Leading lenders on the value of specialized lending solutions

Fergal: [00:00:24] Hello again and thanks for joining us on another edition of CMP TV. I'm Fergal McAlinden, CMP'S news editor. It may seem hard to believe, but the year is already drawing to a close, although there's still plenty of time for more twists and turns in Canada's mortgage market as we enter the final months of this year and with 2023 just around the corner. We're speaking today with top executives from two of Canada's leading lenders. To hear their thoughts on the year to date and what could be in store for the future. Joining me on the show today, I'm very pleased to welcome Emily McLaughlin, senior Manager, mortgage underwriting at CWB Optimum Mortgage and Grant Armstrong, Director of National Sales and Lending at Community Trust. Thanks to you both for joining us today. How are things with you?

Emily: [00:01:03] Great. Thanks for having us, Fergal.

Grant: [00:01:06] Fantastic. Thank you.

Fergal: [00:01:08] It's great to have you both on the show. And Emily, I wanted to start with you. I mentioned the 2022 market, and it's hard to believe that we're coming towards the end of the year. But for you, what have been some of the main challenges that you've seen in the market this year to date, and how have you been dealing with them?

Emily: [00:01:23] Good question, Fergal. So a lot of our challenges have actually been the result of some of the rate increases. So let's start off with the affordability challenges. We've overcome this by taking a holistic approach to each deal and asking the right questions to make sure that we truly understand the affordability of the client. We want to work with the broker to make sure that we are putting the client in the best financial situation. Another challenge would be the volatility of the Canadian housing market. So we follow price trends and we try to get ahead of potential fluctuations. We also paid attention to the dates of the comparable sales and appraisal. So making sure that, you know, it is reflective of where we're at in today's market. And the third challenge, I would say is working with our clients once they come out for renewal and it really different rate environment. So it's pretty tough to explain to the client that mortgage payments have increased after benefiting from lower interest rates. So it was a Schedule one bank. We try to work with the client to explain different prepayment options. There's features of blend and extend portability, monthly payment frequency changes that we can do, and we also have fee and no fee options to work with the client on making sure that that monthly payment stays affordable for them.

Fergal: [00:02:38] Yeah, and it's interesting that you mentioned that affordability issue because we were at NBC Vancouver very recently, and that's one of the topics that came up time and time again was affordability being such a huge challenge in this market. Is that something that you've noticed as well, or what have been some of the main challenges you've been faced with?

Grant: [00:02:54] Absolutely. Affordability is going to be probably the number one challenge of 2022 and probably leak into 2023. So we've been very fortunate to be able to provide some unique financing options using the non-traditional income methods that we have and really focusing on helping Canadians maximize their cash flow opportunities and support them when they need help. We've seen obviously an increase towards refinance transactions. So some of our products and extended amortization help clients in those situations. But the number one challenge that we saw through it this year is just the speed at which change is happening from interest rate hikes to volatility and pricing. From the day a client applies for a mortgage to the day it funds, so many things have changed. So that's the biggest challenge that we've seen in 2022.

Fergal: [00:03:41] And obviously a lot of our viewers today will be mortgage brokers. Emily, is there anything in particular that you've been keeping top of mind in terms of helping them navigate the challenges of this market?

Emily: [00:03:50] Yeah, well, just first of all, by being human and showing empathy and kindness towards the challenging market, as Grant mentioned before, it is ever changing. And we see ourselves as the educational lender in the alternative mortgage space. So we aim to bring value where we can. It will look really different. So sometimes it might be our BDMs or mortgage underwriters working with mortgage brokers to help structure a deal to make sure that we can get that done, or it might even be providing insight to different referral sources such as accountants or trustees, because the phone isn't ringing like it used to in the previous years. Another thing that we're doing is we've got senior leadership out on the road to take along with our sales team so that we can really put close ear to understand the brokers business and the different challenges they're having them having so that we can better support our brokers. We just want to make our brokers look like rock stars.

Fergal: [00:04:43] Good stuff. For Grant. As Emily said, the phone maybe isn't ringing as much for brokers as it has in the past couple of years. Anything that you've been doing in community trust to navigate that.

Grant: [00:04:53] So we've been doing the same thing that we have been for the last couple of years, which is training and educating. That's the number one thing that we really believe that brokers need and they want. The markets change, qualifying criteria change, lenders change alt lending. Today is different than it was five and ten and 15 years ago. So we want to get out in the marketplace and actually provide as much coaching. We do have a number of one on one trainings, group training, seminars, webinars. We find information is key. Information is the best way to support our partners and that's what we're doing and we are going to continue to double down on that in 2023. The more we can get out in the marketplace, the more one of our BDMs or inside sales teams or mortgage advisory team can be out with our partners educating them about community trust, the market, alt lending, everything in between. That's how we're going to continue to help them.

Fergal: [00:05:41] And you both mentioned how much has really been packed into this year, and it's hard to believe that it's all taken place over the course of less than one year. But Emily, we're obviously moving into 2023 now. Is there anything around the corner that you're keeping an eye out for that you think is going to be a big factor in the market next year?

Emily: [00:05:56] Let me grab my crystal ball. So forecasts are pointing to at least 1 to 2 more rate hikes before the end of the year. If we see inflation go down, we believe that 2023 will remain stable. We've got a lot of change. Ultimately, it depends on how quickly inflation comes down and how aggressive the Bank of Canada gets. One thing we can say for certain is that 2021 had rock bottom rates and the level of the market was nuts. So it's not something that we should really be comparing to today. We have to find a new normal. And whether that's 20, 23 or later on, it's just not fair to compare it to 2021 as we have in the past.

