Tag: finance

Mortgage industry’s future

(photo by Nick Youngson / Alpha Stock Images)

The next decade is going to see an evolution in how Canadians obtain mortgages. These shifts will transform the experience for both the mortgage professional and, more importantly, the borrower. Here’s where things are now and what I foresee.

The mortgage industry

A borrower can go to three sources to get their mortgage: account managers at banks, mortgage specialists at banks and mortgage brokers. (I use “bank” as a catchall for financial institutions, including credit unions and trust companies. Financial planners are not included because they represent such a small slice of the pie and refer files to mortgage specialists.)

Employees, particularly account managers, are a bank’s frontline team for mortgages. These salaried employees get incentives if they hit sales targets, but they are, by definition, jacks-of-all-trades. They help with a client’s routine banking needs, open investment accounts, provide general advice and also write mortgages.

Because mortgages are complex, account managers are encouraged (and often required) to send their mortgage applications to a mortgage specialist. This is good policy, because it is best to have an expert eye review something as significant as an average family’s most significant investment and the average bank’s bread-and-butter. Also, because there have rightly been many – one expert told me there was a total of 168 – new rules since the 2008 financial crisis, it has become increasingly difficult to “dabble” in mortgages.

Given these developments, a consumer would be wise to trust the most important financial transaction in their life to a professional who has expertise in a single field, rather than a generalist who is doing mortgages off the side of their desk.

Of course, every bank employs a network of mortgage specialists, with each bank investing varying amounts of resources into training. Still, a mortgage specialist is just that: a bank employee who specializes in mortgages.

Most banks’ mortgage specialists are commission-based and can make a good living from their work. But remember: bank specialists work for the bank, not for you. (They also don’t require a licence or any accreditation to write up your mortgage application.)

Mortgage brokers are independent professionals whose unique responsibility is finding the ideal financial solution for each client, not whatever rate or product their bank is pushing on any given day.

A mortgage broker is a professional who has successfully completed an educational process, passed an exam and undergone comprehensive assessments, including biannual criminal background checks. Additionally, continuing education is required to ensure that mortgage brokers remain informed of the latest developments in this ever-changing industry. Mortgage professionals at the banks, however well-intentioned or however closely they follow the business pages, have no such requirements.

It is commonly said that a mortgage broker “shops around” for the best rate. This is partly true, but there’s more. Brokers know the rates and conditions of every lender. What we do with that information is tailor each client’s need with rate and product choices, allowing them, with their mortgage broker’s guidance, to make the most informed, appropriate decision for what best suits them.

For example, a broker might recommend a more flexible mortgage product with a slightly higher-than-base rate versus a lower rate with restrictions. This is crucial because, again, everyone’s case is unique. Circumstances change. Relocation is sometimes unavoidable.

Even better: for most mortgages, a mortgage broker’s service is provided at no cost to the borrower. Brokers earn their keep from the lender that finances the borrower’s mortgage.

Where is industry headed?

Account managers at banks will continue to write mortgage applications because this remains an efficient use of the bank’s resources. The banks have been building increasingly sophisticated mortgage application platforms for their mortgage specialists and account managers to use. These easy-to-use apps are straightforward and allow their employees to quickly and efficiently pull together all of the necessary information to verify credit data and employment, assess risk and review the property, all at the click of a few buttons.

The banks built these systems so that employees with less expertise (and lower salaries) can replicate or reduce the work of more highly trained professional staff. And, since mortgage specialists are largely commission-based, it seems to me that banks will increasingly depend on salaried individuals who read from their computer screen while dealing with mortgage-seekers.

The obvious issue with an account manager reading off a screen is that, at any point in time where real advice is required, the bank employee will not have the training or experience to provide it.

There is, of course, still currently a place for bank specialists. The best of them can and do give the best service possible to their clients.

My prediction is that the mortgage specialist role will be curtailed until only a few high producers remain. Banks will probably continue to make it easier for mortgage specialists to do their jobs, allowing them to take on more files and the best will grow and the worst will drop off.

Don’t misunderstand me. There is a place for technology, obviously, in the process. In fact, mortgage brokers, by necessity, are entrepreneurial

and resourceful, and have created economies of scale, processing documentation and applications more efficiently than ever. For instance, my team and I have automated the process of 70-plus internal steps per client throughout the mortgage process, streamlining everything for ourselves so that our clients can benefit from the most comprehensive and individualized experience we can offer. This involved a lot of time up-front, but it means that our clients receive the service they want, tailor-fit to their specific needs.

My prediction for mortgage brokers is that there will be a culling of the herd, just like with mortgage specialists. A broker, and any consultant in this day and age, needs to innovate and use the newest technologies to stay relevant in the eyes of borrowers. Not just that, the brokers themselves need to know each lender’s products and how to get files approved.

Superb knowledge, a fast and efficient process, and amazing customer service will become the bare minimum in the future, and the specialists and brokers who “dabble” or aren’t 100% committed to improving their craft will get left in the dust.

Eitan Pinsky is principal of Pinsky Mortgages, a Vancouver-based mortgage broker.

