Threats to the status quo are forcing mortgage professionals to re-evaluate their business methods. That’s the general theme of two recent webinars hosted by industry trainer Greg Williamson.
Williamson interviewed two mortgage executives in the past week:
- Paul Grewal, President, Street Capital
- Gary Mauris, President, Dominion Lending Centres
Here are quotes from those individuals that mortgage players may find noteworthy…
Paul Grewal
“It’s going to require a significant amount of investment” to show the public “what we do (as mortgage brokers)…Mortgage brokers don’t just sell interest rate.”- 82% of a broker’s business comes from referrals, according to Maritz.
- “Mortgage brokers haven’t been effective at renewing customers…Most lenders have the flexibility of lowering the rate and keeping that customer.”
- “The last thing I want to see is lenders exiting the channel” because “it sends the wrong message to consumers” and hurts funding availability.
- Rate buydowns are nothing new. “There were times (10 years ago) when mortgage brokers had to buy down rates to compete with the bank…(Going forward) we don’t want to see that frequency increase, but it’s a reality.”
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BMO’s 2.99% 5-year fixed promotion was “unsustainable…I think we’re going to see some continuing pricing discipline” with fixed-rate mortgages.”
Gary Mauris
Threats to the broker channel include: Lenders leaving the channel, aggressive price wars, and growing mortgage sales forces. But “one of the biggest ones” is a lack of consumer awareness of broker value.- For brokers “to put their heads in the sand” (on these issues) is “absolutely foolish.”
- “We (brokers) have to be as aggressive (on retention) as the banks are.”
- “I think we have to support our trailer fee lenders.”
- “We have to get away from the transactional conversation, ’What is your best rate?’”
- “When someone is saying ‘What is your best rate?’ they’re usually asking that because they don’t know what else to ask.”
- To overcome consumer objections “We (as brokers) have to dollarize the difference” that 10, 15 or 20 bps has on the average mortgage…”
- “I don’t think (FirstLine’s recent decisions) send a good message. That doesn’t say to us that they’re committed to our channel, and that’s a concern for me.” [Gary referred especially to the decision by CIBC to grant stated income products only to their retail sales forces.]
- Some good news: There are two new broker lenders coming down the pipe “that are both going to be active inside of the next 60 days.”
- “I don’t think that (banks) want to be involved in that race to the loser’s circle” by continually competing long term…at 15, 20, 25…basis points below what (the broker) channel has available.”
- “Do I think that the (banks) will…go to the lowest rate to attract Canadians? Not a chance.”
- “Expertise has value…When you cut commission to drop the rate to be competitive, I think the consumer looks at you and I think you lose credibility.”
- “I don’t think that our business is going to be commoditized…to a point where it’s going to drastically affect us long term.”
- “Typically when (customers) are speaking to you, they’re speaking to another broker and another banker—so (brokers) have to be better than two other people.”
Williamson
“The old (broker sales) pitch is just not going to work as the banks get more competitive.”- Brokers shouldn’t compete “rate-to-rate,” they should compete “strategy to no strategy.” The (employees) in the (bank’s) mobile sales forces don’t have strategies. They just product push and fill out applications and sell rate.”
- “If we start sending the message to lenders that we’re prepared to work cheaper…they’ll bring more cheap-rate / cheap-commission products…and that’s not good because then more and more (brokers) will get sucked into that vortex.
Webinar Source: 180 Degrees Coaching Inc.
Rob McLister, CMT
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Last modified: April 26, 2017
Good luck accessing cheap capital without a AAA rating backed by a printing press. The current issue isn’t about a couple basis point spread, rather a creditors’ guarantee in the event of a bank’s default (yes it’s being discussed). Canada has no protective legislation for creditors; this dilemma has been discouraging private and pension funding for years; last year Canadian banks accessed the majority of capital in the U.S, while headlines like below doesn’t make the situation better.
S&P Cuts Mortgage Insurers’ Ratings As It Predicts More Losses http://tinyurl.com/7bna7rn
The market is tightening. Get used to it.
Great article Rob as the Webinars were outstanding and definitely deserved published attention. We are very lucky to have professionals like Greg Williamson who are active in the mortgage industry and bring to light very relevant information that affects off of us in the Canadian Mortgage Industry.
