explaining is something I have been doing ever since I started though, because my first month was when they got rid of zero-down, 40-year amortizations.
+ What is your unfulfilled ambition? Getting to that balance point between having too much money and too much time. It seems you can’t have both. I want to get to the point when I have enough of each.
+ What is the biggest risk you ever took? At age 36, taking the mortgage broker’s exam with little financial background, and making such a big change with a wife and two kids.
+ If you weren’t a broker, what would you be doing? I would definitely be in property development.
+ Do you have any hobbies? The thing I do most now is getting up to Whistler and downhill biking with my son.
+ What words would you use to describe yourself? Driven and focused, but let’s call it what it is – workaholic. Also, someone once told me I was their financial priest, in that they could confess all their financial sins to me. I liked that.
that even if the economy lagged, there was still plenty of opportunity.
“How hard could it be to get 100 deals in a year, which would be good for most people, right?”
And the hard work and long hours obviously paid off, but he also admits that while working towards business targets was the key to his success, it’s also important to put things in perspective.
“For 2010, I should maybe focus on winning an award from my family, rather than my workplace,” he says.
In the garageWoodhouse is the first to say that he has no formal background in financials, but he did get his start
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as a small business owner, starting at just 16 years old.
Working out of his parents’ garage, Woodhouse started a Volkswagen performance parts business, eventually growing it to include a business partner, 14 employees and a 50,000 sq. ft. warehouse over a 10-year period.
But as the Canadian dollar climbed closer to parity with the U.S., it “put the squeeze on our export-based company,” he says. “I spent the next two years listening to various people in my life tell me I should be a mortgage broker before it finally sunk in.”
Today he doesn’t even drive a Volkswagen, yet alone have a flashy car hidden away in the garage.
“I’m not into cars anymore. I totally lost my love for it,” he says. “When you take your hobby and turn it into a business, it either stays a hobby and the business fails, or it becomes a business and the hobby fails.”
Although the hobby did fail for Woodhouse, he does admit, however, that it didn’t die completely. He still buys aftermarket chrome rims for the family vehicles.
ReferralsWhen Woodhouse was dealing in Volkswagen parts, he spent 10 hours a day on the phone forging sales relationships with clients all over Canada and the U.S. After almost two years in the broker business forging similar ties, the business now comes to him, and he boasts sixth generation referrals that contact him.
“For every three clients you get one referral, and those referral tree branches are long,” he says.
As such, it’s important to keep track of where his referrals are coming from and to acknowledge them with a thank-you note. While referral gifts aren’t the norm for him (he does send out the occasional gift certificate to good referral clients), service is.
“That’s the beauty with this business – you take good care of the clients, they will take good care of you,” he says. “Besides, I’m available 18 hours a day, seven days a week. I think that’s more important to them than if I send a fruit basket.”
For actual tracking, he resorts to a not-so-simple Excel sheet.
“I have a rainbow-like Excel sheet the likes nobody else has seen,” he says. “You have to know where referrals are coming from. In one month I
may do 17 deals, which doesn’t sound like a lot, but I’ll have 30 open files going.”
Dealing with that number of deals on a monthly basis on his own probably explains the long work hours for Woodhouse, and one of the first things he mentions is that “I have no life outside of mortgages.” This is followed closely by “I really need an assistant.”
He does say an assistant is in the works, which will give him more time to get back to the things that matter in his personal life – namely his family.
“My family is really the ones that make it all happen for me, and many a client has looked at me with surprise when I mention it to them, asking when I ever see them,” he says. “We make the most of the hours we do have together though, and that is important.”
Another thing an assistant will give him time for is a chance to “feel young” again with his dirt biking buddies, who have a big trip planned this fall.
“For my one buddy’s birthday we are either going to ride to Alaska or to Mexico on dual sport bikes,” he says.
Woodhouse talks about a group of riders that went from Canada to Mexico, riding 95 per cent of the time on off-road trails.
“We have the route and we’re just going to go for it, hoping to do it in 10 days,” he says, before adding with a laugh. “But we’ll see how that goes.” CMP
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The third part is database marketing and lead tracking with our technology platform, the TDMP campaigner. With it we are able to send recurring e-mails every two to three weeks to the e-mail databases of every mortgage agent – branded entirely to their e-mail address and signature block and landing on their personally branded TDMP website. It includes an online test for clients to see if TDMP is right for them.
