MPC Mortgage reportMortgage Professionals Canada (previously CAAMP) released its marquis fall mortgage research report this month. We’ve extracted all of the trends that seem new or notable.

You’ll see the most relevant findings below. (Data points of special interest appear in blue.)


The Market Overall

  • 9.74 million: Number of homeowner households in Canada (up from 9.62 million in 2014)
  • 5.71 million: The number of households who have mortgages and may also have a Home Equity Line of Credit (HELOC)
  • 520,000: The number of households who have no mortgage but do have a HELOC
  • 2.15 million: The number of Canadian households who have HELOCs
  • 3.51 million: Number of households who are mortgage-free (down from 3.98 million in 2014)
  • $3 trillion: The total amount of home equity wealth in Canada
    • By comparison, Canada’s annual GDP is about $1.8 trillion. Imagine knocking 20% off home prices, and the wealth devastation that would have—particularly for people who rely on their home equity for retirement.


Housing and Mortgaging Activity During 2015

  • 5%: Percentage of Canadian households that buy a home in any given year
  • 89%: Percentage of homes purchased in 2015 that have mortgages or a HELOC
  • 76%: Percentage of 2015 homebuyers choosing fixed rates
  • 20%: Percentage of 2015 homebuyers choosing variable/adjustable rates
  • 4%: Percentage of 2015 homebuyers choosing combination mortgages
    • Hybrids continue to be the most undermarketed and underrated mortgage type available, especially with so much rate uncertainty (and not just rate hike uncertainty, but rate cut uncertainty)
  • 660,000: Number of homes purchased in 2015 (existing and resale combined)
  • 590,000: Number of households who bought a home and financed it (mortgage and/or HELOC) in 2015
    • 15% chose both a mortgage and a HELOC (typically a “readvanceable mortgage”)
  • 1 million: Number of homeowners who renewed or refinanced their mortgages during 2015
    • And convenience continued to trump absolute savings as the large majority renewed with their existing lender


Mortgage Types and Amortization Periods

  • 24%: Percentage of mortgages on homes purchased during 2014 or 2015 that have extended amortization periods
  • 23%: Percentage of mortgages with amortizations of 26-30 years
  • 1%: Percentage with amortizations over 30 years
    • Thank you to the lenders who continue to offer 35-year amortizations (RMG, B2B Bank, Alterna, Vancity, Coast Capital and so on). You do a tremendous service to well-qualified borrowers who prefer payment flexibility


Actions that Accelerate Repayment

  • 950,000: Number of mortgage holders who voluntarily increased their regular payments in 2015
  • 1 million: Number of mortgage holders who made a lump-sum payment in the past year
    • That’s about 17.5% of mortgagors
  • $15,300: The average lump-sum payment amount


Renting Secondary Suites

  • 14%: Percentage of mortgage holders who rent or plan to rent out part of their home
    • For many of these folks, it’s now easier to qualify for a mortgage, courtesy of insurers’ more generous add-back rules
  • 21%: Percentage of those who rent out (or plan to rent out) a portion of their home, who indicated: “I need to rent a room/unit in my home to afford my mortgage”
    • Given that secondary suites have been an important income source for homeowners, Dunning says it would be useful to clarify and simplify the processes for complying with municipal standards. We second that idea as most new landlords don’t know all the requirements to have a legal suite


Recent Homebuyer Mortgage Choices

  • 45%: Percentage of mortgages that were obtained from a Canadian bank
  • 42%: Percentage of mortgages that were obtained from a mortgage broker
  • 13%: Percentage of mortgages that were obtained elsewhere


Interest Rates

  • 3.07%: The average mortgage interest rate in Canada
    • Compare that to 3.50%, the average interest rate in the 2013 fall survey
    • Average actual rate for 5-year fixed-rate mortgages (2.81%) has been 1.87 percentage points lower than typical “posted” rates
  • 2.80%: The average interest rate for mortgages on homes purchased during 2015
  • 2.67%: The average rate for mortgages renewed in 2015
  • +/- 1/2%: Estimated change in annual credit growth for every one point change in mortgage interest rates


