Welcome to the 10th episode of the #AskAPrivateLender Podcast brought to you by Mortgage Automator. For this episode, our guest was Grant Plunkie, Senior Underwriter & VP of Mortgage Origination at Shelter Lending.
We talked about Shelter Lending’s operations, the importance of the lender-broker-borrower relationships, some of the specifics of lending in BC and Alberta, Shelter’s speedy turnaround times, and more!
Listen, watch, or read the interview below. And stay tuned for more episodes coming up!
Lawrence: Grant, we are excited to have you join the podcast. We know you’ve been in the industry for a long time. We feel like you can share your experiences, maybe give some people advice or an understanding as to what the market is like, and what private lending is all about.
The first thing I wanted to start off with is how you got into the business. I mean, it’s not a career path that people generally set out and look for, but my understanding is that there are some people in your family who were private lenders way back when, and you saw that growing up. Did that play into you actually getting into the industry from a younger age, or was it something that you did later on?
Grant: There’s a little bit of both elements in there. I don’t think kids grow up dreaming of being a mortgage broker, and I had dreams of doing something else. I thought that I might be a golf pro playing on television, but unfortunately, I was limited by my talent. And I also realized that just seeing as that wasn’t going to happen, I better stay in school, and I was actually on a path to become a lawyer. That started appealing less and less to me after about five or six years of university.
So, I got into the workforce, and through a series of circumstances, ended up buying a house and getting a mortgage, and met a mortgage broker. But to back up just a little bit where I became aware of this, it was actually my grandfather, that was the private lender. He came to Canada as a young man back in about 1920, and really had nothing, worked hard, but he did have some pretty good smarts about real estate for some reason.
He started out basically doing agreements for sale, where he was buying properties for his brothers-in-law because they weren’t able to get credit, or they didn’t have the income to show, whereas he did.
He found out that that was actually quite lucrative or could be more lucrative when you’re dealing with non-family members. So, he quickly aligned himself with a lawyer that somehow seemed to have a lot of these clients in Edmonton and started his private lending career. Did very, very well with it, so much so that he ended up giving away a house to a charity that he was concerned about, and he also bought a fairly large farm and gifted that to my aunt and uncle. So, he did very well with it.
Now, the unfortunate part of that story is out of all of that wealth that he created with mortgages, I didn’t get a dime. However, I did get an idea.
I always thought that when I would be older and have some investment money that I would invest in mortgages, just like my grandfather did. To short circuit that whole idea, when I got a mortgage, I dealt with a mortgage broker because the rates were far better than dealing with the bank at that time, and I ended up talking to the broker that handled my transaction quite a bit. I wasn’t happy with where I was working at, it appealed to me, I thought, you know what, if I can’t be the lender, I can be the middleman.
And so, I thought yeah, this middleman idea appealed to me. You’re not dealing with inventory, which was a problem at the business I was running, and we weren’t dealing with staff in a mortgage brokerage. It’s very limited, maybe an underwriter, or a secretary, or support staff, but not the staffing issues that I had at that store.
So, there were a lot of things that appealed to me about the mortgage broker career at that point. And so, that was the impetus for me, and that was 25 years ago that I had those conversations, and 24 years ago, jumped into the industry. That’s the short version.
Lawrence: To go back, just because it’s such a unique thing that we hear, and we talk to a lot of private lenders, but your grandfather did this such a long time ago …
Joseph: There’s 100 years of private lending in Grant’s blood.
Lawrence: Yeah. And this was like his full business that he set out to do, or was it something that he did on the side?
Grant: This was just on the side.
Lawrence: The amount of money he was probably lending at the time seemed like so much. If he could see the dollars that you’re lending out …
Grant: It would be mind-boggling. When you’re buying homes for a couple thousand dollars back in the day, and somebody needs a thousand dollars, and for us now, that doesn’t even cover the legal fees.
Joseph: It might pay for a mailbox on your lawn at best.
Lawrence: So, you got into the business about 25 years ago, you started as a mortgage broker, so you were helping people get bank financing to start. Was that your entry into the business?
Grant: Yeah, that’s correct. I did that exclusively, brokering where I didn’t have a fund or didn’t have access to private investors. So, I was really what I call a retail broker, and I did that for about 13 years. I thoroughly enjoyed it, it was very good to me. Through that process, I started more and more private deals.
I don’t know how they found me, they just did. I don’t know if it was some sort of a vibe that I was putting out there, but anyhow, these deals just kept on coming to me and I kept on getting them done and finding new lenders and new sources of money to finally reaching the point where I thought, I find this to be my niche in the business and want to make a career out of the private money side.
That was 10 years ago, or a little bit over 10 years ago, that I’ve exclusively been dealing in private mortgages. I haven’t brokered a deal, I haven’t sent a deal to a bank or a mono-line since 2009.
Joseph: It just seems like the natural progression. A lot of people we talked to who’ve been in the industry for quite some time, it seems like they started whether it was banking or brokering, and then they saw those are mainstream financial avenues that people are aware of. And then slowly, through some alley or some way, you end up figuring out that there’s a big opportunity in private lending. I want to ask you when you got into it, it probably wasn’t as competitive as it is today?
Grant: It was a lot different, the landscape for brokers was far, far different. In the community where I live, which is Kelowna BC, there were about 20 brokers in the community when I started, and it was quite noticeable that there was a new guy. I believe at that time, I was either the youngest or the second youngest broker in the city.
And now, I can’t even tell you how many brokers there are, there might be 200 give or take. And while it is more competitive amongst the brokers and the banks, everybody’s buying for the business. 20 plus years ago, there just weren’t the options of four lenders or four brokers such as myself then. It was easier to stand out as a broker, but it was harder to get deals done because the lenders just didn’t exist.
