Let it never be said I give up easily with my clients.

On the surface, you may see me and find I’m active with a number of things. If you are a client, you may not hear from me for  few days or even a week. Rest assured I’m always spending time thinking about one file or another.

I love attending lender presentations. The reason why? It gives my brain that unique opportunity to listen to the details of what products the lender has and my mind just naturally sifts through all the active, inactive or soon to be active files.

It’s almost like magic. Some key word will be said and then I stark asking questions. ‘You mentioned XXX. What about if condition YYY applies?” More often than not I either work out a deal with that lender (or at least the lender rep) for a client I’ve been trying to find a matching product. It’s a fascinating process.

Now the really good reps will look at the deal and say, well if we don’t do it, I know lender X (not them) will certainly look at that kind of deal. Except FirstLine (see last weeks post), they have an answer for almost anything.

This past month (or two)I had a file that I just simply could not find a home for. I hate to say this publicly, but I received a spam email from a private money lender (third in the last 3 weeks, they’ve found me). I asked the first two and they summarily said, NO. They’re in the BIG money deals. $5M and up. So my tiny little commercial deal didn’t meet their specs.

Lesson learned (again) if you need financing from 1 to 5M this is probably the most difficult commercial money you can try and get. Magically above $5M things suddenly open up. You are in a different class somehow. Fewer risks? Lower risk? Certainly you are likely an “accredited” investor and the rules appear to change. $100M, sure no problem. $4M, no forget it.

Anyway, back to my file. Not one to every give up easily, I’m reading through this guys email. “We do commercial of all types.” We do this. We do that. I send him an email (not expecting a response) with the rough details of my file. To my surprise, I get a response back in 15 minutes. “We’re interested, send us more info.”

We’re well past due on this file, but I just couldn’t give up on this guy. Every penny invested, but he’s eking out a living. He just needs a small break for a few months. Yes, I know I sound like a sucker, but this is one of those rare “gut” feeling deals. Too much for him too lose if someone doesn’t find him the cash. He’s got an 11 year track record in biz. Hard to beat that.

I’ve had other similar deals. Down to the wire.. client calling…. lawyer calling… any news?!?!  Um… no.  Suddenly out of the blue I get this idea how to present the file slightly differently to another lender or finally the lender reviews my file and says “oh, yes, we’ll do that.” Hallelujah.

Client calls and says,”I can’t believe you got it done.”  Heh, yeah… um me either. Pardon my surprise, but it wasn’t looking good for the home team for awhile.

Some days I swear someone is looking over my shoulder and taps me and says pay attention to this, you’ll need to use this soon.  I listen and say, hey have I got a client for you.

I love the phrase “some assembly required”. In my case, I like to say “some negotiation required”. Sometimes I get a little too far down a path and think if I don’t negotiate this one item, my client is sunk. Persistence wins the day. Some times a day late.

I have managed to negotiate an amazing deal for my clients. Pulled out all the stops, only to have the client walk. “Oh, the deal wasn’t right for me.” But, but… Chalk another one up to experience. If I encounter anything similar I’ll know where to go (or sometimes more importantly, where NOT to go) next time.

“Ninety percent of the game is half mental” -Yogi Berra. Same applies to the mortgage business. If you “check out” mentally from the deal, the deal wont get done. Even if it’s a background task, like an item on a to do list that you see periodically. Suddenly I’ll see the name and think did I try “X”? Many times a fresh perspective can be a good thing.

Catch you all next week.

In my last post I mentioned that I would write about the  love/hate relationship I have with FirstLine (a subsidiary of CIBC).

The Good

I’ll start with the good side of FirstLine. That’s not too difficult. They offer more products and more options within each of those products to suit just about every possible combination and permutation you could think of to meet your mortgage need. One could say they have a product “For All Your Mortgage Needs”.

Let’s start simple and show you how complex it can get.

Terms. Most offer 1, 3, 5 and sometimes 10 year terms. FL? 1,2,3,4,5,7,10,15,18,20,25 and even something called a “double presidential”. What the heck is this last item? Well it seems they have noticed that during an election year or just after the election, rates are typically at an all time low. Customers have also noticed this and think that a 4 year term is too short or that they just missed the cycle and think it wont be this good until 2 elections from now. The concept here is to time the renewal of your mortgage to happen during, not the next but the election 8 years (2016 say). The bonus part is it’s not fixed at 8 years, it varies depending on when the next, next election is. For example, if you opted for this term today, it would be a 7 year term.

