Competition Intensifies Between D+H & Marlborough Stirling

DnH_MSDavis and Henderson (D+H) has long dominated mortgage origination technology in the broker market. Estimates of D+H’s market share put it north of 90%. But now, its scrappy competitor Marlborough Stirling is attacking D+H where it hurts: price.

Currently, lenders subsidize the software that brokers use to submit applications. Up till now, lenders have reportedly paid 5.5-6.5 basis points or more to receive mortgage applications from brokers over D+H’s and Marlborough Stirling’s systems. (That’s at least $110 on a $200,000 mortgage.)

Now, Marlborough Stirling president and CEO Tim Brown says his company has launched a brand new pricing structure. It is a “move away from the standard basis points (model) on funded loan amounts.”

For confidentiality reasons, Brown couldn’t provide details on how or how much Marlborough Stirling is undercutting D+H. But we got reactions from the broker industry’s two biggest lenders who just switched to the new model: Scotiabank (Scotia Mortgage Authority) and First National. (Both Scotiabank and First National will still remain D+H customers as well.)

profitability-analysisJim Smith, vice president of Scotia Mortgage Authority called Marlborough’s cost reduction “significant.” He says broker origination technology is a “7-figure cost for a large operation.”

“Anytime you make a meaningful cost reduction in a channel, it makes that channel a lot more sustainable. Everyone speaks of the concern about losing…balance sheet lenders. We’re very pleased that we’ve been able to be committed to the channel, and this makes it a little easier to be committed to the [broker market] when you see costs in that channel come down.”

First National’s vice president of residential mortgages, Scott Mackenzie, agrees. “It gets down to economics. We were approached by Marlborough Stirling and [its proposal] clearly reduced the cost of receiving deals from brokers.”

First National, a publicly traded company, has “been under pressure to reduce costs this year,” adds Mackenzie. “There will be a material improvement in costs if brokers sign up with MorWEB.”

MorWEB is Marlborough’s mortgage origination software. The big question now becomes, will brokers move over to that platform in any significant number?

MorWEB’s Achilles heel is lack of connectivity to all lenders. Brokers don’t want to use two systems. If Marlborough is able to sign up the big lenders it’s missing (e.g., TD and National Bank), MorWEB would be significantly more attractive to brokers, many of whom seem to prefer its user interface over D+H’s “Expert” platform. (Brown says Marlborough is making progress with the lenders it’s not doing business with currently.)

ReliabilityCost cutting wasn’t the only reason Scotia and First National entered into new long-term deals with Marlborough. Reliability is the other story. Broker origination software is mission critical and outages can cost millions in lost revenue per day. This year we’ve seen D+H’s downtime, while very infrequent, tarnish its image somewhat. (An example.)

Smith says, “We’ve always been impressed with their (Marlborough Stirling’s) reliability record. (Given events over) this past year, in particular, the industry is going to be attracted to that.”

Marlborough Stirling claims that it has gone eight years without any downtime (we couldn’t verify this). To be fair, however, Marlborough has never had to deal with volumes as big as D+H’s, and the technology strain that goes along with that.

To this, Brown says that his company has “scale tested” to ensure it can handle “100% of the market at any time.” He also adds that Marlborough has full backup and auto-recovery, whereas D+H’s backup systems have been called into question.

“This creates competition in the industry,” says Smith. “For the past several years, even though Marlborough Stirling has been involved in the industry, it’s been debatable whether it was in a meaningful way…I think what they’re doing now will probably [trigger] heightened competition.”

Smith adds, “…The bank likes to have multiple sources for supply. It’s just a good thing from a risk standpoint…”

All in all, competition certainly benefits everyone in our business (except perhaps D+H). It spurs innovation, lowers costs and encourages better customer service.

“Hopefully this will add to the sustainability of the broker channel,” says Mackenzie. “Anything we can do to reduce costs in the channel will help the whole industry.”


Rob McLister, CMT

  1. I am liking it as I am already a MorWEB user. With greater acceptance within both the Broker and lender community, I am sure there will be more good things coming out of this for both lenders and brokers.

