Monday, January 28, 2019

The Canadian economy and the housing market

We are living in strange times, economically speaking. Mortgage stress tests have slowed the housing market and may be one of the reasons the Bank of Canada has signaled it may pause on increasing interest rates. 

Home sales fell sharply in Canada last year -- the largest annual decline since 2008, spurring predictions the country could face stagnant sales in 2019.  The decline was due in large part to slowing activity in British Columbia and in the Greater Toronto Area, both hit hard by new government measures and higher interest rates.

The Canadian Real Estate Association has forecast little improvement in 2019, predicting 0.5% growth in national sales this year, over 2018.

Christopher Alexander, regional director for Re/Max in Ontario and Atlantic Canada, said the mortgage stress test has been the biggest factor keeping buyers out of the market, especially in Vancouver and Toronto.

 “It’s a lot harder to get a mortgage now than it has been for the last 10 years,” he said. “Not only do you have the stress test, but the big banks are very particular in their criteria. It just seems that everybody is being very cautious.”

However, there are variations across the country. The average price of all homes sold in the Greater Toronto Area fell 3.4% in 2018, for example, while the average price climbed 3.7% in Ottawa and 5.8% in Montreal.

Bank of Montreal economist Robert Kavcic predicts little change in national sales totals or prices in 2019. He suggested the the housing market is going into a period of stagnation.

A Bigger Picture
Recently Statistics Canada released its third-quarter report on national wealth, which is the “value of non-financial assets in the Canadian economy.” Total national wealth hit $11.415 trillion in the third quarter, and at $8.752 trillion, real estate made up a 76% share of that figure. That was the highest that both figures had been, going back to the second quarter of 2007.

Data from both Canada and the US shows that real estate as a share of U.S. national wealth in 2007 was 75.3%, compared to 67.6% in Canada. That started to change with the 2008 recession when US real estate as a share of national wealth started to decline while in Canada real estate wealth started to grow.

BMO has estimated that Canadian benchmark home prices will grow by less than one per cent next year and two per cent in 2020, dragged by “tougher mortgage rules and higher interest rates so the share should continue to trend modestly lower.”

Economists have mixed feeling about this trend. Some say a flat housing market is not anything to worry about. Others, like CIBC’s Benjamin Tal said the Canadian housing market is more important to the overall economy than at any other time on record. Aalthough the Bank of Canada (BoC) argues that the worst is now behind us, and that housing markets are stabilizing, some economists find it difficult to agree.

The BoC’s workhorse model says that six quarters can pass before a rate hike can be felt in the economy but according to Tal and others, only five quarters have passed since the first move of this cycle and “we’re already seeing a slowdown in housing-related indicators.” 

The Global Economy
There are growing fears about a worldwide economic slowdown.  Uncertainty with tariffs, ongoing trade wars, and even the US government shutdown (over for now) is all having a negative impact on the global economy as a whole. 

The International Monetary Fund (IMF) downgraded its expectations for the global economy, highlighting sharp declines in Europe and warning that the risks of a major slowdown have increased.

Already, at the annual World Economic Forum being held in Davos, Switzerland, there is worry about the global economy. Absent from the Forum is representation from the US. French President Emanuel Macron stayed home to deal with ongoing domestic issues. British Prime Minister Theresa May is home, desperately trying to eke out a bipartisan deal for Brexit.

In the United States, the shutdown has cut into growth. Early this month, consumer confidence slumped to the lowest level of Trump’s presidency, according to the University of Michigan’s consumer sentiment survey.

While few see a recession as imminent, the number of risks is growing. As an economy slows, it’s easier for it to be knocked off track, many economists say.

 “After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” said Christine Lagarde, managing director of the International Monetary Fund in an interview in the Globe & Mail. “Does that mean a global recession is around the corner? No. But the risk of a sharper decline in global growth has certainly increased.”

Chief executives ranked a global recession as their No. 1 concern for 2019, according to a survey of nearly 800 top business leaders around the world. 

A survey of 1,300 chief executives released by PwC found that 30%  of business leaders believe that global growth will decline in the next 12 months, a record jump in pessimism to about six times the number who said that last year.