Fergal: [00:06:36] Thanks, Emily and Grant, I'm going to ask you to reach for your crystal ball now. Anything that you think is coming down the line.

Grant: [00:06:41] Yeah, absolutely. No crystal ball here. But my best guess is that I've got up and educated information is I think you're going to continue to see some strength in the market. It's going to we're going to have the rate hikes. We're going to have some volatility. But you still see Canadians wanting to buy homes. We still have supply issues in the marketplace. You already can see in the Toronto condo market, you're getting back to some minor bidding. You can start bidding words. You can start to see some aggressive in the rental prices there. So I still know Canadians want to buy real estate. Housing prices have come down in some areas while the mortgage payments have maybe gone up, there's still the ability to afford some of those homes. So refinancing is going to be key. Clients are going to want to continue to buy investment properties for those who can qualify. I still see strength in the mortgage market. Canadians, Canadian home market is incredible. And I think while there's brokers out there that want to continue to give advice, the right advice, we're going to continue to see some good market going into 2023.

Fergal: [00:07:38] Well, one other trend that we've noticed this year is that Canadians have gravitated quite a bit towards the alternative market. And I was just hoping to get both of your views on really how that market can service Canadian borrowers and offer new solutions. Emily, what are your thoughts there?

Emily: [00:07:53] I actually feel really fortunate to play in the space today, So applications right now aren't as cookie cutter as we've seen in the past. We're hearing from our broker partners that deals are becoming more difficult. We're seeing your income types in different sources, right? So a lot of people now have side hustles. There's multiple rental properties, companies that are just starting up because somebody lost employment throughout the pandemic and the list really goes on. We've also seen interest rate hikes. So clients who would have normally demonstrate affordability on the side are now getting pushed through to the alt space. So on the alt side, there's more flexibility. It's not a one size fits all solution. There's room to be creative and take a common sense approach. And it's not just ticking off the boxes to qualify a mortgage. Alternative lending provides clients and brokers with solutions and options.

Fergal: [00:08:43] Would you add anything on that in terms of alternative lending solutions on how they're helping clients in the current market?

Grant: [00:08:48] I've been in the alternative lending game for about 20 years and I've never been more energized about it as I am today. The solutions, the common sense approach, the options for Canadians, even the options for brokers, is just incredible. So I'm excited about what's going to come down. It's going to continue to be challenging and we're going to continue to have to evolve. But there's an opportunity to grow in this space and it's become much more mainstream than it was 10 or 15 years ago. And I'm really proud of what we've done over the last decade in the alt space, specifically in the last number of years, to continue to help Canadians.

Fergal: [00:09:24] For sure. And I think everyone's really looking ahead to the next few years, as you mentioned, because the growth over the past decade has been has been so stark. The last thing that I want to ask you both just before we wrap things up is we mentioned the market for next year and some of your thoughts on how that might evolve. But is there anything that you're focusing on in particular with 2023 just around the corner? Emily, maybe we'll go with you first.

Emily: [00:09:43] Sure. Yeah, absolutely. We want to add value to our brokers, like I mentioned before. Deals aren't easy as they were in the past, and we believe more than ever that the mortgage broker industry will earn a larger share of that overall residential market because the value they bring to the clients. We'll be working with brokers on how to continue finding solutions for the clients and provide training on why it's important to increase the amount of all day business, how to find that all day business, and how to sell an all day solution to borrowers who would have normally qualified on the side and are used to seeing those lower interest rates. We're also investing in our own team by providing more training and professional development, and we're investing in new and innovative technology so that we can deliver the absolute best service to our brokers.

Fergal: [00:10:31] All right, Fantastic. Thanks, Emily. Grant, I'll give you the last word on this one. Anything you're focusing on as we move into 2023.

Grant: [00:10:37] We've got three areas that we're focusing on. We're going to continue to focus on service technology. We've done a fantastic job over the last couple of years, really doubling down on our service program with our mortgage advisory. We brought our cafe and our portal tools that are really focused around technology. We're going to work on some new products, so stay tuned. I'm not going to give too many sneak peeks right now, but stay tuned to what we're doing over the next few months. But the number one thing I think we're going to work on is our efficiency opportunities, and that's with our partners. How do we help them submit the right number of deals and fund the right number of deals and make it a seamless, easy, simple process for both parties? That's how we know Canadians are going to benefit. That's where brokers are going to benefit, and that's how we know we're going to benefit. So those are the three areas that we're going to focus on for 2023.

Fergal: [00:11:23] Okay, sounds good. Well, we'll leave it there for today. It's clear that there's still plenty to look out for in the mortgage market for the remainder of this year. And we'll obviously follow closely some of the trends that you mentioned for 2023 as well. Emily, Grant, many thanks for joining us today and I'm sure we'll talk soon.

Emily: [00:11:37] Thanks for having us, Fergal.

Grant: [00:11:38] Thanks, Fergal.

Fergal: [00:11:40] That's just about all we have time for on today's edition of CMP TV. Thanks again to CWB Optimum Mortgage and Community Trust for joining us on today's show. Thanks to you for watching. We'll see you next time.