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FirstLine Points Still Up in the Air

firstlineAs the wind-down nears for former #1 broker lender FirstLine, brokers are still without an answer on the fate of their POINTS and basisPOINTS accounts.

POINTS and basisPOINTS are incentives that FirstLine pays brokers for sending business. The former can be cashed in for travel, merchandise or gift cards while the latter are typically used to buy down interest rates, offer cash back or extending rate holds.

The clock is ticking for FirstLine brokers. FirstLine’s last day in the industry is just 26 days away—July 31, 2012. (See: FirstLine to Shut Down) Brokers must decide to either use their points or face the uncertainty of whether they’ll receive a payout for them

Some brokers have been accumulating these incentives for years. Prior to CIBC’s FirstLine sale announcement, some top brokers reportedly had over a million basisPOINTS.

CIBC, which owns FirstLine, has not yet said how, or even if, it will compensate brokers who have outstanding points. Roughly $10 to $20 million worth of POINTS/basisPOINTS are still outstanding, according to a source at the company.

That source tells us an announcement was expected more than 10 days ago.

We asked CIBC for an update today, and this is what a spokesperson told us:

As we announced, FirstLine Mortgages will no longer be accepting new mortgage applications as of July 31, 2012. The team is now working on the various activities related to this decision, including the POINTS and basisPOINTS programs. More information will be provided later this month.

The fear among brokers is that CIBC, which has burned bridges with them, will have no goodwill incentive to honour points. Nor are they required to by contract, based on our understanding.

CIBC values its reputation, however. So we’d be surprised if it risked that reputation and left POINTS-holders completely in the lurch. (That’s not to say that any payout offer would be attractive.)

FirstLine-mortgagesGiven the uncertainty, many brokers have decided not to take chances. They’ve been redeeming POINTS as fast as they can.

It’s the basisPOINTS where some brokers still have large balances. CIBC has intentionally set FirstLine’s interest rates well above the market (e.g.  3.64% for a 5-year fixed). That makes it extremely unattractive to use up basisPOINTS for rate buydowns.

The best solution for those with big basisPOINTs balances may be to convert them into marketing dollars. These can be spent on newspaper ads, radio ads, online ads, brochures, signage and so on.

To do that, you need to be a Gold status broker or higher and submit a third-party marketing related invoice to FirstLine (with the vendor’s HST number on it). Brokers should talk to their regional business manager for more details, but hurry. We hear many or all FirstLine RBMs are being let go as of July 24.

Rob McLister, CMT