Mortgage Brokers Today

Mortgage-Broker-Issues Yesterday we covered issues that lenders are concerned about. Today we’ll talk about what’s on the minds of mortgage planners.

Three high-volume planners shared their thoughts at CAAMP’s lender panel on November 23.

The panel featured:

  • Vince Gaetano of Monster Mortgage
  • Peter Kinch of Dominion Lending
  • Tom Hogg of The Mortgage Centre

Here’s what they said… (CMT comments in italics.)

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On balancing relationships with lenders and clients:

  • Lenders have been talking a lot about what they want from brokers.  Peter Kinch hinted that brokers’ interests may be getting overlooked in the process. He said, “A lot of brokers underestimate the value they bring to the lender.”  Kinch felt that brokers should strive to get to a point where their value add is so key to lenders that lenders “won’t be able to live without us.”
  • “You have two customers – one is the borrower and one is the lender.” – Kinch(The audience seemed to find it funny that lenders were being referred to as the “customer” when brokers are the ones sending them the business. We have all the respect in the world for our lenders, but let’s keep things in perspective. As long as the broker originates good mortgages and doesn’t waste the lender’s time, only the customer should be the “customer.”)

On brokers’ value proposition:

  • Vince Gaetano says it’s easier for homeowners to create long-term relationships with a mortgage planner, versus someone at a branch that continually “changes seats.”(Generally speaking, banks will probably never challenge the breadth of mortgage advice provided by a dedicated mortgage planner. The question is, will consumers realize this, and what value will they place on it?)
  • Brokers who compete on rate will “live by the sword and die by the sword” says Kinch.  With so much competition (from branches and other brokers), it’s vital to re-examine your value proposition as a broker.
  • Homeowners want more than the best rate. Gaetano said, “If you have the best rate, you should have all the business.” But that’s not happening,” he says. The people with the best rates have only a slice of market share in our industry.

On branch mortgage specialists:

  • It’s not fair to be critical of bank branches, Tom Hogg told the crowd.  Bank reps are rarely allowed to become true specialists. Instead, “They are required to know a little bit about a lot of things.”  (Bank accounts, mortgages, investments, etc.)  By contrast, he says mortgage planners can focus on becoming experts on their specific subject area.

On advice to new brokers:

  • “I wouldn’t want to begin building my business today,” says Hogg. New brokers today have a lot of “anxieties.”
  • Gaetano says brokers must ensure the experience for first-time buyers is good, or they won’t come back.
  • Consumers don’t want buzzwords or elaborate explanations, says Gaetano. Their attention is best kept when the planner is able to break down and simplify difficult concepts.
  • Clients “want to look you in the eye and know you bleed like they do…that you had a 12% mortgage (too).” If you “humanize the transaction,” people will continue to come back. – Hogg.
  • Become an authority.  “When people see you as an authoritative source, it changes things dramatically.” It creates credibility. – Kinch
  • Customers want to make sure “you know what you’re doing…They want to trust you unequivocally,” says Hogg.
  • Kinch said brokers need the right priorities. “If I talk to a person and their first question is ‘What’s your commission split?’’…the conversation ends there.” Kinch says: “The first question should be: ‘What kind of training do you provide?”
  • Gaetano agreed, saying: “Hook up with a firm that’s going to give you a lot of training.”(Never underestimate the advantage of high-quality training. It remains with you throughout your career. Truth be told, it’s too easy to screw up in this business if you learn on the job…and when errors cost the client money or leave a bad taste in his mouth, you’ve failed.  Instead of being eager to sell, be eager to learn.)

On ideas for growing your business:

  • Hogg says, identify and focus on one client at a time who can provide you referrals.(This is deceptively simple, but true. The best advertising comes from your existing customers. According to Maritz Research, only 1 out of 10 clients come to brokers due to advertising.)
  • Creating a niche has been the foundation of Peter Kinch’s success.  (His specialty is income property financing.)  He says, “Focus on trying to become the absolute expert in a particular niche.” The more education you provide, the less rate will be the focal point.
  • Kinch suggests using the media to your advantage. “Learn something and write about it.”  But he warns:  Never write from the angle of self-promotion, or it becomes advertising instead of an editorial.

On threats to the broker industry:

  • Hogg was concerned about the increasing intensity of branch price competition.  He also said that brokers can no longer take advantage of a lender’s time and resources. For example, he told the audience that brokers must get away from things like “holding three commitments until closing.”(We should all know there is a price to pay when you don’t place clients in the right product from the beginning. Odds are, today’s professionals and lender pressure will soon make “3-commitment brokers” a vestige of yesteryear.)
  1. Although dealing with a broker makes a lost of sense today, at some point in the future, just like in the wonderful world of insurance and mutual funds, each mortgage broker will provide services and financing options from 1 or 2 financial institutions.