What happens now?
The “R” word has been bandied about lately. In economics, a recession is a business cycle contraction, a general slowdown in economic activity. Economic indicators such as GDP, employment, investment spending, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise. While we are living in a slowdown, we are not seeing high job losses or increases in bankruptcies.

There is also some optimism. In a blog by TMG’s David Larock, he writes that core inflation has not increased and five-year fixed rates continue to settle in at slightly lower levels. Variable rates are holding steady. 

It’s a matter of waiting this through, as Canadians did in 2008. There may be an upside-- this projected slow period means buyers can take their time searching for a house and not worry about missing out on a sale. 

As always, Canadians are a resilient bunch – this is just one more challenge they will overcome.

Tuesday, January 22, 2019

L’EXPERT IMMOBILIER PM a choisi Le Groupe Hypothécaire TMG afin de supporter leur plan de croissance stratégique.

Le Groupe Hypothécaire TMG est fier d’annoncer qu’il a signé une alliance stratégique avec L’EXPERT IMMOBILIER PM, ayant des bureaux et des courtiers à travers la province.

Avec l’introduction prochaine de la loi 141 au Québec et de son impact dans le secteur immobilier et hypothécaire, L’EXPERT IMMOBILIER PM cherchait un partenaire d’affaires, partageant les mêmes valeurs et  qui serait en mesure  de faciliter sa croissance. L’Expert Immobilier PM compte plus de 380 courtiers immobiliers travaillant à travers le Québec.

Les systèmes de support, la formation et la technologie de TMG nous ont impressionnés", a déclaré Pierre Breton, fondateur et président de L’EXPERT IMMOBILIER PM. «Ils jouissent d'une excellente réputation dans l’industrie canadienne, ce qui viendra compléter notre solide position sur le marché québécois. Les valeurs de TMG correspondent à nos valeurs et nous sommes impatients de travailler avec ce groupe. « 

 Claude Girard, vice-président, Québec, Le Groupe Hypothécaire TMG est tout aussi enthousiaste. «Nous sommes ravis de travailler avec ce groupe Immobilier dont les valeurs sont notamment orientées vers l’expérience client, où autant les clients que les courtiers sortent gagnant de la relation professionnelle , a-t-il déclaré. De plus, l’équipe de L’Expert Immobilier, est orientée par un respect strict des codes d’éthiques du courtage immobilier, ce qui rejoint nos propre valeurs en terme de conformité. «Notre modèle d’entreprise, unique en son genre, permet flexibilité et autonomie. Ils pourront bénéficier de l’excellente réputation de TMG à l’échelle nationale. C'est une entente naturelle. Nous sommes convaincus que ce sera un partenariat gagnant-gagnant. "

 Le Groupe Hypothécaire TMG, TMG The Mortgage Group,  est une bannière nationale créée  il y a plus de 30 ans , qui a reçu de nombreux prix de reconnaissance et qui est la plus importante société de courtage hypothécaire indépendante au Canada

L’EXPERT IMMOBILIER PM est une société de courtage immobilier innovatrice fondée par Pierre Breton en 1993. La société a connu une croissance rapide. Aujourd'hui, l’entreprise continue d’évoluer, utilise une technologie de pointe et emploi des professionnels de l'immobilier compétents et expérimentés.

Le Groupe Hypothécaire TMG Quebec aligns with EXPERT IMMOBILIER PM

TMG Mortgage Group is proud to announce that it has signed a strategic alliance with EXPERT IMMOBILIER PM, a real estate company with offices and brokers across the province of Quebec.

With the upcoming introduction of Bill 141 in Quebec, and its impact in the real estate and mortgage sector, EXPERT IMMOBILIER PM was looking for a business partner who shared the same values, ​​and who would be able to facilitate its growth. EXPERT IMMOBILIER PM has more than 380 real estate brokers working across Quebec.

TMG's support systems, training and technology impressed us, "said Pierre Breton, founder and President of EXPERT IMMOBILIER PM. “They have an excellent reputation in the mortgage industry, which will complement our strong position in the Quebec market. TMG's values ​​reflect our values ​​and we look forward to working with this group.”

