Broker Insights Newsletter
New mortgage qualification and underwriting criteria coming soon – submit your deals now!
To comply with the new ‘Guideline B20 - Residential Mortgage Underwriting Practices and Procedures,’ mandated by the Office of the Superintendent of Financial Institutions Canada (OSFI), by the Jan. 1, 2018 deadline, Manulife Bank will implement new mortgage qualification and underwriting criteria on Dec. 31, 2017.
The new criteria will apply to all uninsured mortgages and insurable mortgages where the loan-to-value (LTV) is less than 80%. For clients, this will equate to the greater of either:
- The contractual mortgage rate plus an extra 2%, representing OSFI’s newly imposed ‘stress test’ rate (e.g. For Manulife One main account: Use Base Rate (including premiums or discounts) + 2%; for Manulife One sub-account with a fixed term or a Manulife Bank Select portion: Use contractual rate + 2%), or
- The Bank of Canada five-year benchmark rate (regardless of term).
For strong mortgage candidates – including those making down payments greater than 20% of the value of their homes – we anticipate minimal impact from these changes.
For brokers with active mortgage files in progress
Only mortgage applications that receive approved status before Dec. 31, 2017 will qualify under the current criteria if the deals fund as follows:
Must fund within 120 days of application date; otherwise the new qualification and underwriting criteria will apply.
Must fund within 90 days of application date; otherwise the new qualification and underwriting criteria will apply.
We are working diligently to complete files as quickly as possible. Applications submitted on Dec. 31, 2017 or later, as well as applications that have not received an approved status by Dec. 31, 2017, will be qualified under the new criteria.
Feel free to reach out to your Manulife Bank representative for ways to help frame these discussions with your clientele.
Manulife Bank salutes the commitment of our broker partners
Another great conference caps a banner year
Manulife Bank was delighted to greet so many broker partners at our Head Shot Lounge in the National Mortgage Conference Expo, November 26-27. It gave us the chance to thank you personally for helping us reach $1 billion in funded mortgages through the broker channel during 2017 – a milestone we were thrilled to meet so soon after entering the channel! We learnt a lot from our conference dialogue, and we trust you will find your photos a practical souvenir.
New rewards program launching in 2018
Next year marks our 25th anniversary, and we plan to start the celebrations by rolling out a new Manulife Bank Broker Rewards Program on January 1. We will reward our most loyal mortgage brokers, and your clients too, with a range of exclusive benefits tied to three levels of achievement: Silver Elite, Gold Elite, and Platinum Elite.
We designed each higher tier to build on the benefits offered in the previous tier. Starting with product discounts, and Manulife One cash back certificates. Adding increased business development support and exclusive access to certain products and services. Topping everything off with the potential to earn recurring bonus compensation based on outstanding Manulife One advanced amounts. Watch for details, soon to be released.
Meanwhile, thank you so much for your support. We look forward to 2018 as the first of many more rewarding years of working together to help Canadians realize their home ownership dreams.
Keep mortgage-free clients on your contact list
Before you purge the clients who are about to discharge their mortgages from your Customer Relationship Management (CRM) system, stop and consider whether they might still be carrying debt as they approach retirement. Equifax Canada reports* show consumer debt climbing among seniors. Perhaps with a little prompting from you, these clients might recognize that home equity is a potential source of lower-cost funds to meet life’s necessities or unexpected expenses.
Here is the third in our series of possible conversation starters:
Mortgage-free but still in debt?
When you call to offer congratulations, you may discover some of your clients celebrating mortgage freedom but not necessarily debt freedom. In fact, Manulife Bank’s fall 2017 debt survey** found that 35% of Canadians would consider themselves debt free even if they still carried credit card balances. It may be a prime time to suggest that they open a Manulife One account. You don’t have to put a large credit facility in place to establish your clients’ peace of mind; the credit facility can be as low as $100,000. Meanwhile, everyone needs a bank account. Your clients can make the most of the positive savings balance and chequing privileges that Manulife One provides, and in the knowledge that they may have low-cost access to their home equity any time they need it ... all thanks to the mortgage professional whose interest in them didn’t abruptly end with the discharge.
* consumer.equifax.ca/about-equifax/press-releases; Increases to Consumer Debt Highest in Ontario, Lowest in Western Canada (September 05, 2017)
** The Manulife Bank of Canada poll surveyed 2,409 Canadian homeowners and renters in all provinces between ages 20 and 69 with household income of more than $40,000. The survey was conducted online by Nielsen between October 11th - 23rd, 2017. National results were weighted by province and age.
The Truth is in the numbers!
What your clients don’t know can hurt them – because when it comes to managing mortgage debt, ignorance is not bliss.
As the latest Manulife Bank debt survey1 shows, Canadians feel they are lacking in strong debt management skills and yet they don’t like talking about debt.
This is a great opportunity for you to use your expertise to have meaningful conversations with your clients and help them increase their debt knowledge and enable them to make better financial decisions. For example, you can illustrate how prepayment options can help pay off their mortgage quicker and potentially save them interest costs.
