Private lending in a changing lending environment

Fergal: [00:00:24] Hello again and thanks for joining us on another version of CMP TV. I’m Fergal McAlinden, news editor for Canadian Mortgage Professional. Well, it’s been a busy year so far for the Canadian financial market, and it’s been no different for the private sector. New educational requirements for mortgage brokers in Ontario, increased due diligence and rising interest rates are just some of the topics that will touch the general market. Here to discuss these developments and more, I am delighted to have one of the leading figures in the Canadian mortgage industry. Shawn Allen is the founder and principal owner of Matrix Mortgage Global and was recently named Broker of the Year for Private Lending at the 2022 Canadian Mortgage Awards. Shawn, thank you so much for being with us today. How is it with you?

Shawn: [00:01:07] Oh, wonderful. What about you? It’s summer time.

Fergal: [00:01:12] Everything is going really well. Thanks again for coming on the show today. We really appreciate having you. Clearly, these are very changing times for the Canadian housing and mortgage markets. But how do you see the nature of the game and the secret area in particular?

Shawn: [00:01:26] The private sector is constantly growing. It’s been going, you know, for a long time. And more and more people are turning to mortgages as interest rates continue to rise and financing problems weigh heavily on Canadian homeowners.

Fergal: [00:01:44] One of the things I mentioned above is that there has been a lot of interest from regulators in private lending in recent months. Do you feel that it is justified? Was that something you expected coming?

Shawn: [00:01:54] Yeah, I’m all about it, actually. I’m all about the new legislative changes to housing license requirements. I’m all for looking into the personal loan space because there’s a lot of people coming into the space who don’t have a business, you know, doing mortgages. They are favored by the industry, charge exorbitant rates and put people into mortgages that don’t fit the type of loan they deserve. All these efforts are to ensure that the industry remains competitive and profitable for homeowners looking to escape mortgage debt. So all the updates that are coming in terms of more updates that are coming and licensing requirements, I’m all for it.

Fergal: [00:02:49] Do you think the increased interest has come from the influx of new borrowers during the pandemic? We’ve seen, obviously, more and more people coming into space in the last few years.

Shawn: [00:03:01] As for the analysis, I think it goes back to the mortgage syndicate fiasco that is plaguing the mortgage industry. But all of this makes sense because there were other mistakes, big mistakes that were revealed in the mortgage industry through this crisis. However, yes, there are more people coming into the space, but I think there needs to be more education around the types of mortgages and the ways to get out of mortgages. When you talk about privacy, because I often see people being beaten in houses that don’t fit. They are getting high interest rates and there is no way out. And it’s more difficult for people who aren’t properly exposed to get a mortgage. There is no benefit to them except the greed of those who would be the people who are cooperating here and doing it for the benefit and the maximum benefit. So it’s a round-the-clock approach that needs to be taken to clean up the mortgage loan picture. But traditionally, private equity loans were the bread and butter of mortgage lenders. So the way the industry has changed, it’s really interesting to see where we’re going with this, for sure.

Fergal: [00:04:29] Shawn, is there anything else you’re keeping in mind as you visit the private sector this year, between the changes we’ve mentioned in the market and the regulatory focus?

Shawn: [00:04:38] Yes, out of the way of revelations, these are always at the top of mind. When collecting private loans at Matrix, we want to make sure there is a good way out before applying for the loan. This is an important part of our writing process, having a clear exit process and then full disclosure is essential and we want to ensure that our incoming clients know the exit process and provide full documentation. Because I think in 12 to 18 years, even 24 months now, the regulators, if they haven’t done it already, should have a plan to come and start evaluating rental brokerages that are within the private rental area to create. Make sure we don’t say we’re trying to avoid bad apples. We just want to make sure we have a level playing field all the time to make sure we’re all playing by the same rules and give Canadians the protection they need in times of crisis. So I’m all about it. And I think that creating a standard because I do not think that there is a standard practice in the common credit area. And I think we have an established system and I’m giving every support and encouragement I can to people who want to join and even to the moderators if they want the representation to be done in private. .

Fergal: [00:06:00] Is there anything you recommend brokers know when choosing a lender or borrower.