Claude Girard, Vice President, Quebec, TMG Mortgage Group is equally enthusiastic. "We are delighted to be working with this Real Estate group, whose values ​​are particularly geared to the customer experience, where both customers and brokers are the winners of the professional relationship," he said. “In addition, the team of L'Expert Immobilier is guided by a strict respect of the code of ethics of the real estate brokerage, which joins our own values ​​in terms of conformity. Our unique business model allows flexibility and autonomy.

“They will be able to benefit from the excellent reputation of TMG at the national level. It's a natural agreement. We are confident that this will be a win-win partnership,” Girard said.

TMG The Mortgage Group is an award-winning mortgage brokerage and the largest independent brokerage in Canada and has been in business for 30 years.

EXPERT IMMOBILIER PM is an innovative real estate brokerage firm founded by Pierre Breton in 1993. The company has grown rapidly. Today, the business continues to evolve, uses cutting-edge technology and employs skilled and experienced real estate professionals.

Thursday, January 03, 2019

TMG The Mortgage Group continues to grow with the addition of SafeBridge Financial Group

TMG The Mortgage Group is proud to announce a new, strategic affiliation with SafeBridge Financial Group.

At a time when incredible change is taking place in the mortgage industry, TMG The Mortgage Group and SafeBridge Financial Group saw a way to align the natural synergy between them to further benefit their respective businesses and offer more value to their clients.

Since 2006, SafeBridge has distinguished itself as a leader in the mortgage industry and has continued to experience substantial year-over-year growth, while at the same time providing essential mortgage, insurance and investment services for Canadians through their Mortgage Centered Financial Planning™ model (MCFP).

“As the market continues to evolve, we looked for an opportunity to align with an organization committed to the future of the mortgage industry. It was absolutely necessary that this organization was also capable of providing each of our mortgage agents with exceptional tools, support and resources,” said Chris Karram, co-founder of SafeBridge. “We are also excited to provide additional products through SafeBridge Wealth Solutions across the TMG landscape.”

“There is a tremendous ‘fit’ between our two firms and our respective cultures,” said Mark Kerzner, President of TMG The Mortgage Group.  “We are excited to bring our industry-leading lender relationships, marketing support and industry tools to the SafeBridge team.”

“Also, we are looking forward to providing TMG brokers and agents access to and support from SafeBridge Wealth Solutions so they can present value-added products and services to their clients.”

 TMG The Mortgage Group and SafeBridge Financial are the only two brokerages that have received the Employer of Choice Award from the Canadian Mortgage Awards.

TMG The Mortgage Group is an award-winning mortgage brokerage and the largest independent brokerage in Canada.

SafeBridge was co-founded as a Financial Planning Firm in 2006 with a vision to drive transformational change in the Canadian Mortgage Industry by redefining the traditional customer experience through their proprietary Mortgage Centered Financial Planning approach™.

Wednesday, December 05, 2018

The Upside of Alternative and/or Unregulated Lenders

A recent report from the Bank of Canada reviewed the impact of the government’s policy changes on the mortgage market. It found that overall market activity had slowed -- something we knew would happen. The bank also found a correlation between the quality and quantity of credit.  While the data shows a slowdown in “riskier” mortgages, some economists wonder if these borrowers have turned to the unregulated market.

Approximately 20% of the mortgage lending market were made up of people who borrow at least 4.5 times their annual income to buy a home.  That percentage went down to 6% in the second quarter of 2018. That amount of mortgage indebtedness may or may not be a problem for borrowers; however, coupled with other debt, including credit cards, lines of credit and car loans, it may cause some financial problems as rates rise.

History of Mortgage Lending Changes

In 2016, the Office of the Superintendent of Financial Institutions (OSFI) announced a stress test for insured mortgages (mortgages with less than 20% down and requiring mortgage default insurance), stipulating that those buyers must qualify at the Benchmark rate (currently 5.34%).

