Len 00:02
Welcome. My name is Len Lane, and I am the founder and president of Brokers for Life Inc., and we are Dominion Lending Centers in Western Canada. The topic of our podcast will be about what we consider to be Real Life Mortgage Solutions.

Welcome back. Today, we’re going to talk about your car payment and how it may affect your TDS and GDS. One of the biggest things we run into, especially in Alberta, is that people have some very large vehicle payments. Over the years, I’ve seen close to that $2,000 mark for a one-ton diesel that did nothing but pull a holiday trailer on occasion. Right? So, my guest today is Kevin Kennedy, and he is the owner of KDK Financial Corporation. Welcome Ken.

Kevin 00:50
Thank you. Thanks for having me.

Len 00:53
So maybe just give us a little background on how you got into this part of the industry.

Kevin 00:59
Sure, yeah. So I’ve been in the auto business all my life. So when I was 14 years old, I grew up with my dad’s used car dealership in Ontario, and kind of just never got out of it. I went to school, I studied automotive marketing, business admin, and then just worked my way up from the bottom all the way up to running one of Canada’s largest auto finance departments, and I just saw a niche for it. There was probably, I’m going to say, anywhere from five to six files that would come into the dealership where mortgage brokers sent their clients in to restructure their auto loan. And it was a mess. It really was… at the end of the day, it took forever, and, you know, they had to get through the gauntlet of the sales department. They were trying to sell them a car, and at the end of the day, all that the client really needed was just to remove a co-signer or reduce their payments. They just wanted to keep their vehicle and restructure it.

So after seeing, you know, I was there at Toyota for probably four or five years, and I saw this happen every month, pretty consistently. And I decided, you know what, I’m gonna reach out to a couple of mortgage broker friends of mine and just see if this is something that comes up often, and it is. And I was thinking, okay, so this is a common problem, and there’s X amount of mortgage brokers in Canada. There’s gotta be a business here. So I decided to open up KDK Financial, and essentially, what we are is we’re a company that allows mortgage brokers to do their own auto loans, so the mortgage broker is in control of the entire transaction, from start to finish. It’s organized. Nobody’s trying to sell anybody a car. And the client experience is awesome. So it’s a good experience. The client gets what they’re looking for quickly, and the mortgage broker has no issues, and they get what they need quickly as well.

Len 02:47
A variety of different ways that your programs work. Maybe talking about a co-signer is one that I know we run across quite often, but the co-signer wants off… usually mom and dad or Uncle Bob, and so how does that system, and how does that part of the business work?

Kevin 03:05
Yeah, so we do a ton of different types of files. Co-signer removal is a popular one, for sure, and all we do is we just get a competitor lender to pick it up. So banks don’t do, at least in the auto lending world, they don’t do refinancing, so they won’t redo their own paperwork. So the only way to move a co-signer is to get a competitor bank to pick up the paperwork. So we’re kind of like a mortgage broker, in the sense that we have access to all the lenders. So we’ve got 21 lenders, so every major lender.

So we got RBC, CIBC, National Bank, you name it, and all we do is we just get the client qualified with a different bank and then use that loan to pay off the cosign loan, and you’re off to the races. So it’s actually incredibly easy to qualify for. In auto lending, pretty much everything is system adjudicated. So an analyst doesn’t even look at it, all the computer system would go in and see is okay… So listen, this person’s got eight months or a year, or whatever it is, of good auto history, and the system approves, and then you’re good to go. So, it’s quite addicting. It’s fun. I love what I do. And we make a lot of mortgages go through, that definitely wouldn’t have gone through unless we got involved. So it’s, yeah, no, it’s a rush. So co-signer removal is a big one, but the majority of the files that we do are payment reductions, and that’s just simply, when you know your clients… the TDSR is out, what we’ll do is we’ll just reduce that car payment and get your numbers in line, and then you’re off to the races.

Len 04:30
So sometimes it’s that. So, actually, when you refinance, how easy is it to get extra cash for the client?

