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 Centres 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 to one of the long time active mortgage lending companies. Mortgage lending companies. I guess you’re actually a MIC to start with, as well as it’s, one of its founders, and that would be Brian Menges. Brian, welcome to the show.

Brian: [00:00:37] Well, thanks, Len. It’s a pleasure to be here.

Len: [00:00:40] Yeah, I was, uh, I know we’ve I think I’ve pretty much known you since the day I started, which is 19 years today.

Brian: [00:00:46] So it’s a happy anniversary.

Len: [00:00:49] Yeah, well, I get a second anniversary because I paid for my mortgage license on the 29th, and then I paid it again on the 1st of October. Full price twice. So ill advised, unfortunately. But, it’s worked out okay. But so let’s talk about the beginnings of Caplink.

Brian: [00:01:10] Well, we started like, in 1997. We had started out as a private lender that originally we syndicated loans. So we just had a group of investors that we got to know, and we would do individual loans with them or with groups of them. And then in 2005, we actually merged our company with Equiplan, which was run by Marcel Nutshell. Marcel was trying to retire, and when we took over his brokerage firm that introduced us to MICs mortgage investment corporations. So from that time until 2022, we ran MICs which meant that not only did we have to be licensed as a mortgage broker, but ultimately we were licensed, as with the securities regulators, as an investment fund manager, restricted portfolio manager, and exempt market dealer, which we maintain today.

Len: [00:02:11] Yeah, I see the list there. And I go like, oh, exempt market dealer, mortgage broker, mortgage loan administrator as well, right? As well as a restricted portfolio. That’s a lot of licenses.

Brian: [00:02:22] Well, if you count the licenses I have in the US, I think I have 16 licenses and 13 regulators.

Len: [00:02:29] I’m sure it’s working out. But that’s a lot of regulation to keep up to date with and that’s funny. I don’t think people realize that, you know, even B.C. is making that change now to where you’re there’s three different licenses for administrator, you know, and as well as broker and, you know, administrator. So there’s, there’s so many levels to mortgages that cost a lot of money for one. I guess maybe not a lot of money in the bigger picture, but it’s a lot of administration. So does that mean that every level of that has to be audited for trust funds and so forth?

Brian: [00:03:05] No, no. Just… we get as an administrator, we get audited on our… any trust accounts that we have irrespective of what money, like if it’s make money or syndicated funds that flows through there, doesn’t matter. So and our… as a… because we’re securities dealer, we… Caplink itself gets audited every year as well as we now have one fund mutual fund trust that it gets audited every year. So it’s an expensive hobby

Len: [00:03:41] I’m sure. Right. So obviously quite successful in the West. I don’t know how well you’re known in Ontario. Is Ontario on your list as well?

Brian: [00:03:52] Yeah. We haven’t been concentrating on Ontario because of the economic downturn there. But also, as you and I have discussed, back when Covid hit, I actually pushed Caplink south first into the United States and then into Mexico. And we are, we’re having such a good time, actually, in Mexico that we are still lending in Canada. But I’ve suspended lending in the US because the key markets that we work in—Arizona, Florida, California, Texas—they’re all going through quite significant real estate downturns. And I just don’t want to be lending in those markets. And then you add in a little bit of chaos from tariff wars. And it’s so much easier to land in Mexico. So we’ve been really focused on Mexico.

Len: [00:04:50] Yeah. And that’s. Yeah, the tariff wars are interesting. I ordered a pair of shoes. I wear these special shoes that come from California, and you don’t think about the tariffs until you have to pay one. So two pairs of shoes. The tariffs were $98.

Brian: [00:05:09] Funny stories.

Len: [00:05:10] $20, $24 a shoe, right?

Brian: [00:05:13] Well, they’re… what I’m hearing is, yeah, people are getting goods delivered to them, and then they pay the tariff. It’s more valuable than the… costs more than the actual product they bought.

Len: [00:05:24] That’s right. Yeah. So that’s interesting to hear. You know, we’ve seen that several times here and usually with the, with the MICs, so do you have to look at adjusting your book as much in the US as we have had here in the past?

Brian: [00:05:39] Well, we didn’t expose ourselves to too much in the United States. I pulled out of the market a couple of years ago really because it was obvious that it was going to decline because it was overheated and interest rates had started to go up. But I didn’t know how bad it was going to be because I didn’t factor in the current insurance crisis that they have there in insurance. A gentleman I know in Maui, his insurance has gone up 700%. So you’re seeing all sorts of operating costs go up in the states that when you hear about Canadians selling out because of Trump, that’s not… that’s a little disingenuous because Trump was the icing on the cake. But what they’re more concerned about high property taxes, high insurance and then a low return on rental income right now. So they move, people are moving out. But Mexico is the exact opposite, right? All our areas that we land in Mexico are appreciating. We had one young gentleman, an American, that we financed in October last year, so a year ago, and he just sold his property. He bought it for 550 and sold it for seven, over 700. And so you’re seeing real appreciation and real estate and some really good product and, you know, we have just such a great selection of borrowers that we currently, you know, we have no arrears, no defaults, no foreclosures outside of Canada. And what we do have in Canada is pretty minimal. But still, we’d be shocked if one of our loans went into default in Mexico because the borrowers are so strong.