When asked specifically about mortgages…
- Canadians believe that the interest rate (84%) is more important than interest paid over the life of the mortgage (48%)
- Over 25% of Canadians do not understand the value of a shorter amortization period
- Over half of Canadians did not make any extra payments and/or increase the amount of their regular payments toward their mortgage in the past year
Other key findings:
- 55% said they seldom discuss their debt with friends or family
- Nearly 1/3rd of debt holders are embarrassed or don’t know who to talk to about debt management
- Nearly half of Canadians feel they do not have very good knowledge of debt management.
- 62% of Canadians are not satisfied with their overall financial health or access to money for emergencies
- 71% would like to be more confident about financial decisions
Take a look at more survey results.
Don’t just let the numbers do the talking. Start talking about debt today.
1The Manulife Bank of Canada poll surveyed 2,409 Canadian homeowners and renters in all provinces between ages 20 and 69 with household income of more than $40,000. The survey was conducted online by Nielsen between October 11th - 23rd, 2017. National results were weighted by province and age. Manulife, Manulife Bank and the Block Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.
Offer a flexible and affordable mortgage solution
Want to restore smiles to the faces of your clients feeling stricken by the last round of mortgage regulation changes? Many traditional products don’t have the same appeal in a changed market. Manulife One offers your clients financial flexibility and the opportunity to obtain a lower interest rate on an amortized fixed rate sub-account. Whether your client is looking to refinance or renew their mortgage, Manulife One offers the ability to simplify their finances, save interest costs and be debt free years sooner. Manulife One is more than just a home equity line of credit (HELOC).
First, you and your clients will find that Manulife One offers far more financial flexibility than just a HELOC. It’s a solution that combines the best features of a mortgage … plus a line of credit … plus a full-service banking account ... all in one product. Second, you’ll be happy to learn that the sub-account may qualify for some of our lowest rates.
Consider some advantages Manulife One offers that most HELOCS won’t:
- Deposit income directly into the credit line. Our daily interest calculation means that every dollar clients deposit reduces their total debt, saves interest costs and helps them become debt free sooner.
- Ability to track debt separately through sub-accounts. If they’re concerned that interest rates may rise, or prefer regular fixed payments, clients can lock-in part of their debt at a fixed rate.
- Chequing, debit, bank machine and mobile banking from the credit line. Your clients save the time, stress and fees associated with moving money between multiple accounts.
- Positive balances earn a high daily savings rate.
- Ability to capitalize loan interest. If your clients choose, or if they experience temporary financial hardship, they can defer the loan interest up to their available account limit.
Manulife One is an ideal solution for clients who want to refinance, are approaching renewal, or are buying a home but also wish to:
- Start or grow a family
- Have emergency funds readily available
- Manage a rental property
- Smooth out income variations within a small business
- Retire from the workforce
Contact your BDC today for more information and sales strategies.
Debt Truth Revealed
Manulife Bank’s latest Homeowner Debt Survey has uncovered the truth: Many Canadian homeowners, particularly Millennials, are not prepared for unexpected expenses. Use the survey results to help you start a conversation with your clients – of any generation – about solutions that can help them prepare for the unexpected. Learn more
Why prepayment options count
Home buyers need to see past a competitive rate and look at the full picture of what their mortgage offers – or lacks. Typically, lenders offer clients the ability to prepay 10 to 20 percent annually without a prepayment charge. However, when clients want to prepay more, they can incur significant charges. For a closed fixed rate term, they would pay the higher of three months’ worth of interest or the Interest Rate Differential (IRD) amount.
IRD considers the difference between the clients’ mortgage rate and the current rate offered to new clients for a mortgage term that’s closest to the remaining length of their term, less any rate discount they received, multiplied by the amount the homeowner wishes to repay.
Many Canadians who think they have a terrific rate are disappointed when they break their term, as the Johnstones learned when they had to sell their home with two years remaining on the original five-year term. Their bank applied a prepayment charge of $7,122 on an outstanding balance of $225,000 because the Johnstone’s mortgage rate was “discounted” from the bank’s posted rate.
Had the Johnstones chosen a Manulife Bank mortgage and later needed to break their term, the prepayment charge would have been just $1,068. Why so much less? Manulife Bank strives to keep things simple and fair. We calculate IRD using the homeowner’s actual rate and our current rate closest to the remaining term – in this case 2.69%.
Life happens. You can help prepare your clients for the future by considering the cost of early payout before locking in.
Contacting clients who have almost paid off their mortgage
Even when clients have a low mortgage balance and haven’t needed your services recently, why forego calling them? Living happily ever after in the homes you helped them finance, these are likely some of the most satisfied and receptive individuals in your entire Customer Relationship Management (CRM) system.
You may want to reconnect to remind them of the tremendous percentage of their net worth that real estate represents, and the potential of home equity to finance dreams or ease financial stress if their circumstances should change. The Manulife One banking solution is a great place to start ‘big picture’ financial conversations that identify you as an extraordinary resource.
