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Andrew-Lo  “There is not digital strategy, only strategy in a digital world.”

Andrew Lo, COO at Kanetix Ltd., shared that maxim at last week’s MPC National Conference. His message: It’s time for brokers and lenders to stop thinking of customer experience online as being distinct from customer experience in general. With the net being embedded in most of our lives, “strategy” and “digital strategy” are virtually the same thing.
 
“I am sure mortgages are ripe for disruption,” Lo said at the event. The mortgage process is full of frustration, and the job of brokers and lenders is to “convert people from frustration to happiness.” Creative technology can help do that.
 
The Big 6 banks are finally waking up to this. I spoke with a high-level bank mortgage executive yesterday who told me the banks are now in a race to build out their online channels. Expect a number of online mortgage announcements in 2017 and 2018, she said.
 
Fortunately for brokers, banks are not in the lender choice business. They’ll pitch only their own products online, but they’ll noticeably streamline the application, mortgage status and document upload processes.
 
In any case, if you’re eager to improve your own online presence, here are a few nuggets from Lo’s talk:

  • Users of smartphones represent the biggest ocean of potential customers going forward. But you need a website built from the ground up for mobile, to engage people’s attention on dinky little cellphone screens. 
  • Realize that for every person shopping for mortgages on their smartphone, the majority will start to fill out an application on the phone and likely complete that application on their desktop. You need to tightly integrate your mobile and desktop experiences to allow for a smooth transition.
  • Lo suggests connecting your website to Google Analytics, which is free. Use Google’s data to design and optimize your online sales funnel. In other words, figure out how your consumers are using your website and remove all possible impediments (where they drop off, or leave your site). “Make enhancements to the user experience based on data, not opinion,” he urges.
  • Focus on soliciting online client reviews because few other efforts can enhance customer trust more. But be careful to nurture 5-star experiences, he warns. As soon as reviews drop below 4 stars (out of 5), no one seeing your reviews will come to your site.
  • Use A/B testing to determine which homepage (or landing page) better converts leads into applicants. Building two pages and tracking their metrics takes a fair amount of effort, but if you aren’t doing it, your biggest competitors are.

 

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If you live in Vancouver and were thinking of refinancing to 80% loan-to-value, you might want to accelerate those plans.

Perhaps you’ve seen this tipsy little chart of Vancouver average home prices. In the case of detached homes—which spark the biggest headlines and arguably contribute the most to market psychology—prices have just collapsed $294,000 (17%) in one month.

Vancouver Average Price

Source: rebgv.org

 

Now, Couver’s ever-optimistic home bulls contend that averages are skewed thanks to high-value sales. They urge us to concentrate on the HPI index, not average prices. Whatever.

All this author can say after 18 years of studying price charts is that this one is scarytown. It’s more than enough to make some skittish homeowners hit bids, at least in the short term.

Hence, the advice: If you need to tap your equity (refinance) to the tune of 80% loan-to-value, or get an 80% LTV credit line for future borrowing needs, you should be filling out your application as you read this.

When home prices do what they did last month, appraisers become more conservative. Anecdotally we’re already hearing about North Shore and West End/West Side appraisals coming in softer than expected. And lenders and insurers could also be fast to react, by tightening up internal underwriting criteria and cutting back loan sizes.

Now, lest anyone get the wrong idea, nobody reading this should run out and refinance for refinancing’s sake. This is solely an alert for prudent Vancouver owners who A) must refinance anyway, and B) plan to live in their home a long time. For those folks, waiting a few extra months to close could potentially result in their loan amount being cut back by the lender.

Of course, this discussion is academic if the GVA quickly rebounds. Stranger things have happened. In fact, in the back of my mind I almost wondered if Vancouver’s real estate board misplaced a decimal point when publishing that historic $294k print.

A stunning one-month move like that can scare the bejesus out of weak-handed homeowners. So, watch the number of new listings and expedite your refinances, Vancouverites…just to be safe.

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By Jackson Middleton, Special to CMT


Crank up sales FB

If you’re just getting started as a mortgage broker, I hope I’m not the first to tell you that this is one tough business. Success doesn’t come easy and it’s a long way to the rainbow’s pot of gold. 

Successful brokers are very well compensated, but they get successful only after years of hard work. While the potential income is considerable, if you lack the conviction to invest endless hours into growing your business, you might as well quit now. 

Marketing is one area where time (not necessarily money) is mandatory. Most new agents don’t come into the business with loads of cash to spend on marketing. And that might not be a bad thing.

Time vs. Money

Instead of spending big bucks on promotion, new agents can invest something just as valuable: time. Starting lean, on a shoestring budget, helps you learn two important skills:  1) what it takes to connect with people, and 2) what matters to them.

Secret #1 is to invest time in people. This type of “marketing” has the highest return on investment. The mortgage business is a people business and to generate opportunity you must provide value to everyone who could be a potential referral source—all of the time. 

