There have been plenty of twists and turns in Canada’s mortgage landscape this year with interest rates on the up and the housing market cooling from the red-hot activity of recent years. Against that backdrop, what are the country’s leading lenders keeping top of mind in the current climate? We spoke with high-profile executives from MERIX Financial, Community Trust and Marathon Mortgage to hear their thoughts.
Fergal: [00:00:28] Hello again and thanks for joining us on another edition of CMP TV. I'm Fergal McAlinden, CMP'S news editor. It's been a dramatic year in Canada's mortgage market, to say the least. With the record low borrowing rates of recent times coming to an end and sales activity dropping significantly from its February peak. On today's show, we've gathered executives from three of Canada's leading lenders to hear their thoughts on the market's trajectory so far this year. What's coming down the line and anything that they're keeping top of mind in the present climate for our top lenders power panel. I'm very pleased to welcome David Greenwood, Executive Vice President for National Credit Operations at Merix Financial. Grant Armstrong, director of National Sales and Lending a community Trust. And Jason Kennedy, Vice President of Residential Mortgages at Marathon Mortgage. My thanks to you all for joining me today. How are things?
Jason: [00:01:18] Thank you.
David: [00:01:18] Fantastic. Busy.
Grant: [00:01:20] Happy to be here.
Fergal: [00:01:22] Well, it's great to have you all here. David, I thought I would start with you. And our first question is about what is a leading lender in Canada? Your company is keeping top of mind in the current climate.
David: [00:01:32] I think what we're keeping top of mind, given this climate, is really looking at innovative innovation and flexibility in our solutions that we're offering our customers. There's a lot of overlaps in the types of products that are in the marketplace right now. And at our merits, we're really looking to provide solutions that offer customers flexibility. For example, this year we launched a cashback mortgage not only on our fixed rate products but on our variable rate products as well, which a lot of customers found found needed. Also probably more prevalent right now is our offering, which which really is helping a lot of customers right now, specifically in the pre sale market to qualify. Given we can we can qualify on a contract rate as well as we have products with extended amortization. And I think that's probably what's helping prospective buyers right now to get into the home that they've they've purchased and have been waiting to get into for sure.
Fergal: [00:02:24] Thanks for that, David. And Grant, is there anything in particular that Community Trust has been keeping top of mind at present?
Grant: [00:02:30] Yeah, lots of great things that we've been focusing on. So this year we looked at a couple of our programs. We tweaked it to help Canadians. We offered our extended amortization program this year. So up to 35 year amortization, we enhance our pretty already incredible investment program going up to 80% on that and helping Canadians invest in real estate. But we're really taking an extra effort to pay attention to our clients. What are their real needs, how do they earn their money and what what's what do they actually need from their lender? So is it communication solutions? And then we're also expanding that over to our broker partners. Our broker partners, incredibly important. We've expanded our mortgage advisory team so that there's a lot more accessibility. We're open from 8 a.m. to 8 p.m. in Ontario and across the country. So we're able to help brokers the way they want to be helped when they want it. And that's we're keeping top of mind, is making sure giving as much information out, being accessible, creative and innovative solutions.
Fergal: [00:03:29] Okay, I'll good things. Thanks, Grant. Jason, what about over at Marathon? Anything in particular that you've been prioritizing?
Jason: [00:03:36] You know, a great question, great answers from my colleagues here. Marathon's clear aim here was to be offering competitive price mortgages and while delivering exceptional services. We don't have a broad range of products at the current moment, but we're looking to expand into different things as this coming New Year launches. And, you know, the clear aim right now is really servicing our borrowers, our customers, our broker partners, really ensuring that we give that top notch service level good communication from the underwriting perspective. We've got underwriters launched nationally now, so we've covered coast to coast in Canada. And really one thing that we're really focusing on coming into is just the need of the borrower and ensuring that the affordability is there for them and they're in the right products when they come in to Marathon.
Fergal: [00:04:18] Yeah, for sure. One thing that Jason mentioned there was underwriting and obviously at the start of the show we talked about how much the market has actually changed over the past few months. David, I'm just wondering if anything has actually changed in your approach to underwriting so far this year?
David: [00:04:33] Actually, this year we've done a major overhaul of our underwriting policies and procedures are really looking at opportunities and keeping common sense underwriting in mind. We really focus on our credit center underwriters and our personal account managers being advice based and offering solutions and really working with our with our broker partners to ensure that we have the solution or are offering an alternative that fits. Just this year alone and some of the things that we've done, we've expanded our rental program, reducing our rental premiums and increasing our loan to value. We've introduced AVMs, offer the ability for brokers to choose their own appraisers, and we continue to work on new solutions. Of course, given the market conditions today, we are taking a prudent approach and we don't we don't just want to get the customer to get into the home, but a lot of customers stay in that home. So we're making sure as we underwrite, we're looking at the sustainability of the income and employment and having those conversations with our broker partners to make sure we're in the right solution as well as obviously the fluctuations in the housing market. The housing crisis.