Then in October 2017, a similar rule was unveiled for uninsured mortgages (mortgages with more than 20% down) stipulating that those buyers must qualify at either 2% more than the contracted mortgage rate or the Benchmark rate, whichever is higher.

These two rule changes -- along with several others, including; increasing minimum down payments, mortgage premium hikes, and decreasing amortization limits – have made it harder for Canadians to qualify for mortgages, which is what the government wanted for borrowers ‘on the margin’. The rationale was to encourage people to take on less overall debt, including less risky mortgage debt, which would, in theory, keep housing markets safe and protect borrowers in the event interest rates increased.

The Fallout

Mortgage brokers can attest that the impact was seen almost immediately. The rate of clients who may have qualified previously but no longer did from large banks and traditional monoline mortgage lenders went up as much as 20%. 

As a result, alternative lenders saw an uptick in business as brokers presented highly credit worthy homebuyers and refinancers with borrowing options in the unregulated space including private lenders, mortgage investment corporations (MICs) and credit unions. Some credit unions opted to include the stress test as part of their mortgage lending requirement.

The Bank of Canada admits that this segment of mortgage lending is growing, although it falls outside their purview. For example, the market share for private lenders in the GTA has grown by 50% since last year, and now makes up nearly one out of every 10 borrowers, the bank said.
There are now questions about risk in the unregulated market; however, the market is not necessarily riskier, it’s just not under OSFI’s purview.

What the unregulated market is seeing are better quality mortgage clients. Hali Noble, Fisgard’s senior vice-president of residential mortgage investments and broker relations said in an interview, “A lot of these people should be bankable, but they’re not (when applying the new stress tests).”
So, many good quality borrowers have to shift down the ladder to lenders with a higher risk tolerance. The one downside is it comes with a higher cost, but not necessarily more risk.

Borrowers who don’t fit into the mainstream box are now not limited to those with past credit issues, and may include those who are self-employed, those who are new to Canada, and even “A” clients. They simply don’t fit into the new box.

The Unregulated Market

The unregulated market is primarily comprised of private mortgage lenders -- companies and individuals -- who fall outside the purview of Canada’s banking regulators. Private lenders offer mortgage rates higher than traditional mortgage lenders for shorter terms. Typically, borrowers who could not qualify for traditional lending turned to alternative lenders.

Alternative mortgage lenders or private lenders, also known as “B” Lenders, are more willing to look at each situation on a case-by-case basis. They do have criteria, but consider a borrower’s “story”.  For example, if a borrower had a bankruptcy or have some credit issues, they want to know why. For self-employed borrowers, they will consider other documentation to prove income rather than a tax return, which may reflect business write-offs.

Interest rates

Yes, are higher compared to “A” lending, because the borrower profile is considered riskier, but remember it’s only a short-term solution.

You can also expect to pay a larger down payment, from 15% to 35%, depending on both your situation and the property you’re financing. And, there may be lender fees and mortgage broker fees.
Usually, the pre-payment privileges are flexible but there may be a charge for paying out the mortgage early. Alternative lenders are strict about missed payments, and service fees may be higher as well.

Whatever the reason for needing to use an alternative lender, the goal is to get back into the “A” lending space.

Is there cause for concern?

Maybe, maybe not. The reason for all the changes was to ensure that borrowers could manage their debt loads in the future, as interest rates rise.  Inadvertently, the new rules have grown the unregulated market, which may or may not defeat the purpose. People want to buy homes and will do what they need to, to get one.

The increase in demand has caused interest rates to go up even in the private sector, but these lenders are short-term lenders. There must be an exit strategy. There is the risk that borrowers will rely on the private funds for longer terms, which may have a negative financial impact.

The Bank of Canada is also concerned about the potential for mortgage default and bankruptcies. Consumer insolvencies peaked during the 2007-08 financial crisis and have been relatively stable since 2012. Around 120,000 Canadians went insolvent last year, less than 0.4 per cent of the country's population.

  •   Mortgages in arrears across Canada have fallen this year, to one of the lowest levels in history. Only 11,641 mortgages fell into arrears at Canadian banks in January, representing 0.24% of all mortgages held.
  • The biggest indicator for potential arrears is a worsening unemployment rate.
Unregulated lenders are not going anywhere. They have been in the mortgage industry for many years. They continue to fill a need by allowing homebuyers to get into the housing market who otherwise may not have qualified for a mortgage. 

