Pacific Mortgage Group Plans 100% Payout Model

Mortgage-ArchitectsUp to 100% commission payout with no monthly charges or advertising fees. That’s what Pacific Mortgage Group Inc. (Pacific) will offer mortgage brokers.

Pacific is the parent of Mortgage Architects and MyNext Mortgage (soon to be “Radius Financial”).

“It’s a first in the industry,” says Meini Ickert, SVP of National Sales with Mortgage Architects.

The “catch”? Brokers must be Mortgage Architects franchisees and send up to 30% of their volume to MyNext Mortgage, the company’s exclusive lender. Here’s the full release with a complete breakdown of split levels.

“Our brokers are the only ones in the industry that have their own CMHC approved proprietary lender,” said Alex Haditaghi, Pacific’s CEO. Haditaghi wants to funnel volume to that lender by using 96-100% splits as a loss leader strategy. That’s because lending margins are notably better than mortgage brokerage margins—which are getting tighter all the time.

Here’s a complete rundown of Pacific’s new broker offerings.

If MyNext Mortgage offers exceptional value to clients (via outstanding rates, service, and features), it’s a unique strategy that could be effective. MyNext mortgages pay trailer fees as well, so that’s another bonus to brokers.

Robert McLister, CMT

  1. this is not keeping the client in mind. Sending business to a lender just to get paid more is very unethical!

  2. Don’t be so hasty in your judgment. MyNext has great rates with large prepayment privileges, the best service in the business and fast turnaround. If that is not in the clients best interests then I don’t know what is. It is not uncommon for brokers to send 50% of their business to one lender. 30% is very reasonable and trailers ensure the broker is paid for servicing the client long term.

  3. This for me is unfortunately where the “independant” mortgage brokers sales pitch implodes. If half of the business is being directed to any one lender, there is nothing “independant” about that mortgage brokers service. Period!

  4. The role of our mortgage planners is to find the best mortgage product that fits our customer’s specific financial situation. With all things being equal (rates, product features, service etc), we then look at compensation. Mortgage Architects is affiliated with myNext from day one but we never have any problems in supporting all major lenders on a level playing field. Feel free to ask our top 10 lenders.
    The mortgage planners who belong to Mortgage Architects are carefully selected; they are chosen for their reputation as well as the breadth and depth of their experience in the industry.

  5. Hi Chris: You are absolutely right that routing volume based on compensation is unethical. For that reason, MyNext’s product offerings will have to be exceptional for this strategy to have merit. And they may well be…MyNext now, for example, has more aggregators than most lenders (i.e. five separate funding sources), with the goal of delivering consistent below-market pricing.
    Hi Banker: It would be interesting to know the average percentage of volume routed to the typical broker’s top lender. I don’t know the number, but informal discussions with brokers suggest it ranges from 25% to 50%. Most brokers tend to use 3-5 lenders most often, and send elsewhere primarily for niche deals, or when a non-core lender is offering a special rate promo.
    By the way, this is a question customers should ask when choosing a broker. Your broker should be able to justify why they route to the lenders they do. Similarly, folks should ask mortgage specialists who send 100% of their volume to one bank, specifically why their product is so superior to the dozens of other lenders.
    The most common answers made by those who route considerable volume to one lender are:
    1. Superior volume-based pricing
    2. Ability to know their products better
    3. Better service and faster turnaround
    4. Common-sense underwriting exceptions when appropriate
    Many argue these are good reasons to use fewer lenders. Others may differ. In the end, the client must decide on two far more important questions:
    1) Is the broker highly knowledgeable (such that their advice could save you much more than a small difference in rate)
    2) Does the broker care and have your best interests at heart (Are they sincere? Do you like working with them? Do they quote rates competitive with 3rd-party rate aggregator sites, like the Globe & Mail, Ratehub, etc. Without question, you’ll save the most money by dealing with a mortgage professional that truly cares about you as a person, and not just a customer.)

  6. HI Rob. Great points as always however I would like to add something in.
    I agree with ALice’s comment earlier that Mortgage Architect agents are all high end and are a cut above the rest however here is my comment.
    Many brokers do not deal with TD or Scotia for the simple fact the have mobile specialists going after the same business they are and this theory gets no arguement from me. However I find it strange tha tthose we often have this feeling will then go ahead and use their “white lable” product that the firm has the access to. So you do not want to use someone in competition with you however you will use someone that your parent company is in competition with?
    Maybe I am not explaining it very well however if 30% goes to My Next it cuts into the true broker lender results such as First National MCAP etc.

  7. well Mynext is not a white label Mortgage product like DLC, Verico,…
    Mynext is actualy a CMHC/Genworth approved mortgage lender. I have been told their rates and service is also very good!
    Most Brokers do use 3-4 lenders anyway, with the primary lender getting 40-50% of the chunk. in soem instances that number can reach as much as 80%.
    How can the broker lose here? great rates, good service,100% commisions and also the trailer fee?
    This is smart move on their part.

  8. based on these posts, isn’t it a little disingenuous that I see all these brokers advertise that they deal with over 40-50 lenders?