Here is the second in our series of possible conversation starters:
Clients whose mortgage is almost eliminated
Sometimes a client’s mortgage has gotten so small that it’s not worth their time to move it or worth your time to chase new financing options. However, most Canadians have other expenses on the horizon even after their mortgage is nearly paid off. Maybe it’s time to reinvest in their property with a major renovation. They may have children still at college or university. Perhaps they can finally make time to visit destinations on their bucket list. Why not engage them to switch to a Manulife One account to gain flexibility in financing goals and future needs? You can build on a successful client relationships by thoughtfully offering them an effective way to live life on their own terms.
Customer service that keeps getting better
Like you, we want our clients to have a great experience whenever they interact with us. Not only have we launched mobile deposit capabilities this spring, Manulife Bank was ranked #4 for customer service in Canada by Surviscor’s 2016 Canadian Banking Service Level Rankings.
Debts, dollars and decisions
The latest Manulife Bank Homeowner Debt Survey reveals similarities and differences among three generations of homeowners – Millennials, Generation X and Baby Boomers.
- More than one in three Millennials feels mortgage interest rates are too high
- The largest source of stress for Generation X is their inability to save for retirement
- Boomers want to remain in their homes during retirement, but four in 10 expect home equity to make up more than 60% of their household’s wealth when they retire.
Learn more about the perspectives and concerns that may be driving your clients’ mortgage financing decisions by watching our video and reviewing the interactive report.
Are you certain you’ve lost that client?
Somewhere in the depths of your Customer Relationship Management system (CRM) are clients who know you well and appreciate your work, even if they haven’t used your services in a while.
To reconnect and reactivate these client relationships, consider offering tailored debt management solutions that go beyond mortgage origination or renewal alone. The Manulife One banking solution is a great place to start ‘big picture’ financial conversations that identify you as an extraordinary financial services resource.
Here is the first in a series of possible conversation starters:
Opportunity to approach renewal clients you previously lost to rate shopping
Take interest rate debates off the table when engaging clients that stayed with an original lender who matched your rate, or jumped to a competitor who outbid you. Switch the conversation from interest rate to interest paid, and show that you can help them achieve financial freedom sooner with a full service banking solution encompassing all their debt, income and savings. With Manulife One, your clients put every dollar of income to work reducing debt and potentially saving interest costs. With our Manulife One calculator you may be able to illustrate that they could save thousands in interest costs and be debt free years sooner; it may be worthwhile, even if these clients incur penalties, to break a current mortgage. Try the Manulife One calculator today.
For more information on how to attract new clients, retain clients at renewal and re-engage lost clients, contact your local Business Development Consultant or call 1-855-518-7546 to schedule a meeting.
Case study: re-engaging existing clients
Nothing frustrates Jeremy faster than losing valuable renewal business. His origination practice is solid, and he makes a point of connecting with his clients well before renewal, updating their financial information and securing pre-approvals.
He typically hears back promptly from clients who have the hardest time requalifying, those who take the most effort for the least return. But some of Jeremy’s best clients just go quiet. Sometimes he learns a financial institution has matched his best rate or pushed another product at them. Occasionally he has been undercut by fellow brokers who use their commission to buy down rates.
One afternoon Jeremy sat down with Sheila, his Manulife Bank Business Development Consultant, to brainstorm ways to avoid losing any more renewal clients. He had recently offered one couple a five-year fixed rate mortgage from a monoline lender at 2.14%. Their renewal date came and went with no call back and no supporting documents. Their financial picture:
|Combined after-tax monthly income||$9,000|
|Chequing account (earns 0.05%)||$3,000|
|Savings account (earns 0.80%)||$12,000|
|Line of credit balance (at 3.70%)||$8,000|
|Credit card balance ($30,000 limit at 18%)||$2,000|
|Monthly mortgage payment||$1,290|
|Extra cash flow after all expenses||+ $610|
In their present circumstances, it will take Jeremy’s clients 25 years to be debt free.
Sheila ran the numbers and demonstrated how, with consistent monthly expenses and nearly identical monthly payments, Manulife One could save Jeremy’s clients $36,982 and see them debt free in 15 years – simply by structuring debt more effectively and having income and cash flow reduce debt every day it remains in their account. The details:
|Manulife One account limit (80% LTV)||$440,000|
|Consolidated credit cards, credit line||+ $10,000|
|Chequing account balance applied||- $15,000|
|Total consolidated debt||$295,000|
|Line of credit (Manulife One main account) monthly payment ($170,000 at 3.20%)||$453|
|Sub-account monthly payment ($125,000 at 2.59%; 5-year fixed)||+ $838|
|Total monthly payment||$1291|
The Manulife One calculator provides a comparison of a traditional mortgage to Manulife One. It illustrates what clients could save in interest costs over the life of their mortgage and how they could be debt free years sooner with Manulife One. (Try it out.)
Jeremy took a chance and shared the calculator illustration. Now his former clients are calling him – to discuss breaking their existing mortgage and returning to take advantage of his tailored debt management solution.