The trend towards efficiency in the industry is one that everyone has an opinion on. It’s just one of the issues in the broker/lender relationship, which drives the industry. In Part III of MortgageBrokerNewsTV’s broker panel, our group of experienced and successful brokers from across the country share their thoughts on this topic, as well as other, such as volume pooling and the broker/underwriter relationship, which has seen much debate in the industry over the past year. In the coming weeks the panel will touch on other mortgage industry hot-button issues. Find out on MortgageBrokerNewsTV, your home for the industry’s best news, opinion and analysis.
Video transcript below:
John Tenpenny: Guys another big topic amongst brokers and the lenders is the move by lenders towards efficiency as opposed to volume in terms of dealing with brokers and wanting more deals submitted to be approved as opposed to the other way round. So Greg what do you think about that?
Greg Martel, Owner Broker, Dominion Lending Centres, Harbour View Mortgages
Greg Martel: I think when I first started in business, we were in an environment where things were happening so quickly, you buy a place today and then in a month that was worth $60,000 more. So you know people were putting properties in the market that were selling instantly in 2 or 3 days and I think the industry has changed a lot in the last 5 years and now lenders are making, they are a lot more cautious with things and the efficiencies have changed a lot in the last I would say 18 months. So the measures that we have changed kind of ties it back to the question one with education. You really want to focus on educating your client upfront, collecting your documentation upfront before you are actually patching the deal up, before you could be self employed and have [the whole thing in random ways and state a] $100,000 those days, we can all agree those days are gone. And they will probably even change tighter in the future.
So I think ideally where we are going now is the fact that is having processes in line, I have 60 agents that work for me so it’s very difficult to control our pooling and our efficiency ratios. What we did is, we came out with an underwriting system for all our agents. So everybody submits a deal to our staff, our staff basically collects the documentation upfront first and then underwrites the file prior to submission and then submits the deal after. So we know exactly the income, we know where it’s going to fit and we are not constantly calling lenders, changing [their] commitments, we are not constantly calling lenders changing the income or moving the deals around or the [shop kind of approach] we sent this to 3 different lenders, you get 3 different commitments and you pick [which one] at the last minute. So I think ideally it ties back in education, it ties back you have got to be more efficient, do more things upfront, you know be a better broker with the transition of every documentation upfront.
Deb White, Owner Broker, Dominion Lending Centres, White House Mortgage
Deb White: My sentiments exactly and except that I don’t have 60 brokers that I can have an underwriter. So I guess I am the underwriter. When I agree with volume, I bring the efficiency, my funding ratios are very important with my lenders and I try to keep them at a certain level and I am in touch with my BDMs all the time, making sure that my efficiencies are up there. My brokers if we have a new lender on board, because again I am in a smaller area, so they all don’t lend there, we have an office in [Revelstoke] and not a lot of lenders go there. So the brokers are not allowed to submit a deal to a new lender until I oversee the deal, because I want to make sure that it’s going to fit within our parameters and it will fit within the lenders parameters and I pretty much know because I have had to educate myself on each lender. So I guess I am the underwriter of the office. So if it fits with that lender, I will allow it to be submitted otherwise it’s not submitted. So the efficiencies are very very important to me and again it goes back to the education [like Grade III]. You have got to educate the clients, you got to educate the brokers, get the documents upfront, because you know if you are stating you know I am sorry 24,000 or in Calum’s a 100,000 on the income, yet your rental rates come in at $5,000 lower. In my market that makes a big difference and I am sure you got in your area too. So you want to see the documents upfront.
Callum Ross, SVP Agent, The Mortgage Centre, Mortgage Professionals Inc.
Callum Ross: Yeah and I think too the, from my standpoint, we work in a different market and the market prefers to know the overall dynamics of the broader based broker industry, people who are doing private, commercial and other deals, we are the great mortgage advisor to people who can essentially get mortgages absolutely anywhere. That’s my niche I specialise in mortgage financing for people who can get approved everywhere. And so in our case, I think no matter which part of the table you are sitting at I think brokers as a whole tend to think they are doing a client a favour by not asking for documentation upfront and I think the position that we need to start using is, you know I would rather have this on file and make sure that we have our t’s crossed and our i’s dotted that having later on in the process, think that everything is okay and put you through a bunch of papers they decided to up the documentation that might be requested later on. I think it’s generally it’s a junior broker type of perspective where they think they are doing the person a favour, when in reality I think they are doing him a complete disservice. The client is more likely to have all the documents from the beginning submitted them, once you have asked for them once they file them away and when they get asked for them a second time, they start to be very concerned about it.
In the case of my office, it’s our underwriter who generally decides where the deal is being placed. I mean we might get involved in it, but from a mortgage advisor’s standpoint and give some consultation on it, but the final call actually goes to the underwriter and part of that is based on you know if the overall product and pricing and privileges and everything else is isn’t much of a fit for the client, it comes down to which lender is going to make the processes hassle free for us and the client as possible, because you know while we might be being paid specific amount for the deal. If we have to do 3 times as many calls in that deal or 5 times as many e-mails, we have essentially decreased the amount of money we are making per time involved and that becomes a very important part of running a business.