Fergal: [00:05:42] Yeah, for sure. Grant, has it been anything from your side of things where underwriting has changed or any new developments there?
Grant: [00:05:49] I'm very proud of our underwriter, so I don't want to think we changed things materially. We've always done a great job of understanding our Canadians borrowing needs, but we've looked a little bit more to get to know them better. So again, much better, more questions that we ask the clients and their partners and the brokers understand what they're doing with the money, what they understand that they're doing for their business. But our approach has always been to understand the transaction. Understandable. Or understand the home. Maybe that's the one area that's changed a little bit over the last 12 months, a little bit more due diligence, a little deeper. We've done a fantastic job, but we love information, We love data. So we had a lot of technology coming into our processes and that's helped us really get to know what's going on in that transaction.
Fergal: [00:06:37] Okay. Excellent. And Jason, I'll give you the last word on this one. Is there anything that's changed about your own approach to underwriting over the past few months?
Jason: [00:06:44] Not in the past few months. Obviously. Marathon we pride ourselves in pretty good standards within our policies and procedures. There's nothing that's really been outcome or different from a marketplace perspective. One thing that we just like to pride ourselves on is is the turnaround time for our partners and ensuring again, as David alluded to, making sure that the borrower is in the right product that's being offered to them when they're entertaining it. We as a lender, we're in the market for lending money and we're not really in the market for taking back home. So really it's making sure that borrowers placed in the proper product and then they have the sustainability to stay in that home. And really just building our partnerships through our broker care for sure.
Fergal: [00:07:23] And obviously we have a lot of viewers who are brokers and one of the most fundamental aspects of their job when it comes to dealing with lenders is compensation. Grant, maybe I'll go with you for this one from the start. How important is compensation and community trust approach to the mortgage broker community?
Grant: [00:07:39] So our brokers are our partners. So compensation is important and we want to recognize that. But it's also about a holistic compensation program. It's not just here's a transaction, here's revenue, There's incentive programs. Our bearer start program, which we're very proud of, motivates and in sense brokers that are true partners to us, there's volume, there's efficiency. So we believe it's important for our partners to have clear transparency on the commission program, but also to make sure that they're rewarded for being a great partner with us. So for us, I think it's very important and we've gotten a lot of feedback from our broker partners, are very happy with our compensation program, the transparency of the compensation program, the complexity of it. So we're going to keep doing what we're doing today with that.
Fergal: [00:08:23] Okay. Excellent. And David, over at Merix, what's important from a compensation standpoint?
David: [00:08:27] Compensation is extremely important to Merix. We partner with our brokers and we really want to offer them. We really want to offer them choice and income diversification it's a pillar here at Merix. So we offer two compensation models. We offer a focus on building long term value, which of course is unique to the offer, and then also maximizing upfront earnings. So we're the only lender offering that choice of compensation and the fact that you can choose on a daily basis. And we really find that our our loyal, loyal customers really are looking at that Merix offer as an opportunity to look towards the future and help them financially plan for the future as well.
Fergal: [00:09:10] All right. Nice. Jason, how about for Marathon what's been happening there from a compensation standpoint or what are you keeping top of mind.
Jason: [00:09:17] And of course when it comes into our business right our main factor and driver is the broker partner and it is that it's just that as a partner we have marathon. We look at every broker as being a partner and helping build our organization. So keeping compensation top of mind, it is very important to us to ensure that they're being paid, paid well and paid with paid reasonably. But we also like to keep in mind when it comes in to fair compensation models with exceptional service and the competitive rates that Marathon offers. And really that's what we help to drive with the business as we share that earnings with our broker partners.
Fergal: [00:09:51] And Jason, let me stay with you for this one. I talk with brokers all the time, and for them the market is cooled a little bit. Activity is not as high as it once was. Interest rates are going up. Maybe clients have different concerns than they did last year. Is there anything that you're encouraging brokers to keep top of mind in the current climate or anything that they should be focusing on?
Jason: [00:10:11] It's a great question, right? And as we're all evolving to this rate market that's currently happening within Canada, you know, there's a few things for the broker partners that maybe I just share as a personal opinion, right? To be a matter of focus, focus on educating the consumer to the products that they're applying to ensure that they're applying into the right product, know that they're coming into the proper home, maybe not necessarily the product or rate driven, but ensure that they have that affordability model available to them. So it's not necessarily as we talk about valuations in Canada and how they've increased substantially over the past couple of years to be a matter of ensure that borrowers are entering the proper home that way that they're able to sustain and stay in their home, because ultimately that's the goal of us all, is to keep our borrowers, keep our consumers into their home. Those really are the only things that I could really think drive that. And again, it's a matter of an opinion, but we we rely on the expertise of our broker partners to the market to educate those borrowers when they're coming in to Marathon.
Fergal: [00:11:08] Yeah, for sure. And David, is there anything that you would add to that in terms of what brokers should be focusing on at present?