Shawn: [00:06:05] Not really, except to make sure they read it well because a lot of brokers are coming in and they don’t know maybe they don’t know what kind of stuff they are getting their client into. So this can be difficult, but to ensure that they provide due diligence is to read the fine print. Because often brokers come and give their client a private loan. And it’s not just mortgages, any mortgages, because there are always lenders and borrowers who are putting customers on a loan without going out. They can’t break the mortgage if it’s a bona fide sale or there are legal fees or charges and so on. So making sure they’re doing their due diligence and doing what’s best for the client, I think that’s the best advice I can give.

Fergal: [00:06:59] And Shawn, especially for this new idea and [00:07:01] FINRA fee [00:07:02] for an additional group of certifications for personal loan lenders, it looks like you are all of them. But do you think this will benefit all companies?

Shawn: [00:07:11] Yes, 100%. But I don’t really agree with the time when they are using the method where you have to do the mortgage first and then the personal loan is the second. I think that if you want to give your customers a complete solution and a complete solution, then the approval of both parties must be done at the same time because at the same time you can have a customer come to you and you can think or they will think that ‘re a triple-A customer, but then they can being a past customer. In contrast, they may not qualify for everything these days it could be confidential, but because you don’t have permission to give them an answer, they are forced to go elsewhere because of it. So I think that providing both education at the same time and just educating the mortgage lenders would be beneficial to provide the solutions they need to be able to provide solutions to Canadians.

Fergal: [00:08:15] It’s hard to believe that we’re already halfway through the year and looking forward to the second half of the year. Are there any events or events that you see coming that you think people should know about or that you are keeping an eye on yourself?

Shawn: [00:08:29] Yes, rising interest rates are a concern. As you know, pre-epidemic, 2017, 2018, many of these loans are coming up for renewal now. And at that time, those mortgages are getting two and a half to three and a half percent over five fixed years. But right now we’re seeing institutional mortgages at 5% for the top four, the bottom five. Most people who get a loan, a five-year loan, the average person also extends their loans two and a half to three years if they have five years. So many people who got their mortgages in 2017, 2018 may have benefited from variable interest rates in 2020 and 2021, but now these people have mortgages that are going up. So we’re seeing a lot of problems with that, with people having higher interest rates on refinancing, and higher interest rates on mortgages that they refinanced before they matured. And now they have expensive mortgages. What we’re seeing is that a lot of people who have bought real estate and have a rental property, they probably have one rental property in their property and now they’re forced to be in trouble because the property is foreclosed. fixed returns and rents that cannot be increased. However, the cost of transportation has increased. If they took out a variable at the same time or if they have a fixed loan, the cost of the fixed loan will increase. So we’re going to see a lot of people in the wrong roles soon. So it’s going to be interesting to see what 2023, 2024 looks like when all these loans come in for restructuring. Then people get stuck behind the ball because you can’t evict tenants. And. The increase in house prices is linked to the CPI, but the CPI calculation. So it will be interesting to see what happens with those customers in the next 24 to 48 months.

Fergal: [00:10:37] One thing I have to tell you before I leave you is that you were apparently named broker of the year for private lending at the recent Canadian Mortgage Awards. First of all, thank you very much for that. It must feel good to be recognized again from the industry for your work.

Shawn: [00:10:51] Yeah, yeah, of course. It is a great honor to be recognized for five years in a row. It’s just a testament to the work my team is doing, and I really appreciate the recognition, but at the same time, it really puts a lot of pressure on the team to perform and it puts us in the spotlight. So we want to make sure that we provide the best service and the best experience to the industry. So it’s a role that I love to be given and I want to make sure that I’m providing the best in the services that I’m offering to people who are looking for a rental property, whether you’re a renter or not. for advice or consumers looking for advice. It is a definite honor to have the opportunity to provide that support.

Fergal: [00:11:42] Good. Big things. We’ll leave it at that for today. Shawn, thanks so much for coming on the show. I appreciate your time as always. I’m sure we’ll find out soon.

Shawn: [00:11:49] Good. Thank you very much. Thank you. Thank you for being with me.

Fergal: [00:11:53] That’s all we have for today’s show. Thanks again, TO Shawn Allen of Matrix Mortgage Global for contacting us. Thanks for watching and we’ll see you next time here on CMP TV.