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Manulife Bank is fast becoming an essential broker lender thanks to its competitive rates and balance sheet products.

Those products should be in high demand this coming year, especially given National Bank’s exit from the channel. That includes its most recent rollout announced last week, the Manulife One for Small Business Owners.

This product’s hallmark is flexibility. Well-qualified BFS (business for self) clients can qualify with TDS ratios up to 69%.

Moreover, for clients meeting the following criteria, TDS can exceed 70% if:

  • Their net worth is at least 2 times the loan amount
  • Their liquid assets are at least 1.2 times the loan amount (excluding the subject property)

In exchange for these looser qualifications:

  • The maximum loan-to-value is 65% instead of 80%, with 50% maximum for the revolving LOC
  • The LOC rate is a bit higher (prime + 0.70% instead of prime + 0.50%)
  • The rate on the optional 5-year fixed sub-account is about 40 bps higher

Other benefits:

  • There is no rate surcharge for refinances
  • The LOC’s minimum interest payment can be capitalized (i.e., made by the LOC itself)
  • Maximum amortization on the fixed-rate sub account is 30 years
  • The 5-year fixed portion is qualified at the contract rate, not the much higher BoC benchmark.

Keep in mind:

  • The client’s net business income is verified using an NOA and T1 General
  • Applicants must be in business 2+ years to qualify under this program
  • The revolving account is qualified using the BoC’s benchmark rate
  • Maximum loan amount is $1 million
  • The property must be owner-occupied
  • The product is not available in Quebec at this time
  • A $14 monthly fee applies for the M1 ($7 for those aged 60+). It includes comprehensive e-banking.

All in all, the M1, SBO edition, is a strong option for business owners who write down much of their income and need some qualification leeway. It gives them the liquidity they need to grow their businesses, and an interest-offset LOC account to minimize their day-to-day interest cost.

In 2017, Manulife’s mortgage lineup will see even more additions, namely a rental and conventional mortgage. (Its only conventional product currently in the broker channel is the M1.)

With the government’s botched insurance rule changes last month, brokers (and consumers) need all the competitive refinance and rental products they can get.

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Outsource SMThe broker business is paperwork intensive, to put it mildly. You’ve got lender approvals, provincial disclosures, service agreements, client income documents, purchase agreements, and so on and so on.

Pushing all that paper can be tedious and time consuming. Anyone trying to scale their business has undoubtedly thought about how to streamline document processing and staff accordingly. That includes the founder of DocAssist, a new-ish broker service company that we came across recently.

CMT has looked at document outsourcing services (like Nexsys Financial) in the past but the price was never right. With DocAssist, it’s much righter.

DocAssist is essentially a virtual support team at the ready to assist small, medium and even top-producing brokerages. Its goal is to save brokers processing time so they can allocate more resources to marketing and mortgage planning.

“We work with brokers who see the value in expanding their operations, either to increase revenue and spend more time advising clients, or to improve their lifestyle and spend less time getting paper cuts,” says founder Jason Henneberry.

“Our partners believe, as we do, that they can be more effective at growing their businesses by outsourcing repeatable activities and processes that often keep them tied to their desk.”

Basic membership to DocAssist gives brokers access to a variety of on-demand document management services, including:

  • CRA Notice of Assessment retrieval;
  • Title and Corporate Registry searches;
  • Client document management (sorting and labelling all inbound documentation and delivery of receipt notifications to clients and referral sources);
  • Post-funding marketing support (personally signed thank-you cards, preparation and delivery of closing gifts, welcome packages, renewal letters and other custom client marketing).

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For document retrieval, brokers are charged about the same as what it would cost to get these documents directly. DocAssist makes its money on subscription and per-file fees. For example:

  • As low as $29 per month for 10 NOA retrievals.
  • $50 per file for client document management.
  • $100 per file for client document management plus preparation of closing packages (signature-ready lender forms, disclosures & closing documents) and uploading complete compliance documents to the brokerage.
  • Professional fulfillment services are also available starting at $249 per month and $250 per instance. This includes services such as initial file review, closing package preparation (cost of borrowing disclosures, lender forms, etc…), file completion and fulfillment (managing appraisals and working directly with lenders to satisfy conditions and complete the file for instruction), and even vacation coverage.