Tuesday, October 23, 2018

Grateful for my time with MPC

By Mark Kerzner, President, TMG The Mortgage Group

I believe in the power of reflection – looking back as objectively as possible to evaluate an outcome and take the lessons from past experiences so they can be applied to the future.  As I conclude my time as Director of Ontario, and Executive Member of the Board of Directors of Mortgage Professionals Canada – it is time for just such a reflection.

 When I ran for the Board of Directors of CAAMP (now Mortgage Professionals Canada) in 2014 I felt as though our industry was splintering. To me, there was a divide (brokers vs lenders/suppliers).  This is what I wrote then as part of my campaign:

It seems there has been considerable chatter lately about the role of CAAMP, regional associations and the overlap between them. Questions around the need for a national association coupled with discussions about a brokers only association have also been on the table. This is healthy dialogue and I am pleased to see the level of engagement about how we are being represented in our industry.

To that end, I would like to take this opportunity to tell you the three key reasons why I continue to advocate for CAAMP:

1.     I welcome the fact that our association is inclusive of brokers, lenders and suppliers alike. I feel that mix actually makes our voice stronger with the folks we are lobbying in Ottawa.
2.     The fact that we share a board of directors to oversee this national association helps unify our day-to-day business interests.
3.     The majority of members are aligned in seeking a very strong and growing broker channel in Canada. 

I went on to say:

CAAMP has to be more responsive and approachable. It has to advocate the broker channel while improving its events and symposiums.  More than anything, CAAMP has to remain the pre-eminent source to government and the media with respect to all-things-mortgages.

Four years later I am very proud of what we have accomplished but wish we could have done more.

Time is often marked through events and  there has been no shortage of industry benchmarks these past four years.

No one really could have predicted the extent and the resulting magnitude of the regulatory changes introduced starting in the Fall of 2016. Those changes came on the heels of a newly elected Federal Government and new staffing leadership at the Association.

I feel honoured that I have represented our members with Government, Policy Makers and Regulators. I am grateful to the Board volunteers who have given selflessly of their time and in doing so set aside personal considerations for the betterment of the Association and membership as a whole.

I believe that your Association is the pre-eminent source of information to Government and Regulators of all things mortgage related.  Our Association has taken great strides in improving events and overall value to members.

The national Mortgage Forum conference has been a resounding success the last few years and I suspect this year will be no different.

We have brought regional symposiums to new markets, delivered member updates in smaller communities, introduced additional training days and held very successful National and Provincial Hill Days.

In Alberta we have combined efforts to bring to our members and sponsors inclusive and valuable events with streamlined efforts and cost savings.  We have also collaborated and coordinated GR and advocacy efforts.

In Quebec we have grown membership to record levels and have had an average of 450 brokers attend the regional symposium in the last three years.

I am proud of what we are accomplishing – and because of these accomplishments, I am confident we can do more. To do so we need to encourage those on the sidelines to join. The value to your industry is already evident. To have a not-for-profit, industry voice that advocates for brokers is vital. Whether you are a member or not, you benefit from that voice.

The $255 annual membership fee is a tax deduction leaving the net out of pocket cost even less. Even if you see no value in the networking events, conferences, education, surveys, communications, etc… voices do matter. To powerfully advocate on your behalf with Ottawa, the provinces, the regulators and other industry associations we need to count you among us. Please consider joining – not because of the value you seek (which there is much) but because of what you can give back to your industry.

I have much faith in the leadership of the staff and the Board going forward. The Association is in very strong and capable hands. I wish them continued success.

A few final remarks:

Thank you Ron Swift and Jim Murphy for encouraging me to run.

Thank you Michael Ellenzweig, Hali Standlund, Boris Bozic and Paul Grewal for your mentorship over the years. Your respect of the brokerage channel and dedication to the Association set the bar very high for me to strive towards.