The last thing is the financial adviser support we provide. Our inside sales team acts as the “TDMP desk” for the mortgage agent and we assign a TDMP-certified financial adviser to each agent who will meet with every client to explain the whole process and make the mortgage agent look like a star.
CMP: What is it about the Canadian marketplace that makes it ideal for this kind of service?
SA: Just about everyone knows by now that Americans have tax-deductible mortgages whereas Canadians do not. It hardly seems fair, but fortunately, the combination of new Canadian Revenue Agency rules, court rulings and innovative new mortgage products has finally levelled the playing field. The problem is that setting up and administering a Canadian tax-deductible mortgage is complex and time-consuming. Homeowners are seeking sound advice on the strategy from their mortgage professionals, and we set it up so that brokers can rely on TDMP to give them all the help they need. CMP
Sandy Aitken
CMP: You officially transitioned from a specialized mortgage brokerage to a mortgage broker service provider. What prompted this move?
Sandy Aitken: TDMP spent the last few years advising homeowners about the tax-deductible mortgage plan, and so far 12,000 homeowners have attended our public seminars. We have also processed over $1 billion in TDMP mortgage applications of which approximately $300 million have already funded. Through this process, we learned that not every homeowner will qualify for, or is suitable for, TDMP. We thought it would be more efficient to provide homeowners access to this mortgage strategy through independent mortgage brokers and agents instead.
Working with mortgage professionals allows us to focus on providing borrower cash management, as well as reporting and tax advisory services after the TDMP mortgage has funded. Also, our core strength in Internet technology allows us to provide online marketing and sales support to brokers to help them find qualified clients and sell them on the plan.
CMP: Now that you are looking to work with the broker market, rather than within it, what sort of services are you offering brokers?
SA: We have four main broker services. First, we offer comprehensive and specialized online and on demand mortgage training, and our course earns 8.5 AMP CE credits from CAAMP.
Second, we offer branded websites that say ‘powered by TDMP’ and feature the individual mortgage agent. Think of the mortgage agent as Dell and TDMP as Intel Inside. Agents simply load their personal profile and picture and they own the whole story. Over the years we have developed a deep understanding of borrower behaviour and our website is designed to give them what they need.
making your clients’ mortgage
tax deductibleThe Tax Deductible Mortgage Plan (TDMP) recently opened its broker services to all mortgage agents. CMP spoke with Sandy Aitken, CEO and founder, to find out more about how agents can offer their clients a tax-deductible mortgage
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ProFileFavourIte thIngs
mortgagebrokernews.ca
PLACE TO BE That would have to be Europe. I spent a few summers travelling it extensively and can’t get enough of the history and culture, especially in Rome.
CELEBRITYRight now that
would be Richard Robbins. He is such a great
speaker and his seminars and CDs are quite inspirational.
FOOD Any type of Asian-inspired dishes, namely Japanese, Chinese, Indian and sushi. I’m also very fond of Italian and French as well.
Kevin Joseph
+ Mortgage Agent, VP of Operations+ Verico AnnTeam Mortgage Services+ Barrie, Ont.
Favourite thingsHOBBY Technology, software and web design is something that I have been dabbling in lately. I love to be up on the
latest from iPod & BlackBerry.
BOOK The Alchemist. This is on my top five list for sure.
SPOrt Golf. I’m fairly new to the game and have started to really pick it up over the last season.
VACATION SPOT Barbados. The weather is always perfect, the food is amazing and the sea is turquoise and great for surfing.
MUSIC/BAND I pretty much like all types of music - jazz, rock, and hip hop top the list. Currently I’m really enjoying the Kings of Leon album.
DRINK Highland Park Scotch, neat. I like a variety of blends, this one in particular for
its notes of toffee and rustic
smoky finish.
MOVIE Wall Street for sure. It’s a classic. Excellent plot and I can’t wait for the sequel this summer.