“There’s a common misconception in our industry that in order to provide the “best service,” a broker needs to be involved in the entire mortgage process,” Henneberry says. “This belief has so many of us justifying why we aren’t willing to let go and we try to do everything ourselves.”

Henneberry estimates that, on average, his 200+ clients save over five hours per file. “…This time can be re-allocated to more productive, business-generating activities,” he adds.

On the issue of security and confidentiality, Henneberry openly acknowledges that some have concerns about outsourcing sensitive information to a platform run by another brokerage. DocAssist operations are completely firewalled, he assures. The company carefully abides by all PIPEDA requirements and runs on a system separate from MortgagePal, the brokerage he also operates. After closing, all client information is stored with, and only accessible to, the brokerage that owns the client relationship.

At the end of the day, this type of service boils down to cost/benefit. The cost of a full-time documents fulfillment officer can range from $35,000 to $65,000 a year, and that cost is generally fixed. By contrast, DocAssist affords the benefits of variable pricing and outsourced HR headaches. For that reason, it’s probably worth a look for anyone (especially smaller shops) thinking of hiring an assistant.


Sidebar: Interested brokers can sign up for a 15-day free trial with unlimited NOA retrieval at docassist.ca.

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CIBC-Mortgage-AppYesterday we looked at Hello Home, CIBC’s new mobile mortgage app. That story touched on how and why CIBC built it.

Today we’ll examine what this technology means for the bank and for others in the mortgage business. Once again, we spoke with CIBC’s in-house tech sage, Aayaz Pira, VP of Digital Channels.

Here were his thoughts…

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On how realistic it is to expect full completed applications from a smartphone

  • “…What we’ve done is streamline how many [fields] you have to fill out with your thumbs,” Pira says. “We’re grabbing a lot of the [required] information from the pictures of documents [clients are] sending to us.”
  • Note: CIBC employees manually extract information from these photographed documents and enter it into the client’s database record to save the client time.
  • “When we did our analysis…I think we said that out of the 6-8 documents you have to submit…they already have 75% of the information that’s required in a mortgage application. So why [ask]…people to duplicate that information? We should just grab that information from the documentation versus asking them to fill out a massive form.”
  • “So we’re getting 75% of the information from the documents and we’re only asking for the 25% that we need in addition to that” (making the new phone app much more abbreviated than CIBC’s normal mortgage application).

On how long it takes to complete its smartphone application

  • “…When we did our focus groups it took about 15 minutes end to end…if you had all your documents with you…”
  • “But typically that’s not how people complete a mortgage application.”
  • “We built in ‘save and resume’ because, if you need an employment letter (for example), you’re going to need to get that, and if you need your T4 from last year, you’ll need to find that.”
  • “When we did our focus groups and client sessions…we didn’t see clients who wanted to sit there and do it end to end right away. There are logical steps. [People] wanted to come in and out of the app.”
  • “Typically today, if you’re applying for a mortgage [by telephone] you have to listen to 20 minutes of [CIBC’s] terms and conditions and accept via the phone.” With the app, you simply read those terms and electronically consent, which can be a big time saver.

On what happens after submitting the application

  • “You have a choice of when you want a callback from your mortgage specialist” for the next step.
  • “You never have to see the person or go into a banking centre.”
  • “We get your [ink] signature when you go in front of [your] lawyer.”

On whether there are security concerns about photographed documents

  • “No, not at this point. Our legal and privacy team…have been supportive.”
  • “Because we’ve developed a secure mechanism to fire the documents back to CIBC…we don’t see much risk.”
  • Some lenders balk at photographed documents but fax or email is no safer. Fraudulent document altering “can be done by fax (or email) as well.”

