This is time of year, specifically for companies with a calendar fiscal year end, where housekeeping issues have to be completed.   For most companies it’s the time to close the books on the previous year, and ensure that T’s” are being crossed and the “I’s” are being dotted for the upcoming year.  Try as we might, but we have never been able to fully complete our budget, our plan, and our strategy prior to the New Year.  Revisions are required, and taking into account seasonality, mid-January is the time where we can exhale, for about a nanosecond.  Once everything is finalized, then the heavy lifting begins.

One thing that you cannot plan for is luck, good or bad, karma, fate, good fortunate or misfortune.  Irrespective of the comprehensive analysis, the business plan and budget, the organization goes about its business knowing that variables beyond your direct control will determine if you had a good year or not.  Luck plays a part in success, and anyone who suggests otherwise, well, eventually the hubris will catch up to them.

But just for a moment imagine if you could stack the deck in your favour to ensure you had a good year.  I’m talking about results beyond your ability or intellectual capacity to achieve your desired results.  I think we would all jump at the opportunity to be able have that type of influence. That’s why it is difficult for me to criticize the actions of the government when the do exactly that.

Loonie

Take the performance of our Loonie.  You’re probably aware the market has taken our Loonie to the woodshed and given it a good whooping.  Is something going on in shadows? According to the Globe, “To some observers, the currency’s recent sharp decline suggests the Bank of Canada is stealthily engineering devaluation – a gift to beleaguered manufacturers, exporters and domestic tourist operators, and a tonic for an economy suddenly grappling with disinflation“.  Poloz has an affinity for manufacturing, his previous gig was CEO/President for Export Development Canada, Carney’s comfort zone one was Bay St., as in mortgages. Is it a coincidence that we’re hearing less about mortgages and more about our dollar, inflation and manufacturing?  You be the judge.

Outlook on Real Estate

As for the real estate sector, some must be very satisfied with most recent trend. Real estate sales in Toronto, Calgary and Vancouver are skewing the numbers.  The reality is that over 60% of Canadian market place has seen a drop in the number of homes sold for three consecutive months.  At the highest levels of government, household debt is still being spoken of but in cautious terms.  Here’s what Prime Minister Harper had to say about house hold debt this week, “So look, it’s not a reason to panic; in fact, we’ve actually seen Canadian debt beginning to level off. But we would obviously encourage people to look at their debt levels carefully. Eventually, it may not be for two, three years, but eventually interest rates will start to rise. And Canadians should ask themselves serious questions about if interest rates came up significantly, would I still be able to afford my debt payments?“.  Interest rates will rise in about two to three years?  We should thank the PM for the specificity. I have to assume he’s in the know.  It might be time to dust off the variable mortgage pitch. In my case I may have to alter the distribution of volume between fixed and variable mortgages in our projections.  So maybe I’m farther away than I thought from being able to lock up the 2014 business plan and budget in the corporate vault.

One final note about the PM, he really is one of us.  Here’s what he had to say about his own personal mortgage, “in our case, my wife and I have never been big borrowers, but we have borrowed some money in the last few years because of the low rates, but we also know if the rates went up significantly we could still afford to carry that debt”.  It’s heartening that our Prime Minister is so connected to millions of home owners, who did exactly what he did, and just as responsibly.  One last thing about the Prime Ministers mortgage, I wonder if he got in before the changes to amortizations, and did he have to use rental offset to qualify?”.

Until next time

Cheers.

The mortgage industry adapted to a form of virtual currency long ago, before we knew what virtual currency was.

I came across an interesting article in the Globe this week about virtual cash, and the possibility that it may get some traction.  The opening sentence in the article was an eye grabber, “Imagine a day when virtual cash gives central banks a run for their money – literally“.  The digital revolution that we’re witnessing, and experiencing first hand, has changed our lives significantly.  The most profound effect is that very impossible seems possible today.  For example, I’m not shocked or surprised that the gatekeepers of all things monetary are worried about competition.

The Bank of Canada just released a paper saying that central banks are unlikely to stand aside and let the new industrialists such as Amazon and Facebook cut into their action.  I’m not going to pretend to understand the nuances and business models of companies such as Bitcoin, a software company who’s niche is virtual currency, but clearly they’ve grabbed the attention of the Bank of Canada, given the fact that they’ve responded by releasing the paper.  The central banks position that is that virtual currency will never become fully convertible into real cash, thus limiting virtual currency to just the internet.  Hm… anyone want to bet against Amazon or Facebook figuring out a way to make it work? 

