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When mortgage lenders close their doors & The 4 Star Lender Rating Program

Mike De Sousa

It was November 30th 2009 when Abode Mortgage Corporation announced that they had closed their doors.  No outstanding mortgage approvals would close, no brokers would get their commission, and existing Abode clients wouldn't know where to begin getting service on their mortgages.  In fact, two of my colleagues are still owed money for mortgages they helped close for clients before Abode shut down!

There has been talk that Abode Mortgage will open their doors once they find a suitable buyer for the company, but in the meantime, no customer, broker, or lawyer can get answers!  When I chat with customers or mortgage brokers who used Abode Mortgage for their financing, I ask, "Why did you use Abode in the first place?"  The answers vary from, "Well, they had the best price" or "They did the deal when no one else would". Hmmm? Sounds like the the wrong reasons to trust the biggest debt one will most likely have in their lifetime!

Abode was a Canadian company, but indirectly backed by European banks. A Recent article in Business Week online read, "Abode Mortgage Corporation, a wholly owned subsidiary of Abode Mortgage Holdings Corp. has renewed its existing $80 million revolving warehouse credit facility with Deutsche Bank AG until June 1, 2010."

The type of thing that happened to Abode and to others such as GE Money, Accredited Home Loans, HSBC Finance Canada, GMAC, etc. have one thing in common:  They violated what I call The 4 Star Lender Rating Program. 

The 4 Star Lender Rating Program was designed by our team based on four key principles that help to avoid lenders such as Abode, who are more focused on making money on securitizing mortgages than on the service they give to you!  The program is rated as follows:

  1. Star #1: Is the lender backed by a Canadian Bank, directly or indirectly? Let's face it, Canadian Banks have made a ton of money off us, but they avoided financial collapse because of their conservative ways of lending and making profit.  In order to use that protectiveness to your advantage, we look for this same big banks to have their money invested in mortgage lenders behind the scenes.  One example is MERIX Financial who is affiliated with Paradigm Quest Inc. , a huge Canadian financial conglomerate with ties to CMHC, Genworth & Fidelity. 

  2. Star #2: Does the lender lender provide superior customer service to us, your mortgage broker? On the surface, most clients could careless about how the lender treats us, but this affects the ability of the lender to provide a smooth mortgage transaction for you and to close your purchase on time!  So, yes, the service provided to us (although you don't see it directly) is what gets things done behind the scenes.  We rate and examine this service daily.  We work with lender partners to improve the service where necessary because we are a respected group of professionals, and we also get rid of lenders who could care not to provide us with good communication and quick response times.

  3. Star #3: Does the lender give you superior customer service? I will be the first one to admit that the big banks fail to provide customers with a superior level of service, nor do their staff show extra care when helping us to get your mortgage closed on time.  This is one of the reasons we use non-bank providers of mortgages, but who are backed by Canadian Banks indirectly. Consequently, we look for lenders who allow you to speak to them without having to make a formal appointment for every question, but we also like lenders who allow my firm to call and get answers for you on your behalf.  We work with lenders who take proactive measures to allow us to help you if you request it. There are even some lenders who allow you to manage your mortgage online, such as First National LP.  Of course there will always be times when an employee at a lender will wake up on the wrong side of the bed and treat you badly, but that's when our customer service will kick and and deal with the lender for you, so that you don't have to!        

  4. Star #4: Are we getting a competitive product in the marketplace? You'd think that price would be the top priority for searching our a mortgage lender, but it is our last.  Why?  Well, the first reason is that most of the newer and financially diluted lenders are trying to get business by offering really cheap rates.  When we think about what happened to Abode Mortgage, this is not a smart reason to select a lender. We want the lender not only to provide you with a competitive product, w also want them to be profitable enough that they'll be around for the long haul.  So, although it is part of my job to find great wholesale rates for you, it is not my number one priority! Price comes after the first three stars have been met! We want to ensure all the same pre payment options exist, that your penalties are within normal limits and that you can transfer (Port) your mortgage to a new home or have someone else take it over (Assume).

I once read a great quote:

"It is unwise to pay too much, but it's also unwise to pay too little. When you pay too much, all you lose is a little money. But when you pay too little, you stand a chance of losing everything, because the thing you bought is incapable of doing what you bought it to do. The common law of business balance prohibits paying a little and getting a lot - it just cannot be done. So, when you deal with the lowest bidder, it is wise to put a little something aside to take care of the risk you run. And, if you do that, you can afford something better." - John Ruskin

Thanks for reading!

Mike De Sousa and Mindy Small

Your London, Ontario Mortgage Brokers at Dominion Lending Centres Forest City Funding FSCO# 10671