  2. Thank you Melanie and Rob for taking the notes and publishing them on your web site. I didn’t have a chance to attend CAAMP this year. So I find it helpful to read your reports about the lender and broker panels.
    Good job!

  3. Rob, thank you so much for all the useful information! I’m glad to see that I’m doing exactly what Vince and Peter recommend. Persistence is virtue and I learned very early on that competing for rates is a waste of time. Focus on service and become an expert on areas where bank originators can’t hold a candle.

  4. As for the lender being considered the “customer” being a laughing matter when raised by Peter Kinch, I strongly urge my fellow brokers to re-examine their core belief systems as they apply to the relationship between ourselves and all of our clients, including our lenders.
    Yes, lenders are indeed our clients, and every bit as entitled to being treated as such as do our borrowers. As it states in the CAAMP website, it takes three satisfied parties to make one completed mortgage transaction through a broker -, the borrower, the lender, and the broker.
    Our industry’s failure to correctly identify our duty of care to our lenders means that there tends to be some distortion in how we characterize our function to our borrower clients.
    Statements like “We work for you, not the banks”, or “Our services are free” are misleading at best and arise from the simple fact that most brokers don’t really think of the banks as their clients, and yet these are the clients that most often directly pay the commissions and broker fees to the broker.
    In the long run this failure to adequately understand, and therefore properly disclose our relationship with the lenders, will, if not corrected by the industry over time, lead to the continued erosion of confidence in our professional ethics by the public and regulators.
    It shouldn’t be necessary for the regulators to tell us to disclose the nature of our relationship, and how we are paid, to our borrowers, just as we are expected, justifiably, to disclose any conflict of interest where we have prior relationship with a borrower to a lender.

  5. With all due respect Don, Lenders think they’re God. They are not the customer. Yes we as brokers owe them a duty of care to send in accurate applications that close, but that’s all we owe them.

  6. Interesting comments from both Donald Wilson and Frank. To a degree both valid opinions but what does Frank have to offer his client’s when the “Lender known as God” doesn’t see any value in dealing with a mortgage broker. Is Frank still in the mortgage broker business if no lenders offer their products to him? The credit crisis has fast forwarded the need to bring efficiency of their broker partner to the top of their priority list in 2010. Lenders are drilling down to their respective bottom lines and determining which relationships are going to make them profitable and more efficient. “Accurate applications that close..” is a very good start but it may not be enough as we evolve the next few years. They say, “he who holds the gold makes the rules”. Don’t disrespect the lender partner that has paid you handsomely for possibly renting your client for five years.:) Have a great weekend and season’s greetings.

  7. Well said Vince, as I agree with Frank, and want to warn felow brokers to beware the sheep in percieved devils clothing. Yes I said it backwards, because as Vince said, in order to stay in business as a broker, we need the lenders to offer us products and programs to potentially place our clients into.

  8. Thanks for the great feedback everyone.
    Brokers do need to be cognizant of how competitive it’s become for lenders. If you’re a broker who repeatedly sends up deals without confirming guidelines, or leaves pertinent information off an application, or cancels applications excessively, then you are going to be (and deserve to be) shut out of a lender’s approved broker list.
    Conversely, good broker business is still sufficiently profitable for lenders. If you’re an honest broker who plays by the rules, doesn’t sap a lender’s resouces, and sends up good deals, then lenders should appreciate the business.
    A big question seems to be the expectations that lenders place on good brokers. Shutting out quality brokers because they don’t send up enough volume is a real industry concern, as Boris Bozic stated. It may be in the lender’s short-term interests, but long-term it could have several deleterious side effects (to brokers, to lenders, and to the industry at large).
    Perhaps we need to explore that topic more…
    Cheers for now,
    Rob

  9. Rob, I don’t think lenders do appreciate the business. Too many lenders think they are doing us a favour with their “service” and uncompetitive rates.
    I love it when lenders cry about efficiencies and then it takes them 4 days to get us an approval. Apparently the BROKER’S efficiency doesn’t matter. It’s all about the lender.
    Sorry. I just don’t buy the double standard. If lender’s aren’t happy in the channel, get the heck out and stop complaining already.
    I’m not scared to work for a bank if I have to.

  10. Rob, thank you so much for all the useful information! I’m glad to see that I’m doing exactly what Vince and Peter recommend. Persistence is virtue and I learned very early on that competing for rates is a waste of time. Focus on service and become an expert on areas where bank originators can’t hold a candle.

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