Mortgage Brokerage Chiefs Speak Out

A scene of vancouver from a high view pointThe heads of Canada’s largest mortgage brokerages spoke at the recently-concluded CAAMP Forum in Vancouver.

They opined on industry risks, rates, broker attitudes and competition, among other hot topics.

Here are the highlights…

The Panel

Five brokerage industry leaders participated: Michael Beckett (Mortgage Alliance), Colin Dreyer (VERICO), Martin Leedham (Visiting from the Australian Finance Group), Gary Mauris (Dominion Lending Centres) and Grant Thomas (TMG The Mortgage Group).

Here’s what they conveyed (Our comments in italics)…

On the brokerage business:

  • “We have seen our brokerage margins compressed to unbelievable levels.”—Thomas(He said that revenues are no longer there to invest in technology and broker awareness campaigns. He added that industry collaboration is necessary to further the broker value message.)
  • “We’re absolutely going to see more consolidation than ever before” in the brokerage market.—Mauris

On broker opportunities:

  • “The era of cross selling is upon us.”—Dreyer
  • “The biggest growth is in the “B space…Become a ‘B’ expert.”—Mauris
  • “Brokerages are providing more tools than ever before, but brokers have to use them…”—Dreyer
  • “Kodak became extinct when it didn’t move fast enough during the digital revolution.”—Mauris(His message is simple: Brokers must adapt to new realities. History is littered with companies that didn’t change with competitive and technology-driven trends.)

On industry initiative:

  • As industry leaders, “we’re very good at talking. We have to get much better at doing.”—Beckette

On rates:

  • Rate-competition“We should never be offended that someone asks for a better price.”—Dreyer
  • Why is 2.94% so much better than 3.09%? It’s irrelevant in the whole scheme of things.”—Thomas(The industry-laden crowd applauded that statement. But Amanda Lang addressed his question best: “You want the rate your neighbour got.” That 15 bps spread equals $1,200 on an average mortgage over five years. Consumers are realizing that it’s not an “OR” decision. It’s not great service/guidance OR a great rate. It’s an AND proposition. Consumers today expect both rock-bottom rates and top-notch advice. )
  • When it comes to rate differences, “We don’t do a good enough job of dollarizing the difference.”—Mauris(That’s where a broker calculates the payment difference between him/her and the competition, and compares that to what they propose to save the borrower through effective mortgage planning, regular mortgage reviews and so on.)

On selling value:

  • Less experienced brokers lose deals because they “don’t explain what brokers do.”—Thomas(Sell your unique services as a broker, he said.)
  • “Everyone walks in for a Kia and hopes they leave with a Mercedes…What the heck do you go to a broker for if you don’t want advice?”—Leedham
  • “If there is no distinct value difference, [clients]talk about price…Our advantage is not really price (but), for the most part, brokers lead with rate.”—Beckette
  • “Brag about your selling proposition.”—Leedham
     
  • Mortgage-Brokers-Personal-Service“Take the time to meet with the customer.”—Thomas(Nothing beats face-to-face contact for relationship building, but there’s a growing segment of consumers who are just as satisfied to save time and consult with their broker via telephone or web conferencing. Hundreds of top brokers do not meet clients in person, and they are a testament to that business model.)
  • “When our business is only transactional, it becomes about the best rate.”—Mauris

On “dead wood”:

  • “The barrier to entry in our industry is way too low.”—Mauris
  • If you have people (agents) on your team who don’t invest in themselves, “you have to punt them.”—Mauris 

    (“Take the pretenders” and get them out of the business, he added. And, to the extent that half-committed agents don’t provide knowledgeable advice and quality service, he’s absolutely right. Untrained and less-skilled individuals make far more mistakes, which hurts the public’s perception of all brokers.)

On lender efficiency:

  • lending-margins“We need to close the deal with the lender we brought it to.”—Thomas(As brokers, for our own sake, we must make our best efforts to avoid cancellations. But lenders also have to realize that mortgage commoditization and Internet shopping could increase cancellation rates. It’s our strong sense that lender and broker loyalty are slowly fading. It may take broker exclusivity contracts and client cancellation penalties to reverse this trend, and those are a turnoff to some borrowers.)
  • “Pulling rates last minute and going into [another lender’s] quick close is poison.”—Mauris(All the panelists would agree that efficiency is essential for keeping lenders committed to the broker channel.)

On CRM:

  • As brokers, “we need to be good at customer relationship management…Once you have 200 or 300 clients on your books, you don’t need anymore.”—Leedham (Happy clients are the most powerful referral sources.)
  • “If you’re not using CRM by now, you’re in trouble. Banks have built their businesses on retention.”—Mauris

On this and that:

  • “We as mortgage professionals have an attitude problem…The problem is that we don’t believe the client relationship is ours.”—Beckette
  • “We need one name for brokers (nationwide)…Then we’d stand a better chance of them knowing who we are.”—Dreyer(Most in our business would emphatically agree with this statement. Consumers know the term “mortgage broker.” Other titles that provincial regulators force us to use—“sub-mortgage broker,” “mortgage associate,” “agent,” etc.—mean little to the public. That makes it harder for the industry to create awareness, causes confusion for consumers who deal with interprovincial brokers. This is a key issue that CAAMP has spearheaded.)

