Assessing the future of Canada's commercial and residential spaces

Fair Mortgage Solutions’ Jason Sohl spells out what he sees as the main challenges and opportunities in both commercial and residential brokering throughout 2022 and beyond – and explains what brokers need to keep in mind as they dip their toes in the commercial waters.

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00:00.00
keymedia
Hello again and thanks for joining us on another edition of CMP Talk. I'm Fergal McAlinden, news editor of Canadian Mortgage Professional and today we'll be continuing our series of discussions with mortgage professionals from across the country on these ever-changing times in the mortgage industry and what the market has in store for 2022. Today I'm joined by a well-known face in the Canadian mortgage industry who's well placed to comment on emerging trends in the market thanks to his experience in both the commercial andreidential sectors. Jason Sohl is a mortgage broker with Verico Fair Mortgage Solutions in Ontario. He was named an Excellence Awardee at last year's Canadian Mortgage Awards for alternative broker of the year and commercial broker of the year he was also the silver winner for alternative broker specialist of the year in 2020. So Jason, many thanks for joining us today. How are things with you?

00:51.54
Jason Sohl
Things are good. Thank you for having me Fergal. It's always a pleasure to to be invited to by CMP and Key Media for this sort of thing. So thank you.

01:05.44
keymedia
Not at all I give our listeners a little bit of a background into your career to date. Um, could you tell us just a little bit about but your work in the mortgage space on the types of mortgages that you most commonly deal with for listeners who might not be familiar with you.

01:18.94
Jason Sohl
Absolutely generally Speaking. Um I am exposed to all kinds of mortgages at any given time. However, my niche is the alternative and small commercial lending spaces I typically deal with the self-employed people with impaired credit and those that that fall outside of the. Traditional lending box boxes.

01:37.99
keymedia
Okay, excellent. Well I'm sure that it's been the same for you as most other mortgage professionals I commonly hear that 2020 and 21 since the outbreak of the pandemic have been 2 of the busiest years on records across the country in the market. It pes up in the case for you is it something that you've noticed yourself.

01:56.60
Jason Sohl
Well, there's a couple ways to define busy in 202021 there is a volume perspective and a perspective of time in my case, my volume has ah was steady and consistent year over year. However, from a time perspective to process some of these transactions was.

02:05.76
keymedia
Are.

02:15.99
Jason Sohl
More involved than pre twenty twenty and 2021 due to changes in the lending landscape and lenders evolving with the with the changes.

02:24.83
keymedia
And Jason is that something that you think is going to continue throughout the year I mean it's a really big question among brokers in the first couple of months of the of the year has been whether that kind of pace can continue what? what do you think is coming down the line.

02:40.31
Jason Sohl
So I think as restrictions ease in the coming days now despite the anticipated rate changes that we're all hearing about I think it will take some time to assess this particular aspect at some point there may be a slowdown. We have to remember though that there is a bottleneck ah bottleneck to work through which Covid provided.

03:05.21
keymedia
And do you see the same challenges on the the residential side as as the commercial or what are some of the main differentiators between those sectors.

03:13.67
Jason Sohl
Um, can we.

03:19.64
keymedia
Yeah, for sure.

03:30.40
keymedia
Actually if you if you want me to just to rephrase that question actually um I'll I'll go ahead because it it was kind of what we had for number 4 there. But um, yeah, let me let me just ask the question as ah as I've got it written. Um, if that works for you.

03:42.12
Jason Sohl
That's that's why I'm a little. Ah so I have it? yeah.

03:49.80
keymedia
Um, so on the commercial side. Um, what have been some of the biggest trends that you've noticed during the pandemic and throughout the past year has there been anything. That's kind of stood out for you on that front.

03:59.68
Jason Sohl
So there there was a tighter lending practices and even lenders that were exiting specific segments altogether now whether it's temporary or indefinitely that is anybody's guess and remains to be seen until further notice.

04:19.30
keymedia
And we talked a little bit a jasonn about restrictions imposed because of oomicron beginning to ease. How were you expecting the commercial sector to react to those. Um, do you think that there's likely to be a kind of ah a sudden surge in the market or is it likely to be more gradual or.

04:37.16
Jason Sohl
So like the residential side I can see the commercial sector holistically in the short run exploding because we did have that show stopppper or bottleneck happening with with omniron. So now we need time to play catch up however of the commercial that did survive.

04:37.63
keymedia
But are your thoughts on that front.

04:49.11
keymedia
Oh.

04:57.50
Jason Sohl
Or is surviving. This could also make or break ah be a make or break situation for them as consumers shifted their their conceptions.