Lawrence: That makes sense. And now, you’re at Shelter Lending and you’ve been with them for how long?
Grant: Well, Shelter Lending is a brand new entity, and it was brought about by some regulatory changes, not on the mortgage side, but more on the securities side. And so, as I mentioned, I’ve been exclusively working in the private lending market for about 10 years. My business partner, his name is Dave McKitrick, he was working in private lending since about 2005. He left the company that he was at, it was a MIC that had over $100 million dollars.
I was the business development officer and senior underwriter for a large MIC that was about $150 million. We left our respective companies roughly speaking out about the same time. We were interested in working together, but I had a non-compete agreement, so that blushed that for a couple of years. In that time period, I started my own MIC, and I was also dealing with a number of individual private investors. So, we had quite a stable of investors built up around my company.
There were some changes with the BC securities in the capital raising department, so all of a sudden, we had to use an exempt market dealer or a third-party fundraiser, and it became far more expensive to raise capital. And also, we were a small company, it was just not practical to carry on.
And so, Dave and I talked again, he was in the process of acquiring the management contract of a MIC where the operator was retiring, and so we decided that this was a good time to join forces. My non-compete had expired, Dave was getting too busy to handle both the lending and investor side, and so he’s focused exclusively now on the investor side with our exempt market dealer. So, we do have an exempt market dealer, that’s a captive company that only raises money for our own funds, and I handle the operation side of the mortgage business.
Lawrence: So even though the company itself is a newer entity, you guys are running it like it’s been around for 20+ years because you’ve been in the business, you know the business, you’ve worked at those types of companies and helped run them. What kind of deals are you guys doing? Is it mainly residential and commercial? What are you looking for out there?
Grant: Right now, it’s strictly residential, as our fund grows, we may entertain some commercial loans, but for the foreseeable future, it’s strictly residential.
Lawrence: First Mortgages, second mortgages, what type?
Grant: Yeah. We’re doing first and seconds, we’re licensed in BC and Alberta, and we’re able to do business in Manitoba, although we haven’t set up there yet. So, just BC and Alberta for today. And we’re looking primarily for second mortgages, but we also do have a first mortgage fund. The second mortgage fund, what I always tell brokers when they ask what our niche is, I say if lender XYZ is going to 65%, we’ll probably go to 70. If they’re going to 70, we’ll probably go to 75. That’s a bit of our niche, where we would go just a little bit above and beyond.
Joseph: Interesting. I’ve had the pleasure of speaking with both of you guys before, and I knew that Dave was out in Alberta, how do you guys compare the two markets? And do you rely on Dave to give you that insight in Alberta and he solely trusts you in BC, or have you personally gained so much information, knowledge during your time in this industry that you are comfortable with both, I guess Calgary, Edmonton, maybe surrounding areas and greater Vancouver and surrounding areas?
Grant: Yeah. That’s an interesting question, Joseph. I’ve been underwriting for Western Canada for over 10 years now. And while I’ve gained a lot of knowledge of the communities and the industries that are in them, it’s not perfect knowledge, and so we have people on the ground.
Dave’s a fantastic resource too when we’ve got a deal in Calgary because he just knows the neighborhoods. If you mention a neighborhood, he knows it, whereas I have to look at it on the map. But what we do to keep up-to-date with all of the data that we need to make decisions is we have regular conversations with realtors in each market, conversations with our appraisers, and then we look at the stats that came out from CMHC and Genworth or whatever. But we try to keep on top of the markets that we lend in, which are primarily urban markets.
You mentioned a few different cities in Alberta, and as long as the city has greater than 5,000 people, we’re probably interested in lending there. Apart from Fort Mac, sorry, Fort Mac, we can’t help you here. We just have to draw the line somewhere. We also stay out of the greater Vancouver market for the most part, and that’s strictly because the deal size is so large, there are so many lenders there that it’s so competitive.
Joseph: It’s almost saturated at this point.
Grant: Yeah, it is. It is. And we just decided that there’s enough of a market elsewhere for us, and we’re going to pursue that market.
Joseph: I guess my question is, given that Alberta is more, I guess, oil-dependent, the real estate market does fluctuate based on oil and how well it’s doing, do you guys have different loan to value criteria or risk appetite in Alberta versus BC? Or is it 70-75% across the board in both places?
Grant: It does vary by province, and it also varies community by community. So, when we’re looking at a large marketable community, say Victoria or Kelowna for example, we’re far more aggressive in those communities because we know that there’s a more balanced and diverse economy.
When we’re looking at smaller communities where there might only be 5,000 people living there, there’s obviously a reason why there are 5,000 people there. It doesn’t have the industry to support jobs, or it doesn’t have the appeal, so we just basically scale back our loan to values in those communities.
And in regards to Alberta right now, we are a little bit more cautious, we’re in a wait and see mode. We’re still doing business there, we’ve funded a couple of deals there within the past 30 days, but really probably 80% of our new business 90% of our new business is applications coming in from BC.
Lawrence: And obviously, you deal with brokers, that’s where I guess the majority of your business comes in. For brokers who want to submit deals too, that maybe haven’t done business with you before. Is there a specific person they should be reaching out to, or getting in touch with?
Grant: Yeah, absolutely. That’s me, and I can be reached by email, grant at shelterlending.ca. We’ve got a toll free number on our website, and we deal exclusively with mortgage brokers. We’re not sourcing any of our own business, so we’re not competing with our brokers, we just want to make sure that we’re looking after them.
We treat our investors as our primary clients, we treat our brokers as our secondary primary clients if you will, and the borrowers are the clients of the broker. So on renewal, we will deal with the broker, we’ll keep them in the loop if there’s a renewal going out, but typically, we’ll just send it out to the borrower themselves. But at the end of the term, it’s the broker’s client. We want nothing to do with trying to place them at an alternate lend