Praise for whistleblowers

Alan Le Fevre, president of the Wallenberg-Sugihara Civil Courage Society, and Acting Mayor Raymond Louie, right, with the City of Vancouver’s proclamation of Raoul Wallenberg Day. (photo by Masumi Kikuchi)

“If we had a society that was free from embezzlement, free of theft, free of dishonesty, free of unethical conduct, we wouldn’t need whistleblowers. But, unfortunately, we are not a perfect society,” said Ujjal Dosanjh in his keynote address at the 13th annual Raoul Wallenberg Day event, which was held on Jan. 14 at the H.R. MacMillan Space Centre.

Dosanjh, a former federal cabinet minister, B.C. attorney general and the province’s 33rd premier, was, in 2015, the inaugural recipient of the Wallenberg-Sugihara Civil Courage Society’s Civil Courage Award. He was recognized for “his great courage in the face of escalating violence by extremists in the Indo-Canadian community that arose from conflicts that had erupted in India,” said WSCCS board member Ana Policzer in her remarks on Sunday.

The society hosts the annual Wallenberg Day event and, this year, they honoured Vancouver-based lawyer Alayne Fleischmann with the Civil Courage Award.

Fleischmann was born in Terrace, B.C. She got her bachelor’s degree in philosophy from the University of British Columbia, her master’s in international and comparative law from the Institute of International and Comparative Law, Cornell Law School and Université Paris (Sorbonne), and her juris doctor degree from Cornell. In 2006, she was working in quality control at JPMorgan Chase in New York. There, she discovered and tried to stop what she described as “massive criminal securities fraud” – mortgage operations similar to those of many other financial institutions, which led to the 2008 economic collapse. Her efforts resulted in a $9 billion fine being levied on JPMorgan Chase, but no one from the bank was ever prosecuted. She moved back to British Columbia in 2008.

In a 2014 Rolling Stone article, writer Matt Taibbi goes into great detail about Fleischmann’s experiences, the difficulties she faced in bringing the truth to light and the limited impact the truth played in whatever minor justice was carried out against all the banks guilty of mortgage-related wrongdoings. In effect, Taibbi argues, the U.S. department of justice “struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. The banks paid big fines, without trials or even judges – only secret negotiations that typically ended with the public shown nothing but vague, quasi-official papers called ‘statements of facts,’ which were conveniently devoid of anything like actual facts.”

The full Rolling Stone article can be accessed via wsccs.ca/wallenberg-days/2018. At the Wallenberg Day event, organizers screened a 2014 interview with Taibbi and Fleischmann by Democracy Now! WSCCS president Alan Le Fevre also spoke briefly about Fleischmann’s actions and why she was chosen to receive the Civil Courage Award. Unfortunately, Fleischmann could not accept the award in person because of the ongoing litigation.

In his remarks, Dosanjh saluted whistleblowers. “In Canada,” he said, “we don’t know too many of our own heroes…. But we have them. One that we have amongst us in Canada is the honouree tonight, Alayne Fleischmann.”

There are monetary costs to illegitimate or immoral actions, Dosanjh said, but such actions also “jeopardize the health, safety and well-being of the employees, the customers and the society of the institutions.”

Whistleblowers like Fleischmann set out to right a wrong, he said. They are morally compelled to the point where they take the “risk of losing their careers,” “being ostracized” and having rumours spread about them to “delegitimize the truth that they’re trying to tell.”

After such individuals come forward, he said, “life is never the same. You lose friends, you lose relationships, obviously you lose a job possibly, or you’re not promoted or you’re demoted…. And, sometimes, it can be dangerous physically. People have been known to be killed, at least across the border, for trying to expose the truth. Karen Silkwood comes to mind.”

Dosanjh warned that whistleblowers aren’t always correct, however, giving the example of eight B.C. health ministry workers who were found to have been wrongly dismissed in 2012, amid allegations of wrongdoing. “It’s a risky business,” he said. “You’re playing with your own life but you’re also playing with the lives of others you’re trying to expose.” So, you have to not only have the courage to speak up, he said, but the wisdom to know when to not do so, or when to investigate further before doing so.

Several audience members gave their take on corporate and government corruption in the question-and-answer period. Dosanjh said people need to get more vocal about these issues. “There is no silver bullet to deal with any particular issue,” he said. “It’s just a matter of becoming more active politically and raising your voices.”

To an audience member who decried greed as criminal, Dosanjh said, “If you say greed is the basic urge to make more money, that shouldn’t be a crime…. You want to make money, you want to work more … that’s what keeps the world going…. Illegal greed should be a crime – and it already is! The fact is we’re not prosecuting criminals, we’re not apprehending them, we’re not investigating them as much as we should, and we’re falling down in some respects.”

The afternoon event also included the reading by Acting Mayor Raymond Louie of the City of Vancouver proclamation of Jan. 14 as Raoul Wallenberg Day. He thanked event organizers and attendees for taking the time “to remember and to also recommit … with this ongoing effort to have a better world overall.”

The WSCCS is continually “seeking to identify people who, at significant personal risk, have helped to improve or save the lives of others by going against unjust laws or conventions.” For more information, visit wsccs.ca.