Home Equity

  • 49%: The average percentage of home equity for homeowners who have a mortgage but no HELOC
  • 75%: Percentage of the 5.71 million homeowners with mortgages (but not HELOCs) who have an equity ratio of 25% or more
  • >300,000 (3%): Number of homeowners who have less than 10% equity
  • $136,000: The average approved HELOC value
  • 10%: Percentage of homeowners who have fully utilized their available HELOC


Equity Take-Out

  • 9% (850,000): Percentage of homeowners who took equity out of their home in the past year
  • $70,000: The average amount of equity taken out


Sources of Down Payments by First-time Homebuyers

  • 21%: The average down payment made by first-time buyers, as a percentage of home price
    • Dunning notes that this percentage has remained stable over time, at 20% of the purchase price
    • The report notes that, “the rapid rise in house prices means that required down payments have increased relative to incomes”
    • “Given the increasing burden of down payments relative to incomes, that stability is surprising,” Dunning said
  • 19%: Percentage of down payments by first-time buyers that came from family or friends (in the form of loans or gifts)
    • The long-term average is 15%
  • 26%: Percentage of down payment funds for first-time buyers that is loaned from financial institutions
  • 8%: Percentage of down payment funds that come from RRSP withdrawals
  • 93 weeks: The amount of working time at the average wage needed to amass a 20% down payment on an average-priced home
    • This is up from 53 weeks two decades ago


Homeownership as “Forced Saving”

  • 50%: Approximate percentage of the first mortgage payment that goes towards principal repayment (based on current rates)
    • This ratio rises incrementally with every mortgage payment a borrower makes
    • Mortgage payments now include a higher amount of principal repayment, “in both absolute dollar terms and as a percentage of the monthly payment.” This suggests that homebuyers are “now entering into very aggressive forced saving programs,” says Dunning
    • By contrast the first payment principal ratio was 31% a decade ago when rates were at around 4.7%, and 13% two decades ago when rates were at around 8.2%


Mortgage Payments as a Percentage of Monthly Wages

  • 39.5%: Mortgage payments in 2015 as a percentage of monthly wages
    • 38.6% is the long-term average


On The Recent Minimum Down Payment Change

  • 155,000: The number of home sales each year (out of 620,000) valued at $500,000 or more
    • 120,000-125,000: Number of these that have mortgages
  • 10,000 (2%): Percentage of annual homebuyers that would see increases to their required down payments as a result of Ottawa’s new rule
    • This is obviously peanuts. It’s almost like the Department of Finance created a rule for rule’s sake, not that this author is complaining
    • More on the new down payment rules


Sidebar:  This year’s report was based on responses from 2,001 Canadians.


This year’s Home Trust broker fraud debacle was headline news, and it marred our industry.

It made the public question broker ethics, it made top brass at banks more skeptical about broker-originations and it put brokers under the microscope with regulators.

Fraud from brokers and lender reps, especially the widely publicized variety, is costly in so many ways. It results in

  • greater default risk for borrowers
  • higher potential losses for lenders
  • higher compliance costs for lenders
  • higher investigation and enforcement costs for regulators, and
  • damage to the industry’s image, which can result in higher capital costs and tighter lending guidelines

While small relative to the $1.3-trillion-plus mortgage industry, these costs are nonetheless unacceptable.

It is high time to send a message to brokers who take shortcuts. In particular, the industry must call out guys like Rod (Mehrdad) Nevis of Yespros Mortgages Inc. 

Nevis is aGavel B.C. broker who apparently wasn’t overly concerned with submitting accurate applications to lenders. The Financial Institutions Commission (FICOM), B.C.’s mortgage regulatory body, found that he acted “in a manner prejudicial to the public interest” by

  • failing to determine if borrowers had properties other than those disclosed in mortgage applications, even though he knew or “ought to have known” that was the case;
  • failing to advise lenders that the borrowers were concurrently seeking financing for other properties;
  • preparing mortgage applications to send to lenders on the basis the properties would be owner occupied, even though he knew or “ought to have known” that was the case; and
  • Preparing mortgage applications for submission to different lenders over a short period of time for the same borrower, despite unexplained discrepancies concerning residency, rental income and/or ownership of properties

Nevis was fined $10,000 and got a few other slaps on the wrist. But he will still be allowed to operate as a mortgage broker. No doubt, many are asking why.

