Name: Robert McLister

Email: robert@canadianmortgagetrends.com

Biographical Info: Robert McLister is one of Canada’s best-known mortgage experts, a mortgage columnist for The Globe and Mail, editor of CanadianMortgageTrends.com (CMT) and founder of intelliMortgage Inc. and RateSpy.com. Robert created CMT in 2006. The publication now attracts 550,000+ annual readers, is a four-time Canadian Mortgage Awards recipient and has been named one of Canada’s best personal finance sites by the Globe & Mail. Prior to entering the mortgage world, Robert was an equities trader for eleven years and a finance graduate from the University of Michigan Business School. Robert appears regularly in the media for mortgage-related commentary (recent coverage: http://bit.ly/tUjp3Q). He can be followed on Twitter at @CdnMortgageNews


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It’s been a long time coming but D+H finally has real competition for Expert, the system that over 90% of brokers use to send applications to lenders.

DLC Group, a subsidiary of Founders Advantage Capital Corp., has purchased D+H’s competitor, Marlborough Stirling Canada Limited (MSC), for $5.5 million. MSC produces MorWeb software, a web-based order-entry platform for mortgage brokers.

DLC is purchasing 70% of MSC and another group, led by Geoff Willis, is buying the other 30%. Willis currently runs OTTO Mortgage Systems, which also makes software that automates the mortgage origination process.

Chris Pornaras is expected to remain president with Willis also joining the management team in some capacity. As such, we suspect that Otto—or at least much of its best functionality—will be merged with MorWeb sometime next year.

DLC “anticipates it can increase MSC’s market share by having more DLC mortgage brokers use the MSC platform,” says the company’s press release. That shouldn’t be too hard, given DLC’s 5,000 agents comprise 40% of the mortgage broker market and fund $37 billion a year. By this author’s back-of-the-napkin math, if DLC gets even half of those brokers using MorWeb it could pay for the purchase in 24 months or less.

Albeit, while DLC Group has ample volume to make MorWeb viable, it will take time to shift a critical mass of agents from Expert to MorWeb. “Changing peoples’ habits is dependent on user experience,” says DLC President Gary Mauris. “Users want better access to their data, integration to the CRM of their choice and a slick mobile platform, so these things will all be on the drawing board in coming months.”

Regardless of this deal, however, Mauris says “MSC and D+H will both remain key partners for DLC.

Speaking to CMT about his MSC growth plans, Mauris said, “We’re reviewing options and potential opportunities for additional partnerships. We’re also looking for ways to more economically serve our lender partners.”

Regarding third-party brokerage partnerships, some will question whether brokerages would ever use software run by a competitor. Clearly, however, DLC would be crazy to misappropriate its customers’ data—so those criticisms probably aren’t valid.

“We’ve never held broker data hostage and marketed to past agents’ clients,” says Mauris. “A broker’s client data is their data.”

The other consideration will be getting all lenders connected to MorWeb. TD and a few smaller lenders are conspicuously absent. Without TD, many brokers simply won’t use the platform. That should be a top 2017 priority for Mauris, Willis & co. as they invest in their new platform.

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DigitalMortgageConferenceThe mortgage industry is quickly realizing just how vital the online channel is to future growth. You could sense that from the near-standing-room-only crowd at the first-ever Digital Mortgage Conference, held last week in San Francisco.

Most, if not all, of the Canadian banks had representation at the event. Yours truly was also there, scribbling down insights from the top e-lenders in the game.

