Wake up call #72


So we have been hearing a lot of chatter recently on a couple of different fronts. Rate buy-downs have been a big topic as well as the potential sale of Firstline Mortgages leading to the possibility of CIBC cutting ties with the broker channel. I have written about my thoughts on fighting the rate war in the past and I will repost in the future, but today I wanted to focus once again on the possibility of a major bank leaving our channel.

This is NOT a good thing on any level. The supply of money out there is finite and if we lose another funding source this puts pressure on the entire channel. We cannot grow marketshare if we do not have the supply of funds to do that. Now I don’t profess to be a treasury expert in any capacity but I do know that if we continue to lose funding sources this will negatively impact our market share as a channel. We have been talking about this for years yet we continue to put our heads in the sand and do things the same way we have always done them.

WE NEED TO BECOME A MORE EFFICIENT DISTRIBUTION SOURCE for our lending partners. If we don’t they will find another way. Think about any other product or service. If the cost of shipping goods by air becomes substantially more expensive, or product gets damaged, then suppliers will start looking at trucks, or rail or some other alternative. We are simply a distribution channel for investors to put money out. As long as we are efficient and profitable they will continue to use us. If we are not then they will find other avenues.

We have seen numerous examples over the years. BMO left our channel some time ago. We have seen the subprime mess take out a number of lenders (granted that was beyond our control). We have seen Macquarrie leave our channel. We have seen Concentra leave our channel. None of these lenders stopped distributing their product, they just stopped using us to do it. This should tell us something shouldn’t it?

We cannot control what others do but we can control how we react and how we behave. We need to get better as a whole; as a channel brokers need to get better at what we do. We need to focus on raising the level of professionalism as a collective. We need to care about what our peers are doing. We need to provide our lending partners quality mortgage applications that fund. We need to take responsibility for the applications we submit. We need to do at least some level of due diligence to ensure, to the best of our ability, fraud free files.

Simply dumping the Banks in favor of the monolines isn’t the answer. We need to be an efficient distribution channel for all of our lending partners. Bank and monoline alike. Let’s all do our part. Discuss with your lenders what they need to see from you to be more efficient. Do some due diligence. Watch for the red flags on files and discuss them with your lender underwriter. Work as a team with your lender and learn what works for them and what doesn’t.

In my opinion one of the biggest things to being ‘professional’ is knowing when to walk away from a deal. I know that can be tough but sometimes you need to let them go.

If we can get better as a collective and continue to deliver high quality, fraud free mortgage files that consistently fund I can guarantee you our channel will thrive and grow. If we don’t, we run the very real risk of further reducing our pool of lenders and that is certainly not something I think any of us want to see.

10 Responses

  1. Jerry says:

    I hear your rant, I hear everyone’s rant about how this business isn’t profitable anymore, razor thin margins, Banks are becoming more competitive and aggressive. It seems that is all I keep hearing, I haven’t seen a solid solution besides using words like be more professional, try and differentiate yourself. Unfortunately the mortgage brokers have fueled this rate war and the media has supported it and everyone else. I have lost numerous deals and funding ratios have dropped the last couple years. I have done a good job gone over the details, been professional, offered good advice. The clients has been contacted by their bank, or gone to get their RRSP’s, pre authorized debit form etc and the banks have scooped the deal. I guess this is my rant too, I don’t have the answers but trying to collectively continue to deliver high quality apps that fund in a highly competitive rate market is tougher to do these days.
    I know know even at a certain bank that I go into pay a line of credit at the tellers and I get asked every time if I would like to speak to someone about my other business accounts, investments or mortgages.

    • Michael Cameron says:

      Thanks for your rant Jerry. Not certain I have the solution but want to make sure we engage in an open dialogue. There is no question the business is getting tougher. We need to keep sharpening our skills and focus on what we can do.

  2. Francine says:

    Mortgage brokers over the years have done exactly what you are saying, it is not our fault. It is consumerism/capitalism at its best/worst. Unfortunately consumers have no ethics any more. They have no problem using a professional for all the best advice that they need, and in the end continuing on with their own financial institution on the basis of laziness, they just don’t want to bother making the change. I have lost a high volume of business over the years, not to rates, but to the unethical wanderings of the average Canadian consumer. Without mortgage brokers, they would all still be paying posted rates on fixed mortgages, there wouldn’t even be a variable option let alone multi-tiered heloc products.

    When I started as a broker the discounted rates were prime – .25%. Now we are are at the end of the rate game, but we can give outstanding advice based on years of experience and objectivity. However consumers don’t value that. They feel that they deserve advice for free and that we owe it to them. Do we? How will we be in business for them next time around, when they call again because you and I know more than the paid pee-on they are dealing with at the f.i.

    What’s really funny is none of them read the mortgage document that they sign at the lawyers office. They have no idea that in the end the penalties charged on that product they selected are double what they would have paid getting solid advice from the right broker.

    We will see more and more the f.i.’s add to their mortgage clauses at the expense of the consumer, but I guess if they want to play the game they have been playing, they have to bear the cost.

    • Michael Cameron says:

      Thanks Francine. Loyalty is definitely tougher to come by these days but not impossible. Look at Steve Jobs and any Mac fan. Talk about crazy loyal ;0)

      Perhaps a lesson to be learned there?