Len: [00:07:27] Yeah. That’s so it’s… Are they… so they’re not Mexican citizens usually? Is that the scenario?

Brian: [00:07:35] No. We only lend right now… We only lend to Canadians and Americans who are buying second homes in Mexico.

Len: [00:07:43] Right.

Brian: [00:07:44] And so our problem has been the demand has been so great that we haven’t been able to keep up when it comes to raising capital. So we’ve actually, interesting, we have for over a year now I have because my quality of borrower and product was so good, I started to pursue an insurance program, a mortgage default insurance program, and we are in negotiations with two different insurance companies right now, and we expect to have something finalized by the end of this month. And then we hope through that that we can attract institutional money, larger amounts of money, because, you know, we think that we can generate up upwards of $1 billion US in mortgage production within five years.

Len: [00:08:37] Wow.

Brian: [00:08:38] And that’s if we go slow. Like, it’s a huge market in Mexico. We’ve actually, to, I should let you, you know, make it clear that we’ve actually rebranded in Canada. People know us as Caplink Financial, but we’ve actually for our lending purposes in internationally and even locally, we’ve changed the name to SoBankable.

Len: [00:09:03] Right.

Brian: [00:09:03] I saw that somebody was looking us up. You wouldn’t see anything interesting on Caplink’s website, but if you go to the SoBankable website, you’ll see all the information on Mexico. So in Mexico, the realtors and builders we deal with, they only know us as SoBankable.

Len: [00:09:20] And that’s interesting. Yeah, I was actually looking at both sides there. So it’s, if it had a Y, it’d be name bank and bank. No, I’m practicing my Spanish from going for three weeks again at Christmas. I’ve been away for a while, so.

Brian: [00:09:34] Oh, there you go. There’s a lot of mortgage brokers down there. They’re semi-retired, so.

Len: [00:09:40] Yeah, yeah, we hear we run into a few of them every now and then. Our friend Mr. Harry’s, of course, is living in a penthouse out in Nuevo, so it’s… So I was going to catch up to him while we were down there if he’s not renting his place out. So obviously banking and our ownership in Mexico is different. So how is that… how is that part worked around, I guess, or facilitated? Well, there’s.

Brian: [00:10:06] When Mexico established its constitution, originally you couldn’t own real estate in Mexico as a foreigner, as a nonresident. In 1976, they amended their constitution to allow foreigners to own anywhere in Mexico except in what they call the restricted zone. And the restricted zone is 50km from the oceans or 100km from dry land border. So the US-Mexico border. So that very narrow band is called the restricted zone. And when you’re in the restricted zone as a foreigner, you can’t own a property in your personal name. It has to be owned by a Mexican entity. And that can either be an incorporated Mexican corporation or what is more common is what’s called a bank trust. A fideicomiso. And so the most common ownership structure is the trust. And as a lender, we actually don’t put a mortgage on the property. What we do is we take an interest in the trust and it becomes the security for our loans. But to our way of thinking, it’s a mortgage. The enforcement of a defaulted loan would be similar to what we do in Canada. And then when you’re outside the restricted zone, as a foreigner, you can own real estate in your personal name. And at that point, we don’t really rely on the trust structure. We now go… move to what is a traditional mortgage registered on title.

Len: [00:11:39] Oh, really? Yeah. We have a lot of friends who are up in the Chapala.

Brian: [00:11:45] Lake Chapala. Yeah, big, big expat community there for sure.

Len: [00:11:49] Yeah, and some of them, they probably own, because some of them are there about nine months of the year. So they only come when they come home for the warm weather.

Brian: [00:11:57] Well, I tell you, Mexico, you know, I don’t think people appreciate how much it’s improved from a medical. Like when we look at markets, to lend into what we care about is access by flight, by airlines, road transport, medical access, and then amenities and lifestyle that’s offered in the area. And more and more, we’re seeing Canadians who are opting to have surgery in Mexico. And one couple I know that have retired to Huatulco, they’re actually retired mortgage brokers out of Calgary. And one of them had to have surgery and could have come back to Calgary to have the surgery, but opted just to have it where she was and said everything went very well. So you’re getting… you can go down to Mexico and live there on a quite affordable basis and still have access to good medical and dental and everything you need, right?

