Tag: banking

Mortgage industry’s future

(photo by Nick Youngson / Alpha Stock Images)

The next decade is going to see an evolution in how Canadians obtain mortgages. These shifts will transform the experience for both the mortgage professional and, more importantly, the borrower. Here’s where things are now and what I foresee.

The mortgage industry

A borrower can go to three sources to get their mortgage: account managers at banks, mortgage specialists at banks and mortgage brokers. (I use “bank” as a catchall for financial institutions, including credit unions and trust companies. Financial planners are not included because they represent such a small slice of the pie and refer files to mortgage specialists.)

Employees, particularly account managers, are a bank’s frontline team for mortgages. These salaried employees get incentives if they hit sales targets, but they are, by definition, jacks-of-all-trades. They help with a client’s routine banking needs, open investment accounts, provide general advice and also write mortgages.

Because mortgages are complex, account managers are encouraged (and often required) to send their mortgage applications to a mortgage specialist. This is good policy, because it is best to have an expert eye review something as significant as an average family’s most significant investment and the average bank’s bread-and-butter. Also, because there have rightly been many – one expert told me there was a total of 168 – new rules since the 2008 financial crisis, it has become increasingly difficult to “dabble” in mortgages.

Given these developments, a consumer would be wise to trust the most important financial transaction in their life to a professional who has expertise in a single field, rather than a generalist who is doing mortgages off the side of their desk.

Of course, every bank employs a network of mortgage specialists, with each bank investing varying amounts of resources into training. Still, a mortgage specialist is just that: a bank employee who specializes in mortgages.

Most banks’ mortgage specialists are commission-based and can make a good living from their work. But remember: bank specialists work for the bank, not for you. (They also don’t require a licence or any accreditation to write up your mortgage application.)

Mortgage brokers are independent professionals whose unique responsibility is finding the ideal financial solution for each client, not whatever rate or product their bank is pushing on any given day.

A mortgage broker is a professional who has successfully completed an educational process, passed an exam and undergone comprehensive assessments, including biannual criminal background checks. Additionally, continuing education is required to ensure that mortgage brokers remain informed of the latest developments in this ever-changing industry. Mortgage professionals at the banks, however well-intentioned or however closely they follow the business pages, have no such requirements.

It is commonly said that a mortgage broker “shops around” for the best rate. This is partly true, but there’s more. Brokers know the rates and conditions of every lender. What we do with that information is tailor each client’s need with rate and product choices, allowing them, with their mortgage broker’s guidance, to make the most informed, appropriate decision for what best suits them.

For example, a broker might recommend a more flexible mortgage product with a slightly higher-than-base rate versus a lower rate with restrictions. This is crucial because, again, everyone’s case is unique. Circumstances change. Relocation is sometimes unavoidable.

Even better: for most mortgages, a mortgage broker’s service is provided at no cost to the borrower. Brokers earn their keep from the lender that finances the borrower’s mortgage.

Where is industry headed?

Account managers at banks will continue to write mortgage applications because this remains an efficient use of the bank’s resources. The banks have been building increasingly sophisticated mortgage application platforms for their mortgage specialists and account managers to use. These easy-to-use apps are straightforward and allow their employees to quickly and efficiently pull together all of the necessary information to verify credit data and employment, assess risk and review the property, all at the click of a few buttons.

The banks built these systems so that employees with less expertise (and lower salaries) can replicate or reduce the work of more highly trained professional staff. And, since mortgage specialists are largely commission-based, it seems to me that banks will increasingly depend on salaried individuals who read from their computer screen while dealing with mortgage-seekers.

The obvious issue with an account manager reading off a screen is that, at any point in time where real advice is required, the bank employee will not have the training or experience to provide it.

There is, of course, still currently a place for bank specialists. The best of them can and do give the best service possible to their clients.

My prediction is that the mortgage specialist role will be curtailed until only a few high producers remain. Banks will probably continue to make it easier for mortgage specialists to do their jobs, allowing them to take on more files and the best will grow and the worst will drop off.

Don’t misunderstand me. There is a place for technology, obviously, in the process. In fact, mortgage brokers, by necessity, are entrepreneurial

and resourceful, and have created economies of scale, processing documentation and applications more efficiently than ever. For instance, my team and I have automated the process of 70-plus internal steps per client throughout the mortgage process, streamlining everything for ourselves so that our clients can benefit from the most comprehensive and individualized experience we can offer. This involved a lot of time up-front, but it means that our clients receive the service they want, tailor-fit to their specific needs.

My prediction for mortgage brokers is that there will be a culling of the herd, just like with mortgage specialists. A broker, and any consultant in this day and age, needs to innovate and use the newest technologies to stay relevant in the eyes of borrowers. Not just that, the brokers themselves need to know each lender’s products and how to get files approved.

