Last month Scotiabank hosted its always-informative Financials Summit. Top brass from various lenders spoke at the event and each had a few sound bites of note. Here are some of the more notable ones:
CIBC is working to take “paper and process” out of the mortgage system and get answers to mortgage clients more quickly, said President & CEO Victor Dodig.
Scotiabank has “rapid lab” teams working to “reduce frictions” in its mortgage business. The bank’s pull-through rate, in terms of pre-approval to fulfillment, “was lower than we wanted” at 30-35%, said CEO Brian Porter. “We think we can get that to 60%. Now, if you do that you add $5-10 billion of mortgages.”
RBC’s CEO says his firm can “fast follow” market disrupters: “Everything I see, I feel I can replicate right now.”
B2B Bank’s mortgage growth has been well above the industry at 25% y/y, says President & CEO Rejean Robitaille.
The widely reported fraud at Home Trust was primarily from two brokerage houses, said CEO Gerald Soloway. As of last month, Home Trust had onboarded 200+ new brokers, helping to offset lost volume from the firms it canned.
“99% of mortgage brokers are honest and diligent,” said Soloway. “Lawyers get disbarred each year. Every profession has bad apples.”
If you want to predict mortgage arrears, “The canary in the coal mine is unemployment,” Soloway explained.
“If you go delinquent in the first 12 months, there is either something we missed in the underwriting or there is fraud,” said Genworth Canada CEO Stuart Levings.
Levings: “The average Canadian cannot afford the average Canadian home.”
80% of Scotiabank’s broker channel volume comes from just 500-600 brokers, noted Webster.
Mortgages originated by brokers and by Scotiabank’s retail channel are “indistinguishable in terms of arrears,” said Scotiabank’s John Webster, Head, Real Estate Secured Lending.
If you communicate a zero fraud tolerance policy to brokers, “the business will police itself,” said Webster.
Webster: “…The various [regulatory] changes, including the most recent, the purpose test (which requires that) all of the portfolio insured product has to go into a CMHC vehicle, suggests that for the monolines there will be challenges potentially to liquidity, or it will become more expensive…”
Webster: The regulatory environment in the mortgage industry has “never been more prescriptive for new Canadians or for self-employed” borrowers…
From a potential fraud standpoint, Equitable Group CEO Andrew Moor says his bank tracks brokers who send in suspect deals. “Two strikes and you’re out in our case.”
Toronto and Vancouver are where the overvaluation is and that represents 27% of the market, said First National Financial Co-founder & CEO Stephen Smith. But those two markets entail mostly conventional mortgages, he added, noting that the policy to limit mortgage insurance to properties under $1 million was therefore a “political” decision.
Smith stated that he was “surprised” regulators have never reduced GDS/TDS limits.
Smith says his company is “having discussions” with other lenders interested in outsourcing their underwriting to First National (a la TD’s underwriting deal with the company).