David: [00:11:13] Yeah, I agree with Jason. I think right now it's really not always about. It's really it's assessing cash flow in the right solution for the customer and really making sure that they they're stepping into a home that they can comfortably afford. From a broker perspective, I would say it's really looking at where your income is coming from and making sure that you have you have a good plan for income diversification as well and and a breadth of lenders that you can rely on as your top go to's that can provide solutions for your customers. I think that's an important piece.
Fergal: [00:11:49] Yeah, absolutely. Grant, any other thoughts on what brokers should be getting top of mind?
Grant: [00:11:54] I think there's a couple of points is, remember the last couple of years where anomaly the volume, the transactions, the height of the market, the speed of applications, they weren't the normal business. They were a different way of doing business. So brokers have to focus that the markets are returned a bit more of a normality. While they may be different, more calm than they were 12, 18 months ago, they're still pretty strong markets out there comparatively to the 2016 through 2019 years. So focus on that. But the biggest advice I'll give to anybody is focus on what everybody does really well, and that's trusted advice. Last couple of years, everyone ran around, got to get application turnaround times, CEOs got to get all those applications in with it being a little bit more calm. Now there's an opportunity to get back to really what Canadians want, which is trusted advice from a valuable partner. And that's what the brokers need to focus on. That is the number one value proposition. It's why brokers get clients repeat business. It's why they come back all the time. They refer their friends or families. Talking to a broker this week who has done a client's mortgage, their kid's mortgage, and now they've just done their grandkids mortgage that age them. But that also saw that they built a long term relationship. And they keep saying why? It's because the trusted advice they give in that family over the years to help them become successful. So that's the number one thing they need to focus on.
Fergal: [00:13:21] Okay, I'll get advice from each of you. My last question here is one that I'm always interested from hearing from lenders, and that's regulatory issues. Whether there's anything that you think at the moment is maybe hindering things, maybe could if it was reformed, it can make things a little bit easier for the market. David, maybe we'll start with you on that one. Anything from a regulatory standpoint that you would like to see changed?
David: [00:13:45] Absolutely. The stress test, I think I'd like to see some changes to the stress test in a lower rate market. I think it served its purpose. I think in today's market it's a bit punitive and it's probably something that I know insurers are lobbying for. Also the cap, I think the million dollar cap in our major urban markets, I think that million dollar cap, it's time to revisit that million dollar cap for insured and insurable. And I think that would really help the help to continue to move forward.
Fergal: [00:14:15] Is that something that you would agree with, Jason, in terms of what needs to be reformed or anything else that comes to mind for you?
Jason: [00:14:20] Yeah, no, I do agree with the with remarks there by David. Right. When we're talking about the cap in the insurable market, especially in the Greater Toronto area and Greater Vancouver area, those markets have been extremely hot. And to purchase a home under $1,000,000 is hard sought. Now, you know, there's maybe a couple of other things, too, and it's not a matter of reinventing the wheel, but there's there's areas in which case that we could look to revert back to that were once in place based on insurer guidelines. It would be a matter of reverting into maybe a standard depending on Beacon Square. That's something that I would love to see be implemented back into the into the marketplace and see your credit score greater than 680 waive those requirements. You have borrowers that are relying and showing that they've proven the ability to repay their debts on time. Why penalize them any further in affordable market? And then maybe another one to boot there, as well as reverting back if done the proper way, is extended amortization on the insurable product. Again, there's ways that this could be implemented that could be beneficial to the market and still keep a viable strong product there and minimal defaults. So those would be the opinions that I would share to hopefully see something implemented in that sense.
Fergal: [00:15:28] Yeah, for sure. I understand that you mentioned amortization because that's one that I'm hearing about a lot, especially over the past couple of weeks. Grant, will maybe give you the last word on this one. Anything from a regulatory standpoint that you're looking to see changes?
Grant: [00:15:40] I'm going to probably be a little different. I'm not looking for any specific regulatory change right now. I think the markets have been so unique that our partner, the regulator has got some advice. They listen to the the organizations and the associations across the country as well to get that feedback. My one, and it's not necessarily at a federal regulator, but how do we help Canadians build more homes? How do we make affordable housing through building your own home? That seems to be one of the driving forces is just that access to the number of homes in the marketplace. So what can we do as organizations? What can the government do? The regulators due to help make that easier so that if I want to build a house in a great area like Prince Edward County, I can make it easy. You can make it simple and help Canadians build that dream home and live where they want to live.
Fergal: [00:16:27] Okay. Well, it's been such an interesting year in Canada's mortgage space to date. It's obviously not over yet, but we'll leave it there for today. I'd like to thank each of you for coming on and sharing your thoughts. Your insights are much appreciated. Great to talk to you all. And I'm sure we'll speak again soon.
David: [00:16:42] Thank you.
Jason: [00:16:43] Thank you.
Fergal: [00:16:44] That just about does it for today's edition of CMP TV. I'd like to once again thank Merix Financial, Community Trust and Marathon Mortgage for joining us on today's show. Thanks again to you for watching. We'll see you next time on CMP TV.