Superb knowledge, a fast and efficient process, and amazing customer service will become the bare minimum in the future, and the specialists and brokers who “dabble” or aren’t 100% committed to improving their craft will get left in the dust.

Eitan Pinsky is principal of Pinsky Mortgages, a Vancouver-based mortgage broker.

Money still unclaimed

Thousands and thousands of dollars belonging to Jewish institutions and individuals are sitting unclaimed at the Bank of Canada.

Banks and federally chartered trust and loan companies are required to transfer to the Bank of Canada all unclaimed bank balances maintained in Canada in Canadian currency that have been inactive for a period of 10 years. According to the Bank of Canada’s website (bankofcanada.ca), at the end of December 2016, approximately 1.8 million unclaimed balances, worth some $678 million, were on the bank’s books. More than 93% of unclaimed balances were under $1,000, representing 26% of the total value outstanding. In 2016, the bank paid out $15 million to account holders. The oldest balance dates back to 1900.

At the Bank of Canada, there are many small amounts payable to Jewish organizations, including ones that are currently active. There are also some organizations that may no longer be active, which is why money in their name is languishing at the Bank of Canada. It is unfortunate that money intended to benefit Jewish organizations, charities or other causes, should not be used for the intended purpose, but instead sits unclaimed at the bank. Many of these organizations must have successor organizations or responsible persons that, with a little effort, could prove their right to claim the funds.

To discover whether a group you are now or have previously been associated with has such a balance, you should do the following:

  1. Go to bankofcanada.ca.
  2. Type “unclaimed balance” into the search box.
  3. Once you reach the unclaimed balances registry, type one word of the organization name into the search box and scroll through the results.
  4. If you see a name that is familiar, open the link.

If there is a bank account untouched for 10 years, the organization will pop up, along with the name and address of the originating bank. Then you can make a claim for the money through a process set out on the website. You will have to prove that the account was yours, and the website explains how to do that.

You can search by province, or by “all” (of Canada). Each year, on Dec. 31, the Bank of Canada adds another year’s unclaimed bank accounts to the website.

Members of the Canadian Jewish community should try to reclaim funds that were intended for use in the community.

Here are some of the words searched that found unclaimed balances belonging to Jewish groups or institutions: Jewish, Hebrew, tikvah, congregation, Canadian friends, beth, bnai, b’nai, rabbi, synagogue, temple, Torah, Talmud, Israel, Jerusalem, Moshe, Habonim, Zionist, ohel, Na’amat, chevra, camp, JCC, eitz, beit, chaim, kosher, yeshiva, Yiddish.

For example, the Bank of Canada holds $3,311.02 for an organization called Canadian Friends of Tikvah Lay in Ontario. It also holds $256.94 for Yeshiva of the Northwest, whose last transaction date was in 1992 in Vancouver, and $108.69 for the Edmonton Jewish Women’s Baseball League, untouched since 1997.

There may be some hurdles to jump to establish the right to the $953.08 of the Yiddish Drama Company in Toronto, untouched since 1979. However, there are at least a dozen Jewish community centres and congregations in towns across the country that should have very little difficulty in obtaining their unclaimed bank balances.

Few of the amounts found were large – but should any of the money raised or donated for a Jewish cause, charitable or not, be left at the Bank of Canada? Some effort should be made by the community to locate these funds and use them as they were intended.

You should also check your own name and those of family members, especially those family members who died more than 10 years ago, as there are sometimes bank accounts that heirs were unaware of at the time of death and that show up at the Bank of Canada years later. The process for obtaining personal unclaimed funds is also quite simple, and requires establishing your identity and your right to the funds.

Not to be confused with the funds held at the Bank of Canada, the province of British Columbia has its own, government-affiliated B.C. Unclaimed Property Society. It seems to hold more funds for individuals rather than organizations. Its website (unclaimedpropertybc.ca) says:

“Each year, millions of dollars in British Columbia goes unclaimed in dormant credit union accounts, forgotten insurance payments, unclaimed wages, overpayment to debt collectors, as well as unclaimed proceeds from courts, tax offices and unadministered estates and intestates (death without a will and next of kin cannot be notified). The British Columbia Unclaimed Property Society (BCUPS) helps reunite British Columbians with their forgotten or unclaimed assets. We hold unclaimed property as the custodian for rightful owners under the Unclaimed Property Act.”

The BCUPS website also provides an easy way to search, but if you find your name, you will find no further information about the amount of funds or the source of the funds being held for you, until you contact the society. You could think of it as a form of treasure hunt, where you expend no money, but you do expend your time, and maybe there will be a treasure chest or at least a few coins at the end of the hunt.

Felicia Folk is a retired lawyer living in Vancouver.