Simple enough? With any of these terms, it is also possible to have extended amortizations. Possible to have a 25 year term (fixed payments) and 25, 30 or even 35 year amortization.

Now on to the variable or adjustable rate side of the house. Basic adjustable and open adjustable. You can think of the open adjustable as a line of credit. I’ve noticed they’ve dropped their “designer” adjustable products, which at the time would allow you to customize the discount you would get. Say for example back int he good old days (about 1 year ago) you could opt for prime minus (yes minus, not plus like today) one or in one case minus 1.5% for the first six months and then it resets back to prime or prime minus 0.1%.  The idea here being short term cashflow break to get you started (i.e. there’s a check coming in the mail or I get a pay raise in 6 months that equals the difference).

Then they have a Matrix mortgage… we’ll get to that in a minute.

Next up is the “basic” fixed mortgage. This is there “no frills” package offering.  So only available in 3,5,7 & 10 year terms. No frills means just that. No pre-payment options. No increasing monthly amounts. Only monthly payments (no bi-weekly option). Not transferable. Truly a vanilla product offering. For the no frill option, you save about 0.03 or 4 bps off your rate.

You always wanted a convertible car?  How about a convertible mortgage? This is for those folks who either can’t decide quickly or are waiting for something to happen before they pick a mortgage. Say you are renewing and can’t decide between fixed and variable. You’ve heard rates might be dropping or your renewal is in a week and you have a deadline at work you just can miss. Convertible is a short term, high rate, fully open option that allows you to figure out what you want to do and simply switch when the timing is better.

And the lineup wouldn’t be complete without having cashback options for mortgages. Yes, Virginia, the nice old banks understand that even though you have saved up that 10% downpayment but have suddenly realized it will cost you 2,3,4,5% to buy all the little things you might need for your house, like a stove, fridge, lawn mower, etc. So they are willing to give this portion of the downpayment back to you at close. For them being so nice, they’ll charge you full posted rates (which is typically 1 or 1.5% higher than their discounted rate) and expect you to give any of this money back if you refinance or sell the property before the term is up.

Now the cashback “niceness” is not limited to FirstLine. This applies to all lenders who offer this option.

I mentioned the Matrix earlier. This is where the fun begins.  Are you going to swallow the blue pill or the red pill? Blue pill, stop reading now. You’ve been warned!

Welcome to the world of the Matrix. You’ve chosen the red pill. Well done.

Matrix as the name implies is a combination of several products all mixed up into one product.If you can think of it, they can match it to your needs.

How about this deal. Fixed portion of your mortgage for 50% of the outstanding balance, on a double presidential term, with 30% in a basic ARM for 5 years and the remaining 20% as an open line of credit interest only. As the fixed and variable portions of the mortgage get paid down, then the LOC is expanded by this much, thus if you ever need access to any of the equity in your home (for an investment purchase of some kind) then you have full access via the open LOC… which is interest only. If it is a qualified investment, then you can deduct the interest on your taxes.

Complicated enough for you? Financial planners tend to REALLY love this product because the options are almost unlimited.

Now you see why I decided to make this into a post on it’s own? No? That’s good, because I’m not done.

That’s the “A” and for the most part what they call “Alt-A” business (or self-employed, business owners).

What happens if you don’t quite make the mark from the credit point of view or have some oddities with your file? Well guess what FirstLine has a whole host of other products to deal with these situations as well. It was ridiculous at one point a little over a year ago, but things have normalized themselves since. The sub-prime or “B” side of their business, they like to call Access. Probably because it gives access to people who wouldn’t otherwise normally qualify (think service people on commission who can’t verify income with below average credit). Options are few, 3 & 5 year terms (in which you had better fix what ever might be screwing up your file) and rates are generally more than posted rates. You are a serious risk for some reason after all.

The Bad

That’s the good. Now on to the bad.

With all the options, not surprisingly, FL is busy. Apparently more deals than they can handle. So many deals that a) they burn out their underwriters in less than 2 years and b) they have started a new policy where they will not accept any deals from new brokers/agents who have not been completing deals for at least 2 years.

The also have THE strictest submission policy. AS you submit you must also send in all supporting documentation. If you miss something or don’t predict how your underwriter will mis-read or misinterpret something you said or sent in, then you get an auto-decline. Oh and by the way if your declines put you below 30% of submissions vs offers, you will be excluded from submitting until the BDM has time to review their submission guidelines with you. This BDM is always run off her feet.