Len: [00:12:55] Yeah. And that. Yeah. No question. We’ve been going there since the 80s. We bought a timeshare and one of the original vidantas at that time and yeah. So you see, the hospitals are better, you see, you know, there’s… there was such a big gap between… No, wasn’t… there was no middle class. It was just upper class and poverty, right? Is all that you really saw. But these days, you know, 20, 30, 40 years later there it has really advanced in Mexico. There’s no question about that. The food has always been great. But…

Brian: [00:13:31] Yeah. You know, I have to tell you too, I’m spoiled because in doing business in Mexico, we deal a lot with various Mexican nationals and at the level we’re dealing with, with banks and Institutions, everybody we deal with speaks very good English. It’s almost embarrassing because I tell them I can’t even order a pizza at a restaurant in Mexico in Spanish. And they’re speaking… they’re articulating perfectly in English. So I think it’s a very up and coming market. It’s got a lot of young, intelligent people. And one of the reasons we’re really excited about in, you know, investing in mortgages there is because… because there’s this whole economy is burgeoning and growing in Mexico, which will help sustain real estate values long term.

Len: [00:14:25] Yeah. And it’s interesting. That was part of the changes, I think, over the years that I met a young gentleman one time who was selling timeshares Mexican National. And he… his English was was perfect almost to the point of having a not American accent, but he actually had a British accent because he was on an exchange program for two years for business courses with Oxford. So, like, you know, the people who have such a, I think sometimes such a narrow vision of what Mexicans and Mexico is like. But yeah, there’s a lot of money. The guy who owns the Vidantas like, owns cruise ships, right?

Brian: [00:15:01] And I can’t tell you how many people I’ve met, business people in Mexico that are… their kids go to school in Canada. They either go to high school here and college or university here.

Len: [00:15:15] Yeah.

Brian: [00:15:16] And they… but they always… they tend to always go back to Mexico when they’re done their school. But they, you know, people that are Mexican nationals that I’ve spoken to about Canada, they hold Canada in very high regard. It’s a good… you’re seeing Carney and Sheinbaum get together on some, you know, bilateral agreements and I can see Canada and Mexico getting along very well.

Len: [00:15:45] Yeah. No, we have a great dislike for the guy in the middle. So it’s… And with the tariffs going the way they are, I don’t know where that’s all going to end up. But yeah, definitely, definitely a good idea to make some good connections in that direction. There was an article a couple of weeks ago, I guess maybe even a week ago, and it was talking about our ports being too small to bring in the big enough ships out of Mexico to to trade product, right? So we’ll see what they… how that ends up. But that was an interesting conversation as well. So long term… what’s the bigger goal here. I heard the billion number. That’s an exciting number, a lot of zeros.

Brian: [00:16:26] A lot of zeros. Yeah. We’d like to… the medium-term goal is to build up. We’ve been… we basically did a proof of concept. So we did a bunch of lending in Mexico, ironed out all the kinks. And then we have institutional partners coming on here. So really, November 1st, we’ll be launching a much more concerted effort to lend throughout Mexico, or at least in, there’s 31 states in Mexico, and we’re lending in seven right now. And they’re all aware Canadians and Americans tend to cluster. Right. So we’d like to grow that. And… but it’s different. It’s interesting when the… when I deal with Canadians who own in the US, my investors, some of them or people we, you know, have dealt with for finance purposes, nobody planned to retire there. Nobody plans to live there. They own it. They go there for the winters. And at a certain point they’ll sell and come home when they can’t travel anymore. But I would say 50% of Canadians and Americans we’re dealing with right now are buying in Mexico with the intent on retiring there. So, you know, we are very cognizant of the fact that that is going to be a destination place for people to retire to, especially when you realize that if people want to retire in their early 60s and your people are living now to age, you know, Canadians particularly are into their mid-80s.

Brian: [00:18:04] That’s a long runway. And not everybody has enough savings to afford to live in Canada or the US, depending on where they’re from. And they’re looking to move to Mexico because they can get the medical, the dental, but they can live in a nice climate for probably about a third of what it costs to live in a similar place in Canada or the US. So we… Our pursuit is to accommodate that migration. So lending is just a starting point. We’re already engaged in, you know, we do foreign currency exchange. We are facilitating. We’re looking at development of some settlements in or settlements as subdivisions that would accommodate Canadians and Americans retiring full time to Mexico. We have a partner that just finished building a hospital, and they’re looking at building more. So we are… we’d like to build a whole ecosystem that supports Canadians and Americans migrating to Mexico.

Len: [00:19:13] Oh that’s interesting. It’s… So how do mortgage brokers get to be involved? I did talk to our insurance company, as we talked about before. As long as the… basically as long as the client for us is here in Canada, it doesn’t matter where the house is, because we do that for the States all the time as well, right? So we’ve been doing that for Arizona for 25 years, taking equity out or doing something like that, you know, to purchase something somewhere else.