  9. Not at all. Brokers work predominantly with a half dozen lenders but they can also send deals to any other lender when warranted.

  10. Well said and agreed. I used to be with MA and can attest to the fact that brokers are carefuly selected to join MA and that MyNext has some great offerings for clients. I was also with HLC and having to send a large percent of my business to their in house lenders is what made me leave. I like being able to choose my top lenders based on the top 4 beneftits you point out.
    It sounds like an interesting strategy and I’m very interested to see the success.
    All the best!

  11. @M Hatch – so in actuality a broker is offering the best rate amongst 6 lenders? They are not shopping rate to the 40 they allude to in ads, correct? And this is practiced because the more volume they send to a specific lender earns them higher pay, ya? Does this then translate to a lower rate to consumer in the end, or same if they called the lender direct- actually maybe lower C2B, as the middle man is cut out no?

  12. I think that’s what differentiates the good brokers. The first broker I visited presented us with the five-year fixed rate from a single lender and no other options. When I had to push him to check other terms and other lenders, all I got were rates from the same lender.
    So we moved on and my next broker was much more thorough, presenting an option for each term (incl 10 yrs) from a variety of different lenders.

  13. As a broker I offer the best rate available from all 40 lenders to my clients… as do all the brokers I know and work with. Usually 5-8 lenders are offering the best “rate”, and get most of the AAA business. The other 35 lender are offering products to higher risk clients, at higher rates. This allows us brokers to get you the best rate available to you and get the deal approved when most banks would say “no”.
    As for brokers making more money by sending more deals to a handful of lenders… not really. We may get a bonus for sending more business BUT not nearly enough to consider betraying the trust of our clients (a reputation is worth more than a couple hundred dollars). More importantly, by establishing a strong relationship with particual lenders and underwriters, we can save you (the consumer) more money by getting “preffered rates” from high vollume lenders AND get more exceptions to underwriting guidelines to improve your chance of getting approved and save you time with paperwork.
    As for cutting out the middle man; that is up to you. But, brokers have billions in company “buying power”, relationships with lenders and underwriters; and product knowledge. Many of us do more mortgages in a week or two than most people do in a lifetime.
    We offer the best rates, option, unbias advice and experience… without charging our clients a cent*

  14. In refernce to using a white label product or a lender tied to your brokerage company… if the product is competative, and happens to be the best product for your client- GREAT.
    If the broker recieves more compensation for using this product, this allows him/her the ability to pass the savings on to the client via “free legal”, “free appraisal” or a little extra cash for when you move in.
    Most brokers will not take something for nothing; they will ensure their client is recieving a benefit for working with them… or they will not likely last in this business.
    I am not sure if I agree with have a “required” funding percentage… but if they keep the product extremely competative, I suppose it could work.

  15. A Mortgage Broker chooses a lender for different reasons, such as:
    a) Rates
    b) Service
    c) Products and features of the mortgages (Prepayments, double up privileges, penalties…)
    d) Points (the more you use a specific lender, the more points you earn, its easier for you to get lower rates for your clients!)
    e) Everything being equal then commission do play a role.
    Most lenders pay the same amount of money to the brokers anyway. In today’s market place with Banks, Internet and 17,000 brokers out there competing for the same business, it’s very hard for a broker to get away with higher rates and bad products.
    Also most people don’t realize that “Rate” is not everything. Sometimes you may get a mortgage that is 10 Basis point cheaper but it will cost you in a long run. It’s not always about a rate. A good broker should be able to save his clients much more then $200 per year!

  16. Consumer101,
    You are incorrect. As was stated by others here, brokers compare rates and terms at all lenders. We have technology that makes that very easy to do. It just happens that the majority of the time, our volume relationships with certain lenders mean that those lenders will have the best available terms for the client.
    Earning higher pay is irrelevant because lenders generally pay the same and because competition demands that we deliver the best possible pricing and service to clients. Remember, we live or die based on referrals.

  17. Similarly, folks should ask mortgage brokers who send a % of their volume to a ‘white label’, specifically why their product is so superior to the dozens of other lenders. I wonder if besides the rate, they’ll learn about the payouts, or of the increased risk of not being able to renew their mortgage with their chosen lender.

  18. There has never been a white labeler go out of business, as far as I know. Anyone with the capability to white label mortgages has to be financially sound. It takes substantial resources to support these programs.
    By the way, MyNext is not a white label product. It is a standalone lender.
    I think the risk you mention is almost nil. The only ‘A’ lenders I can remember going defunct are Abode and Xceed. Canadiana is now renewing Abode mortgages and I believe Xceed or its successor will renew its customers. There should be no effect on their customers.
    Lastly, any good broker stands behind their recommendations. If I put someone with a lender and that lender wasn’t available at renewal, I’d simply pay my client’s refinance costs to switch.

  19. I think this is a very smart move on their part. The latest word on the street is that they are also looking to buy Invis/MI.
    That will be very interesting.
    As an indep I would never consider joining any big brokerage, but this company is doing many things right.

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