These were 10 of the top takeaways from the event:

  1. Quicken Loans’ Rocket Mortgage is Blasting Off
    • In the first three quarters of this year, Rocket Mortgage (Quicken’s online-optimized lender) handled $5 billion in volume, making it a top-30 U.S. lender after just 11 months in business
    • Every 34 seconds someone creates a Rocket Mortgage account
    • Every 9 minutes someone completes a Rocket Mortgage application
    • Millennials are twice as likely to use Rocket Mortgage to buy a home as Quicken Loans clients 36 or older
    • The majority of clients who are using Rocket Mortgage are doing so on a mobile device
  2. Forget everything you think you know when designing an online platform
    Regis-Hadiaris

    Regis Hadiaris, Product Lead at Rocket Mortgage

    • Quicken felt someone should be able to get approved while standing in the home they want to buy
    • To make the process this fast and simple, Quicken mapped out every step of the mortgage customer experience and re-engineered it
    • “We failed many times” while trying different ideas, said Regis Hadiaris, Rocket Mortgage’s Product Lead
    • “Use user experience testing to break through your own ignorance,” he suggested
  3. Build user confidence to improve conversions
    • Online mortgage lenders are new to most people. Many customers fear they’ll have to go it alone. An e-mortgage company’s job is to convince them they won’t have to.
    • When it comes to service, “The whole discussion of how digital is only non-human is misguided,” said Hadiaris
    • Rocket Mortgage provides the “same type of approval you can get from talking to a person on the telephone,” Hadiaris added. “Once people understand that, their concerns melt away.”
    • “Borrowers don’t expect any less personal support when transacting online,” Carter Kirks, Sr. Manager Consumer Finance Group, PwC, told the crowd
  4. Cost efficiency is the future
    • “Acquiring customers as cheaply as possible is the fulcrum of competition,” said Biniam Gebre, Partner at Oliver Wyman
    • e-lenders “are winning that game,” he said
  5. Top digital mortgage providers all have these things in common:
    • Simplified online applications
    • Intuitive selection of mortgage products
    • Instant rules-based conditional approvals
    • Continuous automated updates for clients
    • Easy-to-access human support, when needed
    • Electronic signing
  6. Direct data ingestion is the killer app
    • The top online lenders are building ways to pull a client’s income, debts and assets directly from third-party sources for instant unconditional approvals
    • Most big U.S. lenders should have this functionality within a year and a half, says Gebre
    • Quicken already links up to 95% of U.S. financial services providers, making it the leader in automated document importing (Quicken uses e-verification firms like this)
    • For clients who decide to import their income and asset information, Rocket Mortgage cuts an average of eight days off the closing time for the loan
    • Competitive advantage in digital lending will centre on your architecture and “how well you can integrate” documentation sources, said John Harrell, VP Product Management at USAA
  7. Online rate research is pervasive
    • Everyone except the “silent generation” (those age 73+) researches mortgage rates online nowadays, says Carter Kirks, Sr. Manager Consumer Finance Group, PwC
  8. Some lenders are going full-auto
    • Rocket Mortgage clients can go start to end without talking to a person
    • ….”our goal is no customer interaction whatsoever…” with a goal “of closing online entirely,” said Vishal Garg, Founder and CEO of Better Mortgage, a Goldman Sachs backed e-lender
    • In time, 90% of the functions performed in manufacturing a mortgage will be machine driven, Garg predicts
    • He adds, “Most of our customer pain points are in the fulfillment of the transaction,” after approval
  9. Competition will intensify for AAA borrowers
    • Insured mortgages “will become extraordinarily competitive…as players [enter] who don’t have legacy costs.” They’ll pass along their savings through lower rates
  10. “Simple” is in high demand
    • Quicken doesn’t purport to have the lowest rates in the country, but its self-serve Rocket Mortgage option is so fast and simple that customers “put value in that,” says Hadiaris
    • J.D. Power rated the Rocket Mortgage’s intuitive user experience as significantly better than Quickens’ regular traditional service mortgage
    • Interestingly, no one but Better Mortgage’s CEO wanted to admit their technology is replacing loan officers, but that is exactly what is happening—albeit in small numbers thus far

Digital Mortgage Conference

The Digital Mortgage Conference, December 8 & 9 in San Francisco

For anyone interested in creating a more automated lending experience, the Digital Mortgage Conference is worth the trip. If nothing else, it’s a good reminder of how hard competitors are working to lure your customers online.