Sidebar: The above-noted FICOM investigation revolved around applications submitted on behalf of four borrowers. Here’s the full consent order.

To outside observers, repercussions for broker negligence and/or fraud must seem grossly inadequate. Fortunately, lenders are increasingly sensitive to fraud, they cooperate more with other lenders and they’re now quicker to remove questionable brokers from their approved lists.

But we must do more. It’s time to make examples of shady brokers and increase deterrents. Specifically, lenders, regulators, broker associations (and ideally law enforcement) must work together to issue a clear, unified statement of non-tolerance for application misrepresentation. This condemnation should be shouted from every corner of the industry—via regulatory bulletins, via broker network newsletters, in industry publications and so on. Unscrupulous brokers must be made to acknowledge that intentional application omissions are just as fraudulent as application falsities. They must be made to fear being caught and fear exile from the business.

To the small minority of unethical brokers, bank reps and credit union reps out there, know that the industry is fed up with your chicanery. The shortcuts you take hurt public confidence in mortgage advisors and make it more expensive for originators to operate. Leave the mortgage business. Or count on being made to leave.


CD Howe surveyThe “sustained low interest-rate environment” has caused a “significant minority” of Canadians to take on more mortgage debt than they can comfortably manage. That was the conclusion from a recent study by C.D. Howe.

Out of all the study’s findings, the one garnering the most headlines was the percentage of homeowners with a mortgage debt-to-disposable income ratio in excess of 500%. That number has rocketed from 3% in 1999 to 11% in 2012 (the latest data available). That’s upwards of half a million households.

That led the study authors, Craig Alexander and Paul Jacobson, to suggest that the federal government “may want to consider further policy actions to lean against the shift towards significantly higher mortgage burdens.” This is despite their conclusion that “the majority of Canadians have been responsible in their borrowing.”

Coincidentally, this study came out right before the Finance Department raised minimum down payments. That measure addressed some of Alexander and Jacobson’s concerns, but not all. They note that highly mortgage-indebted households are more likely to be

  • in the lower-income quintiles
    • i.e., not buying the $500,000+ homes targeted by the new down payment rules
  • younger Canadians who have recently entered the housing market
    • the average first-time buyer’s purchase price is $293,000, says the DoF, again, less than $500,000
  • from provinces with the biggest housing booms.

Also concerning is the fact that roughly 1 in 5 mortgage-indebted households have less than $5,000 in financial assets to draw upon if they lose their job or face surging interest rates. Worse yet, 1 in 10 have less than $1,500 in financial assets and are considered “extremely vulnerable to a negative economic or financial shock.”

“This represents an inadequate financial buffer,”  say the study’s authors, “as the Statistics Canada Survey of Household Spending indicates that average mortgage payments are more than $1,000 a month, before taxes and operating costs.”

All of this speaks to two risks. The first is obviously the financial risk to the borrowers themselves. Even if arrears rates stay contained as expected, no one wants families backed into a debt corner, doing things like racking up unsecured debt to finance secured debt.

The second risk is systemic (i.e., what happens to our financial system if default rates are higher than anticipated?). Default insurers claim they can withstand a U.S.-style housing sell-off without dipping into taxpayer pockets. (By the way, we are assuming/hoping that insurer’s stress tests rest on adequate assumptions.) But the mortgage market would nonetheless endure painful market volatility, huge risk premiums and illiquidity. These effects would be (will be) exacerbated if debt ratios continue moving in the wrong direction.

Hence, if home prices in T.V. (Toronto/Vancouver) continue climbing in 2016, the DoF may not be finished it’s policy tightening. Lowering maximum debt ratio guidelines and increasing minimum credit scores (especially for borrowers making small down payments) could get more attention in Ottawa.