John Tenpenny: Dan.
Dan Eisner, CEO, True North Mortgage
Dan Eisner: Well volume __ requirements and efficiency ratios are just away in the future. There is no point in discussing whether it’s going to happen or not happen. It is happening with us and if a lender was in the room, you know they would say it’s all about profitability as it should be. At True North Mortgage because we are all salaried, what we do is, I actually sit down quarterly usually with our top lenders and actually sit with the underwriters and ask them, how do you like this employee, how do you like that employee, what is the cancellation rate, what is the decline rate and all that. And I will go back to staff with the feedback and if it’s not working out then we have to make some changes, but that’s how we manage it. Really tell you the truth because it really matters to our lenders and our clients. We have two clients, we have the person sitting in front of our desk and we have the lender. And lenders are, I’d rather pick a lender over a client, because a lender I am going to deal with every day of the week.
Deb White: Absolutely. Well I mean by getting the documentation upfront too, when you submit the deal, you send it to your underwriter and when you are top producers like all of us at the table here are and there is many more out there, you get preferred treatment, you get preferred underwriter and if you start sending them not so nice deals and more declines or more cancellations, than you do funded deals, they are not going to be your friends, right. So you know if you give them all the paperwork upfront the deal can close and you know you’ve got the realtors who have a 2 day subject [renewal] well then you can meet that.
Callum Ross: That’s right. And I think the tendency too is a lot of brokers who think it’s about us versus them in trying to get lenders and you know the fact of the matter is they are our suppliers, they are an important part of the relationship and again I don’t really care whether they submit the papers to a bank that compete with us on the street. I mean we are always going to be competing with more and more people, competition in it’s very essence being we’ve got on constantly improve in various areas. And I think that it’s important we need to align the profitability of our lenders who are our suppliers and our profitability, because unless those two are in unison, we are going to have s disparity that’s going to cause a conflict in our business model and that’s not in the best interest of anyone in the industry.
Greg Martel: Exactly. Right, I want to emphasize what you said earlier, you couldn’t have said any better when you said that they want you to be more efficient, but as you do more volume as a broker, you want to be more efficient too. You don’t want to spend x amount of time on each file when you don’t need to.
Callum Ross: That’s right.
Greg Martel: If you can collect the information upfront properly then your average time per file is going to be go down which means you can do more business with less staff.
Callum Ross: Yeah, exactly.
Greg Martel: It’s here exactly.
Callum Ross: And this theme we are seeing is rather the same here and inspite of as much people might paraphrase it in different ways. You know first of all, it’s the competency to understand the basics of the mortgage product, that’s just the bare entry. That enables you to get in the game and then of course you have got to validate your education and your experience through networking and you know more senior broker relationship that enables you to build your knowledge of being a good mortgage agent and you know evolving your sales skills. However, to get to that next level to become a mega producer or a top producer, you know whether people deem that as 20 million or whether they deem it as a 100 million, it becomes about being a good business person. And it’s not no longer just about the sales or I mean it’s no longer about your competency and having the licensing, but I think as we move and we want to evolve through the industry, you have to strive to understand the business side of things as well as being a competent professional, as well as having the technical competency to be able to be a good mortgage provider and that’s what’s separates someone from being able to make a living versus being able to make a good living versus being able to acquire wealth in this business.
Deb White: That’s right.
Greg Martel: You know also too and that’s a tragedy too, if you are not being able to [constantly] measure your business and manage it and you are basically a slave and you are always rattling through it, you have a job.
Callum Ross: Yes.
Greg Martel: You don’t have a business. If you can’t create a good process to be able to sell that one day then you don’t have a career, you don’t have your own business, you have a job. So you have to sit back and determine what your process is going to be, what your checks and measures are going to be and you will be able to one day sit back and you want to measure that and manage it from 30,000 feet and be obviously on the ground for that time you need it.
Callum Ross: That’s right.
Greg Martel: But to be able to sell it one day, you actually have to have that, you have to have an established process where you are a business personnel, you are creating a business model.
Callum Ross: Yeah, I remember after top 50 broker list, Dan was on the list because he had different locations, there were some in __ under fire on the top 50 chat there, they said oh well profitability, I make more money with myself and my one assistant doing my $40 million. The thing that person didn’t grasp when they commented on that is that person clicked themselves out of the game, that business is worth nothing tomorrow, whereas Dan has got a saleable business that runs independent of him being involved in the deals and that was a classic example to me of the old school thinking where you know this person didn’t grasp the understanding of running a business versus selling time for money. And unless you can scale your business and operationalise it, you are trading time for money and you are nothing more than a commission sales person, which is not a disrespectful position but you have got to understand the difference between being a commission sales person and being a business person, because there is a difference.