Mortgage professionals may be feeling angst these days with origination volumes well down from last year’s highs. But it’s in times like these that the value prospect of a broker is at its highest.
That was one of the key messages from the 2023 FSRA Exchange Event held on Thursday.
“We’re in interesting times right now…it’s never been more complicated, I think, to be a homeowner,” noted Huston Loke, Executive Vice President, Market Conduct at the Financial Services Regulatory Authority (FSRA).
He cited new programs and regulations buyers need to navigate, including the First-Time Home Buyers’ Tax Credit and the recent foreign buyer ban on certain properties, along with other headline-grabbing hurdles such as inflation and higher interest rates.
Homebuyers are entering into “probably the largest obligation that they will ever enter into over their life,” Loke added. “And that’s why mortgage brokering is just so important.”
But how can brokers ensure they’re at the top of their game and bringing top-notch and appropriate advice to their clients?
Several industry experts brought their ideas to the table during a panel discussion specifically on mortgage brokering.
Veronica Love, Chair of Mortgage Professionals Canada and SVP of Corporate Development at TMG The Mortgage Group, said this is not the year for mortgage brokers to be “stuck” servicing only a very specific type of client.
“If you only service clients in one realm, you’ll be turning away more people than you’ll be servicing. And we want to be full-service providers,” she said, noting this includes being able to handle not only “A” lending deals, but also those in the private and alternative spaces.
She also spoke about the importance of having the client sign a “mortgage reasoning letter” that outlines the advice that was provided by the broker and the scenario that the client agreed to.
“The broker signs it, the consumer signs it, and that way there is full transparency, good communication and a full understanding by the client,” Love said, adding this can be especially important in the world of private lending where penalties or fees may be involved.
Sadiq Boodoo, president of the Canadian Mortgage Brokers Association (CMBA) and President and CEO of Approved Financial, said there are three things all mortgage professionals need to know well in order to succeed: your lenders, your products and your client.
“Without those things, you cannot give advice,” he said. “The typical sales process goes from receiving, understanding, helping, then following up. What we need to do is spend more time in that understanding phase.”
Brokers who thoroughly understand their lenders, their products and their clients are then in the best situation to offer the most suitable products for their clients’ needs, he added.
In the alternative and private lending space, he said it’s “absolutely critical” for brokers to identify an exit strategy for those clients in order to “move them into more preferable lending options.”
From the regulator’s perspective, Huston said mortgage agents and brokerage owners should also be asking certain questions to ensure everything they are doing is, at the end of the day, in the best interest of the consumer.
That includes whether their metrics for success are purely financial or involve other measures tied to the success of the customer. Or whether their growth targets are compatible with putting customers in the right products, along with reviewing the kind of training, education and mentorship programs the brokerage offers.
“To that end, when FSRA thinks about how we can advance this forward, we think about things like mortgage suitability and principal broker oversight, and how we can bring those two concepts into play to strengthen the delivery of the service that’s of critical importance to the customer,” he said.
“Brokers are equipped to do this because brokers are exactly that, brokering a deal. We look after the Canadian consumer in the process, but we also have to look after our lender partners and make sure it’s a suitable fit for the lender.”
Love added that lenders have been key partners in raising the standards set for mortgage professionals by becoming more selective about those they choose to work with.
“One of the biggest trends I’ve seen over the past two years is lender partners now saying, we don’t want to work with all of you. We want to work with the best of you,” she said. “So they are self-correcting the industry and making sure that people rise to the occasion and have the professionalism they need to be good partners.”
The conference took part just as FSRA is overseeing the implementation of a new two-tiered licensing program for all Ontario brokers and agents.
Under FSRA’s new licensing system, coming into effect in April, all brokers/agents wanting to arrange private mortgages and investments for private investors and mortgage lenders will require a “level 2” licence. Those with a “level 1” licence will be restricted to arranging mortgages with financial institutions or CMHC-approved lenders. Registration for the Private Mortgage Course is currently available through several accredited providers, including Mortgage Professionals Canada.
“The new requirements will help ensure consumers and investors receive appropriate mortgage advice and product recommendations when dealing with private mortgages,” FSRA said in its material for mortgage professionals.
Hali Noble, SVP of residential mortgage investments and broker relations at Fisguard and a founding member of the Canadian Alternative Mortgage Lenders Association (CAMLA), said she sees the new licensing requirements as a positive step forward in encouraging more education for those working in the private or alternative lending spaces.
“I think education is always good, whether you’re dealing with a private investor or investment entity of different kinds or a Mortgage Investment Corporation (MICs),” she said.
“For many years, of course, the MICs and the MIEs [Mortgage Investment Entities] in the alternative space have been doing the risk assessments for our investors,” she said.
“We do all the work there, but having some education and being able to teach our professionals what to look for, how to assess suitability, risk, etc., I think is a good thing.”
