Top execs talk the future of lending

Fergal: [00:00:25] Hello again and thanks for joining us on another edition of CMP TV. I'm Fergal McAlinden, CMP's News Editor. And today we'll be delving into the lending side of the mortgage industry to take a closer look at some of the most recent developments in that space. Of course, it goes without saying that it's been an eventful year where lending is concerned with rates on the rise. And here to talk us through some of the main trends in 2022 to date and what could be coming down the line. Delighted to be joined by executives from two of the most prominent lenders and Canada's mortgage industry. With us today at the panel today are Joe Flor, associate vice president for national partner relations at Equitable Bank. Joe, how are things with you? 

Joe: [00:01:00] Very good. Very excited to be here. Thank you.

Fergal: [00:01:03] Good to have you on. We're also joined by Lisa Abbatangelo, vice president for mortgage operations, at community trust. Lisa, thanks for joining us. How are you? 

Lisa: [00:01:10] Thank you Fergal I'm great. 

Fergal: [00:01:12] Lisa, I'm going to start with you, if that's okay. Obviously, as I mentioned, it's been a really eventful year in the industry to date and in the mortgage space. Are there any significant trends that you've been noticing as a lender so far this year that you wanted to share with us? 

Lisa: [00:01:26] So certainly trends really just in response to the environment that we're in. Many more refinances than purchases given the housing market and the rising rate environment. No surprise there with those rising rate increase, of course, comes with affordability challenges that some of the borrowers are having where they thought they could afford a little bit more than they actually can, as well as some very significant rate shocks at renewals and how we can help and our borrower, partners and customers navigate through those choppy waters. Home values, of course, that's a big story for everyone. Values are coming in much lower than they were traditionally month over month. It's always interesting to see how the home values are operating. Some cases, there are home values that are coming in less than the purchase price, and our borrowers are left scrambling for a greater down payment in order to keep that purchase agreement in place and for refinances, not necessarily enough there for them to be able to accomplish everything that they had originally set out to do and more just focusing on debt consolidation, which is a responsible thing to do in today's climate, most certainly. And generally, the trends as it does in many different economic climates, situations that some borrowers have never experienced before, so, so important for clients to reach out or broker partners are needed more than ever during these uncertain times, and CTC is glad to help any way we can. 

Fergal: [00:03:13] Yeah. It really has been very interesting to see how some of those trends have developed this year. It's such a radical difference in the past couple of years. Joe, what are some of the main trends that you've been noticing as a lender so far this year? 

Joe: [00:03:25] Absolutely everything is, as I mentioned. I mean, I can echo the same for us because we have so many different business segments, including reverse mortgages. One thing we have noticed is that side of the business has definitely increased. I think, you know, the bank of mom and dad has definitely been leveraged a lot more and a lot more clients are trying to increase their purchasing power by being able to leverage that. So we've seen a huge increase in the senior demographic sort of trying to leverage that their properties to be able to help their children with first time purchases or even just in general purchases. The rental market has definitely stepped up a lot. We've seen a lot more of that activity at Equitable as well. And yeah, it's just it's been it's been interesting to see the paradigm shift from when we started in January to now and with home values. I think that's that's an issue that we're all experiencing it and we necessarily don't even use an appraisal because we use the, the FCT program with the flex appraisals and quite a bit of our GVA properties are used with that flex appraisal and even those are not coming in. Which is interesting because I mean rates have just started to increase, but you know, the values would you wouldn't see those comparables really being affected through just that direct comparison right away. But yeah, it's been such an interesting dynamic to see all the different shifts in the market. So yeah, I mean some of our businesses business lines have definitely seen the decreases. We're still relatively busy on the alternative side, which is great, you know, trying to continue to leverage the Challenger bank mindset and think of the innovation and solutions that we can provide to provide specialized solutions for our broker partners to be able to navigate through these through these waters. And one thing I notice, not just from a lender perspective, but broker side, is I have a lot of friends in the industry. I've been around for a long time and a lot of them have reached out to me to say, My God, I'm not as busy. But what I think is, is the busy what they're referring to is they've been so used to over the last year and a half of being crazy busy that they're probably at their 2019 levels and thinking, Wow, I'm not as busy as I was because everybody when the pandemic started was going crazy trying to get, you know, first of all, get accustomed to working remotely and navigate with technology and whatnot. And now that we're all accustomed to that, you know, everyone's become a lot more efficient, not just brokers, but lenders alike. And, you know, I think that this slow down is like, oh, my God, I'm actually really slow. But I don't think it's that they're very slow. I just think that they're just not used to it because they were so busy for so long. So those are the things that I've noticed over the last few weeks, a few months. 

