September 14 will be here before you know it
On September 14, changes will be coming to the way brokers and lenders request and receive credit information about Canadian consumers from Equifax: Lenders will need an identifying Member Number in order to continue receiving files from brokers through the industry’s connector platforms, while brokers are being asked to sign an amendment to their contracts with the company that will limit them to sharing Equifax information, as well as the FICO 8 score, with credentialed lenders only.
As arguably the Canadian mortgage industry’s most important tech firm, Filogix has been instrumental in preparing brokers and lenders for the coming changes. Shortly after a Filogix/Equifax webinar about the upcoming changes on June 29, Mortgage Broker News reached out Ryan Spence, manager of Filogix’s broker channel, to get a sense of how brokerages and lenders are progressing in their readiness for September 14.
This interview has been edited for length and clarity.
Mortgage Broker News: Who’s going to benefit from the changes Equifax is making around brokers’ and lenders’ access to Canadian credit information?
Ryan Spence: In large part, when we look at the nature of where the industry’s going and the way society expects information to be handled – specifically private information, consumer information – the natural progression is toward a secure, compliant, transparent transaction, so anything that provides opportunity for the consumer to know what’s happening with their information is a good thing. It’s certainly beneficial to the consumer to know who’s seeing their information and where it’s being sent.
MBN: What has the attitude been among brokers and broker/owners who have been reaching out and asking Filogix for advice? Are they anxious? Are they happy about the changes? What’s your read on the sentiment out there?
RS: Especially as a brokerage that has regulatory and privacy rules governing them, they’re happy to see changes that do make things secure, transparent and compliant. Anything that allows them to understand more of what’s happening in their brokerages is a good thing.
Most brokerages do these things as a matter of course. They’re mortgage professionals – they have an inherent interest in making sure they have good data handling practices. Many of these changes, I don’t think, are really a concern for them. They just want to understand how they apply the changes and how they adjust their business day-to-day.
In some cases, they find they don’t have to make any adjustments at all because they’re already doing these things. They are really good brokerages that have these secure processes and handle consumer information well today.
MBN: Have you seen the sentiment toward the changes evolving, or has it generally been positive since the changes were announced?
RS: I would say it’s evolving as people understand more. Anytime there’s a change, I think your natural reaction is to be a bit defensive, a bit unsure – ‘This may affect me negatively.’ But as more information comes out and you can understand the process of how it might impact your specific scenario, you come to the realization that, ‘Oh, that’s actually not too bad.’
So the conversations we have typically are brokerages saying, ‘Alright, I think I understand what’s happening,’ or ‘I’m not really sure in understand. Can you walk me through it?’ And when you walk through their scenario, they really do see that [the changes] make sense and that this is really a positive change to the industry as a whole.
MBN: What were some of the worries right off the bat? What were brokers concerned most about?
RS: I think one of the concerns is their transactional efficiency, like ‘How do I do my transaction?’ If you’re not understanding the fundamental reason for the change, it seems a bit scarier than it actually is.
It seems like, because there are a lot of things happening simultaneously, that people tend to get overwhelmed by the total tonnage of things happening. We’ve got COVID, we’ve got changes Equifax are enforcing, there’s shifting in consumer perception on how you should handle consumer information. All these things taken collectively are pretty big, but if you take them one thread at a time and dive down into some of the finer details, the individual threads aren’t so scary.
MBN: What do mortgage professionals actually need to do to be compliant with the new Equifax requirements?
RS: When we think of mortgage professionals, there are a few different buckets. I might be a broker, I might be a lender, I might be both. So depending on where you sit, there’s going to be a few different answers. And there’s just one thing to do, but several things in conjunction.
Whether I’m a broker or I’m a lender, I need to contact Equifax and update my agreement or get the things done with Equifax that I need to do. If I’m a broker – contact Equifax and get the new agreements in place. If I’m a lender, contact Equifax and either update my agreement and become credentialed or become a new recognized lender within the Equifax world and become credentialed that way. That allows them to see the bureau.
Because we’re looking now at having these bureaus sent securely, they also need to be able to get the bureau. They have to have some tool that allows them to connect to the network, the Filogix network as an example, to a connector system that will allow them to receive that bureau securely.