But Alexander and Jacobson wisely recommend that any new mortgage rules be targeted. The last thing anyone wants are weak markets getting weaker with a national policy intended to rein in T.V. lending.

Moreover, given enough time, natural economic forces would address some of the imbalances we’re seeing, specifically

  • higher prices would curtail demand
  • higher rates would crimp affordability, and hence prices (best not hold your breath on this one)
  • higher incomes would improve affordability and debt ratios (for many)
  • housing supply would catch up with demand (maybe not in the major single-family urban markets, but definitely with multi-family units and suburban housing)

But policy-makers are likely not content to let the “invisible hand” correct household debt risks on its own. So keep an eye on this chart through the first half of 2016. It may have magically predictive properties for new mortgage rules.

National Average Home Price

Other notable findings from the survey:

  • B.C. has gone from a primary mortgage-to-disposable income ratio of 250% in 1999 to 375% in 2012 (Remember that’s an average, so many are above this ratio)
  • Ontario’s average mortgage-to-disposable income ratio rose from nearly 200% to around 350%
  • The share of young households (age 25 to 34) with ratios above 300% has increased by almost 27 percentage points
  • 14% of those aged 25 to 44 have ratios above 500%, along with 16% of those 65 to 75 years old vs. just 5% of those aged 45 to 54

Ultimately, debt service ratios (a.k.a., affordability ratios) are far more predictive of losses than debt-to-income ratios, and Canada’s average debt service ratio isn’t far from its long-run average. But we may never realize how close some people are to the edge until interest rates or unemployment spike.


Guusto mobile image(Sponsored Post)

“Thank you” can be a powerful pair of words, in personal life and equally in business.

A recent survey from Mortgage Professionals Canada found that 75% of mortgage consumers would have liked to receive a follow-up from their mortgage provider after closing, with most expecting just a simple “thank you for your business.”

For mortgage professionals wanting a unique way to convey that appreciation, or brokerages looking to reward employees, there’s a new, free service that makes it easy. It’s called Guusto and it’s an instant gifting platform (app and web dashboard). It lets you send something thoughtful like a drink, dinner or a movie, leaving a lasting impression on clients and a potential referral source. And to really make someone’s day, Guusto has teamed up with the One Drop Foundation to donate one day of clean drinking water for every gift sent.

Gone are the days of easy-to-misplace plastic gift cards that add waste to landfills and are tied to a specific store or restaurant. With Guusto, gifts can be redeemed at any of the 1,500+ partner locations across Canada using a mobile device or by displaying a printout.

One of its best features for business is the ability to track when clients have claimed the gift you’ve sent. You can even set a date in which the gift must be claimed by. If the gift recipient hasn’t done so in that timeframe (e.g., one year), the money is refunded back to your account. That way your incentive spending isn’t wasted on people who lost your gift, or never bothered to open it in the first place.

According to Guusto co-founder Joe Facciolo, “it can be costly to underestimate the power of building a loyal customer base.” In the mortgage business, customers can easily be worth more than 4-5 times as much as their first mortgage.

And referrals are just as important, given they’re trusted more than virtually any form of advertising. As all of us in the mortgage business know, it’s far harder to sell to new clients than old ones. Data from Market Metrics finds that the probability of closing a new prospect is less than 20%, compared with a 60-70% chance of selling to an existing client.

So if you’re looking for a unique way to give thanks this holiday season and beyond, either for customer appreciation or employee recognition, try Guusto for free. For businesses that need to send a lot of gifts, email Joe Facciolo for a 10-minute Guusto for Biz demo –



FedEver since the infamous 2013 Taper Tantrum, we’ve been hearing about impending Fed rate hikes and all of their implications. It was like a giant raincloud following us month after month.

Today, finally, that cloud of uncertainty passed.

