Mortgage Rates & Mortgage Broker News in Canada

CIBC IRD Penalty Case Update

Here’s the latest on the CIBC IRD penalty class action:

• CIBC reportedly just appointed its defence counsel in Vancouver.
• The lead lawyer fighting CIBC (Kieran Bridge) also sued Coast Capital Savings for ambiguous IRD contract language and for overcharging on mortgage penalties. Coast won the penalty portion of that case on appeal. It was a legal battle that spanned a number of years.

Broker Market Share—Now and Onward

In Canada, mortgage broker market share began at less than 1% in the 1980s, grew to 14% in the 90s, and peaked at 35% in 2006.

It has now slid to 22%, according to Yousry Bissada.

Yousry, who presented at last week’s Axiom Leadership Summit, is one of the most accomplished executives in the mortgage business. He’s held senior positions at Filogix, FirstLine, Paradigm Quest, Canadiana, and TD Canada Trust. His presentation was a fascinating overview of our industry.

Below, we’ve compiled a few of Yousry’s main points about the competition between mortgage brokers and bank mortgage specialists…

Less Broker in Your Broker

“There are lenders that are taking the brokering out of brokering” — IMBA President Albert Collu, via CMP

That line is symbolic of what’s happening in our business.

The face of mortgage brokering is changing. Lender policies meant to drive efficiencies are impairing brokers from doing their jobs.

This is no more evident than with volume minimums. More and more, lenders are electing to cut off brokers who don’t send them a minimum volume of business (such as one deal a quarter, $2.5-$5.0 million per year, etc.).

Lenders do this because they don’t want to expend limited resources on non-producing brokers. On the face of it, it makes sense. But it’s having undesirable effects.

2011 CRE Investor Forum

For those into real estate investing, Canadian Real Estate (CRE) is holding its West Coast Investor forum November 12 & 13 at the beautiful Vancouver Convention Centre.

The two-day conference has more than 30 prominent real estate speakers to learn from and network with, as well as a real estate expo and TV personalities from HGTV and W Networks. More info…

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For Brokers: There’s also a mortgage broker workshop covering Alt-A/non-prime lending, debt repair, private lending, and social media marketing. It costs $79 (an early bird discount until Sunday) and includes six AMP credits. More info…

30 Days Till the CAAMP Mortgage Forum

Canada’s biggest mortgage convention is a month away.

The CAAMP Mortgage Forum runs Nov. 20-22 in Toronto.

This year’s speakers include NFL legend Terry Bradshaw, CBC’s Amanda Lang, marketing sage Seth Godin, and Shark Tank’s Barbara Corcoran, among others.

Here’s the schedule. New this year:

Class Action Lawsuit Filed Against CIBC Mortgages on Prepayment Penalties

Consumers hate mortgage prepayment penalties, largely because they don’t understand them.

Now, there is about to be a high-profile challenge of how mortgage penalties are calculated.

CIBC Mortgages Inc., a subsidiary of CIBC bank, has just been named the subject of a pending class action lawsuit.

The intended suit claims that CIBC improperly calculated penalties for customers who broke their mortgages from 2005 to date.

The claim alleges that:

“CIBC applied terms and conditions to certain mortgage contracts to allow it unfettered discretion for calculation of mortgage prepayment penalties.”

“…the quantification of prepayment penalties applied by CIBC are in breach of the mortgage contracts.”

Interprovincial Mortgage Brokers

The Internet has made doing business possible across the farthest reaches of the globe. It’s not surprising then, that technology is fostering mortgage brokering across provincial lines.

More and more, we see out-of-province brokers advertising and quoting rates in other provinces. This is making the mortgage market more price-efficient and lowering costs for consumers.

While some brokers may resist this development (and disdain far-away brokers who compete in their vicinity), interprovincial brokering is here to stay and it’s a trend that’s growing.

Steve Jobs

Apple’s Steve Jobs, who died Wednesday, impacted hundreds of millions of lives in almost every industry, including Canada’s mortgage industry.

One small example was how Apple computers automated mortgage processing. Prior to the mid-80’s, brokers generally took mortgage applications by hand. Brokers would then often manually retype an application before faxing it to a lender.

“In 1985, the first application system (linked directly to lenders), was developed solely on an Apple platform,” say Bruce Davison, one of the original Mortgage Centre owners.

Xceed Back in Broker Channel

Xceed issued a press release Friday about its new RRSP mortgage (link). More interesting, however, was the line at the end of the release, which read:  “This marks the return of XCEED to the mortgage broker channel.”

Xceed has been selling mortgages through its “internal mortgage sales team” since January, when it abruptly pulled out of the broker market.

Now, a “select group” of brokers (which it calls “Friends of XCEED”) will again have the opportunity to do business with it.

