CMP spoke with Michel Durand in the space to find out what commercial brokers need to know to navigate a still evolving landscape.

MICHEL DURAND / PRESIDENT AND PRINCIPAL BROKER / MORTGAGE ALLIANCE COMMERCIAL

What do brokers need to do to succeed in the commercial market?


Michel Durand: There are no secrets here, and it’s no different than what it takes to succeed in any market or industry. First, surround yourself with the best professionals to help you accomplish your objective – I would recommend using the most reputable commercial mortgage brokers to facilitate financing your transactions for your client or if you’re helping with purchasing a property, seek out and find the most reputable and active commercial Realtor in that particular market. I would also add that to be successful, you need to stick to what you know how to do well. As a broker, you will get better returns by investing your time in transactions that you understand thoroughly and for which you have a proven track record of success. Find your niche and stick with it. Master what you do, and you will be more successful at it. I see too many people trying to do anything and everything that comes across their plate, hoping to make it work. Hope is not a good business model. Working on transactions that you do not master leads to the borrower and lender getting frustrated and, more often than not, the transaction falling apart.

What are some of the major trends affecting the commercial market today?

MD: The pandemic has had a significant effect on securing commercial mortgages. The lenders reacted, as they usually do to abrupt changes in the economy, by immediately taking a wait-and-see position with respect to any new loan requests they received at the beginning of this situation. Many commercial loan programs were stopped, as this was the first time in history that the lenders had to deal with so many requests for mortgage deferrals. Many lenders had no choice but to take a significant amount of personnel out of their usual underwriting and loan processing positions and have them spend all their time addressing mortgage deferrals. Most lenders have come back to something we can describe as close to normal operations. That being said, because much of the staff is working from home, there are additional delays in processing commercial loans for all the lenders right now. The lenders are not the only ones with additional delays that affect our industry; CMHC has now advised the market that it will be between eight to 12 weeks, once the file is submitted, before they can start working on that transaction. With uncertainty continuing in the market, lenders are being appropriately more conservative in their underwriting, which is affecting loan-to-values being offered to borrowers. The lenders are being rightfully less aggressive on loan-to-values in the current market. That said, the current situation is significantly better than the uncertainty that reigned in the market three months ago.

What’s the best way for a broker to transition from residential to commercial mortgages?

MD: I cannot understate how difficult it is to transition from residential to commercial mortgages as a broker. There are absolutely no synergies that can be shared or that can be used in commercial mortgage brokering that come from residential mortgage brokering. I believe the biggest mistake most residential mortgage brokers make is trying to apply the concepts that have served them well on the residential side to getting a commercial transaction done. To become a successful commercial mortgage broker, you essentially have to throw out everything you’ve learned and every reflex you’ve developed on the residential side. Everything is different: the client approach, how to target your market, how to underwrite the loan, how to submit to a lender, how you get paid for your transaction, how you need to negotiate with the lender, as well as all of the professionals involved in getting the transaction closed. I have rarely seen a residential agent successfully transition to commercial mortgage brokering. That being said, the best way to transition from residential to commercial is to find yourself a mentor who has dedicated his career to commercial mortgage brokering and shadow that person for the next three to five years. Learn how to underwrite a commercial mortgage transaction. Unless you can defend your request to the lender and prove that your request meets all their policies, the lender will see your intervention as being a fly in the ointment. Last but not least, recognize that unless you are ready to dedicate 100% of your time to commercial mortgages, you will not achieve much success or respect from the lenders you need to work with to meet your clients’ needs.


What qualities does a top commercial broker need to have?

MD: Without a shadow of a doubt, if you do not master your craft, you will not be successful at what you do. You need to develop relationships with lenders so the lender sees you as a facilitator who will allow the transaction to be processed with fewer challenges, instead of seeing you as the broker who just keeps asking when the term sheet will be ready. If you are unable to have the lender recognize that you are an expert and an ally, and that you will help expedite the process, you will not get much collaboration from that lender. Additionally, you need to know the lenders’ underwriting policies as well as – if not better than – the underwriter or account manager you’re dealing with. It’s fair to say that most lenders on the commercial side do not like dealing with mortgage brokers. That’s because most brokers submitting a commercial transaction are not properly prepared to ensure the process is easier than if the broker were not involved. Most brokers underestimate the amount of time, work and effort required to successfully conclude a commercial mortgage transaction. The broker needs to be systemized, needs to be organized and needs to follow up on a regular basis on every aspect of the transaction with both the borrower and the lender. Lastly, the commercial broker needs to have enough experience and confidence that will allow him or her to properly address and mitigate any challenges the lender mayhave, as well as to properly correct any misconceptions the borrower may have on how quick or easy or at what rate his loan should be. In sum: Be less of a broker and more of a facilitator

CMP interviews Michel Durand on “How to survive in Today’s Bleak Commercial Lending Space”

Michel Durand, CEO of Mortgage Alliance Commercial, says that he’s been able to use his trusted position amongst prospects, clients, and lenders to broker a record number of deals in the wake of the pandemic. He says that current market conditions are shaped more by anxiety than the real impacts of the pandemic.