CAAMP TV

Some 1,200+ people watched CAAMP TV last week. During last Monday’s broadcast, I had the pleasure of sharing a panel with Hali Strandlund (Fisgard), Kathy Gregory (Paradigm Quest) and Jim Murphy (CAAMP).

Some of the topics included:

  • Mortgage rules and their industry impact
  • Using “Accredited Mortgage Professionals” as the one name for brokers across the country.
  • Online mortgage trends, and more…
CAAMP TV is produced by TMG The Mortgage Group.

Rob McLister, CMT

  1. I just renewed my mortgage after having 4 banks compete for my business. I got a 2 year rate at 2.49%. 80 basis points below posted rates. Who needs a mortgage broker?

  2. Thank you very much for that article. I fully agree that we need the Universal name for our profession. Too many people in the general public are confused with the many terms that are thrown at them. Mortgage Professionals need to be fully recognized as the only ones to go to when in need of financing for one of their biggest purchases of their lives.

  3. I think you answered your own question in your post. Clearly, you needed a mortgage broker since you had to go to 4 different banks and spend all that time negotiating on your own when you could have had a broker do that for you. Plus, I imagine you’ve been reading this blog in the past, (written by a mortgage broker), which has given you the education you needed to negotiate with the banks on your own.

  4. Why would you want a 2 year rate?Did you understand the meat and potatoes of this article? If you aren’t planning to move/sell your home, you should be thinking 10 year rate! Anyway, Peter, now you’ll be renewing in 2014 right when rates are climbing (at least, in theory). Well done sir. Way to not get advice and only think RATE!

  5. I’d never get a 2 year at this stage of the rate cycle. A 1 year is both cheaper and way more flexible. You should have sought better advice.

  6. On the 300 customers I have to say that it is a number to maintain. We run a consistent CRM bi monthly program as suggested by Maritz a few years ago but I still believe every year you need to consistently add to the number as people move cross continent today and we lose track of them in no time. As i tell my new people, the ones who don’t make it are usually the ones who do not continue to look for business, be that CRM or just continuing to search out new referral sources. My partner/wife laughs because I check three things before I leave the house my wallet, BB and business cards.

  7. If you really want to see how confusing it is watch for my article in the AMBA magazine coming out in December. Our regulators can’t agree on what to call us.

  8. Thanks for the great summary Rob. I am not a mortgage professional but work with several, and love your blog as a way to keep up with industry news and trends.
    Some of your key quotes are very relevant to me as a Rent to Own specialist.

  9. I bet once the renewal comes up in 2014, IF rates are moving up, you will see those prime minus 0.5%-0.85% come back into fasion.
    I’ve got 5 mortgages and the best move I made was locking in the prime minue 0.85% 2.5 years ago (or so). If rates do rise, I expect to see these come back (and I’m not convinced we will have a meanigful move in rates before 2015 – maybe a quarter point here or there at best).
    Second best move was rolling over those 1 year mortgages and I’m about to roll over another one.
    Europe is a catastrophe, the US isn’t much better, Canandian inflation and GPD growth isn’t going anywhere meaningful. I bet we will still be speaking about the Euro crisis and the US debt woes right through to 2020.

  10. 10 year rates are in the neighborhood of 3% higher than a 2 year rate, and rates won’t be going higher for at least another 2 years. Why would you just give away 3% to a bank? Keep that money and pay down your mortgage. By the way, I also did this 2 years ago, because I didn’t beleive rates were going to climb just yet, so I’m well ahead.

  11. Don’t get me wrong, there will always be a need for mortgage brokers, and I actually do have a mortgage broker, but she could only get 2.59%. I’ve renewed my mortgage enough times over the years to pick up a few things on negotiating. I spent 1 hour at each of 3 banks, and 1 hour on the phone with the 4th. My mortgage is almost $500,000.00, and by my calculations, I saved $3700.00 a year for 4 hours of my time. I wish I had a job that paid that well.

  12. Thanks Jim, but how is a 1 year rate cheaper and more flexible?
    With all the turmoil in markets and economies around the world, rates cannot possibly go up significantly. As well as we are doing here in Canada, our economy will not take off and boom for another 10 years. I made that call 2 years ago, and went with a 2 year mortgage then as well, so I’m ahead right now. I know a few people who in 2010 renewed a 5 year variable, and I’m still a full percent lower.

  13. I also negotiated a LOC at %1/2 over prime, a no fee chequing account, and a premium self directed investment account with unlimited trades at $6.95 each. I didn’t say I was only thinking rate, I was focused on it, but still thinking with a plan. Thanks for your comment though.

  14. Thanks DD, I’m not a fan of CIBC, but those issues are not a concern for me. I’m not ending my mortgage anytime early, and not making any extra payments.

  15. Leo,
    I am not a pessimist by nature but the fact is…
    …Canada kicked the can a little further away in late 2008 and early 2009, by financing the CMHC with about 50 Billion. My fear is our turn may come, if not sooner in the future. I am encouraged by the Oil prices coming down and hope they trend continue. If the Oil prices start going up again, God help us.

  16. In a surprise move, CIBC phoned me today to tell me they lowered my rate to 2.34%. My renewal papers were signed a week and a half ago, but today was the renewal date. Totally blew me away.

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