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Bank earnings_sq

Another bank earnings season is in the bag. It was a quarter where Canada’s Big 6 banks addressed analysts about the changing regulatory landscape.

There was also a sharper focus on uninsured mortgage portfolios. National Bank analyst Peter Routledge addressed the issue in a recent note to clients: “With uninsured mortgages driving an increasing portion of overall mortgage and loan growth…the consequences of a decline in housing prices—most notably in the Toronto and Vancouver markets—weighs more heavily with each passing quarter.”

As usual, we’ve picked through the Big Banks’ quarterly earnings reports, presentations and conference calls, and compiled all the mortgage-related goodies here. Notable tidbits are highlighted in blue.

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READ MORE

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Andrew-Lo  “There is not digital strategy, only strategy in a digital world.”

Andrew Lo, COO at Kanetix Ltd., shared that maxim at last week’s MPC National Conference. His message: It’s time for brokers and lenders to stop thinking of customer experience online as being distinct from customer experience in general. With the net being embedded in most of our lives, “strategy” and “digital strategy” are virtually the same thing.
 
“I am sure mortgages are ripe for disruption,” Lo said at the event. The mortgage process is full of frustration, and the job of brokers and lenders is to “convert people from frustration to happiness.” Creative technology can help do that.
 
The Big 6 banks are finally waking up to this. I spoke with a high-level bank mortgage executive yesterday who told me the banks are now in a race to build out their online channels. Expect a number of online mortgage announcements in 2017 and 2018, she said.
 
Fortunately for brokers, banks are not in the lender choice business. They’ll pitch only their own products online, but they’ll noticeably streamline the application, mortgage status and document upload processes.
 
In any case, if you’re eager to improve your own online presence, here are a few nuggets from Lo’s talk:

  • Users of smartphones represent the biggest ocean of potential customers going forward. But you need a website built from the ground up for mobile, to engage people’s attention on dinky little cellphone screens. 
  • Realize that for every person shopping for mortgages on their smartphone, the majority will start to fill out an application on the phone and likely complete that application on their desktop. You need to tightly integrate your mobile and desktop experiences to allow for a smooth transition.
  • Lo suggests connecting your website to Google Analytics, which is free. Use Google’s data to design and optimize your online sales funnel. In other words, figure out how your consumers are using your website and remove all possible impediments (where they drop off, or leave your site). “Make enhancements to the user experience based on data, not opinion,” he urges.
  • Focus on soliciting online client reviews because few other efforts can enhance customer trust more. But be careful to nurture 5-star experiences, he warns. As soon as reviews drop below 4 stars (out of 5), no one seeing your reviews will come to your site.
  • Use A/B testing to determine which homepage (or landing page) better converts leads into applicants. Building two pages and tracking their metrics takes a fair amount of effort, but if you aren’t doing it, your biggest competitors are.

 

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National-BankWhen it rains it pours. On the heels of Ottawa’s broker-unfriendly insurance rules comes word that National Bank will no longer sell its branded mortgages through brokers.

National Bank had 2.5% share of the broker market as of last quarter, according to D+H. Brokers represented about a quarter of its mortgage production. This now leaves Scotiabank and TD as the last Big 6 banks to distribute through brokers.

But there’s some good news:

