Dominion Lending is one of the fastest growing mortgage brokerages in Canada. It opened its doors in January 2006 and flew under the radar for about 18 months before exploding onto the scene. Dominion is now on track to close a very respectable $7 billion in mortgage volume in 2008, and has its sights on the #1 broker volume ranking in 2009.
We recently had a moment to chat with its president Gary Mauris. The interview yielded some rather interesting observations about Dominion Lending, as well as market-wide developments.
CMT: Thanks for being with us Gary. First off, I’d like to start by talking about Dominion itself. You’ve experienced rapid growth with about 1200 agents now across the country. What benefits do clients get at Dominion that they might not get at a bank?
Gary: DLC brokers have access to virtually all the mortgage products from every lender in Canada. That ensures our clients have access to the very best mortgage products for their own situation.
Also, unlike most bankers, DLC agents are licensed in their originating Province and have completed the [mortgage agent] education requirements.
CMT: How comfortable do you think Canadians are becoming with arranging mortgages over the Internet?
Gary: We believe that the vast majority of Canadians begin their search for mortgage products on the Internet. The only people using the telephone book these days are seniors. It is incredibly important for agents to become as web savvy/tech savvy as possible to help them accelerate their careers in today’s market. DLC has the ultimate solution, a tech friendly company supported by 170 bricks and mortar locations, so that after the consumer has investigated the best solution they can go and meet an agent face to face. Every DLC agent in Canada has their own fully functioning website with streaming video, rate updates and a built in Customer Relation Management that we provide at no charge.
CMT: How important is the Internet to Dominion’s business plan?
Gary: The Internet will continue to be a very large part of the future focus for DLC and our agents. Currently head office is completing our EMP (Elevated Marketing Platform) this platform gives every agent in Canada access to their own website for updates, press releases, easy link access, loading instant video footage and a myriad of other easy-to-use technology advantages.
DLC head office also advertises via Google Adwords and several other web portals to drive business back to our agents.
CMT: How do you feel the end of insured 100% financing and 40-year amortizations will affect brokers’ volumes in 2009?
Gary: The loss of the 40 year amortization will not substantially affect our industry as most customers already qualify for mortgages with lesser amortizations.
The loss of the 100% mortgage will definitely have an impact, however, and we feel the changes were announced hastily. Canada’s default rate on subprime business was less than the US default rate on their “A” / prime mortgage business. There are thousands of Canadians who have the income to support the 100% mortgage product. Yet they struggle to amass the necessary down payment to enter the housing market. This move has dashed the hopes of thousands of Canadians who will now have to look far into the future before they realize the joy of home ownership.
CMT: What trends do you foresee materializing in Canada’s subprime market over the next 12 months?
Gary: We believe we will begin to see many lenders starting to reenter the subprime space within the next 12 months. Our lending guidelines and policies are distinctively different than in the US. The sudden withdrawal in the Canadian market was reactionary and was not a reflection of Canadian foreclosures or unmanageable default ratios.
CMT: Do you feel there is any threat to mortgages becoming commoditized as consumers focus more and more on rate? Or do you think consumers will start putting more value in the services of mortgage brokers and less on rate?
Gary: We do not think our industry runs the risk of becoming commoditized. Obviously we have to remain competitive when it comes to rate but consumers value time savings, convenience, expertise, flexibility, and the ability to shop the rates and products from all the lenders.
CMT: From a mortgage agent’s perspective, what unique tools does Dominion offer to help an agent’s business?
Gary: Among other things, we offer equipment leasing, a national advertising fund, a proprietary line of mortgage products, a free CRM system, and extensive support. In addition, we have more templates, tools, and training available than anyone else.
CMT: Do you see any threat to the franchise model from brokerages that charge agents a flat monthly desk fee?
Gary: Our franchise model is based on a 5% fee to head office. We are not threatened by flat-fee/discount models. Ask yourself, what happened to the flat fee/ discount model real-estate companies? Do any still really exist? The two most expensive Realty companies to work for have a commanding market share, REMAX and ROYAL LEPAGE. If people were only concerned with the cheapest most inexpensive model, we’d all be driving Hyundais.
We believe that we have to be very competitive with our agents and owners and very transparent. All agents are paid top-tier volume bonus, all of their personal volume bonus, and lender incentives. We provide our agents with the AUTOPILOT tools to keep in touch with their friends, family, past, present and future customers automatically and give them more brand awareness and confidence than any other company in the country. Today, DLC agents using our CRM system (at no cost) are averaging between one and two extra mortgages per month simply by keeping in touch with their sphere of influence a minimum of 12 times per year. Discount models cannot afford to provide these services and will struggle to exist in the years to come.
So tell me, what’s more important, getting an extra 5 basis points per deal or completing one or two extra mortgages per month?
CMT: Dominion is investing heavily in television and print ads. What kind of return are you seeing from this investment?
Gary: We believe in the value of building a brand, especially in the financial service sector. Our budget for advertising over the next 12 months is well over 2 million dollars, primarily directed towards television advertising. From September 2008 to September 2009 our base buy of television advertising will make more than 140 million viewer impressions via more than 7300 commercials across Canada.
Our advertising campaign was developed to make DLC top of mind with the consumer and have the consumer recognize our name when talking to our agents. DLC has more name awareness and familiarity than most other mortgage companies in Canada. Whether the customer thinks our name is familiar because of RBC Dominion, the Dominion of Canada, Toronto Dominion, or Dominion Bond Rating, customers immediately recognize our name and believe we have been around forever. The response to our network has been amazing and all leads are given to our agents.
CMT: Agents sometimes question the effectiveness of print and TV advertising. How are you able to measure the effectiveness of Dominion’
s campaigns so you can be confident they are paying off?
Gary: Our offices are getting more walk in than ever before and our agents are finding the consumer is choosing them when they are talking with more than one agent. Most people recognize our name as familiar and it automatically builds trust, confidence and security to the consumer when choosing a mortgage.
CMT: Dominion recently launched DLC Leasing, an equipment leasing division. How does this help clients and provide an ancillary income stream to Dominion agents?
Gary: Many clients come to us to refinance their mortgage and grow their business. We can now offer this alternative financing source that is up to 100% tax deductible, does not affect their borrowing power, and does not force them to refinance their existing mortgage.
31% of existing customers are already in business for themselves. Why not offer them equipment leasing and earn up to 1000 basis points per deal? A $20,000 lease pays gross fees of $2,000 to the agent. Our agents are actually using this service to help them close more mortgages.
CMT: Gary, these are intriguing insights. Thanks very much.