04:59.91
keymedia
Are. Okay, and in terms of specific asset classes on the commercial side are there any that you're keeping an eye on for strong performance this year any that you think will maybe take um a while longer to recover or what are your thoughts on that front.

05:18.50
Jason Sohl
So I believe a land and development on the large commercial side. Let's take off as there's been pretty much. They've pretty much been at a standstill for the last two years the small and midcommercial segments as we open up more specifically the mixed use the residential commercial.

05:23.93
keymedia
Are.

05:38.27
Jason Sohl
May be popular as businesses start to gain traction again.

05:41.37
keymedia
I suppose ah on the commercial front. It's it's probably been a straight as couple years and that there you know different asset classes have have performed so differently. Um, so I suppose you would be hoping that for the rest of the year that there's kind of more of a steadiness across all sectors.

06:04.58
keymedia
I Know sorry I was just kind of I was just kind of adding on I guess to the to the the last question there. Um.

06:13.59
Jason Sohl
Can you repeat that that I'm assuming all this can be edited at some point.

06:16.30
keymedia
Oh yeah, absolutely yeah, we can. We can edit it for sure. No um I was just asking if um, if you know with performances across different asset classes being so uneven over the past year or two on the commercial site. Obviously the likes of you know hospitality have not performed as well. Um, would you be hoping that for the remainder of this year that the performance is more steady across each of the asset classes on the commercial side are.

06:42.99
Jason Sohl
I Would like to think that again, it still remains to be seen because we don't know what businesses went sideways or we do. We have an idea of what what to ask? Ah what? what industries went sideways. But then at the end of the day we need to also recognize how long it's gonna take.

06:54.44
keymedia
Are.

07:01.51
Jason Sohl
Take some of these but to recover now some of these businesses could take anywhere if if if they're aggressive or if they're not or the impacts. What the impacts did to to their bottom line did to them. It could take anywhere for some of these some of these individuals would come. So it could take two months or it could take really another two years so I would I would that's a very tricky question to answer without without knowing what went on specifically to to the.

07:22.76
keymedia
Are.

07:36.00
keymedia
And I wanted to ask you as well about the alternative front and some of the main themes that you noticed um last year whether that be on ah either the residential or the commercial side was there anything that really did I yeah.

07:49.63
Jason Sohl
Or yes, one of the main themes that that ah that I noticed was the rapid changes of vendor policies. So as the restrictions were imposed and and relaxed in some ah throughout throughout the timeline throughout the year um

07:56.28
keymedia
Are.

08:04.49
keymedia
Are.

08:07.53
Jason Sohl
Changes to how lenders assess the borrowers specifically those directly impacted again like you mentioned the hospitality industry was one of them. Retail sector is another and the entertainment related professions was also changing that the lenders had to mitigate their risks with now interest rates.

08:26.68
keymedia
Whoa.

08:27.34
Jason Sohl
As they go up as they already have been. Um, they're no longer the same. No no.

08:29.82
keymedia
A.

08:35.78
keymedia
Um, 10 hours

08:49.59
keymedia
Sorry I'm just taking a note of the times stampmp. Um do youmi day. Um, ask a question again and always um so I just wanted to ask on the alternative front as well. What some of the main themes that you noticed last year were either on the residential or commercial side I know you had mentioned earlier on about lendry guidelines tightening and things like that was that one of the big ones for you.

09:15.41
Jason Sohl
Ah, yes, 1 of the main themes that that I noticed was the rapid changes of the ledger policies. So as the restrictions that were imposed and relaxed throughout the year changes to how lenders assessed borrowers specifically.

09:18.87
keymedia
Are. Are.

09:34.20
Jason Sohl
Directly impacted and some of these some of these industries are the hospitality as we know the retail sectors and the entertainment fields. The lenders were changing their policies to help mitigate their own risks as well. So trying to keep up with that was it.

09:34.56
keymedia
Oh.

09:53.59
Jason Sohl
Ah challenge. But it wasn't impossible.

09:57.00
keymedia
And as we look ahead into next into the next few months or the rest of this year um I mean obviously it's so uncertain what's going to happen with the pandemic. We thought we were out of the woods and then o macron came along but if things are to continue at their current pace and if. Looks at though we may be exiting the the pandemic. Um, what do you see coming down the line for the alternative space in 2022 are there any trends that you think are going to develop or continue.

10:24.44
Jason Sohl
So I think there's going to be a catchup. We're going to be in catchup mode for the most part I do see some some innovative products and it it wouldn't surprise me if there are more innovative products to help counter What has been happening I think we will see more prime bar. We spill over into the alternative space for a couple.

10:28.80
keymedia
Are. Um.

10:43.35
Jason Sohl
Reasons 1 is being. They don't qualify on the prime side but on another side I have seen is sometimes the alternative side is less has less headaches for the borrower compared to the prime side.