Oh, wait it gets better. Every re-submission doesn’t negate any previous decline. So if you submit a deal and it only gets accepted on the third try, you are already at 30%. The next submission better go well or you’re in trouble.

FL also requires you to put a line at the top of each submission in the notes (can’t be at the bottom) that states EXACTLY the time and date of when you received permission from the client to pull their credit. Auto decline of you forget or it’s not at the top.

This spring, FL was so busy… how busy where they? I submitted a deal. Waited 4 days. Called. They said they received it everything looked good but would take another 5 business days to review…. 9 days?!? Yes, but we have your submission. Typically purchases normally only give 5 days for financing. This deal was no exception. I had 1 day to go elsewhere.

Their volume has gone down… slightly… They now are saying 48 hours if you have all your documentation in, that’s assuming you have ALL of it. I’ve had a grand total of 1 deal that has given me all the documentation upfront. There’s always something people forget or haven’t completed on time. In other words, I have to have perfect clients with all their ducks in a row (documents in hand), ready to go on the day of submission.

If you don’t have the documents, add another 48 hours on top of when ever you fax/email it to them. Are you keeping track of time? Submit. 2 days. Send extra documents. 2 days. Something happens (weekend or sick day) they forget about your file. Day 5 your in a panic as you don’t know if it’s close or not. I have developed this strange tendency with FL of submitting to another lender as backup around day 2 or 3 just in case FL drops the ball. That way on day 5 I’ve either heard from FL or my back up option. If FL does come through, days later, I can kill my backup option. This isn’t normal practice as my backup lender(s) would get really pissed with me.

Today I have given up trying to predict what the lenders “might” want as proof today. I’ve had a submission almost die because they didn’t like the formatting of the document sent by the government.  Yes, the format was slightly off. They assumed it was a fraudulent document. My clients were in dis-belief. Someone’s fax machine had altered the document just enough to change the look of the font and misaligned the numbers on the page. Unbelievable.

I’m not sure why it is with FirstLine, but I always seem to be on the phone with them at the 11th hour trying to get the deal to close. “yes, I sent that document 2 days ago.”

Which reminds me, I think I have been cut off as I have not met the minimal submission requirements (I think it’s a deal a quarter). Now I have to submit through someone else and mess with their submission ratios.

So, yes I would love to use this lender more. Eventually, I’m assuming, you learn the ins and outs of all their little rules and you actually get assigned an underwriter that doesn’t disappear in 18 months and who knows you might even get an approval in 48 hours.

Well, I think that’s a long enough post for today. Hope you have all enjoyed this little insight to the fun with one lender. Fortunately the other ones I deal with are’t nearly so difficult. Although they all seem to have their moments.

Time to end my shift and remember what I was in the middle of before I started this post.

I’ve been listening to a book by Jeff Jarvis recently. Yes, listen to a book as the speed at which I read and the amount of spare time I have to read all the books I want would mean I would have to live to be 1000 years old before I finished everything… and they keep coming out with new books!

Anyway, in Jeff’s book he mentions that there is a law (I’m not sure who’s name is linked to it, but it wasn’t Murphy or Moore) that states that there is a direct inverse relationship between trust and control.

In other words the more control you give clients/customers/employees (or to use that buzz word from the 90′s “empowerment”) the more they trust you, and I believe subsequently the more creative things they start doing.

Not to toot my own horn, but this is my blog after all, but I have found that the more information I give to people and more importantly the more accurate/timely information I give, suddenly the trust factor goes way up. Suddenly the barrier that was there drops or disappears. The language they use starts to change. They start telling me personal stories.

This is one of the reasons I started my blog. I wanted to share the information and I was very much hoping that people would interact. Now I know that in order for folks to interact they have to first be able to FIND my blog. I have started to see comments from folks coming from different avenues (i.e. sending my replies, but not directly on my site). Comments via plaxo, linkedin and even facebook.

I guess finally this year I am getting feedback. Maybe over the next year I’ll start seeing more as these things have a tendency to grow over time, and set up more links to more social networking sites.

I’m also seeing the same kind of shift in the mortgage brokering world. The company I work for suddenly realized the errors of their ways when completely out of the blue one of the banks we did fully a third of our business with suddenly declares they are no longer doing business with brokers. Some brokers were simply stunned as they did a large majority of their business with this one bank.