Notice I didn’t say that your goal has to be to sell to every potential referral source. Providing value doesn’t have to entail mortgages.

Consumer survey 2The challenge with the mortgage business is that clients really only care about mortgages for 30 to 60 days every three to five years, and even then, what they actually care about is home ownership. The mortgage itself is simply a vehicle to that end.

Selling a mortgage is a long, hard road, one that is better left untravelled. Instead of “selling,” connect with people on what matters to them, build trust and develop relationships. This will lead to conversations, referrals and clients. I’m not saying you should hide what you do; just don’t expect people to care about what you do until you first have shown you care about them.

Putting Theory Into Practice

To show what this looks like in the real world, let me share a quick story about what worked well for me when I was a broker.

In 2011, when Twitter was still a place where it was socially acceptable to talk with strangers and marketers hadn’t yet ruined the platform (which is another topic altogether), I resolved to have three meaningful connections with people in my hometown Regina, SK (#YQR) on Twitter every day. I would do a daily search for the #YQR hashtag to see if anyone needed anything.

I came upon a Tweet that said, “I’m new to #YQR and I’m looking for a place to buy Italian syrups for my coffee #help.” So I replied, “Talk to Kyle at Ambassador, he will help you out for sure.” I attached a Google map, followed her account, she thanked me and that was that.

A couple of weeks later, I got a Tweet from her: “Hey @kiltedbroker, thanks for the advice, I went and saw Kyle, and got what I needed, appreciate it.” I responded with some sort of pleasantry, and gave her some space. Then the magic happened. Later that week she sent me a direct message: “My husband and I aren’t in a place to buy a house yet, but when we are, can you please sit down with us to look at our financing options?”

Six months later I closed the deal, which was, at that time, the biggest mortgage in my four-year career.

The Art of Communication

Thumbs upI didn’t get the above-mentioned deal because I tried to sell this person a mortgage. I didn’t reply with, “Welcome to #YQR, when you are ready to buy a home, I would love to help you with your financing.” I got the deal because I provided value with no strings attached.

She then checked me out online, read my Twitter bio (which said, “I’m wearing a kilt right now, I have consumed coffee today and I can help you with mortgage financing”), and decided to work with me—largely because I was nice enough to help her find coffee condiments.

Learning to communicate on social media was how I invested my time. I learned to go where the people are, I provided value to them, and it paid off consistently.

How will you invest your time? Where are your people? How will you provide benefits to them? These are good things to think about.

It doesn’t matter if the conversation is online or offline, with a potential client or a referral partner, with a friend on Facebook or a meeting of business owners at a BNI breakfast, the goal has to be to provide value to keep top of mind. Do this, and the opportunities will follow. You may not see an immediate reward but long-term gain is many times greater than a single mortgage transaction.

Once you’ve spent years investing in people, the deals will flow in. That’s when you’ll have real money to spend on marketing and advertising, and that is where this business gets fun. I hope you put in the work and reach that potential!


Jackson headshotJackson Middleton, a.k.a. the @kiltedbroker, spent seven years as a mortgage broker before founding KiltedMedia.ca, a content marketing and web design company that works exclusively with Canadian mortgage professionals. He is wearing a kilt right now, has consumed coffee today, and lives in a school on Vancouver Island with his wife and four kids.

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A mortgage broker’s job comes with its share of uncomfortable moments. Telling a client that you can’t provide them with the appraisal they just paid for is one of them.

It’s an issue that comes up time and again, but one that’s frequently misunderstood. Appraisers and brokers cannot simply hand over appraisals to clients, despite the client being charged for them. Here’s why.

“It’s actually a fairly simple answer to be honest with you,” says Keith Lancastle, Chief Executive Officer of the Appraisal Institute of Canada (AIC), whose 5,000 members make up 80 percent of certified appraisers in Canada. “It’s one of those things where our members’ obligation is first and foremost to his or her client,” he said, and the “client” is almost always the lender, whose guidelines the appraisal is prepared under.

“If the [lender] wants to share a copy of the appraisal with the prospective homeowner that’s fine, but the appraiser cannot provide it because the [borrower] is not their client.”

Lancastle says it’s an issue that triggers ongoing inquiries to the AIC. Prospective homeowners are routinely trying to get their hands on a report, he says. But the association’s response is generally not what people want to hear: “It’s up to the member’s client if they wish to share the report with someone else.”

Aside from the fact that the lender is the appraiser’s client and therefore retains ownership of the report, Lancastle says there’s another reason appraisal reports aren’t freely distributed. “More often than not, lenders are reticent to give prospective homeowners a copy of an appraisal report because they could…[shop] it around” with other lenders.

Industry association Mortgage Professionals Canada notes that appraisal costs are like any other fees paid for by the client for the benefit of the lender. Other such fees include mortgage default insurance and title insurance.