Fergal: [00:06:03] Yeah. It's interesting that you say that last part, because a lot of the brokers that I talked to now are saying that things have slowed down quite a bit for them. But what people are forgetting is that the past couple of years have been so unprecedented. It's really just getting back to a normal level as opposed to a massive drop off. But Lisa, let me bring you in on this point. Brokers, a lot of them say that their priorities are shifting a little bit. Have your priorities or your outlook changed with the market as a lender? 

Lisa: [00:06:31] Yes. So for our outlook, we're we're always just monitoring the environment, whatever environment we happen to be, whatever the economy is bringing at US rates, housing markets, trends. And we want to always dynamically move with whatever's happening in the trends in the markets, whether it's competitive rates or the stability of a product offering. Or recently we introduced a 35 year amortization to help a little bit soften some of those affordability issues that are borrowers are experiencing, either in a new origination or at renewal. So our outlook is always dynamically moving with the environment, whatever it happens to be. Now it seems to be a little bit more fun than others with all the different factors coming at us, with rates and inflation and coming out of the pandemic and the supply chain issues. So it certainly makes for fun times, but also most important that we're constantly dynamic in the way we're reacting to some of those trends. In terms of our priorities, our mission is the same, which is to help Canadians become more financially successful and secure and really to help us accomplish this mission. Now, as always, we really look to support our broker partners the best way we can by being flexible and responsive and creative. Our brokers partners are needed more than ever so we can all gather together to help Canadians get through this really challenging times and quite unprecedented for many. 

Fergal: [00:08:02] Absolutely. Well said, Joe. Has there been any kind of change in terms of priorities or outlook where equitable is concerned?

Joe: [00:08:09] It's no changes as of yet. We are tabling a lot of ideas to help with the affordability issues and hopefully help our brokers get their clients into home ownership because that's always been our mission as a challenger bank. Our mindset is always trying to be efficient and making the experience that much better for our broker partners so that that continues to be our main focus. Really driving that philosophy of the Challenger bank is really what we're continually looking towards, and I mentioned it in the first response, but being very solution is very instrumental in that challenge mindset. Being nimble and being able to act on either opportunities or in circumstances that we're facing now, just making things a lot better for our partners. And I agree with Lisa, this is the time when we need to be there for them. Really help them navigate through these murky waters and not just with us as a lender, but helping them also understand where maybe they can place other deals. Because at the end of the day, if we can't do a deal, we want to make sure that we still assist them in getting that deal done somewhere, because not every broker is versed in all the lenders out there. And with us, we're so tight and so close to what's happening from a competitive landscape. So we want to make sure that we are true partners. And it's not just all about us at equitable, but it's the client at the end of the day, right? There's an end line at the end. 

Fergal: [00:09:26] You both mentioned the importance of that relationship with broker partners to your respective companies. And obviously there will be a lot of brokers will be watching today who have such an array of lenders that they can choose from. And we'll want to know if there's anything that you think brokers should keep top of mind about, specialized lending and the lenders that they work with, at least. What are your thoughts on that front? 

Lisa: [00:09:48] Yeah. I think really we're we're trying to help out our broker partners. And in many ways, this is unprecedented times for Canadians and borrowers, but it's also unprecedented times for many brokers that are out there who may have just gotten into this line of business in the last couple of years, which is an interesting time to join our industry. So we really want to help educate and inform our broker partners. And one of the things that we talk about often is that as a we are a regulated financial institution, alternative, many alternative lenders are. And it's not just about pure equity lending. We do follow the five C's of credit. We do have an obligation to make sure that our borrowers can afford what they're about to get into, that we understand their situations and that we're helping them at the end of the day, not just about the equity that's in their property. That's one of the things we almost lead with when we're talking to our broker partners to help them get through this, but also how we can take those five C's and be creative and flexible around a solution that's right for their customers. I think it's also important for brokers to really understand the industry and all the lenders that are out there, whether it's a prime lender, an alternative lender or a private lender, what do they do? What are their niches? How you can use them to the best of their ability to help their customer and their customer specific needs? And then the most important thing, I think, in many ways is that the story matters. Everybody has their own story and we want the truth. We want the good, the bad and the ugly. If we can get the full picture, then we can help them the best way that we can. And if we're not able to help them, to Joe's point, and it was an excellent one, we really just want to help them find a great solution for their customer. We can't do that unless we know the story and the whole story. 

