Growth by Shrinking?!

While this statement may sound like an oxymoron, there is some real merit to it as a strategy.

Lenders are doing it

For a few years now we have seen a real move for lenders to try and move toward fewer, higher producing agents in order to improve efficiency.

Top Producers are Doing It

Many top mortgage brokers have believed in this strategy for a long time.  Have you ever had a referral source that was more hassle than they are worth?  Do you continue to accept their referrals?  Perhaps you shouldn't.  By removing high maintenance, toxic referral sources brokers can often grow their business by spending more time and giving better service to their existing client base and strong referral sources.

Should More Brokerages be Doing It?

I would argue an emphatic "Yes" to this one.  How many times have you heard one brokerage or another bragging about the number of agents they have on staff?  Bigger is often not better.  At Axiom we are committed to quality.  We don't want to be the biggest but we do have a burning desire to be the best.  If we need to, we are not afraid to "Shrink in order to Grow".

Think about it... could this strategy help you grow your business?

What are you thinking Mr. Flaherty?

Todays announced changes to the rules governing mortgage lending are just another indication of how out of touch our politicians are with reality. While I applaud any effort to create economic stability, it should be well thought out and actually have a positive impact.
Todays announcements include:

• Reducing maximum amortization to 30 years
• Reducing LTV of refinances from 90% to 85%
• Removing the ability to insure high ratio HELOCS

The most significant of which is reducing the available amortization period. The 35 year (and even 40 year) amortization is not the cause of household financial woes in Canada. Reducing the amortization does little to nothing to reduce Canadian debt loads. The impact of reducing the amortization period will be to simply reduce the amount of mortgage a home-owner or prospective home-owner can qualify for. This means a trickle down which will take some first time buyers out of the market and put additional downward pressure on house prices. This measure effectively penalizes those who purchased with a 35 or 40 year amortization in previous years, and therefore were willing to pay a higher amount for a home because of the reduced carrying cost of an extended amortization.

If a household is prepared to spend $1000/month on housing then that number is not going to change because of a reduced amortization. It simply means they can buy less house leaving a smaller market for those trying to sell their home, who perhaps purchased with a higher amortization. The only real impact this change has is to increase the likelihood that those that purchased at the peak with minimal equity will end up with negative equity. This does not alleviate problems but in fact causes more problems. People are more likely to ‘walk away' from an asset with negative equity in tough times rather than fight through to protect an asset with real or perceived long term value. Mr. Flaherty you are effectively jeopardizing the equity that you purport to be protecting.

To see the full announcement visit http://www.fin.gc.ca/n11/11-003-eng.asp