There isn’t a day that goes that by that I don’t read something about our changing world or economy, and immediately wonder how can this make us obsolete?  Is the thought of virtual currency a threat to our industry?  Don’t think so. Why? Because the mortgage industry is miles ahead in this regard.  A broker, a lender, a lawyer and the borrower never see the product we provide as an industry.  It’s not as if I show up at a brokers office with a wheelbarrow full of cash, our average balance at Merix Financial is just north of $280k, and dump it on the broker’s desk and say, “here you go”. Then the broker wheels it over to the lawyer’s office, and he in turn takes it to the lawyer for the other side, and so on and so forth.  Magically someone along the line gets to actually keep some of the cash, but we never know how the final balance works out.  What an interesting concept.  We sell something you can’t see, and can’t touch.  Can you imagine if we did?  Imagine the cash in the wheelbarrow scenario, after I dump the cash on the brokers desk I say, “I’d like you to count it, and sign off stating all the information you provided is correct”.  And if the borrower happens to be there, we say “take a good look at this pile; this is what you owe me, plus more”.   Thankfully we don’t do business this way, for if we did we would all be curled up in the fetal position, sucking our thumbs, paralyzed with fear.

Virtual currency doesn’t pose a threat to us.  Could it change how we do things?  Possibly, but we long ago adapted to a form of virtual currency, even when we didn’t know what virtual currency was.  If virtual currency becomes the norm it will elicit a collective industry yawn.  Now, what won’t surprise me is if one day we pull out a twenty dollar bill and on the back of the bill is a picture of Mark Zuckerberg.

Until next time,

Cheers.

One of the pleasures of being a business owner is the great people you get to work with.  The spectrum ranges from employees, suppliers and of course our customers.  This week MERIX had the privilege of hosting a number of our top supporters/customers at the World Business Forum, in New York City.  NYC is such a vibrant and cool city.  The pace is frenetic, and at times abrasive.  I’m okay with those characteristics because it definitely contributes to the overall experience.  Combine that with a learning opportunity, and sharing it with extraordinary people, well, you end with a memorable trip.

I think I’ve attended about half dozen World Business Forums. I enjoy the experience because I get to remove myself from my daily routine and think about issues from a macro perspective.  The World Business Forum is what inspired me to transform and change the CAAMP Mortgage Forum.  It was my hope was that for one day of the year, (the second day of the CAAMP conference) we could all set aside GDS/TDS, rental offsets, OSFI, the Finance Department, beacon scores and other daily issues and take a few moments to think beyond ourselves and our own backyard.  I always wanted to share that experience with our customers, and that’s exactly what we did we invited our top supports to NYC to experience the World Business Forum.

What a delight it was to be able to spend time with our customers and employees for an extended period of time.  At MERIX we’ve always tried to do things a little bit differently. There’s nothing new about customer appreciation trips, but I believe what’s different about our events is the core – education.  We don’t use education as a cover to create an event just to drink excessively, and over indulge in food. Don’t get me wrong, I’m not prudish enough to turn away a libation or great food that will wreak havoc with my girlish figure. It’s just that in our world it’s about learning first, party second.  We do both well; just in order.

To our valued supporters/customers, John Bargis, Sandy Fisher, Richard Anderson, Gerry Bray, Mackenzie Gartside, Tracey Morrison, Sarah Schiess, Victor Schaefer, Tyler Hilderbrand, Marvis Olson, Marcus Tzaferis, Brenda Coleman, Jacquie Bushell and Catherine Adams from Genworth Financial, our sincerest thank you for your support, and for giving us the opportunity to spend a few days together to get to know just a little bit better.

Until next time,

Cheers.

It’s amazing how many thoughts can race through your mind in a matter of seconds.  The images are vivid, yet vanish in seconds.

I had such an experience earlier this week.  There I was, about to start a meeting with the Minister of Finance, Jim Flaherty and my mind went racing down memory lane.  For a split second, I found myself recalling the very first mortgage application I ever filled out. This was twenty five years ago.  I met my first customers on a Saturday morning, but as it was my first deal as a mortgage broker, I would have gladly have met them at 3:00am.  Oh, the knowledge I had back then.  For example, I was aware that mortgage’s was spelled with two “g’s”.  I was so wet behind the ears that I had to keep a drawer open in my desk so I could refer to an old Statement of Mortgage.  I wanted to make sure I didn’t miss anything, so I kept taking a peek at a completed Statement of Mortgage.  I had to resist the urge to laugh at the memory.