A few quick thoughts on the Federal Reserve’s 25-basis-point rate bump:

  • It was built up as a blockbuster rate meeting. Yet, yields closed the day little changed. What we saw was a case of textbook anticipation fatigue, and an announcement that couldn’t have been any more anticlimactic.
  • Our eager economist friends are already predicting what happens next: four more U.S. rate hikes in 2016, they say.
  • Long-term Canadian rates—like the 5-year yield—may somewhat track long-term U.S. rates, but it won’t happen to the same extent it usually does, not with North America’s economies deviating.
  • Short-term Canadian rates (e.g., prime rate) will continue to hinge on domestic inflation data, Bank of Canada-speak, oil prices, and so on. They may increasingly take separate paths from U.S. rates for the foreseeable future. (You can see this divergence already in each country’s 2-year notes.)

In reality, not much has changed on this side of the border, post-Fed-decision. Core inflation is still steady and holding near the Bank of Canada’s 2% target and true inflation is still well below it (says the Bank). With all this Fed “liftoff” distraction out of the way, we can get back to advising clients on what matters most, which doesn’t entail sweating about future interest rates.


Bank earnings_sq

Just when you thought profits at the Big Banks couldn’t soar any higher, they do. And then some.

The Big 6 Banks earned a whopping $35 billion combined in 2015. Much of that is thanks to strong performance from residential mortgages, despite the slowdown in Alberta and Saskatchewan. Wider spreads on variable rate products also helped boost net interest margin for several of the banks.

There was ample discussion about the expected impact from slowing economies in the prairie provinces. The consensus from banks is that they haven’t seen a substantial increase in defaults so far, but that it will take more time for the full effects to flow through to their balance sheets.

As we do every quarter, CMT has dug through the Big 6 Banks’ quarterly earnings reports, presentations and conference calls, and compiled all the mortgage-related highlights. The more interesting observations appear in blue.




Finance Minister, Bill Morneau

If you’re trying to scratch together a down payment, or you sell mortgages for a living, today’s news could have been much, much worse.

The new down payment rules Finance Minister Bill Morneau announced this morning were as benign a policy change as one could hope for. This refers, of course, to the new minimum down payment requirement, which takes effect on February 15, 2016.

For properties between $500,000 and $1 million, folks getting an insured mortgage will now need to put more down—up to an additional 2.5% of the purchase price. In other words, 5% down will be required on the first $500,000, and 10% down will be required on the next $500,000.

For a $750,000 property, that means you’d have to cough up a 33% bigger down payment (compared to today), or another $12,500. The new rule doesn’t affect properties over $1 million because they don’t qualify for high-ratio mortgage insurance anyway.

As we reported last week, it seemed clear that some sort of down payment changes were on the way. But the speculation was that Ottawa would impose a flat 7-10% down payment for properties between $500,000 and $1 million. The actual rule announced today will affect far fewer borrowers than that (Benjamin Tal estimates about 4% of buyers overall). Many folks buying in that price range will find a way to scrape up an extra $5,000 or $25,000—from mom and dad, from borrowing their down payment, from selling other assets, etc.

Of course, buyers without other resources may have to save for another one to three years to buy a higher-priced home. But the deferral of these buyers will barely put a dent in home prices, at least in cities where high-value properties and multiple offers are the norm. (Properties over $500,000 in smaller metros will be more impacted.)

The changes I’d be more concerned about, as a consumer, are the higher securitization fees and larger capital requirements for lenders. These policies were announced in tandem with the down payment tweak.

Most lenders will absolutely pass down some or all of these costs to consumers. In fact, with the rate increases of late, some speculate they already have been.

I’ve been researching all day on what that means for mortgage pricing. The potential impact looks to be in the range of 3-8 basis points for the securitization fee change (depending on the lender), and another few basis points for OSFI’s additional capital requirements. Let’s call it a total 5-10 basis-point hike in mortgage rates over time.

CMHC says “the changes in guarantee fees are not expected to have a material impact on the level of mortgage rates, which remain at historically low levels.” And it’s right. But 5-10 basis points means a well-qualified ultra-low-risk borrower will cough up another $700 to $1,400 in interest over five years on a 5-year $300,000 mortgage. And who wants to pay that?

Then again, there’s a case to be made for building the war chests of CMHC and lenders, in the highly unlikely event that home prices crash land. So at least borrowers can take solace that their hard-earned interest payments are going to a “good” cause.


