On the occasion of First National’s 35th business anniversary, two of the company’s leaders pay tribute to mortgage brokers for making our company a market leader and the mortgage industry better for all Canadians. Scott McKenzie is Senior Vice President, Residential Mortgages and Elena Robinson is Vice President Residential Sales.
Scott you were recruited by Stephen Smith and Moray Tawse not long after they founded First National. What was the mortgage industry like back in 1988?
It was much smaller and less dynamic. There were very few mortgage brokers and only a handful of mortgage lenders serving them. The choice was very limited for Canadians seeking a mortgage.
What was the mortgage qualification process like?
It was tougher than it is today. The Beacon scoring system didn’t exist. If a borrower had any sort of part-time income back then, insurance was not available to them; they had to get a second mortgage. The average GDS/ TDS ratio to qualify was 32/42 whereas now it’s 39/44. Of course, house prices were a fraction of what they are today. When I bought my first house right before starting at First National, I was forced to compete with another buyer by upping my bid by $100. My realtor asked me if I could afford $100. Times were different. The first mortgage I underwrote at First National was for $85,000.
Elena, you joined in 1990 as a sales representative and then left to become a mortgage broker for 20 years before returning. What do you recall of the broker channel back then?
Mortgage brokers probably had 5% share of the entire mortgage market. Today, it’s 35% of a market that is many times larger. Back then, there were probably fewer than 600 brokers serving the entire country. We were at a conference recently and there were 600 brokers from just one firm. But it’s not just scale that’s different; today’s brokers bring tremendous skills and knowledge to the market and a choice of mortgage solutions that was just unheard of in the 1980s.
Scott, what was First National like 35 years ago?
When we started, we had two offices; one in Oakville where I was stationed and the other in Toronto where Moray and Stephen resided. In 1989, the Oakville office originated around $50 million in mortgages annually. $50 million is a bad day for us now.
Last year, First National originated close to $20 billion through the broker channel.
Yes the difference in scale is staggering, but the one thing that hasn’t changed is our commitment to mortgage brokers. We allied ourselves with the channel from day one, believing that it was ideally positioned to serve the best interests of Canadians. We continue to believe that. Because brokers are free to choose the right lender, lenders always keep their pencils sharp. It’s the advantage of competition.
How did you differentiate First National as a lender in the broker channel in the beginning?
The same way we do now: through service. Back in 1988, it took days and sometimes longer to issue a mortgage commitment letter. Everything was done on paper and distribution was by fax and courier. Every time interest rates changed, financial institutions completely retyped their entire commitment documents on paper. It led to long and frustrating delays for brokers and borrowers. Recognizing that problem, Stephen wrote a software program called Merlin that allowed First National to simply change the rate in a dedicated field and instantly produce a new commitment on a dot matrix printer. It almost took less time to underwrite a deal than to fax the documentation. It was the beginning of a new era of service, with brokers at the very centre of the equation.
Elena, how was that advancement received by brokers?
It changed the game. It created a better experience. It was common in the late 1980s to wait weeks to get approved for a car loan, let alone a mortgage. Merlin was a huge competitive advantage and brokers embraced it. I was one of them. Brokers could count on First National to deliver mortgage commitments within four hours, which is now the de facto industry standard. In a broader sense, First National knew the challenges we faced as brokers, the interdependencies we had with lawyers and realtors and the importance of timeliness in responding to our requests. They went the extra mile to help us deliver great service to our clients and to succeed in business as entrepreneurs. It was a partnership in the true sense of the word.
In your view, did technology level the competitive playing field?
Merlin gave mortgage brokers a new tool that allowed them to enhance their competitive position. I think the rise of brokers also helped consumers to recognize that mortgages were more than just a commodity. Mortgage brokers and non-bank lenders like First National showed the way by proving that there was real value beyond a competitive interest rate in the form of advice and responsiveness – the drivers of a great experience.
Scott, would you say mortgage brokers made the market what it is now?
Brokers were instrumental in making the mortgage market far more competitive, far more responsive and far better for all Canadians. The creation of mortgage securitization happened in parallel to the development of the broker channel and opened the door to substantial market growth and product choice. Those factors certainly made First National what it is today.
Elena, do brokers still occupy a central place in First National’s thinking?
Very much so. Our mission has not changed. It’s to provide best-in-class service for brokers by owning the moment and not letting anything stand in the way of delivering on our commitment to them. A service-first approach is what will carry us forward together as a force for good. Maybe it’s a small thing but we never require brokers to meet certain threshold volumes with First National. That’s not always true with other lenders and it speaks to our desire to see new brokers succeed. When they grow, we grow. It’s all about building relationships of trust and with trust comes loyalty.
As a larger company, how can First National deliver the promise of good service in future?
We’re fortunate that we have a culture built on service. It’s our philosophy, not just a strategy. We have first generation members of our team who continue to show the way. Their experience is invaluable. It has been passed down over decades so that the service ethos is ingrained at all levels. We care about doing the right thing, and treating brokers the way we ourselves would like to be treated if the shoe was on the other foot.
One of First National’s cultural markers is empowerment. Why should that matter to brokers?
We don’t pass the buck. We make decisions faster. Empowerment is an accelerant of service and in turn makes First National nimble and competitive which translates well for brokers who thrive on the very same fundamentals. I worked at First National when it was a company of 10 people and I work here now with over 900 colleagues in Residential Mortgages and the devotion to service is the same. The difference is our team is stronger, deeper and more diverse – but we still strive for better every day and have the talent to deliver.
Scott, what’s the secret to First National’s longevity?
There is no single answer to that question but great people doing great things is key. We are also good at underwriting. The fact that one of Canada’s largest banks chose First National to underwrite mortgages for them in the broker channel is evidence of those skills and another acknowledgement of the value mortgage brokers bring to the marketplace.
Where do you see the industry going in the future and what role do you expect brokers and First National to play?
Brokers will play a major part in the market long into the future. Statistics show that brokers’ share of the market increases during challenging economic times because borrowers look to brokers for sound, independent, specialist advice. More than ever, Canadians also need mortgage competition and that’s where brokers and First National come together to play a part. The market of the future will also be shaped by digital technology and open banking.
Elena, will First National remain devoted to the broker channel?
Without question. We have sought to be a lender that is relevant, reliable and consistent for brokers for 35 years and we will do everything we can to remain so for the next 35 years.
Scott, you get the final word.
We are grateful that mortgage brokers give First National the chance to compete, the opportunity to serve and the encouragement to grow and innovate. To all of our partners, thank you for your support.