Of Dean Koeller’s four roles at Calvert Home Mortgage Investment Corporation, his family’s 38-year boutique lending business, the one helping the most to anchor the ship amid recent waves of heavy regulation and market shake-ups is chief compliance officer. The new position, created in response to 2009 legislation, has tasked Koeller with bolstering his knowledge base, keeping the company competitive, and seizing the opportunities that will benefit the boutique lenders nimble enough to respond. Here, he breaks down the strategies that have helped him adjust.
Advantage: What trends do you see in the boutique lending industry in Canada right now?
Dean Koeller: As a result of new securities legislation that commenced in 2009 that redefined a mortgage to be a security, the mortgage-investment industry, which previously had few regulations, now is required to have compliance standards similar to mutual-trust funds and other investment vehicles that typically operate under magnitudes of scale of mutlimillions of dollars. Banks are approving fewer borrowers, so there are more opportunities for private lenders. Also, because stock markets aren’t performing as they did in the ’80s and ’90s, investors are looking for alternative investment vehicles.
How is this affecting the boutique lending market?
As we continue to see more money flooding to this industry, it’s creating a much more competitive environment, pushing small mom-and-pop private lenders out of the market. The detriment of that is most apparent in small towns, where banks are very cautious to lend money, which makes it difficult to do anything, from property development to renovation to small real estate investment.
How did Calvert Home Mortgage respond to these changes?
I developed a provincial association of like-minded industry members, the Private Mortgage Lenders Forum, to gather the knowledge they needed to comply with the new regulation. We sought out legal expertise where required, sat down with securities administrators, and had a dialogue where we lacked understanding. It’s incumbent upon us as an industry to ensure there are professional standards in place to benefit borrowers and investors entrusting their savings to our industry. The better we can hold those standards in place, the more credible we are and the more value we can provide back to the marketplace.
How has the industry evolved since Calvert Home Mortgage was founded by your father in 1975?
We saw huge growth over the last 15 years for our industry, coupled with, in the late ’90s and early 2000s, an increase in competitive factors coming from the United States. Companies like Wells Fargo were coming into the Canadian market and offering more competitive and riskier types of products. Then we saw the US mortgage market implode and cause a financial crisis around the world. This sparked a huge amount of concern, from investors to regulators to politicians. Over the last six years, the change has been increasing regulation at every level. The benefit is it has created a healthier real estate market in Canada that’s less prone to financial implications for the rest of country, but it’s challenged us to react to a lot of compliance fairly quickly.
How does Calvert Home Mortgage maintain a high level of customer service while continuing to meet a growing demand in the mortgage-investment marketplace?
We have to be able to react very quickly to opportunities and threats facing our business. We’ve seen a reduction in mortgage products available to business for self across the lending industry, which presents an opportunity for us to develop more products to meet those needs.
What are some of the perks of running a family business?
We’ve been able to start a family charity that identifies those individuals who need help in our community. It’s called the Charitable Foundation of the Family and was started by my father. The goal is to be the safety net for those who are falling through our social networks and systems. We donated more than $1 million in the last 10 years and usually do about 5–10 transactions per month. You might call us a “lender of last resorts.”