Implementation details:

  • Qualified borrowers who get approved before February 15, 2016, can still buy with only 5% down. But lenders will likely set their application submission deadlines 1-2 weeks earlier.
  • People will still pay the same default insurance premiums, based on their overall loan-to-value (e.g., 3.60% of principal for a 5% to 9.99% down payment).
  • Check out these FAQs for more details.

On securitization:

  • CMHC’s intent was to raise CMB costs equally on small and large lenders alike. The increased cost amounts to roughly 40 bps for all lenders, says a source very familiar with the change.
  • The new guarantee fees reduce the attractiveness of securitizing via Canada Mortgage Bonds, relative to NHA MBS (where fees are also going up for lenders issuing over $7.5 billion worth of NHA MBS).
  • The MBS guarantee limit was raised from $80 billion to $105 billion for 2016, but it won’t create any more MBS funding or risk. The extra is just to support new requirements of the CMB program.
  • The government’s stated purpose of these fee hikes was to “encourage the development of private market funding alternatives by narrowing the funding cost difference between government-sponsored and private market funding sources.” Good luck with that. Insured mortgages, to which these fees apply, can’t be securitized outside of CMHC-sponsored channels. And no “private” CMHC-sponsored securitization markets exist (that we know of anyway).

Other effects:

  • First-time buyers were mostly spared by these new down payment regs. Their average purchase price is $293,000, well under the $500,000 threshold. 
  • Moreover, less than 1 in 10 first timers are buying $500,000+ properties to begin with.
  • Calgary could get hit the hardest (just what they need), because they have a much larger share of high-ratio mortgages, says Tal.

If you’re a mortgage industry watcher, you’ll find occasional wisdom in the earnings calls of Canada’s non-bank lenders. So we’ve decided to cherry-pick some of their soundbites and post them in a new series called Lender Call Roundups.

This quarter, we heard from Home Trust on its terminated brokers, Street Capital on its bank application and the end of its loyalty program, and First National on the success of its TD partnership.

Here’s a quick rundown of their comments, with highlights in blue.


Street Capital

Notables from its call:

  • “Consistent with last year’s quarter’s drivers, the strong uptick in revenue for the first three and nine months of the year was partly due to above-trend renewal volumes in 2015,” said Marissa Lauder, Chief Financial Officer, Street Capital Group. “Renewals are above trend this year because they reflect both five-year terms originated in 2010, and higher-than-usual renewals of three- and four-year terms originated in 2011 and 2012, respectively. This is a result of promotions we implemented in those years to meet investor demand for three- and four-year product.”
  • “Moving into 2016, renewal volumes will revert to normalized levels, which will be primarily limited to five-year terms originated in 2011. We expect this to translate into approximately 15 percent lower renewals in 2016 compared to 2015,” she added.
  • New origination volumes were negatively impacted in the quarter by the discontinuation of our loyalty product, which paid trailer fee commissions to brokers. As well, we made some normal course credit underwriting adjustments to maintain strong credit performance.”
  • Asked why the loyalty product was being discontinued, Lazaro DaRocha, President, Street Capital replied: “…after running it for the couple years that we did, we weren’t seeing a material difference between that product and our normal product. So what we were finding is that the net margin on that loyalty product, because we weren’t seeing the lifts that we needed, was actually being lower than our standard product.
  • Street Capital CEO Ed Gettings noted the company is presently in the pre-commencement review phase of its application to the Minister of Finance to continue as a Schedule I bank. “If we receive our bank licence approval within a relatively short period of time we can move fairly quickly to introduce deposits and uninsured lending products, but we haven’t built any meaningful contribution to our profitability and to our expectations until 2017 for these balance sheet items.”
  • “Our credit quality continues to be strong,” noted DaRocha. “At September 30th, the serious arrears rate on our portfolio of mortgages was 14 basis points, well below the high 20s, low 30s reported in the CBA stats. This is well below last year, which was 27 basis points…”
  • The company said it sold $2.3 billion of mortgages during Q3, roughly flat with Q3 2014.
  • Its gain of sale, as a percentage of mortgages in Q3, was up 180 bps, which it attributed to wider spreads.


