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BMO’s Take on Mortgage Brokers

Bank of Montreal lost market share when it stopped discounting mortgages last year.  Now BMO no longer sells mortgages through brokers, stating they make more money when they sell mortgages directly through the bank.

There has been a lot of recent press about this decision.  Since BMO is a respected institution, their comments on mortgage brokers are worth analyzing.

Take this story for example.  Bloomberg quotes BMO as saying they were unable to “develop…deep relationships with…customers coming in through (the) broker channel.” 

That’s easy to imagine.  Clients of mortgage brokers are often far more loyal to their mortgage planner than to the bank lending the actual money.  It is the mortgage planner–not the bank–that shops several different lenders for the best rate and terms, does all the paperwork, gets fast approvals, and provides unbiased money-saving advice.  It’s tough for any bank to build relationships when they’re not providing these services.

BMO’s CEO suggests further that BMO’s unnecessarily long approval process has been another thorn in their side.  Again, that’s totally conceivable.  Mortgage buyers today want extremely prompt service.  Big institutions, however, have a lot of bureaucracy.  Much of the time immediate service just isn’t a possibility. 

With mortgage brokers, however, competition has streamlined things.  We know exactly how to handle complex deals, have fewer hoops to jump through, and use dedicated underwriters to speed up the process.

When all’s said and done, BMO is an outstanding bank.  But today is a new age.  If BMO and other banks want to compete with mortgage brokers, perhaps they need to act more like mortgage brokers.