  • National will ramp up its funding of Paradigm Quest, which is a huge vote of confidence in the mortgage process outsourcing firm.
    • This will generate billions in new mortgage originations for PQ brands like Merix Financial. “Our goal is to fund a similar volume of mortgages in this new third-party model as we do currently,” the bank says.
    • “It’s a natural extension of a great partnership that we’ve had for several years with National Bank,” said Kathy Gregory, President of Paradigm Quest Inc. 
    • Merix Financial CEO Boris Bozic added, “We’re delighted the bank had this confidence in us. It adds to our list of institutional partners, lets Merix offer new products and lets us support mortgage brokers more than ever….”
  • It’s a testament to the quality of broker-originated mortgages given the bank’s own treasury will continue standing behind them.
    • The bank confirmed that “this is a business decision driven by economics, not by any concerns about the health of the channel or risks in the channel.”
  • Other “balance-sheet” broker channel lenders should immediately benefit from National’s departure, including Scotiabank, TD, B2B and Manulife Bank.
    • We see Manulife Bank in particular as a big winner here since its Manulife One product resembles National’s All-in-One, and since Manulife is reportedly launching key balance sheet products, including a potential replacement for National’s equity-focused “net worth” mortgage.
    • TD could also see soaring volumes if it launches its HELOC in the broker channel. B2B could also be a winner if it makes its HELOC automatically readvanceable. I believe both of these scenarios are real possibilities. And lastly, MCAP and its Fusion HELOC will see more volume, especially if it opens it up to non-top-tier brokers.

Here’s the bad news:

  • No matter how you spin it, it’s never great PR for our industry when consumers hear that a bank has pulled its broker products.
  • Brokers are reportedly losing National’s popular All-in-One, Net Worth and rental programs. We hear the bank will not be funding these products at third-party lenders.
  • I fear that NBC will provide competitive funding mainly for vanilla fixed-rate products (hopefully I’m wrong on this.) Given NBC’s deposit-raising challenges and cruddy variable-rate pricing this year, we’re not overly optimistic about its 3rd-party floating-rate offerings.
  • There’s no telling how long the bank will continue funding 3rd-party mortgages. Once it ramps up its online channel it may need some or all of that funding back.
  • Some of National Bank’s branches outside of Quebec could wither. Many of them relied on brokers for the majority of their new customers (broker-originated customers were typically referred to a local branch). It’ll be interesting to hear if NBC is closing branches on its analyst conference call tomorrow.

What led to this decision:

  • Big Investment: To thrive in the broker space, National would have had to invest tens or hundreds of millions in systems and infrastructure. Its legacy technology and workflow was simply not effective in delivering the prompt service that brokers and customers demand.
  • e-Channel: CEO Louis Vachon wants to shift resources online. He recently stated: “…We feel that in the relative near future that online origination of mortgages will be a fourth distribution segment…We feel that over time, [selling mortgages online is] going to be as attractive, if not more attractive…than the traditional third-party brokers market.” 
  • Compensation: The bank paid brokers too much. When your commissions are double or triple the industry-standard on HELOCs, and 30-50% more on mortgages, what do you expect to happen to profitability?
  • Cross-sell: Brokers don’t cross-sell National Bank’s non-mortgage products, and apparently its branches weren’t doing a bang-up job of it either. Meanwhile, Scotiabank is reportedly quite pleased with its new broker cross-sell strategy. So this factor was clearly not insurmountable.
  • Renewals: National enjoys higher retention of customers at maturity if the customer comes to National directly.

Parting Thoughts

For full disclosure, my firm did over $30 million in mortgages with National Bank last year, so I know them and their service “challenges” well. But the bank always respected brokers and its top-tier management (i.e., Mark Squire), genuinely tried to deliver better rates and service to brokers, despite the tight constraints he was under from HQ.

Our industry will miss National and the amazing people we’ve come to know there. It’s a stinging blow to be sure, but nowhere near as painful as FirstLine’s exit.

“FirstLine took more than $13 billion right out of the marketplace,” notes Bozic. “But NBC is still actively involved in the broker space, just not through their brand.” That’s key, he says, because “Monoline support and growth is vital for mortgage brokers,” as is broker lender liquidity.

As one final note to those depressed by this news. Recall that after FirstLine’s departure in July 2012, it might have seemed like the beginning of the end. Broker share of the mortgage market back then was 25%.

Today, brokers own 30% of the market, five points more.

Our industry has always been good at bouncing back. That can’t be overstated. And it’s worth remembering, because we’ll need every ounce of that resilience in the years ahead.

