After a long and successful tenure at mortgage lender, MCAP, Bryan Devries took a big leap over to the broker side of the business.
In November, Bryan was named Executive Vice President, Sales and Operations, at Invis and Mortgage Intelligence.
We recently caught up with Bryan to chat about lenders, banks, and brokers.
I understand that lenders want the borrower to stay with them for the whole term but why should this be put on the broker? If a client wishes to refinance early and leave for a better deal, the lender should not hold that against the broker.
Yeah, that was the part of the interview that threw me off as well.
If lenders are dead set on ensuring that borrowers stay with them for the entire term, why not include larger break fees in the contract language? If you give the borrower the option to opt out when they can access better terms elsewhere, you shouldn’t really be surprised when a certain percentage do so.
And you certainly shouldn’t hold it against brokers, who have a duty of service towards their clients.
Al R
Hi Al & Christopher,
Being a broker, we get paid by the lender based on the client staying for the full term.
In reality, however, lenders know a percentage of clients will leave early. In fact, 5-year fixed clients break or refi every 3.5 years on average.
I think we have three duties as brokers in this respect:
1. We have a duty to advise the client not to break their mortgage unless it is clearly beneficial for the client to do so.
2. If the customer wishes to break or refi, we have a duty to advise the client to go back to their existing lender to get its best offer.
3. We then have an obligation to find the client the best offer at another lender for comparison purposes.
Then it’s our job to let the customer make the decision based on facts, with no pressure either way.
Just my personal view of things…
Cheers,
Rob
Hi Rob – that seems fair, and I think it’s only proper to give your current lender a chance to put their best offer on the table if you’re thinking of refinancing or breaking.
As a consumer, I honestly wouldn’t have an issue with lenders having larger break fees that more accurately reflect foregone profits. It’s a bit surprising to me that the average length of a 5 year fixed is 3.5 yrs, but I guess it shouldn’t be. Perhaps if break fees had more teeth, and people understood them up front, they would be more careful about choosing appropriate terms instead of reflexively going with a 5 year.
Al R
Hey Rob
I took time to go over your post and I wanted to say I agree, but as I went on I found I don’t at all. We owe nothing to the lenders that we place our mortgages with; we owe everything to the client. The client comes to us so that we can help them with goals for their mortgage financing. If you as their broker can reduce the balance of the mortgage in the same remaining time of the term at no cost to the client then you should be advising them to switch.
Cheers Walter
Hi Walter,
Thanks for the feedback.
I’ll elaborate a bit and hopefully my reasoning becomes apparent.
I’m in 100% agreement that brokers owe our primary allegiance to the client. As you can infer from my comment above, if we can save the client a material amount of money by moving them, we owe it to the client to advise them of this option. By “material,” I don’t mean saving them $50 so we can get paid again on the deal.
By taking them back to their existing lender, it provides the client a chance to get the same deal that we can get them elsewhere, and save all the hassle, application process, and time of moving. That is why it’s in the clients best interests to at least give their existing lender a chance.
Cheers,
Rob
Rob,
DO you mean to say that as a broker, you advise the client to return to their existing lender – but on their own? Or with your help?
I doubt you like working for free, or mere pittance as top-ups pay very little.
Thx
Jake
Hi Jake,
If the lender allows the broker to be involved then we assist ourselves. Otherwise, the client can call servicing directly.
A mortgage planner’s service shouldn’t end at closing, and shouldn’t always be contingent on compensation. We get paid well enough at funding, such that we can allocate resources for servicing post-close.
Much of the time we’re not compensated for bringing a client back to their lender, but if that lender has the best overall solution, how can it be ignored?
It’s no different from when a broker refers a client to a non-broker lender and doesn’t get paid. If a mortgage planner is aware of a better deal outside the channel, I think we have a responsibility to present it regardless of compensation. You might lose 10% of your deals, but doing the best thing for your clients always pays in the long-run.
Cheers,
Rob
Rob, fully agree when you say “if the lender has the best overall solution”.. 100%. So many times I’ve talked clients OUT OF jumping off the bridge when they found out penalties, calculated numbers and showed them why staying was the course of action while they were stuck on rate rate rate.
Nice conversation, and an excellent site. Much appreciated :)
Jake