Despite encountering a major roadblock, Steve Lydon, vice-president of alternative lending at NPX, fought his way to become a leader in the Canadian subprime space
Steve Lydon left Great Britain in the midst of a burgeoning career in alternative lending, only to be met with an icy reception from the Canadian lending community. But that didn’t stop him. Instead, Lydon kept his foot in the door of the mortgage industry by becoming a broker.
“I was always drawn to the subprime, alternative lending world,” he says. “My main lender as a broker was Wells Fargo. The salesperson for Wells Fargo was leaving and asked if I’d be interested [in joining the lender], and I said, ‘Yeah, that’s what I did in England.’ So that’s where it all started.”
Lydon’s regional sales role with Wells Fargo helped the bank achieve success in the Canadian market. He then moved to MCAP, where he spent a decade as national sales manager for the Eclipse product before being approached by an industry rival. In May 2017, Merix/NPX appointed Lydon as VP of its alternative lending arm.
Lydon attributes his success in the industry to his laser focus on subprime business. “That was my experience from England, and I stayed on it because that’s what I knew,” he says. “I just developed an understanding of what the alternative lenders required and focused my time virtually 100% on the alternative lending business.”
The experience he developed in alternative lending in England, combined with his work as a broker in Canada, gave Lydon a skill set that was infinitely useful.
“I was knowledgeable in what those types of lenders were looking for when you submit a deal, and I was very knowledgeable about how to package a deal, put it together and find a solution,” he says. “That’s what I was good at. That just gelled in well with the lending side because I could teach brokers what I thought was the best way to package a deal, and as it turns out, it was quite successful.”
Winds of change
Lydon acknowledges that 2017 has been a year of great change for both brokers and lenders in the Canadian mortgage industry, but he believes it’s just the beginning.
“It’s already changing because of B-20 and the more rigorous ways lenders have to look at deals and underwrite them,” he says. “The news now about the stress test come January 2018 – that’s going to change it again.”
OSFI’s latest tweak to Guideline B-20 will require a stress test for uninsured mortgages as well as insured. While the move is expected to hinder Canadians’ home-buying power, Lydon believes it will also tip the scales back toward the broker industry in its competition with the big banks.
“It’s certainly going to make it … a more level playing field [with the alternative side] – which is interesting and good,” he says. “Hopefully that will start the increase back up on the broker segment. But certainly for the alternative arm, it’s going to make it a more level playing field for the likes of NPX as opposed to the bigger players. There will be less room for buying business with low rates and higher commissions.”
Of course, adapting to the new normal won’t be without its challenges – on both the lender and the broker sides.
“The challenge for lenders will be to have the full portfolio of products and the knowledge and the means to service them,” Lydon says, “because there’s an awful lot that goes on behind the scenes with deals. It’s not a case of putting an ad out there and saying you offer an 80% alt deal at 4.5% if you can’t service it. There’s a lot involved in setting that up. It’s not just a case of saying, ‘I’m going to do it.’”
For brokers, he adds, the key to conquering the alternative space – and thus growing their business in the face of ever-tightening mortgage regulations – is knowledge of what lenders in the space are looking for.
“In the A world, it’s pretty much in a box – either it fits or it doesn’t,” he says, “whereas in the alternative world, it’s more solution-based. You’ve got to have the knowledge of what each lender is doing to do the right thing for your clients, especially with things like interest rate differential penalties. There’s such a variance in how lenders calculate. Brokers keep telling me they want to do what’s best for their clients, so you have to have the knowledge of what’s involved with each deal and each guideline.”
Taking the banks head-on
How will channel lenders continue to compete with the big banks and earn Canadians’ mortgages? Lydon points to NPX’s recent efforts to expand its market share.
“As we speak, I am hiring a national sales team for NPX, which has never happened before,” he says. “We’re growing because we know we have to.”
That growth, he adds, will be fuelled by a thorough understanding of what products are needed in the market – which involves soliciting feedback from multiple avenues.