Home Capital

HCG-LOGONotables from its call:

(Quotes from CEO Gerald Soloway unless otherwise specified)

  • “We…changed our underwriting processes to separate sales and underwriting of mortgage products. While it’s simple to say, it’s a very difficult process to change, the culture of a company, and do that separation effectively.”
  • “While we had some growing pains during the second quarter, we now see very promising signs that our efforts to change our processes and grow our mortgage broker network are working…The third-quarter results bear that out. We reported traditional residential mortgage originations of $1.51 billion in Q3, an increase of 17% from the $1.29 billion in Q2.”
  • “In Q2 2015, we stated that the amount originated only in 2014 from the suspended brokers was $960 million. The total value of the loans that they originated (from the time that the brokers first started doing business with Home, which in some cases was several years ago, and that were outstanding on September 30) was $1.72 billion, out of a total mortgage portfolio of $23.4 billion. That is down from the $1.93 billion as of June 30. I want to point out that the $200-million decrease in the quarter was due to normal run-off and there were no losses involved in the $200-million run-off.”
  • “As we have disclosed, we are reviewing and revalidating, where appropriate, the income documentation related to all of the loans from the suspended brokers. We are approximately one quarter of the way through the review of the loans and we plan to complete it sometime in 2016.”
  • Asked what that process entails, Soloway responded: “We looked at them with increased scrutiny. We went through every piece of documentation. We re-verified income proof. We confirmed property valuations. Every part of the file, we wanted to know exactly where we stood.
  • “So far, more than 90% of the mortgages renewed are eligible for renewal on our books, either because we are comfortable with the original documentation or we have sought and received updated income documentation. As for the remainder, which is less than 10% and actually around 7% or 8% at the present time, of what we have reviewed so far, either the customer wasn’t cooperative or has not provided adequate income documentation to date. These mortgages are performing very well, in line with or better than our broader mortgage portfolio. I emphasize that there have been no unusual credit issues. And I repeat, for the first nine months of 2015, total credit write-offs on our entire portfolio were only three basis points compared to five basis points last year.”
  • “Over the past year, we have added more than 600 new brokers to the list of active brokers, so that the total number of active brokers who have completed at least one transaction with Home in the last 12 months is now approximately 4,800 and that number is continuing to grow.”
  • Of those 600 brokers, Pino Decina, Executive VP, Residential Mortgage Lending, said, “Those amount to just over 100 actual brokerages across the country, the majority being obviously in Southern Ontario.”
  • Asked why it seems like the 45 suspended brokers generated around 70% of Home Capital’s loan book and need to be replaced by 600 brokers, President Martin Reid said: “The volume takes a while to build up for a new broker. They don’t necessarily give you all the business upfront versus when you cut off a broker and they are generating a lot of volume, you lose that right away. So, it does take time for that volume to pick up, but that’s where the addition of new brokers, the addition of the CFF network, …we think over time not only replace that business, but replace it with better-quality business.”
  • “Perhaps the biggest news after the quarter end is the closing of our purchase of CFF Bank for approximately $17.80 million subject to final adjustments. CFF also gives us a distribution agreement with a network of more than 30 Canadian First Financial Centers located across Canada. This is another channel for originations and since closing on October 1, little over a month ago, we have received a positive response from the CFF broker network regarding CFF and the whole mortgage products.”
  • Asked if they are seeing any rate increases for renewals that are being reviewed, Soloway said: “No, because we are not renewing those who may have any impairments on their proof of income. We have just taken a very strict line. If they can’t confirm their income, we haven’t increased the rate. We have just told them that we are de-marketing them, if they can’t prove their income to proper standards.”
  • Soloway was also asked about insured mortgages that were purchased from a third party during the quarter, and whether this was done to accelerate Home Capital’s originations, and whether this has been done in the past. Soloway responded: “No, it was – we were quite pleased with the purchase terms. It was an entity that was broker-driven type of loans – we just found it economically feasible to make the purchase. We may well make further purchases depending on the market conditions.”