10:56.75
keymedia
Okay, and ah obviously it's always one of the big themes really in the barcage industry but it seems that over the last month or 2 more than most the issue of interest rate increases has been just the number 1 topic across the entire industry. Um. The bank of Canada didn't raise their rits in January but it looks as though their next statement for the second in March is is going to see some interest rate increase. Um, what do you think the consequences of the had are going to be for the market I mean is it a cause for concern or is this something that was inevitable and. Was always gonna happen sooner rather than later.

11:36.86
Jason Sohl
So around this time last year interest rates were were just just shy of 2% on on the fixed side this time this at this point in time this year. The interest rates are just just slightly over 3

11:53.31
keymedia
Wow.

11:54.40
Jason Sohl
Ah, almost a point difference. Um, now this this can pose a couple challenges with with another quarter point increase on the fixed rate side it would it could potentially bump up the qualifying rate that we're all subjected to in qualifying forwards. So.

11:58.62
keymedia
1

12:08.77
keymedia
Are.

12:12.87
Jason Sohl
On the fix side if it if it increases another quarter point point three that will change the stress test all by itself which will put forwards into a little bit of a predicament if they are already stretched at the stress stress test line.

12:14.22
keymedia
Um.

12:28.96
keymedia
Are.

12:31.81
Jason Sohl
In terms of the variable rate mortgages if the bank of Canada decides to increase it's going to take it could take a gradual increase for the interest rates to be comparative to call it the fixed rate to mortgages today. However, again, there is no hard rule that the bank of Canada can.

12:52.47
Jason Sohl
At a quarter point intervals. We also have to recognize that inflation is at an all time high right now at a hovering in and around 5% so how the interest rates play out and how to slow this down is going to be an interesting point to see in the near future.

13:08.73
keymedia
Absolutely, it seems as though that's going to continue to be 1 of the the main topics throughout the year and the question on a lot of people's minds is really just how many interest rate increases are impending. Um, but for the next one that's due to come would you expect. The bank to kind of stay with that quarter point increase if they do raise rates at all.

13:28.88
Jason Sohl
Ah, from a personal so I can answer this personally or professionally.

13:39.60
Jason Sohl
Can you ask the question again I Probably just took to the professional bird.

13:39.20
keymedia
Whichever you'd prefer.

13:43.30
keymedia
Yeah, for sure and so 1 question that's been on people's minds I mean if ah, an interest rate increase from the bank is inevitable in their next announcement which is the start of March. Do you think that they will raise it by just a quarter point or what would be your projection for um. And of how steeply that rate will begin to rise.

14:04.41
Jason Sohl
I think that the interest rate increase if there is going to be 1 is probably going to start very small at a quarter point to set for for them for for the for the government to see how how the quarter point will.

14:23.26
Jason Sohl
Into the economy. That's that's my.

14:27.59
keymedia
Okay, all right? Well, it will be interesting to see for sure. Um, 1 thing before I let you go Jason is just that I know that we've spoken in the past about some of the kind of specifics of of of your role and um. Particularly for brokers who might not be accustomed to the commercial or alternative spaces I'm wondering if you have any actually just and just let me start that one again because the start of my questions didn't really make sense and 1 thing that I wanted to ask you just before I let you go is that for. Procresy might not be accustomed to either the commercial or the alternative spaces. Um, but want to get involved and don't know where to start have you any advice for what they need to keep in mind before they get involved or anything that should be top of mind for them as they go into either of those spaces.

15:17.12
Jason Sohl
Oh yes, of course so fundamental and basic education and knowledge in both areas are important but what is also important is the experience as it isn't always black and white planning adaptability being able to quickly maneuver staying on top of. Regulatory and lender changes are very key with either space I would recommend obtaining a highly skilled and patient mentor to help them along in their career.

15:44.59
keymedia
Okay, excellent. We'll look from our discussion that seems as though we're in for an interesting year ahead in both commercial and residential spheres so we will keep our eye on those as the air goes on I want to thank you for coming on today. Jasonson we're going to leave it there but really appreciated your insight today and I'm sure we'll talk.

16:03.77
Jason Sohl
Thank you very much for having me again Vergil I appreciate it.

16:04.37
keymedia
Again in the future.

16:09.41
keymedia
We're going to wrap it up there thanks to you for listening to today's podcast stay tuned for more great content from cnp in the coming weeks will be continuing to speak with industry experts about what's in store so we'll see you very soon. Awesome! Yeah I think that went the I think that went fine. Absolutely yeah, let me just ah, stop the recording here.

16:26.95
Jason Sohl
So I know I was you think that went fine I Hope so um.