“It’s an insight for the whole executive board as to what’s needed,” he says. “We all sit down and have input from the market. You just can’t come out with an 80% product; you have to have a full suite. There’s business for self, rentals, new-to-Canada. There’s lots of things. You have to be on top of the game and see what the market needs. A good advisory panel of brokers is always a good thing. I tap into the broker knowledge and find out what is needed.”
“I was always drawn to the subprime, alternative lending world,” he says. “My main lender as a broker was Wells Fargo. The salesperson for Wells Fargo was leaving and asked if I’d be interested [in joining the lender], and I said, ‘Yeah, that’s what I did in England.’ So that’s where it all started.”
Lydon’s regional sales role with Wells Fargo helped the bank achieve success in the Canadian market. He then moved to MCAP, where he spent a decade as national sales manager for the Eclipse product before being approached by an industry rival. In May 2017, Merix/NPX appointed Lydon as VP of its alternative lending arm.
Lydon attributes his success in the industry to his laser focus on subprime business. “That was my experience from England, and I stayed on it because that’s what I knew,” he says. “I just developed an understanding of what the alternative lenders required and focused my time virtually 100% on the alternative lending business.”
The experience he developed in alternative lending in England, combined with his work as a broker in Canada, gave Lydon a skill set that was infinitely useful.
“I was knowledgeable in what those types of lenders were looking for when you submit a deal, and I was very knowledgeable about how to package a deal, put it together and find a solution,” he says. “That’s what I was good at. That just gelled in well with the lending side because I could teach brokers what I thought was the best way to package a deal, and as it turns out, it was quite successful.”
Winds of change
Lydon acknowledges that 2017 has been a year of great change for both brokers and lenders in the Canadian mortgage industry, but he believes it’s just the beginning.
“It’s already changing because of B-20 and the more rigorous ways lenders have to look at deals and underwrite them,” he says. “The news now about the stress test come January 2018 – that’s going to change it again.”
OSFI’s latest tweak to Guideline B-20 will require a stress test for uninsured mortgages as well as insured. While the move is expected to hinder Canadians’ home-buying power, Lydon believes it will also tip the scales back toward the broker industry in its competition with the big banks.
“It’s certainly going to make it … a more level playing field [with the alternative side] – which is interesting and good,” he says. “Hopefully that will start the increase back up on the broker segment. But certainly for the alternative arm, it’s going to make it a more level playing field for the likes of NPX as opposed to the bigger players. There will be less room for buying business with low rates and higher commissions.”
Of course, adapting to the new normal won’t be without its challenges – on both the lender and the broker sides.
“The challenge for lenders will be to have the full portfolio of products and the knowledge and the means to service them,” Lydon says, “because there’s an awful lot that goes on behind the scenes with deals. It’s not a case of putting an ad out there and saying you offer an 80% alt deal at 4.5% if you can’t service it. There’s a lot involved in setting that up. It’s not just a case of saying, ‘I’m going to do it.’”
For brokers, he adds, the key to conquering the alternative space – and thus growing their business in the face of ever-tightening mortgage regulations – is knowledge of what lenders in the space are looking for.
“In the A world, it’s pretty much in a box – either it fits or it doesn’t,” he says, “whereas in the alternative world, it’s more solution-based. You’ve got to have the knowledge of what each lender is doing to do the right thing for your clients, especially with things like interest rate differential penalties. There’s such a variance in how lenders calculate. Brokers keep telling me they want to do what’s best for their clients, so you have to have the knowledge of what’s involved with each deal and each guideline.”
Taking the banks head-on
How will channel lenders continue to compete with the big banks and earn Canadians’ mortgages? Lydon points to NPX’s recent efforts to expand its market share.
“As we speak, I am hiring a national sales team for NPX, which has never happened before,” he says. “We’re growing because we know we have to.”
That growth, he adds, will be fuelled by a thorough understanding of what products are needed in the market – which involves soliciting feedback from multiple avenues.
“It’s an insight for the whole executive board as to what’s needed,” he says. “We all sit down and have input from the market. You just can’t come out with an 80% product; you have to have a full suite. There’s business for self, rentals, new-to-Canada. There’s lots of things. You have to be on top of the game and see what the market needs. A good advisory panel of brokers is always a good thing. I tap into the broker knowledge and find out what is needed.”