Kevin 04:37
Pretty easy. So the loan-to-value parameters in auto lending is typically around 140-250% loan-to-value. So if they’ve got the vehicle, unless they had a whole bunch of negative equity when they bought it originally, we’ll be able to add in some cash. So quite often, by the time you add in some cash and then re-amortize the loan, you can actually get quite a bit of equity out of the vehicle and still have their payments go down. So that’s kind of a perfect storm. Anytime you’re dealing with a mortgage broker and you have a way to access cash, and your total debt servicing goes down at the same time, it’s kind of a perfect storm. So it’s also one of the more popular things, I would say, between the payment reduction and the cash added to the loan, that’s probably, I’m going to say, 70% of our business, and then the rest kind of just goes down from there. But that’s two of the biggest things that we do, for sure.

Len 05:30
Yeah, we see it a lot of times too, where somebody has… I had one client in particular that his purchases were always F350, size or bigger. What had happened to him is that he had gotten to a point where the dealership had kept rolling his other vehicles into the loan, and he was at a point where he owed way more than the vehicles. Is there really anything you can do for them at that point?

Kevin 05:58
It’s tougher for sure. At the end of the day, eventually, there’s going to be a stop point for the lender where there’s going to have to be some cash injection. So if you trade in every, you know, couple years, and you’re constantly rolling in negative equity and not putting cash down, doing longest terms, there’s going to be a point where the bank just says no, right, max to finance, you’re going to need to put down some cash or whatever. But most of the time we’re okay. We really don’t run into situations like that because, at the end of the day, we’re refinancing their current vehicle. Where you get into trouble is when you’re trading in, and the dealership pays you next to nothing for your vehicle, and you’re rolling it in. But most of the time when we’re doing a refinance, even if they are kind of on the upper end, as far as negative equity, we typically get it done. There might be a situation where there’s a cash call and we need five grand down or something like that if they’re really upside down, but most of the time s, it’s clear sailing.

Len 06:46
Five grand would not have helped that client.

Len 06:52
So, you’re obviously, working with brokers right across Canada? Pretty much, except for Quebec. I’m assuming?

Kevin 07:00
We stopped at Quebec.

Len 07:03
Yeah, Quebec. So did we. We skipped over to Nova Scotia.. actually licensed there as well. Always interesting to see that. So a big group in the West for you, what kind of penetration have you had into the broker market?

Kevin 07:16
So, we’re pretty much, I’m going to say we probably have 70, 80% of all mortgage brokers. I’m going to say it’s pretty close to that number, and our largest group… so, like, I decided when I built the company, what I would do is I just reach out to corporate first. So I’d reach out to, like, TMG, to the management team over there, and kind of just filter down. So yeah, that’s basically all I did, is I, when I first started the company, I looked up the highest volume mortgage brokers, and I called them first. I just went down the list, and then the rest is just really word of mouth, because it is such a good service, right? So the nice thing that makes us different from anything else or anybody else, is that it essentially is like the mortgage broker is doing their own auto loan, it’s that streamlined, even to the point on our website, you can actually… when you submit the leads, you can see your status constantly updated in real time, so you’ll see if a file is approved or funded or whatever. So the only real difference between, you know, doing a mortgage and doing an auto loan is just that we’re the ones that are processing the paperwork for you. But, it’s, it’s been a bit of a ride. And yeah, we just got back into Ontario. We were in Ontario in 2023 we had to pull out. Now we’re back in, but the majority of our brokers are in BC, Alberta, Saskatchewan, which is probably the majority of our business.

Len 08:38
Excellent. So, how simple is it for the mortgage broker? I know we like simple. Simpler the better, right? But what does it look like for actually submitting to your system?