  2. I was a huge fan of the LSS platform and was sad to see it go. It was a lot more user friendly than Expert and you could easily track your deals. We didnt have any choice but to go with Expert. Supposedly MorWeb is similar to the LSS system and users are very happy with it. I would be open to this option if my company offered it especially if it is saving our broker supporting lenders money.

  3. Davis and Henderson DH is on the TSE in the $20 range with a $1.24 annualized dividend making it a yield of 6%

  4. Our preferred base is Morweb by far for reasons of speed, no down time and user friendly with storage of documents (free) and we can email to the lenders \lawyers etc direct from the platform.
    In an atmosphere where cost cutting is being passed down to the broker I think it is time to go with Morweb who seems to get it that without supporting brokers there will be no market. Brokers create competition so diminishing their market share sets the Canadian public in jeopardy of losing the power they have gained by having choice. Thanks for your support Morweb. Suzanne

  5. Suzanne, while I can’t speak to the Morweb platform as my only experience with it is a few webinars sessions. It could very well be a much better system. Expert does have those same capabilities however. Document storage can happen by way of faxing completed files to a toll free number and it is then documented straight to the file or you can upload specific documents to their appropriate location within the stored file. From there it is very easy to email or fax directly to the lender of your choice.
    I like competition too and will look into Morweb in more detail once more lenders are on board, but in the mean time I wanted to share this information with you. It may be worth a call to your Expert Rep.

  6. I have been using Morweb for 3 years now and will never go back to using Filogix unless I have to. There are only a few lenders not on Morweb who simply rarely get our business because of their self inflicted restrictions. In the event I must use that lender, I dust off the cob webs and fire up Filogix.
    Customer services with Morweb squashes that of it’s competitor and the system works so much better.
    Personally, it would be nice to see both platforms with equal share pushing each to be competitive inevitably creating a better product for our industry.
    Just my thoughts.

  7. Rob,
    This article has got me wondering how meaningful these market share numbers really are?
    My First thought is that D&H’s 90% market share is based upon the total number of Expert log-In’s issued vs the Total number of registered mortgage professionals. If that is the case, we know that our industry lends itself to that old “60/40 rule” where the bulk of the business is done by 40% of the participants. Following that thought process, D&H’s money is made from something like 36% of all registered mortgage professionals based on mortgage $ volumes, but still having to cover the overhead to support 90% of all registered mortgage professionals. Hopefully that is not a significant figure, because if it were, I bet Kevin O’Leary would be quick to find a solution and I hear he may have some free time between Nov 25-27. Marlborough Stirling on the other hand has been around for 8 years and with less than 10% market share they manage to remain profitable. One must therefore assume that the 10% Marlborough Stirling market share they control comes with less overhead?
    If my hypothesis is completely out the window and D&H; with their near monopoly @ 90% market share should be very comfortable with a VERY, VERY healthy balance sheet …

  8. If the lenders are acheiving some great savings from Morweb perhaps they will be willing to pass those savings through to us in the brokerage commumity in the form of an incentive to switch to Morweb.
    Perhaps a few extra bps are in order on a Morweb deal?
    Just saying.

  9. If the lenders are acheiving some great savings from Morweb perhaps they will be willing to pass those savings through to us in the brokerage commumity in the form of an incentive to switch to Morweb.
    Perhaps a few extra bps are in order on a Morweb deal?
    Just saying.

  10. If the lenders are acheiving some great savings from Morweb perhaps they will be willing to pass those savings through to us in the brokerage commumity in the form of an incentive to switch to Morweb.
    Perhaps a few extra bps are in order on a Morweb deal?
    Just saying.

  11. Why not have extra bps go into a deeper discounted rate? That might give us a better bang for the buck? More deals funded on both the lender and Broker side of the fence means greater aggregate finders fees. Offering a few extra bps in finders fee may not get many people to switch and learn a new technology. Saving deals by being able to offer reduced rates would certainly make a better case for switching.

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