Despite bleak headlines and dire, COVID-coloured predictions for the commercial lending industry, one commercial broker says his firm is having a banner year.

They’re coming, though, and Durand is ready for them.

“When the real estate market does well, we do well, when the real estate market is in turmoil, we do better,” Durand says, noting that many commercial mortgage holders still need their mortgages renegotiated. Now, with underwriting rules and market outlooks changing, it’s harder for those borrowers to conduct and complete that renegotiation or secure new loans. That’s why so many are turning to Durand, he says, to broker the deals they need completed.

COVID-19 still a disruptor

While the volume of business has increased for Durand, he says the work is becoming more challenging than ever. Much of that is due to the decision by many commercial lenders at the end of March to completely stop their lending programs for commercial transactions, both because of the pandemic’s undermining of whole swathes of the commercial real estate market and because of the sheer number of deferral requests.

With the pipeline narrowing, Durand says he’s relied on the strength of his relationships with lenders who, he says, hold him in high esteem and will chose him and his clients for the limited number of commercial deals they’re still making. He says that in a market defined by confidence, a reputation that can only be built over decades is golden.

From a wider commercial lending perspective, he says the Canada Emergency Commercial Rent Assistance (CECRA) program has helped buck up some confidence in the market and “cushion” the impact of the pandemic on the commercial lending space. He says, though, that the ticking clock on a program like CECRA points to a longer-term challenge in the commercial lending space: what will happen when things get worse?

While Durand expects the full impacts of the pandemic to be felt in the commercial lending space in the coming months, he also expects that the mortgage industry as a whole will adapt to a worsening situation. He says that the lending industry tends to react quickly to changing circumstances and that brokers must act accordingly. When things fly out of brokers’ hands, and circumstance sets the tone, he says brokers need to stay on top of their clients. In March, he immediately worked with his clients to ensure their filings and documents were all in their best working order, submitted, and on the lenders’ “front burner”. These clients were the top priority for lenders when they opened the tap again.

Proactivity and education have become watchwords in the commercial space, Durand says. Now he’s addressing mortgage renegotiations due in six months or a year to make sure clients are taken care of before the situation worsens. He’s preparing clients for the eventuality of a weakened economy or second wave of COVID-19 and getting them ready for stingy lending driven by more conservative underwriting rules.

Durand says he’s preparing his business to weather any new storms that may be brewing, putting him in a position to act on every opportunity that arises.

“In every situation like this, and I’ve been doing this for 27 years, it’s not the end of the world,” Durand says. “We’re all going to get through it and opportunities are going to arise. If you focus on that, knowing that you’re going to get through it, I’m not saying it’s going to be easy, but you’re going to get through it and there will be opportunities. All of a sudden, it doesn’t hurt so much. All of a sudden, it’s easier to handle.”

by David Kitai 31 Jul 2020,  MORTGAGE BROKER NEWS

Quebec authorizes resumption of residential construction

Quebec’s government has included residential construction to the list of its priority services, and has allowed projects to continue starting April 20.

In an April 13 news release, the government stated that this permit to continue building residential units applies to homes scheduled for delivery no later than July 31.

“This announcement applies to construction and renovation work, including surveying and building inspection,” according to Jean Boulet, Minister of Labour, Employment and Social Solidarity and Minister responsible for the Mauricie Region. “At the same time, it will reopen the supply chain of the residential sector of the construction industry, which involves numerous small and medium-sized businesses.”

The global coronavirus outbreak has ground many vital industries to a standstill. Construction activity across Canada markedly decelerated over the last few weeks.

“Including residential construction in the list of priority services and activities was called for because of the sector’s tangible social impacts for many households,” Boulet said. “Our goal is to make sure that people can move into their new homes as quickly as possible, which in turn will make rental housing available. I am convinced that residential construction and renovation can resume while keeping industry stakeholders healthy and safe.”

by Ephraim Vecina
15 Apr 2020