Brian: [00:19:44] And there’s… where we’re getting like for… of the leads that we’ve had for the homes that we have financed, a good portion have come from Canadian mortgage brokers. Everybody seems to know somebody who’s looking to buy or owns already in Mexico and is looking for financing. So, we take apps like we do in Canada. We underwrite loans in Mexico, pretty similar to how we underwrite in Canada. And we just take… The difference is we’re taking security in Mexico. They can just reach out directly to me. We would process the loan and they would charge a broker fee like they would if they were doing a private deal in Canada. And what we do first is, as you and I have discussed, we get permission from the broker owner. We want to make sure… we’ve had two outcomes. Like what you’re saying. Some owners are comfortable with it and they just treat it like another deal. Others don’t want to do it, but they give permission to their broker to work with us independent of their brokerage firm. So we get instructions from the broker owner. We’ve talked to RECA, and of course, RECA has been very adamant that they have no jurisdiction on… for financing outside of Alberta. So they don’t require… they don’t look at it as anybody having to have a special license or reporting to them if they’re doing deals in Mexico. And in Mexico, they don’t have a formal mortgage broker designation at all anywhere in Mexico. So, basically the individuals, the Canadian mortgage brokers we’ve dealt with have just treated it like another application. And most times the broker owners are on side with them doing it.

Brian: [00:21:46] So we remit commission right to the broker owner, the broker brokerage shop. And… but it’s pretty simple. In fact, it’s probably less work for the mortgage broker because we… it is complicated. And so once we’re introduced to the borrower by the Canadian mortgage broker, we pretty much take it from there. They’ll give us the original application and then we’ll have to deal with the borrower directly because it is quite involved. But it doesn’t matter, and so, yeah, it’s not more complicated than that. We try to make it as easy as possible. We try to automate and, our communications, we stay in touch with the Canadian mortgage broker as well as the borrower. And one thing that they have to be cognizant of, though, is because we work with trusts, the trust takes 45 to 60 days to establish in Mexico. So if you are working with a Canadian, you have to manage their expectations. We find that’s one of the biggest obligations of the Canadian mortgage broker. And that you cannot close in two weeks. So you’re looking at a minimum two months to close. So immediately when we’re engaged on a file, we want to know if they’ve purchased a property when the closing date is, because we know it just can’t happen that quickly. But other than that, we manage it. And, it’s… same kind of underwriting. You know, we’ve… we have a minimum credit score of 660. We have a maximum loan to value of 70%. We… Our TDS maximum is 50%, loans are 30 AMs and five year terms fixed. And that’s really it, doesn’t get more complicated than that.

Len: [00:23:38] That’s not complicated at all. Weah. And that’s, you know, just, I’m sure some of the brokerages look at it like it. What’s the difference if the money came from Caplink directly other than so bankable. Right. So it’s, you know, it’s a… I think it’s a viable option. And, you know, you’ve already talked to one of my associates that… who is fluent, as is several of her friends in Spanish. So, so I’m sure that she’s cooking up something to do because she did that many years ago down there, actually.

Brian: [00:24:11] So, yeah, we’ve talked with her and she should get into it because we have, uh, I just think of one of the brokers we deal with started out just, you know, with one deal, and I would suggest to you now at least 50% of his mortgage practice in Vancouver, where he lives, is financing Canadians buying property in Mexico.

Len: [00:24:37] Yeah, yeah. And like I said, we have friends who have retired and they travel actually this year, they’re traveling around Canada because they don’t want to travel around the states and anything or offshore. But they’re up in Chapala about half of the year. So I’ve been putting the bug in their ear to say, I don’t know that they want to buy because they like to travel around. But I am sure they know a lot of people up there that maybe just in that market. So we’ll see how it goes.

Brian: [00:25:05] If you think about it, you could go on holiday, sit by the pool and hand out business cards.

Len: [00:25:10] I always make sure and hand out one regardless of where I am in the world. So anyways. All right, you know, I have to thank you for your time. I know you’re a busy guy. Obviously, with all this on the go. It’s… I see you have a large team behind you now. I didn’t realize there was that many people working in your office, but I see you brought the children in as well. So is that a good thing or?

Brian: [00:25:32] Oh, it’s a great thing. Yeah. No. I’m lucky my… I never insisted my kids get involved with what I do. They could do whatever they want. But my two sons have both found their way into the business, and they’re at a point now where if they weren’t here, I’d be walking around with one arm tied behind my back. So I’m fortunate. They want to be here. They’re smart, they’re good. And they really like what they’re doing, so.

Len: [00:25:59] Yeah. Excellent. So. All right, Brian, thank you for your time. And we will talk to you soon.

Brian: [00:26:05] Okay. Thanks, Len.

Len: [00:26:07] 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.