Kevin 08:53
So there are two main functions on the… so we have a broker dashboard that’s built for mortgage brokers, and it’s really two main functions on the site. So the first one is called Broker Quote, and that’s where we prefer that the broker kind of starts the communication with KDK. And what that does is allow you to get a payment scenario within two minutes. So you submit the broker quote and then you get a reply back, and you’ll be able to see where payments fall, et cetera, et cetera. And then what you do with that number is you present it to your mortgage lender just to make sure that the numbers are going to work. And then once you have an outcome that’s going to benefit the client, you simply just reach out to your client, be like, Hey, listen, here’s the solution that we have to the problem that we ran into with your auto loan. And we work with a company called KDK Financial. They’re going to reach out to you and kind of start the approval process. And then what you do at that point, once we have the consent to contact your client, you just go into your dashboard and you choose, submit lead, and then one of our client care specialists reaches out to the client immediately and starts working on the approval. Typically, we have an approval within 24 hours. And then once we get the approval, we’ll go through it with the client, sign everything over DocuSign, and then, once we’re funded, which is the next day, we send the mortgage broker everything that they require to get their file done. So copy the contracts showing that the pay has been reduced, and then loan closure documents showing that the old loan is gone, and then you’re good to go. So that’s really it. So one thing I have learned about mortgage brokers is to make it easy. So that’s what we do. You literally just have to submit the lead. We take it from there, and it’s extremely quick, and the paperwork work is tight, so you get everything that you need very quickly, and it’s all perfect.

Len 10:30
So you’re able to get a payout that quickly?

Kevin 10:34
Oh, yeah, yeah, everything’s electronic, so we can pull payouts electronically from all the lenders, and we send you proof of loan closure documents. We just send you a copy of the payout statement, a copy of the bill of sale, and then a copy of loan closure check showing that the loan is gone, and then the client can get a lien release letter, typically five to seven days after that, if needed.

Len 10:54
Yeah, that’s interesting, because I sold one of our cars personally, and it went to a bank in a week, the guy had to wait to register the vehicle. He already had the vehicle, but it was like…

Kevin 11:06
Going to the banks one of the worst.

Len 11:09
Not that we don’t love Scotiabank. How about a caveat in there for us…

Kevin 11:15
They’re slow on some paperwork sometimes.

Len 11:20
So talk about some of the success stories. I see a few on your site. What are the ones that jump to the front of your mind?

Kevin 11:29
So obviously, there’s so many, here really is, but one of the ones that really sit well is sometimes we deal with clients that are in a tough spot, like a lot of Canadians are right now, right? So, probably my most memorable file was a couple of years ago, a nice lady, she had three car loans, her and her husband, and the payments were close to $1,800 a month between all three, and she was struggling. It’s when mortgage rates are really high. Her mortgage came up for renewal, and payments were causing an issue. She was honestly fearing that she would have to foreclose on her mortgage. And what we ended up doing, she was in a good equity spot, in the sense that the car loans were four or five years old. So we ended up re-amortizing two of them and adding cash to one of them to pay out the third, and her overall monthly payment obligation went from 1800 down to, I think it was around 650, and that extra, you know, 1200 bucks, or 1150 or whatever it is, made the difference for her, right? And at the end of the day, things went really well. She ended up keeping the house. She didn’t foreclose. So there are lots of feel-good stories there. But, I mean, we’re constantly helping people obtain home ownership, which is something that I didn’t think I would love this much. In the car business, it was fun, you know, you get people approved. Great. You know, they got a brand new car. They’re all happy. But now what we’re doing is we’re helping people obtain home ownership, or saving people from difficult spots, which is probably the most rewarding thing I’ve ever done. And, yeah, it’s awesome. I really enjoy it.

Len 13:07
Yeah, that is one of the things that has probably kept me in the mortgage industry, is that end result for, especially first time buyers, or somebody who know has worked hard, but you know, just didn’t make very good financial decisions sometimes, that you’re able to get that transferred over and less payment and get home ownership out of it, that’s a great way to go. One of the things I have run across quite a few times is transferring the vehicles to a company name. How difficult is that to do?