On whether downloading a phone app is a hindrance

  • “I think when clients find value in something that makes [a process] easy for them, I think they’re willing to download that.” (Here’s the Apple download link if you’re interested).
  • “We’re adding a lot of incentives into it…The rate we’re offering in the mobile app is a better rate (at least 5 bps better) than you can get by just calling into the contact centre. We also waive some of the fees associated with the mortgage process as well.”
Aayaz Pira, CIBC

Aayaz Pira, CIBC

On why CIBC didn’t add Hello Home functionality to its existing banking app

  • “Because we don’t know how this is going to work, quite honestly.”
  • “We are convinced that this is the right step forward but I didn’t want to entirely disrupt the mobile banking roadmap that we’re currently working on.” (One example of that roadmap is the ability to open a deposit account by smartphone. Deposit gathering is “more core” to CIBC’s business than mortgages, at least as of today.)
  • “If this becomes core to our business, we will definitely ingest it into our full mobile app.”
  • “This was a way that we could put something out in an agile, quick-to-market way.”

On CIBC’s Dedicated e-Mortgage Specialists

  • “We currently have a mortgage call centre…to initiate and adjudicate mortgages by telephone.”
  • A subset of those call centre advisors have been assigned to take mortgage applications from the app.
  • These are generally salaried CIBC employees versus commissioned salespeople (unlike CIBC’s 1,000+ mobile Mortgage Advisors).
  • “They sit in our contact centre” and work set hours each day and send auto-responses after-hours.

On whether this will cannibalize CIBC’s other channels, including its 1,100+ branches

  • “That’s not a concern [but] it’s always a topic of conversation…We have strong support from [management].”
  • “We believe this [app] can be a companion for our Mobile Mortgage Advisors in the future,” who can use it to keep in touch with clients by chat, let them upload documents, send them status updates, etc.
  • “We’re doing the same thing with our digital account opening capability for deposit accounts,” which is a “direct to consumer” technology.

On What’s Next

  • “We have a bunch of capabilities and use cases we want to build into future phases, but we want clients to tell us what they actually want. We’re going to build as we go along, while getting real-time feedback from our clients.”
  • “As we build future iterations we’ll start to automate more and more…reduce some of the overhead for our e-mortgage specialists and make it really easy for our clients.”
  • “We did tinker with machine learning and deep learning through taking a picture [of a document] and then actually grabbing all the information and populating a database with that information…We’re not doing that today but that technology exists, we know how it works, we know we want to use it.”

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This Author’s Take

I hesitate to use the word watershed, but that’s likely what this technology is. And it’s not so much coding brilliance (as functional as it is, the app isn’t overflowing with novel spellbinding technology).

Rather, it’s the fact that a major Canadian bank ignored potential cannibalization of its existing channels (our words, not CIBC’s) by going direct to online consumers. That underlines, bolds and italicizes the importance of e-mortgage channels in 2016.

This little app will push Canadian borrowers further along the online mortgage adoption curve. As more early adopters arrange their mortgages online, we’ll start to see front-runners in this space emerge, right before demand surges in (perhaps) two to three years.

CIBC’s CEO Victor Dodig has clearly articulated that the bank wants to drive more customers through digital channels. And who can blame him? Automation and salaried employees (versus commissioned salespeople) will become a necessity for maintaining margins. As long as the bank provides a killer user experience and maintains high cross-sell, the future looks bright for CIBC’s e-mortgage channel—especially given its first mover status among the Big 6.

Over the last year the mortgage industry has awakened to innovations like the Rocket Mortgage. Hello Home is potentially another such landmark that lending historians will look back on when debating the question, “What triggered the acceleration in online mortgage originations?”

 

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There’s a digital revolution underway in mortgages, and more people realize it every day.

But some believe that stodgy old banks are behind the Internet curve. They claim that big banks are slow to adapt, that they steer more like a supertanker than a speedboat and that banks would rather shelter their precious branch networks from the margin threat of online channels.

Well, times are changing, my friends. When CIBC launched its mortgage app two weeks ago, it put the mortgage industry on notice that technological competition is en route, and it’s coming hard and fast.

Named “Hello Home,” CIBC’s new app is something you might expect from a nimble fintech startup. For a bank, it’s definitely counter-convention.

Before we go any further, let’s review what the app does. In brief, it lets borrowers:

  • Have a dedicated mortgage specialist assigned to them through the app
  • Message that specialist anytime with questions
  • Negotiate their mortgage rate with that specialist through chat, without ever speaking to them
  • Submit a streamlined mortgage application on their smartphone
  • Save and resume that application
  • Apply with a co-applicant, who can use their own smartphone
  • Take photos of all documents
  • Securely upload those documents to CIBC
  • Electronically agree to CIBC’s terms (no scanning or faxing a signature)
  • Get a special discounted mortgage rate.