In a couple of nanoseconds I also thought about the first time a fledgling national association called CIMBL made their way to British Columbia to pitch brokers on why they should become members.  I was in attendance at the pitch. I remembered standing at the back of the room listening to CIMBL’s talking head, saying without embarrassment, “if you do not become members of this association lenders will not pay you a finder’s fee.”  I couldn’t help but think, “you fool, you just set this new association back by three years in British Columbia”.  I was wrong, it was five years.  There were many other thoughts that kept running through my head, especially about CAAMP, and how far we’ve come as an association.

But I had to clear my mind and prepare for the meeting with Mr. Flaherty. Jim Murphy, CAAMP President, Daryl Harris, CAAMP Chair, and myself were given the opportunity to meet with the Minister of Finance this week.  The purpose of the meeting was to share our thoughts and concerns for the mortgage broker market.  Both Jim and Daryl did an outstanding job, laying out the facts in a balanced and measured way.  It was our hope that the Minister of Finance would view our positioning points through the lens of consumer choice and the important contribution the mortgage broker channel makes to the Canadian economy.  Jim Murphy has done yeomen’s work on behalf of our industry in Ottawa and this most recent meeting added another layer to the relationship foundation between CAAMP and the Finance Department.  Kudos to both Jim and Daryl.

As for my role at the meeting?  I spoke briefly about the important role that mono-line lenders, like MERIX, play in the mortgage broker channel.  Most importantly, the choice we provide for Canadian borrowers.  I also spoke briefly about the contribution that mono-lines make to Canadian tax role.  Mono-lines provide greater choice for borrowers but they’re also job creators.  I made it very clear that we ask for no favour.  The mono-lines are prepared to compete but the nuances and difference between mono-lines and banks should be factored when making decisions which impacts funding for the mortgage broker channel.  The Minister of Finance stated that his office would consult with our industry about all the recent changes and what our needs might be going into 2014.

One of the things I am most proud about during my time on the CAAMP Board is the relationship which has been built with Ottawa and the regulators.  I wasn’t too long ago when it was difficult to get a phone call returned from the powers that be. Today, the calls are being returned and we have an opportunity to sit at the adult table. Influence cannot happen without dialogue.  I believe CAAMP’s efforts are being noticed.  It’s why we don’t hear the “cash grab” argument with the frequency we once did.  Today, even the haters have some difficulty arguing that the nominal cost to be a member is not worth trying to protect our collective wallets.

Until next time,

Cheers

It’s been a while since my last post, and I thought it was time to get back into the swing of things now that summer is coming to an end.  This is the time of year when kids start to grumble because it’s back to school.  Parents are running around buying back to school clothing.  Summer homes will be visited less frequently as we move into September.  In no time we’ll be digging out our fall clothes, and giving our winter jackets a second glance.  The end of summer usually brings on a touch of melancholy.  Summers are supposed to happy and fun filled months.  I’m not sure if the summer of 2013 will looked upon with any degree of fondness.   My memories of this summer will be of the devastating floods in Alberta, the loss of life in a terrible train explosion in Quebec, Mother Nature wreaking havoc in Ontario, and the freighting thought that a country in the Middle East may have used chemical weapons on their own citizens.  The summer of 2013 was filled with fun, sun and madness. 

Comparing what we’re experiencing in our industry to that of mother nature’s destructive powers, and geopolitical issues, seems inconsequential.  Theoretically it is, but when livelihoods are impacted the challenges are real.  Over the summer of 2013 we’ve seen a steady rise in interest rates.  Since April of this year, interest rates have risen by 80 bps.  Normally that would have caused howling from the hilltops.  But there’s nothing normal about this summer, thus the muted commentary about rising interest rates.  This is the summer where we had to accept the fact that we have a liquidity issue, not a crisis, yet.   This is impacting everyone, borrowers, brokers, the oligopoly and smaller mono-lines.  This is the summer where the self-fulfilling prophesy may have turned into reality.  Condo prices appear to be contracting, while the average price for a single family home is on the increase.  Condo sales are down 34% below their 10 year average.  No one should be surprised by this.   When mortgage rules are tightened, first time home buyers are impacted the most.  The point of market entry for first time home buyers is now further from their grasp.  First time home buyers fuels the entire real estate market.  Impact them, and you’ve impacted the entire market.  There are those who are now predicting that two very distinct market sectors are a way of the future.  Sales and price for single family homes will be very different from the condo market.  Owning dirt is always preferable, and will be even more so in the near term. 

Our industry is very fluid, and constantly changing.  We’ve seen numerous changes during the summer of 2013, and we should expect more.  In the same fashion we expect a change in seasons.  Good riddance summer of 2013.

Enjoy the long weekend.

Until next time

Cheers