Insights from the 2017 National Mortgage Conference
Another national mortgage conference has come and gone, but many will remember this year’s instalment as nothing short of a success.
More than 1,200 mortgage professionals from across the country descended upon Niagara Falls for Mortgage Professionals Canada’s annual National Mortgage Conference. While OSFI’s new B-20 mortgage rules dominated discussions, the mood was predominantly positive and optimistic about the future of the industry.
“We will navigate these waters. We will beat these challenges. And I guarantee you that the four of us (First National, Street Capital, MCAP and Merix) will be here again next year,” Jason Ellis, Senior VP and Managing Director of Capital Markets at First National, said during the Lender Panel.
The two-day event featured keynote speakers Amanda Lang, Bloomberg TV anchor and bestselling author, and former Prime Minister Stephen Harper, who during his talk critiqued the current government’s implementation of recent mortgage rule changes by saying, “[When in government] we did our consulting with industry members before announcements, not after.”
Attendees had the chance to take in a variety of educational sessions that ranged from sales and marketing advice to technical and management tips, the ever-popular broker and lender panels, a luncheon hosted by CBC radio personality and author Terry O’Reilly, and the two-day Expo featuring 65 exhibitors.
Based on the theme One Year Later, this lively discussion featured representatives from four of the industry’s leading monoline lenders: Mark Aldridge, President and CEO of MCAP; Boris Bozic, President and CEO of Merix; Duncan Hannay, President and CEO of Street Capital; and Jason Ellis, Senior Vice President at First National.
Here are some of the highlights:
“Going into 2017, I knew that this year was going to be challenging, but we underestimated how challenging it was going to be,” said Bozic, referencing the impact from new government rules. He said year-over-year volume at Merix was down 6% in Q3 and is expected to be down 8% by the end of the year. He also estimated that $15 billion less in high-ratio funding volume is being done nationally, translating into roughly $75 million in commissions that has “evaporated.” He added: “There isn’t, I believe, anybody in this room who hasn’t been impacted by that.”
“I think we are all collectively going to have to pivot our business models to grasp the changing marketplace and the changing needs of both borrowers and savers, frankly,” said Hannay.
“None of us up here are conspiracy theorists, but I think the disproportionate bias these changes have had on lenders like ourselves wasn’t an unwelcome result for the regulators,” said Ellis. He added: “The Department of Finance last year suggested they were done [with regulatory changes] and that they were going to give everything a chance to settle in. But I guess OSFI didn’t get the memo and here we are with B-20 again. We would like to believe the pendulum has fully swung to give this thing a chance to settle in.”
“…if the idea of the 200 bps [stress test] was to reduce risk and keep people from buying a home who can’t afford it, according to the government, what’s going to happen is people are going to do 30-year am[ortization] mortgages and they’re going to pay their mortgages off slower than they otherwise would,” said Aldridge.
“The large banks have demonstrated an appetite for assets. I think they will continue to compete for your business ultimately, so I don’t think that’s necessarily a bad thing. Competition is good,” said Hannay. “With the complexity of the mortgage rules and the mortgage process … frankly it favours the mortgage broker in many ways because people are going to seek advice, particularly first-time buyers, more often than not. So I think it will continue to be an important channel. As for the smaller lender, it’s clearly going to be tougher to compete.”
“The percentage of homes being done at 30 years [amortization] has gone up materially in the last six months,” said Aldridge. He added that he believes the bigger issue is not the impact on new buyers, but instead those renewing their mortgages who have never missed a payment, but won’t be able to qualify under the 200-bps stress test. “You’re stuck at that bank. And believe me, the banks have the data, so they can charge 20 bps, 30 bps more on customers who have nowhere to go… In the interest of financial stability, we push competition to the side and it’s going to be consumers, it’s going to be probably 20% of mortgage consumers out there, that suffer from that.”
Responding to a question about how much longer lenders will continue to offer aggressively discounted rates, Aldridge said this: “If you’re competing with someone who has access to extremely competitive low-ratio, uninsurable funding, in order to get access to that you have to use some high-ratio as well. How can companies like ours get any high ratio? Well 5bps is not going to do it, so we’ve had to be extremely aggressive to be able to pull any business away in this environment. So, how long is that going to last? It’s an expense on my income statement, so…12 more months is my guess…”
The conference also featured a panel of leading economists who sat down to discuss issues ranging from their expectations for interest rates, the housing market and the real estate finance industry. The panelists included Will Dunning, Chief Economist at Mortgage Professionals Canada, Sebastien Lavoie, Chief Economist at Laurentian Bank Securities, and Jean-François Perrault, Senior Vice-President and Chief Economist at Scotiabank.
Asked to select a “regional winner” in the current housing market, Lavoie said, “it’s a momentum story in Canada, but especially in Quebec.” He said there are fewer uncertainties compared to other provinces, like the minimum wage and mortgage rule changes in Ontario and potentially new housing affordability rules in B.C.
Commenting on the new OSFI rules taking effect on January 1, Perrault said, “it’s going to have a bit of a negative impact, but it was designed to.” He added that as long as economic growth continues, “it’s not something we worry about tremendously.”
Dunning noted that 6-7% of buyers will be taken out of the marketplace due to interest rate hikes, while another 12-15% will be taken out due to new mortgage rules. “That’s not a trivial change in the marketplace.”
Asked about concern of a housing bubble in either Toronto or Vancouver, Dunning said he doesn’t believe the market meets the definition of a bubble, as it isn’t being driven by speculative prices that depart from economic fundamentals. “We see economic fundamentals that are truly supportive of the housing prices we’ve see,” he said, adding that “interest cost affordability is as good as it’s been in a generation.”
Mortgage Hall of Fame and Awards Night
This year’s gala paid tribute to four mortgage industry titans whose contributions have shaped the face of the industry. The four newest inductees into the Mortgage Hall of Fame are:
John Bordignon – Executive Vice President, Corporate Investor Management for Paradigm Quest Inc., an industry leader in innovative financial technology and business process outsourcing
Ed Gettings – Co-founder, former CEO and a current director of Street Capital Financial Corporation, a leading mortgage brand in the mortgage broker channel
Andrew Moor – President and CEO of Equitable Bank, positioned as ‘Canada’s Challenger Bank’ and a leading digital banking player
Dan Putnam – Senior Vice President, Business Development, Residential at CMLS Financial, a preferred lender in the mortgage broker channel, with a reputation for building solid broker relationships. Putnam is also a former Chair of Mortgage Professionals Canada
Here are this year’s Awards of Excellence winners:
Financial Literacy Leader of the Year – Ross Taylor
Innovator of the Year – Matthew Ablakan
Making a Difference Community Service Award – John Ribalkin, AMP
Marketing Campaign of the Year – Ramin Nazaradeh
AMP of the Year – Mike Raghubar, AMP
Mentor of the Year – Bud Jorgenson, AMP
BDM of the Year – Paul Gajdos
Broker of the Year – Tracy Valko, AMP
Underwriter of the Year – Helga Peller, AMP
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