“The expectation needs to be set with the client that the appraisal required by the lender is a non-refundable fee,” said Renee Dadswell, Manager, Professional Development at Mortgage Professionals Canada. “If the mortgage does not fund, the fee must still be paid, which is why it is often charged upfront to the client. Some brokers will negotiate with a client to refund this fee once the mortgage closes. In other cases, the lender may reimburse for the appraisal–once the mortgage funds.”

If a mortgage broker is directly asked by the client for a copy of the appraisal report, Mortgage Professionals Canada recommends seeking the lender’s approval prior to releasing the information to the borrower.

“But in order for that appraisal to be used for any other financing purpose, there needs to be more than just permission from the lender,” notes Jennie Hodgson, Vice President, Education. “The appraiser must agree and prepare a letter of transmittal, an appraisal update or, in some cases, a whole new appraisal.”

She adds that she is not aware of any lenders taking legal steps with a broker or brokerage for an appraisal being released without the lender’s consent. However, brokers should advise borrowers that the appraisal, if provided, is for information purposes only and cannot be used for financing purposes with another lender.

Providing appraisals to other parties without transmittal letters can even open brokers up to legal liability. If a broker gives a private lender an appraisal commissioned by another lender, for example, and the property goes into default and is liquidated for less than the appraisal’s value, Hodgson says it’s not unthinkable that the lender might “launch legal action against multiple parties, including the broker.”


Parting Note: While a lender is not necessarily obligated to release the full appraisal to the borrower, some of the information in the appraisal is the borrower’s personal property, and accessible to them under PIPEDA legislation. More on that.

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Our recent story on changeovers in the benchmark 5-year bond sparked some good questions about how and when the benchmark changes. As noted in that previous story, when the market rolls over to a new benchmark bond, it can play havoc with bond yield charts (which many mortgage pros watch for clues on rate direction).

Here are some related FAQs on bond issuances and benchmarks:

Question: How often does the Bank of Canada (BoC) auction off new 5-year government bonds?
Answer: The Bank of Canada currently auctions two new 5-year bonds per year. Thereafter, each of those bonds is re-opened (re-auctioned) two to four more times. More info

Question: Does the benchmark change because the Bank of Canada designates a new benchmark? Or does the market decide on the official benchmark?
Answer: The market decides. “Benchmark bonds are not determined by the Bank of Canada,” says the BoC. “Benchmark bonds are market convention.”

Question: When does the benchmark change for the 5-year bond?
Answer: “The benchmark bond usually changes after the last re-opening of the new bond,” says the Bank of Canada. At that point, the new bond takes over as benchmark and becomes the bond that you see quoted by the media, displayed in charts and so on. The old bond sticks around, but it becomes less and less traded as time goes on.

It’s sometimes hard to know when the benchmark will change because “the number of re-openings is not pre-announced,” says the BoC. “The decision on the number of re-opening depends on multiple factors, like borrowing need, benchmark target size and market condition.”

If you’re interested, here’s a list of the benchmark bonds and the dates they came into being: http://www.bankofcanada.ca/stats/assets/pdf/bench_CDN.pdf. You can use this link to confirm whenever Canada has switched to a new benchmark. Our thanks to the Bank of Canada for this information.

Collateral Pitfalls Disclosed

Collateral-MortgageBanks are improving their disclosures on the drawbacks of collateral charge mortgages.

Effective January 31, 2015, the Department of Finance says banks will start warning individual consumers about the implications of collateral charge mortgages “before entering into the mortgage loan agreement.”

The DoF says “consumers require sufficient information in order to more clearly understand the costs and consequences of a collateral charge mortgage relative to a conventional mortgage.”


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A DIY Leveraged Investing Option

Almost three years after Fraser Smith passed on, the financial technique he popularized (the Smith Manoeuvre) is still actively used. One of the most common questions prospective Smith Manoeuvre users have is, “What is the best mortgage to do it with?”

That answer hinges on where you trade, the mortgage rate and terms you receive, and who advises you on your investments, among other things. But if you’re a self-directed investor, one solution stands out: the Scotiabank STEP.


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Analyzing BMO’s Go-Fixed Advice

BMOFixed rates are now “superior,” said BMO in this report released Thursday.

“While we have in the past supported going variable,” circumstances now “favour…locking in…”

That’s been BMO’s rally cry since 2010 when it proclaimed “Time to Say Goodbye…to Variable.” In retrospect, that advice would have cost mortgagors handsomely. But BMO was far from alone in that call.

Few anticipated the economy would drag along the bottom, depressing rates for five years after the great recession. People are now becoming desensitized to statements like “We may not see such low fixed rates again any time soon” (BMO’s latest prognostication).

Sooner or later, economists will be right on fixed rates, partly for the reasons BMO mentions (including higher inflation). But there are things about BMO’s report that people need to know about.


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