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Business gift_FBHappily, it’s only taken six hours to update 183 rates and 25 lenders’ policies following today’s default insurance rule changes. I reckon I’ll be done combing through the rate sheets and policy updates by the weekend, just in time to question the grey matter of those responsible for this absurdity.

Here’s some of the results so far of the DoF’s mortgage insurance ban. These numbers are not exhaustive. They’re just from the banks, monolines and credit unions this author commonly uses:

  • Typical new rate surcharge on refinances: 15 bps
  • Number of broker lenders who have terminated prime refinances altogether: 6
  • Typical new rate surcharge on amortizations over 25 years: 10 bps
  • Number of lenders who have terminated amortizations over 25 years altogether: 7
  • Typical new rate surcharge on single-unit rentals: 15-25 bps
  • Number of lenders who have terminated rentals altogether: 6
  • Typical new rate surcharge on properties over $1 million: 15-25 bps
  • Number of lenders who have terminated lending on $1 million+ properties altogether: 5

Some of the lenders who pulled the plug on these products will be back in the game once they’ve arranged new funding. But they’ll be tacking on meaningful rate premiums, like almost every other lender.

But there’s more:

  • Number of lenders who raised all their rates in the last week (and no, not because of bond yields), instead of just raising refi, long-amortization, rental and $1 million+ rates: 4
  • Number of lenders with better rates on higher-defaulting low-equity insured mortgages than lower-defaulting 20%+ equity conventional mortgages: 18
  • Number of borrowers with 20%+ equity who default on their mortgages: Less than 1 in 300
  • Canadian taxpayer losses from a U.S.-style housing catastrophe: $0
    (Insurers’ capital would be drawn down ~$9 billion, says Moody’s. But that’s a fraction of their combined overall capital base, so a taxpayer bailout would be extraordinarily improbable.)

And that brings us to the most upsetting stat of all:

  • Estimated number of mortgagors who will unjustifiably get their pockets picked by those behind this, one of the most costly, reckless, ill-planned, non-consultative series of policy decisions in Canadian mortgage history: At least 6 million (half of current borrowers)…and more to come. 

 

 

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2016 ConferenceMortgage Professionals Canada’s National Conference has wrapped up in Vancouver. It’s the nation’s largest gathering of mortgage brokers and lenders.

One of the best MPC events is perennially the Expo. It’s kind of like Christmas for mortgage brokers because you always discover new products and services to improve your revenue. On that note, here’s some of the news we heard on the show floor:

  • B2B Bank: Is now the only national lender left who still offers a 35-year amortization.
  • Bridgewater Bank: Is reportedly considering re-entering the prime lending market.
  • Eclipse: Is one of the only B-lenders with its own MIC; it’s doing 85% LTV bundles again.
  • Home Trust: Will be announcing a new near-prime product for borrowers adversely affected by the new mortgage rules.
  • Kanetix: Launched a warm lead phone service for $150 a lead.
  • Lendesk: Launched a new broker loan origination system with integrated e-signatures, automated document reminders, APIs for data transfer, customized commitment letters and a borrower portal with a mobile-friendly application.
  • Manulife: Will reportedly be announcing a conventional product to 80% LTV, a BFS product to 65% LTV and an “equity” product to 50% LTV.
  • Mortgage Alliance: Now offers customers free credit scores and personalized property valuation updates (from Brookfield) in its mobile app.
  • MPP: Is working on a solution to help B.C. brokers meet FICOM’s updated guidelines on selling creditor life insurance; is considering launching job-loss insurance in 2017.
  • Scotiabank: Reaffirmed its commitment to the broker space. Is going national with its new cross-selling program, which promotes other Scotia products to broker-originated Scotiabank customers.
  • Street Capital: Is still awaiting its bank licence. Upon receipt, it reportedly plans on launching a new non-prime mortgage product.
  • TMG: Offers a new mobile app that can pump applications directly into D+H Expert.
  • VERICO: Has rolled out its new lender hub, powered by DealAssist, at a promotional rate of $99 per deal submitted.
  • Xceed: At long last has an online portal for mortgage customers.