Kevin 13:41
It’s actually quite easy. We probably do… I’m going to say 15 to 20 of those a month. It’s starting to pick up as far as one of our most commonly requested services. So the lender that we use for that is RBC, and the reason that we use RBC is because they will approve the commercial loan based on the client’s personal credit. So RBC has the corp. on as the primary, your clients in the second position. But the nice thing about RBC is they don’t report to the personal bureau, so they consider it a true corporate loan. So they report to the commercial bureau, but not the personal bureau. So what we provide the mortgage broker is obviously proof of loan closure doc, so proof that the old loan is gone, and then they’re running the file through their Corp, and then you’re off as far as debt servicing is concerned. So we don’t need any company financials really. RBC doesn’t really care too much at all about the company. I’ve had clients that just opened up a company a month ago and got approved because their personal credit is good. So RBC doesn’t report to the personal bureau, but they will go after the client if they default, right, down the road. So their sole reason for approving is based on their personal credit. So as long as the client’s got good credit, we can redo the loan and take it off the bureau through commercial lending.

Len 15:00
Because most of them love a personal guarantee, and that ends up on the credit bureau, right?

Kevin 15:04
They do. To my knowledge, the only bank that does it in the manner that works for mortgage brokers is RBC, and it’s sad too, because these clients are being told at the dealership that it won’t show up on their credit bureau. And then, surprise, surprise, when it’s time to do things like a mortgage, there it is. So it’s one of those things that, you know, it’s unfortunate that the business is like that. But sometimes a dealership will tell the client whatever they want to hear to get them to sign, and then take a truck or a car or whatever. But yeah, we come in and we clean that up and then get it done appropriately.

Len 15:35
So do you have to make as many credit pulls as the dealership to…

Kevin 15:41
No, not at all. And that’s another thing about that, is this just stupid, like… they’ll get an applicant, and they’ll do what’s called a shotgun, so they’ll send it to 10 lenders all at once and and basically just chasing the highest pay from the highest bank. The thing with auto lending is you don’t know how much they’re they’re going to pay the dealership till it’s approved, because it’s based on credit, and you get different amounts. So what a lazy finance manager will do is they’ll just send it to all lenders and pick which one is best. With us, I’d say the average would be one and a half inquiries. We’re pretty good at sending it to the appropriate bank to get it done.

Len 16:21
I actually know where it may fit, just like we do with a mortgage, right? We try to make sure that we understand that the ins and outs of each lender; there’s a lot of them, but that’s the biggest one. That’s the one that drives me crazy. So they don’t, you know, shop for vehicles, and you’ll see like, 10-12, pulls from different banks, and they’re hard pulls, because they show up on the credit bureau, right?

Kevin 16:43
So, yeah, the worst part is they, you know, if they didn’t get approved by that one dealership, they’ll go to the other one. They’ll do it too. Like I’ve said, there’s like 30 inquiries in a month, yeah, stuff like this on the bureau, right? Max is out at 99, and I’ve seen it a few times.

Len 17:01
Is that right? Oh, my God.

Kevin 17:04
No, we definitely understand credit, and we want to make sure that the client’s profile is not damaged when dealing with us.

Len 17:12
Yeah, that’s an ethical way… Yes. So how many files do you think you see on average from some of the top brokers?

Kevin 17:25
Oh, gosh, I had one lady last week. So we pay commission on every file… that I sent her a commission it was $2,500; she did five files in a week. I mean, there’s some that use us a lot, and there’s some that use us just when it’s a necessity. So at the end of the day, it just comes down to how proactive you want to be. And all I can do is tell you what I see from other brokerages. And there’s some that do incredibly high volume, and they’re nowhere near, you know, as big of a group as some of the others that should be doing that high volume. What they’re doing is working. And the feedback that I get is is they’re just presenting it on every file. The ones that that that do, do quite a bit of business with us and and it’s working for them. A lot of times if a client doesn’t like what they hear from a mortgage broker, they’ll call another one. So if you’ve got a client that wants to be pre-approved for a home, and you say, Hey, listen, you’re approved for S350,000 and that’s it. You’re done. And they’re looking, they’re shopping, they’re not finding a house that they want to have under that cap, and they end up calling another mortgage broker and trying to get a different answer. Well, the nice thing about us, if you utilize the broker quote function, you can be prepared to kind of give the client another option. So you can say, Okay, listen, you’re approved for 350, but if you do an auto loan adjustment, you can be approved for 450 or whatever it is. And the feedback that I’m getting from the brokers that do high volume is that it works. So, clients will always want to have that little bit of extra spending power on buying a home. And if you can come up with a creative way to do it for them, you’re going to win the file.

