MCAP Initiative Aimed At Banks

MCAP-MortgageMCAP launched a new campaign today designed to take market share from the banks.

Effective immediately, MCAP pays brokers a small bonus when they move an existing Big 5 bank mortgage to MCAP. Mortgages under this promotion must fund with MCAP by June 30, 2011.

In a letter to brokers, MCAP Service Corporation President, Ron Swift, said:

Ron-SwiftWe are taking the lead by launching the first of what we hope will be many initiatives aimed at growing mortgage broker market share…And we invite other lenders to join forces with us to support the mortgage broker channel and increase market share by targeting customers currently using the banks and other non-broker channels.

Roughly 1 in 4 mortgages are originated by mortgage brokers.  But, banks have a huge edge (i.e. high retention rate) with renewals and refinances.

MCAP also notes that mortgage growth is slowing overall. As a result, it says some brokers have been “taking deals from one monoline lender to another,” which “has a negative impact on the monoline lenders who support the mortgage broker industry.”

MCAP adds: “We need to be focused on increasing our market share by taking business from lenders who do not support the mortgage broker channel.”

From the purely objective standpoint of promoting competition, it’s great to see a non-bank lender rallying the industry against the banks and putting some money where its mouth is. Banks’ retail divisions want to cut our throats, and our industry needs to battle back in a more unified fashion.

On the other hand, brokers must still keep the client’s interests at the forefront. If that means moving a customer from a non-bank to a bank with materially better terms, so be it.


Rob McLister, CMT

  1. Being a broker I’m happy to get paid more, but 5bp won’t influence my decision where to send a deal. The best way to build market share is to offer better rates and products. My customers reward me with their business because I’m loyal to them, not to a lender.

  2. A little surprise by the lack of comments given the significance here – the reality is the broker market share needs to grow if you want to continue to service your clients and someone has put their hand up with an opinion on how to gain market share. Yet, the response remains muted.
    Why is that?

  3. Maybe it’s because a 5 basis pt finders fee seems insignificant to effect change. People might think this is just a marketing play.

  4. The only way to gain market share is to differentiate yourself from the banks and unfortunately a lot of brokers aren’t pursuing this strategy.
    Even brokers who currently have a constant stream of clients will find that retention would become increasingly difficult as the banks aggressively move towards the financial planning segment which is a sector that provides a lot of referrals to mortgage brokers.
    The recent acquisition of one of the leading independent investment firms, Dundee Wealth, by Scotiabank is a reminder that banks are continuing their expansion into segments that have worked with the broker channel with many years. Just as National Bank bought Altamira, another independent firm, 8 years ago and only last year fully integrated it into National Bank, brokers need to understand that heading forward, the usual taglines of doing business, the 50 different lenders to choose from, the fact that we don’t work directly for any lender, etc. etc. will not be sufficient to sustain and attract new clients. You will have to offer something ‘else’ beyond mortgages if you want to keep clients and you will not be able to compete with the deep pockets, brand recognition, and cross branding of the big banks unless you adapt ahead of time.
    The days when brokers can compete on rates are long gone. But the good news is that the compensation paid to brokers increased steadily and so has the recognition by lenders that brokers provide a valuable service. This should give brokers enough of an incentive to think outside the box.

  5. I don’t think this would happen. Although some brokers/brokerages are already doing this, it’s not a good strategy because banks these days will match the best broker rates. Ultimately there has to be the added value element if you want to keep clients.
    If anything, for the past two years I have seen the compensation increasing instead of decreasing. The competition among lenders will keep the pay competitive.
    With that said, I think that lenders would continue to put greater emphasis on status tiers as well as reward quality over quantity (commit-to-fund ratio).

  6. MCAP is generally a good supporter of brokers, while providing excellent service to our clients, with a good range of products. I applaud their efforts, but would prefer a “token” fee for assisting in the renewals of my clients with their company. Over the years I have given up lots of dollars, simply negotiating favourable renewal terms for my clients to stay with MCAP, when I could have walked them across the street, and earned a new, full commission. I would certainly have “won”, but at the expense of my clients (having to provide the whole gamut of paperwork over again). By my NOT switching them, I have helped MCAP (and yes, ultimately helped myself with my clients who refer more clients because of my perceived constant attention to their needs). So, I for one, would be happier to refer a lot more “Bank” and non Bank deals to MCAP for a “token” renewal fee, rather than the 5 basis points initiating fee up front, and then everybody wins, including our clients. But any lender who helps to recognize and reward my ( and other broker) efforts, while providing excellence to my clients, should be applauded.

  7. At renewal, I tell my clients the rate their existing lender is offering on new business. I then suggest they call that lender to see if it will beat that rate. If the lender won’t budge and I can find the client something better elsewhere, I inform the client.
    That is all the loyalty a broker owes a lender. A tiny finders fee is meaningless. The only thing that matters is what saves my clients the most money. It is the lender’s responsibility to offer the best deal. If they refuse, they should lose the client. It’s that simple.

  8. I wasn’t talking about lower rates elsewhere- SIMPLY having MCAP offer the best rates to my clients, and YES I do negotiate those rates for them.
    Certainly where lower rates are elsewhere, and not matched by an existing lender, our clients have an opportunity to move. But if I help them stay, I would like to get compensated, otherwise it leads to what many brokers aim for “churning”. That ultimately doesn’t help my clients, and doesn’t help my lender partners and doesn’t make credible our services with the consumer.

  9. “Churning” and “lender partners” are overused terms in the mortgage business. My ONLY partner is my customer. Moving my client to get them a better mortgage elsewhere is not churning. If my client wants to move and they save good money doing so, it is in their best interests.

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