DOW JONES NEWSWIRES
“Standard & Poor’s downgraded the credit ratings of several U.S. mortgage insurers…”
What does this have to do with Canada?
CW: Your posts are increasingly irrational and irrelevant. Go back to “Gart Squirmer’s” site where fear-mongering and mindless ramblings are encouraged.
Where do you think capital funding is coming from App? Global pension funds is a $28 trillion dollar industry managed by the best money managers in the world.
Firstly, these guys ain’t stupid, and when they see Genworth’s US rating downgraded to B, or 5 levels into junk territory, along with Canada’s unemployment rate rising, economy contracting and household debt-to-income at 153%, they have every reason to pull the plug and demand legislative guarantees, because not like you (who only thinks months ahead), they’re thinking a decades down the road. Secondly, many pension funds are not even allowed to hold investments lower then AAA.
You’re having a hard time facing it App and showing great denial. Be a man, do your homework and carry on. It’s just business, so don’t get emotional.
And just to add (since you’ve always accused my arguments as irrational and irrelevant), I don’t post all the information I obtain, but this time I’ll give you a public lead for your homework. Read it all.
http://www.otpp.com/wps/wcm/connect/otpp_en/home/newsroom/news+releases/2011/scoc-national-securities-regulator
And with the exit of domestic capital into emerging economies, leaves the BoC as the bond buyer of last resort, a policy decision that will result in further uncertainty and a potential sovereign downgrade like we are seeing in Europe now. Are they willing to accommodate the mortgage industry with the risk of Canada’s downgrade? Or will they choose to tighten lending with the risk of a housing crises?
The situation is a double-edged sword, and if you’re a creditor with billions on the line, your first priority is to secure your investment for any outcome. No guarantees, no further lending.
“I don’t think that our business is going to be commoditized”
To me, this is exactly where the mortgage industry is headed. Most products are the same, similar pre-payments, portabliity, assumablity, most mortgage has the same “bells and whistles” that is why rate is so important. It is becoming more and more of a commodity, I dont see that changing.
I agree, very good advice. The bottom line is even veteran brokers would have to adjust going forward. But the key to success, I think, is focusing on niche markets and becoming specialized in your field. Once you do that then the price point becomes much less relevant because your clients see you as a partner to their success. In contrast, if you’re merely competing in an environment where thousands of other mortgage agents/specialists are competing for the same audience, your strategic importance become diluted and the vast availability of mortgage providers available means that your clients are far more likely to contact you as part of their “shopping” routine as opposed to actually being interested in working with you because of the services you provide. The value proposition in quite weak. This is where brokers have a HUGE advantage over bank representatives because there’s no limit (aside from your knowledge, of course) as to what kind of business you can actually do. The opportunity to differentiate yourself through the broker channel is much better than working for a retail bank. It’s no coincidence that a lot of mortgage advisers who start working at a bank eventually move to the independent channel. It’s not just the better compensation but also the freedom to pursue a whole bunch of different avenues. Brokers who are competing for rates and focusing only on triple-A business would have a hard time retaining customers. And the statistics are already pretty ugly. According to Will Dunning’s CAAMP report back in May, banks are renewing customers at 60% while brokers are achieving less than 20%.
Just wanted to commend Rob for allowing the bears room on this blog.
Many hosts would not be as gracious given the nature and target audience, so thank you, Rob.
Thanks Dizzle, We try to avoid the censor button, especially when differing or critical views are presented respectfully and factually. Cheers…
Mortgages may become commoditized but truly expert advice will never be.
I believe Gary Mauris said it best – “Expertise has value” – in today’s competitive market, mortgage brokers must stay on top of their game and be experts in the field. With knowledge comes credibility – with credibility comes value. With an expert, knowledgable mortgage broker, consumers can feel confident that they have the best terms and rates for their needs, no matter what rates other banks and brokers offer.
Most of the things these two people are saying is true but they’re missing one big fact.
Who controls the real estate transaction? Realtors do. If you look at the big banks such as RBC, they agressively target realtors, and realtors respond. WHY? because RBC gives them power or sale listings, and free advertising on inside bank location. I know a certain real estate firm that has to have RBC agents in their sales meetings at least 4 times a year. If we brokers want to change this business, stop looking at what other brokers are doing, and start looking at banks are doing, and by attracting realtors, realtors will refer you and you’ll grow the broker channel.