First National

First-National.gifNotables from its call:

  • “…we’ve seen no pickup in arrears rates in…Alberta at this stage, and I would think we would expect to see some upticks in 2016 as there are more layoffs…but…all of our assets that we have in Alberta are insured so that we don’t have material…exposure there,” said Stephen Smith, Chairman and President of First National.
  • Asked about First National’s arrangement to provide underwriting to TD Bank, Smith said: “Well I think our launch…of that third-party underwriting has…exceeded expectations. It was on time…[and]…volumes are higher than anticipated. That’s a fairly substantial implementation with integration across credit information technology sales channels – very successful. It certainly would be something we could put out and launch for any other institution. Certainly the big advantage…that makes it very efficient, is our Merlin technology [which] enables the brokers in real-time to track all their deals also. So, it works well that we can very easily integrate into the back offices…so, certainly it would be more efficient, a lower cost solution for other institutions.”
  • Asked if First National saw any kind of fallout from Home Capital’s suspension of dozens of brokers in October for alleged fraud, Smith replied, “I don’t believe so. We’ve always had a standard of underwriting, which is among the best in the country. We have adhered to that standard…”
  • On the growth in market share of commercial originations: “We put a big push on this year to increase our share of commercial mortgages, including launching some different products and going after some different clients,” said Moray Tawse, Executive Vice President, Mortgage Investments. “I think the marketing that we did over the last year or so is really starting to pay off. We see that the gains that we’ve got in that marketing are going to continue, I think, and we’re going to be strong players and hopefully gain a little bit more market share as we go forward – so I think those gains are sustainable and not sort of a one-time bump.
  • First National said its net income fell 18% YoY due partly to “volatility in the bond market that negatively affected the Company’s economic hedging program.”

Note: Transcripts are provided as-is from the companies and/or third-party source, and their accuracy cannot be 100% assured.

Steve Huebl & Robert McLister


Paperwork_smSponsored Post

Occasionally, the very same mortgage regulations that protect lenders and borrowers can also drown us in an ocean of red tape.

Income proof is a great example. People with self-employed, bonus or commission income often need a Notice of Assessment (NOA). If they can’t provide one in a timely manner to satisfy a financing condition, they can risk losing the home they’ve fallen in love with.

“This is a big deal for mortgage brokers,” said Mitchell Demeter, founder of NOA Today Services Inc. “It is common for lenders to require these documents, and often clients have lost them.”

A key home-buying prerequisite

When most people go house-hunting they mainly consider the mortgage approval. Specific income documentation, like Notices of Assessment, rarely cross their minds. But they should be top of mind for their mortgage broker, and even their Realtor.

Industry professionals feel an obligation, as they rightly should, to see their clients’ home purchase go smoothly. So they must anticipate a client’s needs. This includes ensuring they have the proper documentation to close the sale, something that brokers and Realtors should confirm early on.

Getting access to NOAs is fairly easy, says Demeter, but getting that access takes time. “Clients can obtain NOAs themselves from the Canada Revenue Agency (CRA), but it can take one to two weeks. That can easily make the difference when it comes to getting the house you want in the allotted financing time,” he said.

NOA Today helps address that by securing government tax documents quickly. Mortgage brokers who register with NOA Today are verified by a representative, usually the same day. Once the process is complete, mortgage professionals can regularly order Notice of Assessment packages on behalf of their clients. This package will contain NOAs from the past three years as well as a current Statement of Account. And it is virtually always delivered within 24 hours.

A valuable business tool

Homebuyers rely on mortgage brokers to remove stress from the paperwork process. NOA Today secures NOAs within 24 hours most of the time. That allows clients to gain certainty from the lender sooner, rather than having to wait days or weeks for Revenue Canada to mail the documents.

Traditionally, many mortgage brokers have advised their clients to contact the CRA to get these documents. In today’s competitive housing market, an intermediary can save precious time, and often save a deal altogether. NOA Today’s service costs $39—one of the lowest such fees in the industry. A broker’s first order is $0.99 and each subsequent order earns an entry into monthly raffles for prizes like NHL tickets.

Interested mortgage professionals can visit to learn more.