Tuesday, August 21, 2012

Brokers can manage mortgage changes

By Mark Kerzner, President, TMG The Mortgage Group Canada Inc.

What a summer it has been so far for the mortgage industry and quite a year overall for both homeowners and those of us who work in it.

Here is a quick recap:

January – BMO’s 5 -year fixed rate dropped to 2.99% and started a mini-rate war.

February - FirstLine Mortgages – a leader in non-bank mortgage -- lending went up for sale.

March – Canada Mortgage and Housing Corporation (CMHC), the country’s leading mortgage default insurer,  starts to approach its $600B debt ceiling and BMO reintroduces 2.99%.

April – Minister of Finance Jim Flaherty says he will not be making additional mortgage changes.

May – The Office of the Superintendent of Financial Institutions (OSFI) now overseas CMHC and recommends credit guideline change.

June - The Minister of Finance surprises us with his announcement of the fourth round of mortgage guideline changes in the last three years.

July - FirstLine Mortgages shuts its doors.

August - It's reported that the Canadian arm of ING is up for sale.

Also in that time the following lender changes have occurred:

  •  TD  exits the sub-prime market
  •  Laurentien changes to B2B Bank and later it purchases AGF
  • Resmor is sold to MCAP, closes and relaunches as RMG Mortgages
  •  Lenders quickly change their lending guidelines on self-employed programs, on equity take-outs and New to Canada programs.

Those of us in the industry may feel under fire from lenders and Government, and for good reason. Over the years, the broker rate advantage has slowly eroded as banks start to advertise their own discounted rates. Mortgage brokers no longer have a monopoly on the lowest rates so we differentiate ourselves by offering better service, choice and knowledge. This actually transferred some power from lenders to brokers as lender sales channels and branches only offer single product lines.

When there is less choice and more restrictions, it’s sure to have an impact on the market and the business of mortgages. Perhaps I am na├»ve but I feel that some bank lenders still don’t understand the broker channel and what we offer. Possibly they feel threatened or maybe they want to support their own proprietary channels first.

Banks have been under intense scrutiny from OSFI and the Minister of Finance over the last few years and costs of capital have increased. With limited amounts of capital, lenders look to put it towards the best risk-weighted returns.

So what does this all mean? It means that lenders are both being selective and increasingly sensitive to their costs. It also means that mortgage brokers must continue to demonstrate the immense value we have among mortgage consumers. There are still approximately $1.2 trillion worth of mortgages outstanding and hundreds of thousands of housing starts and resales each year. Even in the wake of increased guidelines and fewer lenders to choose from, our role as a client's advocate is NOT going away and Canadians still need mortgages.

We are incredible partners for lenders.  We represent distribution as well as quality control.  We must continue to offer feedback on clients’ wants and needs so customers are well-served, which is a positive reflection on mortgage brokers as a whole. We MUST support those who support us.
So what can we do? We can be proud of the work we do with our customers. We can be proud of our profession. We can be willing to work a little harder and a little smarter and continue to offer real value to our customers and to our lenders.

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