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service directory
mortgagebrokernews.ca
Capital Directwww.capitaldirect.caPh: (780) 868-0550Page 2
HomEquity Bankwww.homequitybank.caPh: 1 866 522 2447Page 17
Non-Bank Lenders
Abode Mortgage Corporationwww.abodecorp.comPh: 1 877 226 3305Page 60
Macquarie Financialwww.macquariefinancial.comPh: 1 877 462 3788Page 45
Firm Capitalwww.FirmCapital.comPh: 416 635 0221Page 25
Home Trustwww.hometrust.caPh: 1 877 903 2133Page 21
Broker Networks
Home Loans Canadawww.hlcmortgages.caPh: 1 866 452 1821Inside Front Cover
INVISwww.invis.caPh: 1 866 854 6847Page 11
Financial Tieswww.finties.comPh: 905 793 3393Page 16
Equitable Trust Companywww.equitabletrust.comPh: 1 866 407 0004Page 9
Merix Financialwww.merixfinancial.comPh: 1 877 637 4911Page 39
FirstLine Mortgageswww.firstline.comPh: 1 800 387 2020 ext. 6044Inside Back Cover
Fisgard Capital Corporationwww.fisgardmortgage.comPh: 1 866 382 9255Page 23
Dominion Lending Centreswww.DominionLending.caPh: 1 888 806 8080Page 35
Centum Financial Group Inc.www.centum.caPh: 1 604 257 3940Page 33
Street Capitalwww.streetcapital.ca
Ph: 877 416 7873 Page 5
TDwww.tdfinancingservices.com
Ph: 866 694 4392 Page 27
National Bankwww.nbc.caPh: 1 888 483 5628Page 7
Banks
Bridgewater Bankwww.bridgewaterbank.caPh: 1 888 837 2326Page 19
ING Directwww.ingdirectbrokerteam.caPh: 1-800-574-5629Page 53
Insurance
Genworth Financial Canadawww.genworth.caPh: 1 800 511 8888Outside Back Cover & Guide Outside Back Cover
The Money Sourcewww.mymoneysource.ca
Ph: 416 699 2274 Page 55
Timbercreek Mortgage Investmentwww.timbercreekfunds.com
Ph: 416-306-9967Page 10
Peoples Trustwww.peoplestrust.comPh: 1 800 663 0324Page 40
Home n Work Mortgageswww.homenwork.com Ph: 1 866 658 0492 x 100Page 46 & Classified
Optimum MortgageA Division of Canadian Western Trustwww.OptimumMortgage.caPh: 866 441 3775 Page 30
Mortgage Protection Planwww.mppbroker.comPh:1 866 677 4677Page 47
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service directory
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Real Estate
Canadian National Association of Real Estate Appraiserswww.cnarea.caPh: 1 888 399 3366Page 24
Would you like to see your company
name here?Please contact Trevor Biggs:[email protected]
Services
Best Points Travelwww.bestpointstravel.comPh: 1 800 551 8786Page 26
Stewart Title Guaranty Companywww.stewart.caPh: 1 888 667 5151Guide Inside Front Cover
Title Insurance
First Canadian Title www.firstcanadiantitle.comPh: 1 866 804 3122Guide Inside Back Cover
TDMP.comwww.tdmp.comPh: 1 866 500 8886Page 31
Tax-Deductible Mortgages
Commercial Lenders
Technology/Software
Applied Business Softwarewww.absnetwork.comPh: 1 800 833 3343Page 28
Filogix Limited Partnershipwww.filogix.comPh: 1 866 345 6449Page 18
Reach your target market with affordable advertising solutions
Please contact Andrew Davies at 416-644-8740 x232
Get Smarter withShow your clients how to pay off
their mortgage 50% faster without changing their current budget!
View Smart Equity™ Now! Short Online Video at www.gregstanley.ca
Contact Greg Stanley CFP AMP 866.658.0492 Ext 100
© Stanley 2009 all rights reserved.
ROMSPEN investment corporationwww.romspen.comPh: 1 800 494 0389Page 1
Verico The Mortgage Practice [email protected]: 905 458 4222Page 12
RMAI Financial Groupwww.rmaifinancial.comPh: 1 866 955 7624Page 29
The Mortgage Groupwww.mortgagegrp.comPh: 877 899 1024Page 22
VERICOwww.verico.caPh: 1 866 983 7426Page 13
Mortgage Intelligencewww.mortgageintelligence.caPh: 1 877 667 5483Page 41
The Mortgage Centre Canadawww.mortgagecentre.comPh: 1 800 423 0107Page 3
Nexus Investment Corpwww.nexusinvestment.caPh: 1 604 664 7079Page 15
B.C. Real Estate Conventionwww.BCRealEstateConvention.comPh: 1 866 345 6449Guide page 7
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