Mortgage brokers are compensated through finders fees paid by lenders. After a mortgage closes, the broker gets a percentage of the loan amount for preparing and managing the client’s file.
When the client’s term is up the lender will try to get the client to renew. If the client renews, the broker who brought the lender the business in the first place usually gets nothing. That’s because few lenders pay brokers anything on renewal. If they do, it’s likely in the form of trailer fees (a small percentage of the loan amount each year).
Now, thanks to Street Capital, there’s a new model. They’re the first lender to automatically pay full commission to brokers when a client renews. Mortgage planners who send deals to Street Capital no longer need to worry about the lender “stealing” their client.
It’s a compelling prospect if you’re a mortgage planner. Other things being equal, it’s a clear reason to send business to Street Capital. In fact, Street Capital will likely see their mortgage volume soar in 2008 solely because of this policy.
Our take is simple. Street Capital has opened the genie bottle and, in time, other lenders will surely follow their lead.
Most brokers will agree, it’s long overdue.
Would a broker be more inclined to “sell” a Street Capital mortgage now instead of another product that might be better suited for the client?
Hi FT,
That’s a good logical question.
A professional mortgage planner faces these decisions regularly. There are countless lenders that offer incentives of some sort.
The main thing that seperates the best in our business from the “not so good” is ethics. Therefore, “other things being equal” should be the key point. A reputable mortgage planner will never forsake the client’s best interests for his/her compensation.
Even if a broker has questionable morals, they should be smart enough to realize that it makes good business sense to be a good fiduciary. Doing the right thing cultivates more business for mortgage planners in the long run.
Have a great weekend,
Rob
Peoples Trust, a Sub Prime Lender, has been paying fees to Brokers on renewals for the past 3 years in Ontario. It’s by no means a new idea.
Phil, I’ve emailed you for clarification on this. Cheers… Rob
An update to the above:
People’s Trust has a unique renewal model as well, albeit slightly different than Street Capital’s. We’ll do a story on them shortly…