Thank you to Dan Putnam, Jared Dreyer and Lionel Lewko for leading the Board during my terms and for providing me an opportunity to contribute along the way.

Thank you to Claude Girard, Elaine Taylor, Mike Wolfe, Michael Cameron for serving alongside me on the Executive. I appreciate the discussion and debates we had but more than anything admire your leadership and commitment to the industry. 

Thank you to Cara Shulman for making sure the face of the Association is reflected in a professional and meaningful way.

Samir Asusa – thank you! Your leadership during the transition of CEOs was truly remarkable. You are smart, straightforward and empathetic. I feel fortunate to have had this time to work together.

One of the truly remarkable story lines of our industry these past few years has been Paul Taylor. Having come from a completely different industry Paul has led the Association through three different Boards, enhanced focus on Government Relations, and provided calming leadership to members across the country. He is a wonderful colleague and friend.

Thank you to all the Board members and dedicated staff I have had the pleasure of serving with over the past 4 years.

Thank you to my wonderful, supportive and inspiring wife and family. Your sacrifices these past few years allowed me an opportunity to follow my passion.

One last thank you – to my work family at TMG The Mortgage Group. You inspire me every day to give back. Your strength and leadership enabled me to participate in the Association fully. I feel fortunate to work alongside you.

One past reflection:
I remember the first CIMBL (predecessor of CAAMP) conference I attended nearly 20 years ago. As a newly minted mortgage executive I recall the excitement, enthusiasm and sense of learning I felt.  I knew at that moment that this was a very special industry and an association I looked up to. It was a place where seasoned mortgage professionals would come together, share best practices and chart a course for the future.

I continue to feel that same excitement and enthusiasm today.

Thursday, October 11, 2018

5 Tips for Success

By Mark Kerzner, President TMG The Mortgage Group

A colleague asked me recently if I could share a couple of things that I do each week that helps me to be successful.  I often look to others for inspiration so I was quite flattered to be asked this question myself.

I thought about it for a bit and below is what I shared.

Below are some key fundamentals that govern who I am and how I see myself.

1.     Honour time commitments. Know what’s in your calendar, leave enough time to get to next meeting, and don’t double book.
It may not seem like a big deal if you are 10 or 15 minutes late for a meeting or a call, but trust me when I say, that’s not the case. The other person (people) are literally waiting and starting to wonder what else they could be doing with this time. They may begin to feel that they simply don’t matter or they may also have other commitments. Cancelling at the 11th hour can be equally as annoying.

2.     Honour your time commitments with family. If you say you will be home for dinner at 6:30 p.m. be home. It adds a lot of stress to both your family and business when you don’t meet those commitments.
Just like a business meeting that begins late, when family takes a back seat to your clock you run the risk of setting off a negative chain of events and resentment at home. We have all heard that time is precious (and it is) but it’s also limited. Often we have drives, school plays, teacher meetings, etc. that also need our attention and commitment.

This doesn’t mean you have to be home for every dinner or attend absolutely every school event. It just means that when you say you are going to be there, make sure you are.

3.     Don’t TRY.  Try is really a useless word. Either you will or you will not.
When you say you will ‘try’ you are building in an excuse right from the get go. Going back to the concept of commitment -- commit one way or the other … if you cannot do something don’t say you will ‘try’ and then don’t do it.

4.     Do something creative/fun each week.
I really enjoy hockey, coaching and watching my children perform (dance). It helps me to turn off from the office for a few hours a couple times each week. Find your passion and take the time to make it happen.

5.     Be driven by your work passion.
Just like we need to find our personal passions we need to do the same thing at work. Considering we spend 40 or 50 or 60 plus hours each week on our business, find those aspects of your work that you really love. I think I have the greatest job in the industry. I get to work with talented, committed and passionate people every day who strive to put Canadians in financial situations to enable them to own homes and set them up for success. I am truly humbled that I have been able to represent my industry colleagues with Government, Regulators and the Media and I do not take that responsibility lightly. When you love what you do, you stop counting the hours.

The truth is that we all find inspiration in different places. I wanted to share my experience and encourage you to find your own, and then share that as well.