We’ve seen some of this technology on broker and lender websites before, but not from a major Canadian bank, not in this slick of a package and not on a smartphone.

I spoke with CIBC’s VP of Digital Channels, Aayaz Pira, for the inside take on this important launch. Here’s what he shared…

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On What Prompted the App

  • “We get an incredible amount of traffic to our mortgage pages on cibc.com,” Pira said.
  • “What we used to do was use those as leads for our Mortgage Advisors.”
  • Management felt it important to let people who “self-initiate” the mortgage process, and who didn’t want to visit a branch, continue the mortgage sale online.
  • “Our executives visited a few banks in Europe and observed [how those banks were using] digital platforms to support the mortgage process.”
  • In particular, “Allied Irish Banks was doing something interesting with mortgages and that’s where some of our inspiration came from.”
  • “We wanted our [online platform] to be mobile first because we know…growth of mobile in our client base is exploding…[The customer’s] phone is in their pocket at all times, so why not make use of that?”
  • More than 80% of people use mobile phones in their home-buying journey, Pira added.
  • “Outside of mortgages, more than 85% of bill pays and transfers are already done digitally.”
  • “We know that clients who use our digital channel are happier clients and have deeper relationships with our bank.” (In addition to having a higher NPS, or net promoter score.)
  • Pulling all that together, we ran a six-week sprint to re-imagine the home-buying experience of our clients.”
  • Aayaz’s team developed a proof of concept and showed it to the bank’s executives. The mortgage team said, “This is amazing. We should definitely do something with this.”
  • “Once we got the executive buy-in and the sponsorship from the mortgage product team, we sent 10 people or more, a cross-functional team, into our lab and said, ‘You guys are going to stay here for the next three months and just build it. So we had developers, designers, product people, strategists…all co-located in a room, just bringing this to life.“

On what frictions exist in today’s mortgage processes

  • Pira cited three key frictions that CIBC wanted to overcome:
    • “The amount of paper.”
    • “Knowing where you are in the [mortgage] journey.”
    • “Having to go into a branch or banking centre…When you start the mortgage process, you speak to somebody or you go into a banking centre and there’s so much back and forth.”

On the App’s First Iteration

  • “The product we put out to market is…a minimum viable product.”
  • “We brought this to life in about four months.”
  • “It’s not [yet] the full set of use cases that we have imagined.”
  • The app was launched on the iPhone. An Android version is coming soon.
  • “What we’ve done is put a really beautiful and sexy digital front end on a [workflow] process that exists [already].”

On Some of the App’s Capabilities

  • “The mortgage process is obviously complex so having a human being…you can chat with is really important. So, in-app chat is a core feature—being able to speak to a mortgage advisor who is dedicated to you.”
  • The document imager is one of the coolest features. “What we’re doing…is using a camera to snap a picture [of a document] and securely send it over to the mortgage specialist.”
  • Keeping clients up to date is also vital. “What we’ve tried to do is show you that, these are the five steps. This is where you are in each of the steps. There are notifications and messaging back and forth to let you know when a step is completed, what the next step looks like, and when you can expect to have something back from the mortgage specialist.”

This rundown gives you a sense for the what and why behind CIBC’s new app. Tomorrow we’ll look at how it could change the bank’s business, some potential areas of concern and what this might mean for the rest of the mortgage industry. 

If you want to learn more in the meantime, CIBC and Scott McGillivray are showcasing the app at 7 p.m. May 31 on Facebook.

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Manulife-BankA Canadian financial powerhouse is endorsing the mortgage broker distribution model. Manulife Bank, a subsidiary of Manulife Financial — one of Canada’s largest companies — will start making its mortgages available through brokers in 2016.

The launch is expected to happen early in the new year, in time for the all-important spring market. The move gives brokers access to the popular Manulife One (M1) product as well as Manulife Select mortgages (only high-ratio Manulife Select mortgages for now).

The news is a major win for the channel. Manulife is a globally respected brand and a strong balance sheet lender. Its feature-rich product line will augment the superior choice that brokers already afford consumers. Its entrance is a vote of confidence for mortgage brokers, who the bank says are uniquely adept at selling specialized financial products like the M1.

