Executives share strategies for brokers and borrowers
A significant boost arrived last week for mortgage borrowers and brokers alike when the national banking regulator announced it would no longer require homeowners with an uninsured mortgage to undergo a stress test when switching lenders at renewal time.
The Office of the Superintendent of Financial Institutions (OSFI) said on Wednesday that it was acting on feedback from the mortgage industry about a perceived “imbalance” between insured and uninsured mortgage renewals, and suggested it saw little risk in scrapping the stress test requirement for uninsured borrowers.
That decision is a big win for brokers as they gear up for the much-publicized renewal wave on the way in 2025 and 2026, according to a top lending executive.
Sushanta Sen (pictured, top left), director of sales at MCAP, told an audience at the Canadian Mortgage Summit that the move represented a “huge” opportunity for brokers to present as varied a slate of options as possible for their clients in the upcoming renewal flurry.
He said one of the most important factors for brokers to keep in mind on the renewal front was the need to establish contact with clients as early as possible. “I’m talking really early,” he said. “Not 90 days – even sooner than that. The reason I say this is the roads ahead are going to be very different than what happened in the last 12-18 months. Interest rates are going down – that’s for sure.
“Depending on which economist you follow, there are various predictions out there to the point of even talking about another point and a half to two points [in rate reductions] by next fall.”
Quality early contact in renewal process a must
While rates may drop further, most borrowers are likely to face mortgage renewals at rates much higher than their initial contract rate. For Sen, that increases the importance of brokers having clear conversations with their clients to steel them against the reality of elevated monthly payments.
Taking the right approach is essential. “When you get to them early – first of all, be you,” he said. “Consumers, your customers, want to talk to you about their budget, about the shock, the increase in the payments that’s going to happen.
OSFI is removing the stress test requirement for uninsured mortgage borrowers switching lenders at renewal, addressing industry feedback on barriers to securing better rates.
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 27, 2024
Read more: https://t.co/ZlCJDuWDRq
“Many can withstand that, but they need your help. They need your guidance so that when it comes up for renewal – be it three months, six months, a year or even 18 months – they know that they’re on course. The biggest missed opportunity out there is not getting to them soon.”
Agostino Tuzi (pictured, top middle), IC Savings’ vice president, credit, emphasized the size of the opportunity presented to mortgage brokers and agents as they gear up for the coming market.
Speaking on the same panel as Sen, he mentioned recent conversations with brokers about facing a “really tough” market in recent times but noted the chance for brokers to position themselves as an indispensable source of information for borrowers.
Payment shock is real, he said – “and they need to be able to turn to somebody to get them through that. This is a real opportunity. You’ve got a captive audience in these borrowers to really be that trusted advisor, help them through this storm, and build a long-lasting relationship.”
One of the most important components of maximizing that opportunity, according to Tuzi, is brokers effectively mining their databases – which he described as “gold” – to realize which clients are in need of assistance.
Real estate lawyer notes standard broker mistakes in closing process
Rounding out the panel was Shayle Rothman (pictured, top right), president of RealEstateLawyers.ca. He spoke to common missteps made by brokers in the mortgage process – and said it often begins with not taking the right approach to a client. “Whether you’re a newbie or you’re a seasoned professional, you’ve been doing thousands of deals or it’s your first one, don’t treat the clients as a number,” he said.
“Treat them as if it’s your first deal, treat them as if it’s your only deal and your reputation depends on it. The reason I’m saying that is as soon as it starts flowing through the transaction, everything has a ripple effect and you need to realize that if there’s outstanding broker conditions it’s garbage in, garbage out. So you need to manage the expectations of your clients.”
What can end up happening if those expectations aren’t set, Rothman said, is that when closing – whether for a purchase or refinance – borrowers become exasperated by delays they hadn’t anticipated. “We try to buffer things but if there are outstanding broker conditions, there’s no way for me to massage it,” he said.
“If we can’t get a hold of [the broker], I have to get the client involved in order to close those transactions. Your reputation is everything; minimize the stress for a client, try to get your documentation in as quickly as possible so that you’re not the hold-up of a transaction.”
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