Meridian Credit Union. A Quick Take

Meridian is the largest credit union in Ontario with over $8 billion in assets. After it acquired Desjardins in March, it redoubled its push in the mortgage broker channel. Since then, more and more brokers have begun noticing its competitive offerings.

One of Meridian’s biggest claims to fame is its lending niches. It wants to be viewed as a genuinely “common-sense” lender. Lest you be a broker jaded by that term (“common-sense lending”), have a look at some of Meridian’s products below. Its mortgages fill voids that many lenders consider either “higher risk” or suitable for branch-only products.

OMAC and CMAC Join TMG

OMAC Mortgages, a longstanding regional mortgage brokerage firm, has formed an alliance with The Mortgage Group (TMG).

OMAC operates mostly in Ontario with about two dozen storefronts, plus three more in Alberta under the CMAC Mortgages name. OMAC has been around since 1993 and it’s been a steadfast independent ever since.

Ron Swift, Pacific Mortgage Group's New CEO

Think of big free agency moves in recent sports history: Nash to the Suns, Ramirez to the Red Sox, Shaq to the Lakers, Maddux to the Braves.

Pacific Mortgage Group Inc. (Pacific) just pulled off the equivalent in the lender industry, with surprise news that it has signed industry heavyweight Ron Swift from MCAP.

Brokers Rate Lenders

Canadian Mortgage Professional (CMP) polled almost 400 brokers about which lender they liked best, based on various criteria.

MCAP came out on top, followed closely by Merix Financial. (Here are the rankings)

What follows are some of the more notable findings from that survey (our comments in italics):

• 53% of brokers said they do less than 20% of their volume with banks.
  
  That seems counterintuitive. Banks have the top three spots for broker market share, and command 57% of all broker volume, according to D+H.

What Lenders Are Approving

It’s often instructive to look at a lender’s recent applications to see what kind of deals they’ll approve. That’s especially true on the "B"-side of the business where lender guidelines are much less clear-cut.

It's not surprising then that B-lenders are often able to grow volumes simply by educating more brokers.

MonCana: Canada’s Soon-to-be-Newest Bank

Canadians and the broker channel are getting a new mortgage lender.° It’s called MonCana Bank of Canada.

Headquartered in Calgary, MonCana “is focused on the origination, sale and servicing of single family mortgages across Canada. The Bank is dedicated to the brokerage industry, originating both mortgages and deposits through brokers.” (Source)

Bob Ord to Run a New MIC

Mortgage Industry veteran Bob Ord has been hired by Invis/MI, a national mortgage brokerage firm, to launch Title Mortgage Investment Corporation.

Title is a new MIC that will be owned, at least in part, by Invis/MI.

Ord says Title will “develop innovative, non-standard products and shorter-term financing solutions” for brokers. “We’re not going to compete with traditional insured lenders.”

Rogers Bank Adds to OSFI’s Inbox

Rogers Communications wants to add banking to its mix of wireless, cable and media holdings. The Globe reports that it already has a bank application with OSFI (Canada’s banking regulator).

At this point, Rogers appears to have no plans to venture into mortgage lending.

Its application adds to the list of 12 bank applications currently pending at OSFI.

Refinance Activity Plummets 40%, Says CMHC

Tighter mortgage rules are hurting CMHC’s default insurance business. This is most evident in insured mortgage refinances, which have plunged a remarkable 40%.

That’s due in part to the government’s move on March 18, 2011 to limit insured mortgage refinances to a maximum of 85% loan-to-value (instead of 90% previously).

That rule continues to force thousands of Canadians to pay higher interest rates on debt that they used to be able to refinance and consolidate. The government’s hope is that this will encourage homeowners to borrow more responsibly, knowing that they can’t rely on home equity to bail themselves out.

Mortgage Broker Websites

It’s hard to imagine being a mortgage broker without a website.

Websites are the business cards of the 21st century and essential marketing tools for lenders and brokers. Argentum Mortgage CEO, Albert Collu, explains why:

“An overwhelming percentage of borrowers will seek out mortgage information on the internet before making contact with a mortgage professional,” he says.

The data backs that up. Over 80% of first-time buyers use the net to research mortgages, according to CMHC’s Mortgage Consumer Survey. It’s probably even higher than that.

What’s more, “the largest demographic using mortgage brokers are between the ages of 25 and 35 (the Google generation),” adds Collu.

But despite the importance of websites, brokers often fail to invest in a top-notch Internet presence. Collu cites two reasons for that:

Debt till Death

Canadians may be living longer, but they’re also taking longer to pay off their debts.

CIBC released survey results recently that suggest 72% of Canadians hold some form of debt.

In a separate poll from HomEquity Bank, nearly half of the respondents said they expect to carry debt into retirement.

Moreover, 19% of those age 45-60 expect to still be paying off their mortgage into retirement.