But unlike most new players in our space, Manulife says it’s coming to the channel from a different angle. “We want to help brokers help people get out of debt,” says Jeff Spencer, Vice President, Retail Sales, Manulife Bank and Trust, and a former mortgage broker himself. “Manulife One is not just a line of credit. It’s a way for clients to manage their financial lives.”

Manulife-OneSpencer is partly referring to the M1’s interest offset functionality, which lets you combine debt and savings/income into one account. Incoming cash flow (like your paycheque) reduces your debt balance, even if only temporarily, in order to save interest. Here’s more on that.

The M1 also features:

  • A revolving line of credit
  • A LOC credit limit that grows automatically with each mortgage payment
  • Multiple sub-accounts for multiple fixed-rate and/or LOC portions
  • Full banking with the second-biggest ATM network in Canada

To date, only a small minority of brokers have been able to refer business to Manulife, and on a very limited basis with limited compensation. Under the new model, Manulife will pay finders’ fees “competitive with the rest of industry,” including paying brokers on the authorized limit of its Manulife One account, and potentially paying a bonus for deals with a minimum amount in a fixed-rate M1 account.

The M1’s two main negatives are the lack of a discounted variable-rate option and its $14 monthly fee. That fee includes full banking and unlimited Manulife One sub-accounts, however, whereas its arch-rival National Bank’s All-in-One has a $6 fee per account.

Manulife’s entry will create formidable competition in the broker channel for National Bank, the only other national lender with an interest-offset product. It’ll also take a bite out of Scotiabank’s and MCAP’s volume, each of which distribute their own readvanceable mortgages through brokers.

Manulife will work with select brokers only and require them to go through a 2- to 3-hour professional development process. “We want to make it a bit more of an exclusive club to deal with Manulife,” Spencer says. Brokers can get more info at Manulife’s CAAMP Expo booth in Toronto on November 15 and 16.

The company plans to outsource its underwriting to a third party, just like TD has done with First National. Manulife couldn’t disclose who its underwriting partner is at this point but promised to announce it on or before the official broker launch.

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For small- to medium-sized brokers, there are few services a broker network can provide that are more valuable than a good centralized underwriting hub.

Underwriting hubs afford brokers a way to

  • access lenders that they might not have status with
  • receive guidance on challenging deals
  • get better pricing, faster turnaround and better compensation

We spent an afternoon on Invis-Mortgage Intelligence’s deal desk to see if these hubs are really all they’re cracked up to be. Here’s that story.


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Fisgard Spreads East

FisgardFisgard, one of the nation’s largest private mortgage investment corporations (MICs), is expanding its business eastward. It launched in Ontario, Saskatchewan and Manitoba this past Monday.

It’s an important move for the 21-year-old lender, which has limited itself to the BC and Alberta markets for two decades. Fisgard’s mortgage features will be the same across the country, and those features are now more compelling than ever — for a private lender anyway.


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Radius’s New ARM + Monoline Q&A

To some brokers, Radius Financial is perceived as just another monoline lender selling plain-Jane insured mortgages. Until now, its shortage of competitive products had a lot to do with that. But Radius took a big step on Monday by adding a range of new mortgages.

Headlining its new lineup is a red-hot prime — 0.70% adjustable rate mortgage (ARM). It’s a high-ratio full-frills full-comp product with 20/20 prepayment options and a standard (i.e., fair) penalty. Radius also added a new conventional mortgage line with better, albeit not spectacular, pricing.

These moves will only help Radius, whose submission volumes rocketed 300% last year versus 2011 — albeit from a relatively small base. That growth ranked it second in the industry among the top 20 lenders. (It opened up to all brokers in 2011. Previously, it was a proprietary lender for Mortgage Architects.)

To handle that growth, Alex Haditaghi, Chairman and Founder of Pacific Mortgage Group (Radius’s parent) says the firm has hired 18 staff in the last 12 months. That includes top underwriters lured from two of the four biggest broker lenders.

While researching this story we had an informative exchange with CEO Ron Swift about Radius’s funding and strategy. His feedback also reflected what other monolines face these days when putting out competitive products.


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