 

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On Monday night, two leaders in our business will receive one of the highest honours in Canada’s mortgage industry. Both will join an exclusive group of 40 individuals who can call themselves Mortgage Hall of Fame inductees.

Gary Mauris, co-founder and President & CEO of Dominion Lending Centres and Art Appelberg, president of Northwood Mortgages, will be inducted next week at an awards ceremony during Mortgage Professionals Canada’s 2016 Mortgage Forum.

Both men have each contributed immensely to the growth of Canada’s mortgage industry. Here’s a closer look at their storied careers, and thoughts from each of them on what they learned along the way.

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Art AppelbergArt Appelberg, AMP

President of Northwood Mortgages and an MBA graduate of the Schulich School of Business at York University, Art Appelberg has built a 30-year career in banking, accounting, credit risk, mortgage origination and lending. 

An entrepreneur at heart, Art became an independent mortgage agent in 1989. Seeing its potential, he went on a year later to establish his own brokerage, Northwood Mortgage. Since then, Art has grown Northwood into one of the premiere full-service mortgage brokerages in Canada, winning many industry awards, including CMA’s Lifetime Achievement and CAAMP-IMBA’s Outstanding Contribution to the Industry awards.

In his 10,000 sq. ft. mortgage office, Art also houses a successful mortgage investment company. More recently, he opened an in-house financial centre to offer his clients a one-stop-shop for all their financial, legal, real estate, investment and insurance needs.

At the core of Art’s strategy is his belief in nurturing the concept of a “Professional Community” that incorporates full-time mortgage placement officers, as well as trainers for all Northwood Mortgage agents.

With a passion for fresh industry ideas and a never-ending appetite for continued growth, Art continues down a road of success in this business, one he believes promises tremendous opportunity to come.


Read CMT’s one-on-one Q&A with Art


 

Gary MaurisGary Mauris, AMP

Gary is the co-founder, President & CEO of Dominion Lending Centres, a company he started from nothing ten years ago with partner Chris Kayat. Today, the DLC group of companies accounts for almost 40% of all broker originated mortgages in Canada.

Gary has entrepreneurship embedded in his DNA, having sold two prior successful companies to the public market. He’s been a finalist for Ernst & Young’s Entrepreneur of the Year and earned the 2016 Tri-Cities Chamber of Commerce Business Leader of the Year. His companies have won too many industry awards to count, and DLC has been recognized by Profit Magazine one of Canada’s fastest-growing companies.

As a business leader, Gary is called upon to share his views with media throughout Canada. He was part of the 2011 Pre-budget Consultation process with the-then Federal Minister of Finance, Jim Flaherty; he was selected to be part of CBC’s “Face the Nation” in 2016 and he had an open and frank discussion with Prime Minister Justin Trudeau on topics key to our industry.

Gary has led multiple socially conscious initiatives, including being co-founder and president of I AM SOMEONE Ending Bullying Society. He recently co-founded “Bikes for Kids,” a National program that collects new bicycles for underprivileged children across Canada. Whether it’s in or out of office, Gary is one of the most accomplished recipients ever to win MPC’s coveted award. 


Read CMT’s Q&A with Gary


Story by Steve Huebl & Robert McLister

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Network FBLenders pay a toll to get applications from mortgage brokers. The long-established toll keepers are D+H and Marlborough Stirling. These two technology companies get a slice of every deal lenders receive through their online platforms.

But lenders are growing weary of this expense, which is reportedly as much as 5-6 basis points per funded mortgage in the case of D+H (i.e., up to $180 on a $300,000 mortgage). Lenders resent having to pay more for bigger deals when D+H’s processing costs are much the same regardless of deal size. So they’re taking matters into their own hands.