As a direct result of this “failure”, Mortgage Alliance changed their focus slightly to align themselves with either broker only lenders (i.e. mortgage lenders who do not have traditional bricks & mortar branches and rely upon the broker community) and lenders who are truly focused on the broker business that comes in as they have realized that then they don’t have to market to the masses directly, but instead market to the brokers.

As a result, we, i.e. mortgage alliance, now have 3 unique product offerings for our clients not available from any other bank or broker channel. The Right Mortgage, Habitat Mortgage and the Smart Mortgage.

(editors note: word press just ate half this post trying to recreate from memory, so much for auto-save)

BMO was the bank that dropped the broker channel. My understanding of the situation was they wanted to be a full service provider, more like RBC. RBC is unique in the banking world (at least in Canada). They are the only bank that provides any and all products for any kind of financial transaction. From GIC to VISA and everything in between. Anyway they can make money off your money, they’ve got a product to fit their… err your needs. Their goal is to be a one stop financial spot where they’ll work really hard to give you the illusion of providing choice of a full and complete financial product range, all the while building up these invisible walls to recirculate the cash within it’s own borders. In the broker world we like to call them the Evil Blue Empire (insert your own imperial storm trooper theme music from Star Wars here). I guess it’s appropriate that one of BMO’s primary colours is blue.

The bank that is definitely not following this trend is TD. They are of the mind that there are many more companies out there that are better at doing certain tasks than they are and are willing to cooperate with these business in order to meet customer needs. Unfortunately, they like the rest of them, are also trying to paint us brokers into a tiny little corner. “Your want a mortgage? Sure you can use a broker. But wait we can offer these products that they can’t. Got a better rate from a broker? We’ll match it!”

Tied selling. Now, I know this is illegal in Canada, but that doesn’t seem to stop it from happening… over time. What is tied selling? Simplest example that happens in my world is getting a mortgage for someone and then “offering” or selling insurance at the same time. The two items are “tied”. I simply refuse to sell the mortgage insurance (as it’s expensive and has a declining balance and… another topic for another day). But the banks don’t seem to have a problem with doing this. They just don’t do it all on the same day or in RBC’s case I guess they simply refer you to another department.

A recent change with the banks has been to get my clients to come into the “servicing” branch in order to sign the mortgage papers. I’ve found a way around this, however this irks me as soon as the client is done signing the mortgage, the tied selling begins. Do you have life insurance? How’s your retirement planning going? Maybe you should book another appointment and we can discuss (i.e. sell you something else where we make better returns).

(See my previous post on Banks vs Brokers)

I had a client I sent to Scotia to sign the mortgage papers. I even called ahead to tell them not to sell her any other products. My client calls me and says that she thinks she just signed up for monthly RRSP contributions. WHAT?!?! I said NO other products. Scotia has been in my bad books ever since. They’ve also been painting themselves into a corner and as far as I can tell heading the way of BMO. They bought Maple Trust as they noticed that these guys really knew how to engage their customers (and brokers) and did a large volume as a result. Now SMaple has to follow the Scotia rules. I wonder if they are still doing the same volume of business.

Well, the picture wouldn’t be complete if I didn’t cover the last “big bank”. FirstLine mortgages is the broker representation of CIBC. Now I could… no I will write a separate blog post on these folks as they have to be the single most complex lender we all deal with. They get so much volume from just having such a wide diversity of products that anything you send takes 48 hours to turn around. Most lenders provide commitments in that time, they are happy to ask you to send backup documents which then takes 48 more hours. So if you’ve got 3 weeks for financing I should be able to get your deal done through FirstLine.

Technically I still have a file with them that is neither accepted or declined. It just sits in a queue somewhere. I was forced to do the deal somewhere else.

So here the banks go, taking away control from brokers. We’re doing the natural thing and forming alliances with the mortgage companies & the one remaining bank who sees us as an ally and a way to leverage themselves. I can only hope that as time goes on and competition grows in the non-bank arena that we start to see some more options or competitive products.

The one product that I really miss was the HELOC for business owners. This product to me made so much sense for business owners. Completely open product at prime +1 rates (which today seems reasonable given closed variables are at prime + something today) secured by real estate.

Commercial? Hm. That seems to be a whole other kettle of fish. I’m sure I could write an entire blog post on that topic as well.

Well this turned into a slightly different post than the original. Hope you still like it anyway.