Fergal: [00:11:46] And Joe, is there anything that you want brokers to keep top of mind or that you would recommend they bear in mind whenever they're considering specialized lending and the type of lenders that they work with?

Joe: [00:11:57] I think Lisa said all the points. It's like she was in my brain for a second there because I'm like thinking like, let's see here. I think the biggest thing is, is really understanding your client, knowing exactly what their intentions are and finding the right solution for them. And that's going to come with understanding the market and knowing all the lenders and all the specialized programs that are out there. I think in the past, us as lenders and I'm sure even principle brokers have always said, hey, you know, work with three or four prime lenders and two or three lenders. But in this day and age, you really want to know all your lender partners and maybe develop a relationship, even if it's on a smaller scale with pretty much everyone because everyone's got different programs. We're not all, you know, cut from the same cloth anymore. Everyone's got their own sort of niches and different, different solutions available. And I think it's important to really recognize that and understand it so that you can please your clients with the best solution available. Because at the end of the day, in the art world, you're only as good as your last deal. And that's not just from a broker lender relationship, that's also your client to write. A lot of those referrals come word of mouth. You know, they're not cookie cutter deals. They're not as educated when their credit's not very good or their financial situation isn't good or their income is challenging to prove, such as self employed and having a broker to really work with them and provide them with the best advice is so crucial. So if you're providing them with their best solution, they will refer you for your business. So I think it's even more imperative now to really get what your partners are offering. 

Fergal: [00:13:19] Well, I'd be interested to hear your answer on this one, Lisa. Just about whether there is a best way for a broker to identify if a client is actually suitable for an alternative or a specialized lending solution or anything that they should be conscious of on that front. 

Lisa: [00:13:36] Yes. So I think being educated and informed, I might say this a few times during this panel, but it's so important to understand the lenders that are out there and all that they have to offer. So absolutely, you know, the business development partners, internal and external. We do have a wonderful team at CTC, as do others in the area and the lender landscape, to be able to help their brokers with either educating and informing their team or their brokerage or on 1 to 1 agent level type Q&A or education sessions. And also they can help them with whatever support mechanisms that particular a lender has to offer. In addition to some of the traditional stuff that's out there. Everybody likes a good piece of collateral material, but there's so many other things that alternative lenders have to be able to help support their broker partners. We are very proud at CTC to have a mortgage advisory team somewhat unique to the industry where we provide partners with access to underwriter, qualified and experienced members 8 to 8 Monday to Friday Eastern Standard Time, where they can pick up the phone and call someone and get some quick and immediate answers. And if they're not able to provide that quick and immediate answer, they will get back to them in a dedicated period of time so that they can get the answers to what they're looking for. We also have to supplement our mortgage advisory team. We're very proud of our café, which is our portal, which has useful tools data as well as additional access to support when they want it, whether it's self serve, whether they want to pick up the phone, or we can also support online chats now. So it's about educating and informing and being available to help the broker partners, whichever way they choose to interact with this. And hopefully it is a flexible period of time as possible. 

Fergal: [00:15:43] Okay. Great. Joe, is that educational component that Lisa mentioned. Is that a very big priority for you at Equitable as well? 

Joe: [00:15:52] Yeah, absolutely is. I mean, for us, it's a little different. We're a one stop shop lender. We offer prime we offer reverse mortgages, we offer alternatives. So for us, we can always help the broker navigate through sort of that deal. If we feel it could be a prime deal, I think that would be my first piece of advice, is make sure that you're you've explored sort of all your options and what's best for the client. So if you see that it's not a prime client because of the fact that their income can't be proved and they're self employed or they've got to be showing bank statements, then, you know, it's an ordeal. Credit's not really a driver anymore of whether it's an alter or a prime deal, because a lot of our majority of our clients are north of 700 FICO. So that's not even a true indicator as it was in the past. So it really is understanding the fundamentals of credit and does it fit the box, right. And if it doesn't fit the prime world, then most likely it's going to start moving into the alt space. And if it's not an all out deal, regardless of, you know, the solid credit, it's probably related to the ratios, right, with the higher stress test that we're seeing. So it's really understanding all the different segments of A, B and C, call it that. But for us, like I said, we're a one stop shop, so we can always have those proper conversations and help our broker partners sort of guide it, guide them through whether it's going to be a prime or not deal. 