Len 18:55
No question, and auto debt servicing as you understand it, as well… that’s the part that you can scrape another couple $100 a month out of that, out of the liabilities, right? It’s definitely going to make a big difference on the other side, at $50,000 or so, quite easily with that number, right?

Kevin 19:19
It makes a big difference, and it’s something that clients want to be aware of. They want to have options, right? And the nice thing is that they’re not committed to keeping the loan re-amortized that long. So after the mortgage is done, there’s nothing to stop them from raising their payments. And there are lots of clients, especially self-employed clients, their numbers on paper don’t look that great, you know, or waitresses, or tip-heavy businesses and stuff like that, where they make more money than what the mortgage lender will give them qualification for. So that’s a nice thing for them to be able to balance it out.

Len 19:51
And touched on it. So what kind of revenue remuneration… how do you pay the brokers?

Kevin 19:58
So every file, if it’s under $30,000 we we pay $250, and if it’s over $30,000, you get a $500 commission. So we were deciding if we should do a commission model or not, but, um, I figured, I really want the company to be essentially an underwriter for the mortgage business, so you guys get paid when you send a mortgage in, and I want to mimic that and pay you when you do an auto loan. And so we pay a pretty hefty commission on every file, and part of it is to drive other business too, like we want as much business as possible. So there are situations where you may not need to do a refinance to get your mortgage done, but if we have a commission piece to the puzzle, it might motivate you to say, Hey, listen, you know, even on the exit with the client, you know, you’re co-signed on a car loan with your daughter. We didn’t need to do it to get the mortgage, but here’s a company that could benefit you and your daughter and give her some financial independence and and we chase the files like that as well. And we also do a lot of acquisitions too. We were talking earlier about… you mentioned Colin Bruce and stuff like that, and how he has us on his website. And there are just simply clients that just want to buy a car, and they don’t want to deal with a car dealership’s finance department, because it can be a very shitty experience. So nice thing about us is that we can just set up the loan for them. They come in, they pay cash, and you’re out the door. So that’s another piece of our business. We don’t do a ton of it, we are primarily focused on the mortgage broker relationship, doing the refinancing and stuff like that. But yeah, absolutely. You’ve got a client that wants to buy a car and doesn’t want to go through the BS, then we can help out with that too.

Len 21:40
Yeah, exactly, right. So it’s always stressful, I think, for people, especially first-time homebuyers or car buyers or something like that, right? That they don’t understand… there was a company called Western Auto Credit. I think they’re probably around somewhere. But when I lived in Fort McMurray for half a dozen years when we started the company, actually, and I was cringed when I heard… was coming to town, because, you know that some poor young guy was gonna go pay 18% for truck payment, right? And he was making big bucks. But it kind of makes you go like… but anyways, but that’s there, right? That’s part of the industry. It’s not unlike ours, where there are a lot of people that just do private lending, and it’s way higher than our standard lender. But sometimes that’s all that the client can get anyway, right?

Kevin 22:31
So sometimes it just comes down to, you know, credit rebuilding and stuff with the higher interest rates and stuff like that. It’s not necessarily the dealership that’s, you know, being predatory, because they don’t make as much money on a high-interest-rate loan as they do on a prime loan. So their goal is always going to be to get them done through a prime lender. But there are situations where, you know, credit just doesn’t justify it, and they have to do one of those high-interest-rate loans. And we do a lot of that too. Like, there’s quite often, you know, we’ll see a client that’s in an 18% loan and they’ve had good auto history for a year or whatever, and we’ll get that cut in half. So there’s always going to be an option if they’ve paid well to get out of those high-interest-rate loans. And we’re here to help. The biggest thing with dealerships, with clients, is that they’re very high-pressure in the finance department, selling products and stuff like that. And I’ve seen a lot of files where the client got, you know, taken advantage of pretty hard. So the nice thing about us is that we don’t do any of that. We just simply provide the client a loan, and they can just pay cash, so they’re protected. But yeah, I’ve seen some pretty sad stories, so we’re here to help with that stuff too.