There are a number of vendors that supply technology to the private lending space. You pick the tool that works best for you. Maybe it’s a tool you’re already using, maybe it’s a new tool you use all the time. Ultimately, becoming part of that connecting system to the marketplace allows you to receive those bureaus as well. You’re both allowed to receive them and able to receive them.
From a brokerage point of view, if they have their stuff in place, if lenders have their stuff in place, the transaction happens as it does today, just through a secure system.
MBN: Is it as simple as contacting Equifax and filling out some forms?
RS: In some cases. If you’re an existing Equifax client, it’s fairly easy because they know who you are and they’ve vetted you previously. If you’re a new lender and Equifax doesn’t know who you are, then you contact Equifax and there’s a slightly more robust process.
But ultimately, you’re right. It’s an application process that involves forms and paperwork and answering questions on the Equifax side to have that access.
MBN: What is Filogix’s role in all of this? For people not familiar with the concept, what is a ‘connector’?
RS: Maybe think of the Filogix marketplace as the ecosystem of the industry, where all sorts of brokers and lenders and technology providers all connect to ultimately be part of that transaction.
It's a bunch of interconnected webs that allow communication from the origination side to the lender’s or funder’s side, and in the middle of that marketplace interact with other services like credit bureaus or contact management or payroll systems. As they move through the marketplace, all the bits and pieces that make up the transaction become integrated into that flow, if you like.
MBN: Kind of like the dark matter that holds the universe together?
RS: It’s a little bit like that – all the various integrations and links that connect all the various systems together that make whoever you are in the ecosystem of the transaction able to get the things you need to do in order to fill the roll you’re responsible for in that ecosystem.
MBN: At the end of the Filogix/Equifax presentation on June 29, there was a fairly active Q&A session. What are some of the most common questions you have been hearing from Canadian mortgage professionals who might still be anxious about the changes? What can they do to mitigate their concerns?
RS: There are two primary ones. They typically both come from brokers, but one is a broker-lender hybrid question, if you like.
One of the things that brokers are concerned about is, historically, especially on the private lending side, they just printed and emailed applications and credit private bureaus. That ended a little while ago with Equifax updating their terms and conditions to look for secure transmission rather than insecure.
Brokers are saying, ‘How do I do the thing tomorrow that I used to do yesterday? How do I get to my lenders and how do I act?’ In the Expert world, there aren’t any changes at a high level. It’s really what you do with them after the fact that’s that key bit.
One of the questions on the call was, ‘Does this mean I can’t read the credit bureau?’ And of course the answer’s no. You have to be able to read a credit bureau to do your job. You can still obtain the credit bureau, you can still read the credit bureau on-screen. It’s just what you do with that bureau is your responsibility.
At the same time, a lot of private lenders are saying, ‘I used to receive applications by email. What do I do now?” Again, the same basic answer is: You do the same thing that every lender wants to do. If you want to be a part of that secure transaction, you find an appropriate tool that gets you there.
From a regulatory point of view, a regulator doesn’t really care who the end lender on a file is. Whether it’s a big financial institution or a small individual investor lender, they expect the brokerage and the agent to handle that consumer’s information the same. They just want to make sure the transaction follows the same process.
MBN: How would you rate the industry’s readiness for September 14?
RS: In the last number of months, there’s certainly been a lot of work done by private lenders, and third-party tools as well, to ensure that people do know they have opportunities, and what those opportunities are. In our system, we’ve added 70 or 80 new private lenders over the past few months. Those lenders have gone out and reviewed the tools that are available, they’ve picked the tools that work for them, and they’ve done the work to be registered with Equifax, so they’ve prepared themselves for whatever changes are coming up.
Brokers are asking their lenders, ‘Are you ready? How do I do this tomorrow?” And for the most part, as we move forward, more and more people are going, ‘I am ready now.’
MBN: Is there anything else brokers and lenders need to know?
RS: The big thing is to make sure that brokers and lenders that haven’t reached out and still have questions make those calls now rather than waiting until the last minute. Some of these changes may take a little bit of paperwork, and that paperwork may not happen overnight. Be prepared for the change well in advance of the change actually happening.