  3. Well said Michael. We, as an industry, need to find a way to make it so the banks can’t resist dealing with us. I think that in a lot of ways it means completely changing how we do business as an industry. We need to stop picking mortgages for our clients, and start helping them select the right mortgage, and this means putting all of the options (including BMO and RBC) on the table, so that the client can understand the differences in value that different lenders represent, and then let them make the final decision.

    We need to stop trying to control the client’s decisions, and start controlling the process instead.

    • Michael Cameron says:

      Thanks Nolan,

      That is absolutely the point. There are two sides to the equation – supply (Lenders/Products) and demand (Consumers). We need 1) to make sure our supply continues, then 2) Take care of our consumers.

  4. Mike Maguire says:

    We talk about relationships and professionalism but what I don’t get is why so many brokers bailed on Firstline when they raised their variable rate by a quarter point last year. The product was still one of the best out there and saving money on your mortgage has alot more to do with shortening the amortization than rate. How about having a mortgage professional that you can call after the deal closes. Someone that knows you and what is important and someone who does not get transferred a month later. The rate game seems to get precipitated by the bank road reps. They have to use rate as they really don’t have too much more to offer. They drive the bulk of there business thru realtors who tend to be very demanding and not overly loyal. Personally they would have to give me a fantastic rate. Kind of scares me when I deal with someone that works out of their car and wants to meet in coffee shops. Now it appears that CIBC wants to get into that game. All of my staff have been called offering the huge compensation of 55 points and CIBC will bestow their knowledge on you of how to win over realtors and keep them. So just what well qualified mortgages brokers are going to jump at this deal? Personally I like to have loyal clients who trust me and refer friends and family. I for one do not want to see Firstline’s demise as they have been a great lender over the years and even today still give me great service. Unforunately CIBC does not have a great track record with there business decisions in the past and maybe this one might fall into the same box. Only time will tell.

  5. Clarence says:

    Actually one of the things that stood out to me in our meeting with FirstLine was that they were making the change to support there internal sales staff because it was less expensive for them. This is the same reason that Concentra and BMO have given us as well. If these Banks are making decisions based entirely on the bottom line, what it costs the bank per mortgage, I am not sure how we can win that fight. Banks pay there employees less per mortgage than they pay a brokerage (about half from what I hear) plus they typically offer higher rates in house than they do broker business? Both of these points make us as brokers more expensive in the banks eyes would they not? I am not sure if they really look at how much new business we bring in.. just how much each transaction costs them?

    I agree that we can offer our clients better service, better advice and build strong relationships with the clients but banks make decisions based on how many dollars it costs per client not if the client is happy with our service.

    Banks have a place in the broker channel but they can and do make decisions based entirely on how many pennies something costs. Regardless of how well we service the needs of the clients.

    I am not sure how we combat that?

  6. Renee Stribbell says:

    I have been in this business a long time and have seen the introduction of new lenders and the withdrawal of lenders from the marketplace, mainly due to the cost of distribution.

    Mortgage brokers are the main distribution channel for quite a few of the lenders that we deal with. I believe that a lot of those lenders are looking at creating their own sales force as opposed to using mortgage brokers, because they have more control of the bottom line. Do I think it is a good thing-of course not!

    Mortgage brokers over the years have increased market share. Now, the banks are seeing mortgage brokers as more of a competitive force in the industry and are responding as such.

    We have helped create the competitive nature of mortgages which in the end benefits the consumer. However as a result of this we have trained the consumer base to ask “what is your best rate”? as their first question-because for years that is was we boasted that we offered!

    How many advertisements did brokers put out that said “We beat the banks!”, or “Low mortgage rates at no cost to you!”. We did what needed to be done to get the phone to ring, right? We didn’t advertise our years of experience, that we offer mortgage counseling, or that we were professionals in our field.

    So now we are trying to work backwards-we are now saying that we offer more than the best rate. I know that and my clients know that, but the average consumer does not, and because we have trained them as such, doesn’t care…at first. Unfortunately they don’t really care until something goes wrong (placed in the wrong product, things fall apart because the person they were dealing didn’t know what they were doing).

    Here is the thing-I completely agree that we need to be full blown professionals. Here is what that means to me: I have the knowledge and experience to listen to my clients and determine what would be the best mortgage scenario for them and their situation. I am their broker “for life” and I tell them that. I know what my lenders have to offer for products, and understand their underwriting policies and procedures so that I try not to send them deals that they will not do (this is a biggie and I think is where our distribution channel falls apart). If I am not sure I contact the lender prior to submitting the deal to make sure it will fit. I keep funding ratios in the back of of my mind because I know I need to remain efficient with the lender.

    This is where our industry is lacking-a lot of us throw a deal at a lender to see if it will stick-if it doesn’t with them we move on to another lender, and so on and so on. The agents that do this do it because they do not know any better-they have not had the training to know any better. Let’s train the new agents out of the gate to make sure they become more efficient and cost the lenders less money!

    Canadians need mortgage brokers. We know this. Some consumers know this. What we need to show the lenders and consumers is why-a lot of us offer much more than rate. Unfortunately there are some brokers that offer nothing more than rate and those are the ones that are really hurting this channel.

    I don’t know what the solution looks like completely but am willing to participate in any way I can to come up with the change needs to keep our channel viable.

    I guess I needed to rant too!

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