Fergal: [00:17:04] And with that changing landscape that we mentioned, Lisa, has there been one single most important aspect of your approach in dealing with the mortgage broker community this year or anything that you've changed in that regard? 

Lisa: [00:17:17] I don't think it's not just one single approach. It's just been so dynamic and fluid. Everything that's been happening in the economy as well as our industry, we really are focused on building an awareness for CTC. We've welcomed nearly 1000 new members partners to CTC this year alone and participated in about 100 industry events throughout the provinces that we currently operate in, which is BC, Alberta and Ontario. So it's really about the awareness of CTC and what we have to offer. I mentioned about educating and training our CTC broker partners to help them, whether they're a new agent or an experienced agent and everything in between. And then, of course, recognizing our broker partners to support their business as well as recognize and thank them for their business and working in partnering with CTC. 

Fergal: [00:18:15] Excellent and Joe anything that's really stood out for you in terms of your interaction with the broker community, in terms of what's being important? 

Joe: [00:18:22] Yeah, I think being continually being focused on on service. I mean, that's one of our main pillars of being the Challenger bank is really focusing on that service. And I know it's a cliché that everyone uses. We have the best service you hear from every industry and every person. But for us it really is our core value at equitable bank and it just doesn't come from picking up the phone or returning emails within a certain time frame. It's about the technology that we can provide our broker partners to make things more efficient and easier. We just came up with our own portal with Equitable Connect. We've got the automated appraisals that we offer and we have a few other things that we're working on that are going to make things even more efficient for our broker partners. But it's all about that smooth transaction because at the end of the day, speed is important with our with our partners. I know it's not as busy for some, but speed is so important because if you're not a broker today and you're not quick at responding to your client, someone else will be. And you could lose that client. Right? That's just what's become the loyalty aspect of it is kind of been thrown out the window and it really is all about who's going to get my deal done faster and better and with a better rate. So it's such a different world and I've been part of the broker industry for well over 20 years and I've seen that shift and technology's right at the right at the helm of it. So our focus is always going to be driving the best service. 

Fergal: [00:19:36] But well, just before I let you both go, we've already talked, obviously, about some of the trends that have taken place so far this year. And there have been so many already with interest rate hikes and inflation and the housing market, and things like that. But, Lisa, are there any significant trends that are coming down the line in the lending space that you're keeping an eye on for the remainder of the year? 

Lisa: [00:19:57] Yeah. Other than the common characters that we've just talked about, really, it's about the headwinds that are affecting Canadians this year and really will be probably through the next year as well to some completely unprecedented to Canadians. So we're really just taking our responsibility very seriously together with our broker partners and really our entire industry to make sure that we can help Canadians get through what still to be somewhat uncertain, how fast are rising rates going to go? What's the inflation really going to happen? Is there a recession coming? So really the best that we can do to support Canadians get through the upcoming year as well as probably through the better part of 2023. 

Fergal: [00:20:43] Thanks, Lisa. And Joe, just last word to you on what you're keeping top of mind on the lending space in the near future.

Joe: [00:20:50] Yeah. For us, it's always making sure that we're being prudent and staying on top of what's happening in the industry so that we're here for the long run. At the end of the day, we know that things are changing and changing relatively quickly. So we want to make sure we're doing the responsible thing, not just from a lender perspective, but for the entire industry. I think it's important for us to be cognizant that certain markets are going to be hit more than others and keep an eye on those and do the responsible thing as it relates to whether we're going to be fully exposed, that 80% loan to value or scale back where we need to. So for us, again, it's just being aware and making our brokers also be aware of the changes we're making and just assisting them wherever they need to and helping them grow their business wherever they can. So that's top of mind for us. And it always is, right? 

Fergal: [00:21:36] Okay. Great stuff. Well, look, we will leave it there for today, but I'd like to thank you both for coming on and sharing some of your thoughts on recent trends and what could be coming down the line. We really appreciate your time today, and I'm sure that we will talk very soon. 

Joe: [00:21:48] Perfect. Thanks both. 

Lisa: [00:21:49] Thank you, Fergal. Thanks, Joe.  

Joe: [00:21:50] Thanks, Lisa. 

Fergal: [00:21:53] That's just about it for today's episode. My thanks to Equitable Bank and Community Trust for their participation in today's show. Thanks to you for watching. We'll see you next time on CMP TV.