Len 23:33
Yeah, obviously working with brokers. How do they co-brand with you?

Kevin 23:37
So a lot of brokers will open up their own auto lending division within their brokerage. So you’ve got, like, TMG Auto Finance, or however they want to market it, and we kind of just leave the marketing up to the broker and how they want to do it. If you go on Instagram and do, I think it’s hashtag KDK Financial, you’ll see a couple of examples of different mortgage brokers and how they market it. But yeah, like I said at the beginning of this podcast, we really are just the underwriter for you guys. You now have the ability to do your own auto lending. So market it however you want. The only requirement that we have on any type of advertisement is that you just have to mention or put our logo that says, you know, powered by KDK Financial, so market how you see fit, and then just have that in there, and we’re fully good to go.

Len 24:26
Yeah, we have, I don’t know how many newsletters that go out every… I know what I have for my own is almost 500 or 600, but I’m sure over the whole team, there’s probably got to be 1500 newsletters that go out every month, right? So easily, if not more. So good way to… We’ll talk about that after the call, about how we can make that up, just a link to put into the newsletters, and that worked for us as well. So, yeah, it’s something that is needed. Like I said, we worked with others in the past. They even wandered away and never came back. But sounds like you’re having some great success right across Western Canada or across Canada, and it’s definitely something that’s needed, especially seeing how the average used car loan was sitting around 9% there for quite a while. Here, it’s come down a little bit, but not a huge chunk. But where do you see that rate these days for used vehicles?

Kevin 25:23
Yeah, so it was bad for a while. Like five years ago, used car rates were 4.9% and then they went to 5.9, 6.9, 7.9, 8.9, 9.9, 10.9%. They actually got as high as 10.9, which… it was getting scary. It’s starting to come down. Last couple of years it’s been kind of 8.9, 9.9%. Now most lenders are at 7.9, so it’s still high, but it’s certainly trending down. So I think by the end of the year, most rates will have a six in front of it. I’m hoping that trend continues, but who knows. But the nice thing is, if they have bought a car, and it’s a used car, in the last two to three years, we will have a lower rate, so there’s going to be a benefit there on pretty much every file.

Len 26:03
Yeah, yeah, I had in the midst of that, I had to trade mine, and I didn’t want to buy a new one at the time, because I wasn’t sure what I was doing. And so yeah, I ended up with an 8.99, but then the leasing side got so low that Honda gave me a 2.99 on a brand new one. So I’m like, okay…

Kevin 26:25
You’ll still get what’s called subvented lending, like the 2.9 and stuff like that, but you have to buy brand new. That’s kind of the only caveat. But yeah, the rates on new are pretty good always. Typically, they’re under 4% so it’s just, when you deal with a used car, it catches you, and you know what? It’s tough, right? At the end of the day, you get the depreciation when you buy used, so you save some money, but you have a higher rate. So it’s a jungle. It really comes down to your car ownership and then how you plan to keep it. If you’re going to buy a car and then keep it for five or six years, I would say go new if you’re going to trade out every two or three years. I still believe used is the way to go, even with the slightly higher rate.

Len 27:04
Yeah, that two-to-three-year mark makes a big difference, right? So you can buy that, save that 30% almost right off the start of what they were when they were sitting on the lot, right? So, yep, for many years, I used to buy just used. That was just the 30% difference. I don’t know how many Regals I drove that you could buy them off the rental market as well, right?

So, yeah, thanks for your time Kevin. It’s a definite, interesting part of the market, and like I said, with a lot of people with 9% payments, it’s something that they should be looking at it if they haven’t miled out the car, of course, and there’s some years left in it, it definitely can be a big assist to them to knock down that to a couple $100 makes a big difference in TDS, and in the mortgage side as well.

Kevin 27:57
Absolutely okay.

Len 27:59
Thanks for your time.

Kevin 28:00
No worries, take care.

Len 28:03
Thanks for listening today. I hope you found the information that we provided to be useful in your mortgage journey. And remember, you can always find our associates at www.brokersforlife.ca/associates. Have a great day.