What’s on the Minds of Lender Execs

October 28, 2015  Robert McLister  2k 

Last month Scotiabank hosted its always-informative Financials Summit. Top brass from various lenders spoke at the event and each had a few sound bites of note. Here are some of the more notable ones:

• CIBC is working to take “paper and process” out of the mortgage system and get answers to mortgage clients more quickly, said President & CEO Victor Dodig.
  
• Scotiabank has “rapid lab” teams working to “reduce frictions” in its mortgage business. The bank’s pull-through rate, in terms of pre-approval to fulfillment, “was lower than we wanted” at 30-35%, said CEO Brian Porter. “We think we can get that to 60%. Now, if you do that you add $5-10 billion of mortgages.”
  
• RBC’s CEO says his firm can “fast follow” market disrupters: “Everything I see, I feel I can replicate right now.”
  
• B2B Bank’s mortgage growth has been well above the industry at 25% y/y, says President & CEO Rejean Robitaille.
  
• The widely reported fraud at Home Trust was primarily from two brokerage houses, said CEO Gerald Soloway. As of last month, Home Trust had onboarded 200+ new brokers, helping to offset lost volume from the firms it canned.
  
• “99% of mortgage brokers are honest and diligent,” said Soloway. “Lawyers get disbarred each year. Every profession has bad apples.”
  
• If you want to predict mortgage arrears, “The canary in the coal mine is unemployment,” Soloway explained.
  
• “If you go delinquent in the first 12 months, there is either something we missed in the underwriting or there is fraud,” said Genworth Canada CEO Stuart Levings.
  
• Levings: “The average Canadian cannot afford the average Canadian home.”
  
• 80% of Scotiabank’s broker channel volume comes from just 500-600 brokers, noted Webster.
  
• Mortgages originated by brokers and by Scotiabank’s retail channel are “indistinguishable in terms of arrears,” said Scotiabank’s John Webster, Head, Real Estate Secured Lending.
  
• If you communicate a zero fraud tolerance policy to brokers, “the business will police itself,” said Webster.
  
• Webster: “…The various [regulatory] changes, including the most recent, the purpose test (which requires that) all of the portfolio insured product has to go into a CMHC vehicle, suggests that for the monolines there will be challenges potentially to liquidity, or it will become more expensive…”
  
• Webster: The regulatory environment in the mortgage industry has “never been more prescriptive for new Canadians or for self-employed” borrowers…
  
• From a potential fraud standpoint, Equitable Group CEO Andrew Moor says his bank tracks brokers who send in suspect deals. “Two strikes and you’re out in our case.”
  
• Toronto and Vancouver are where the overvaluation is and that represents 27% of the market, said First National Financial Co-founder & CEO Stephen Smith. But those two markets entail mostly conventional mortgages, he added, noting that the policy to limit mortgage insurance to properties under $1 million was therefore a “political” decision.
  
• Smith stated that he was “surprised” regulators have never reduced GDS/TDS limits.
  
• Smith says his company is “having discussions” with other lenders interested in outsourcing their underwriting to First National (a la TD’s underwriting deal with the company).