The talk out there is that a consortium of lenders is making a play for Marlborough Stirling’s MorWeb platform. The MorWeb business is rumoured to have been hemorrhaging cash. Its parent, Capita plc, has reportedly been running a process to find a buyer for weeks now, as MorWeb clings on to just 5-9% market share (our best estimate). If lenders are successful in buying MorWeb, their connectivity costs could drop by 50%.

But lenders may have competition for MorWeb. Word is, Dominion Lending Centres and a few other broker networks have been separately eyeing the company. With DLC controlling roughly 40% of broker market volume, it could make MorWeb viable overnight by cutting lenders’ costs (relative to D+H), pumping $30+ billion in volume through the system and charging its own access fees.

If the MorWeb transaction doesn’t pan out, lenders seem open to cutting deals with Canada’s largest superbrokers for direct access. Lenders would then invest some of their D+H savings back into the brokerages (perhaps 1 bp a deal, or a small flat amount per mortgage). That could fund new technology and marketing initiatives for broker firms, among other things.

Case in point is a firm like Mortgage Alliance. It’s decided to build its own direct channels to lenders. Just today it announced a link to First National, Canada’s largest non-bank lender. Last month it hooked in to Paradigm Quest and its brands Merix and Lendwise.

It’s Been a Long Time Coming

Most monopolies don’t last. D+H might have avoided his fate had it restructured its pricing and built in value that end-users (brokers) crave. Brokers have long been underwhelmed by Expert’s functionality, as this sample ILMB Facebook post conveys:

Facebook-on-DH2

 

D+H could have broadly released tools like online application APIs (accessible to tech-savvy broker-owners, not just superbrokers), better links to third-party CRM systems, a native CRM system, a slick mobile app with document imaging (it demo’d this a few years back…where did it go?), secure email document sharing and so on. That might have instilled broker loyalty.

Instead, it’s seemingly opted to milk its cash cow — and despite all of its well-drafted lender contracts, that could cost it long-term.


Here’s to hoping that D+H surprises everyone with innovation at this weekend’s MPC conference in Vancouver. 

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Donald Trump has “blown up” the bond market. That’s CNBC’s depiction after the president-elect’s victory wiped out $1+ trillion of its value in the last week.

Trumponomics, Trumpflation, the Trump Thump, Trumpulus, or whatever you want to call it, has incited fear in bondland. Traders envision 4%+ GDP growth, inflation, massive deficits, a potential U.S. credit rating downgrade and unravelling of the greatest bond bull market of all time.

All of this is conspiring to reshape investors’ mindsets…radically. It’s raising the implied odds that 2016’s bottom in rates won’t be broken for several quarters, at a minimum.

And if the bond market is somehow mispricing Canada’s economic prospects—and yields do fall 55+ bps to new lows—imagine what hideous fate that would portend for Canada. It’s a fate that, given a soon-to-be-robust U.S. economy (the destination for 73% of our exports), now seems less probable.

But make no mistake, we’re staring at much uncertainty through 2018, not the least of which is:

  • How much will a resurgent U.S. economy boost Canadian exports?
  • What kind of trade deal do we get post-NAFTA 1.0?
  • Where does oil go next?
  • How much does a cheaper loonie absorb any trade shock?
  • Will Ottawa keep Canada’s business environment (tax regime) competitive with the U.S.?

These questions and others will have econo-gurus debating interest rate direction for months. Our clients will see their headlines and ask the perennial question: “Should I lock in?” And the answer will be as clear as ever: There is no clear answer.

But here’s something we can tell clients with confidence. The rate paradigm as we knew it on November 7th was transformed on November 8th. In 2017, the economy that we sell three-quarters of our goods and services to will be firing on two more cylinders, and net net, that could help Canadian business, boost Canadian inflation and be rate bullish.

And if we’re wrong, borrowers will have far bigger problems to contemplate than not picking the bottom in interest rates.