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ING Direct to Close Broker Channel

ING-DirectOne of the best lenders in Canada is closing its mortgage broker division. ING Direct Canada made that announcement today.

ING’s last day for broker submissions is Feb. 16, 2013.

It’s a bitter pill to swallow for the broker community, but one that was a possibility from the minute Scotiabank acquired ING in August.

This strategy change is a 180-degree reversal for ING, which currently sources most of its business from brokers. The company will be re-branded (i.e., lose the ING name) and sell mortgages direct to consumers via call centres and the Internet. ING is Canada’s 7th biggest broker lender according to D+H, and largest direct-to-consumer mortgage lender.

In an email to brokers, Scotiabank and ING said: “We felt that both ING DIRECT’s and Scotiabank’s objectives would be better served by allowing each entity to focus its efforts on its own relative strengths.”

The reason given for the decision was overlap in Scotia and ING’s broker offerings. The main overlap is that they both offer bank-funded mortgages through brokers. What isn’t overlapping is:

  • ING’s strong customer-focused branding
  • ING’s generally better rates (for status brokers)
  • The fact that ING doesn’t require branch closings (which Scotia imposes on lower-status brokers)
  • ING’s far better penalty calculation
  • ING’s better prepayment privileges
  • ING’s automated rate holds
  • ING’s DND program, and
  • ING’s outstanding blend and extend option, provided at fully discounted rates.

“ING has been so revolutionary. It has changed the way banks operate in Canada,” said George Hugh, CEO of Taurus Mortgage Capital and ING Direct Canada’s former head of mortgage origination. “It’s sad to lose a player like that. There is nothing positive about brokers having one less choice.”

“ING had a big impact on delivering value to mortgage customers,” Hugh adds. “It’s not coincidental that when ING entered the market, no-haggle mortgage offers started appearing (from competitors).”

ING launched in 1997. It started its broker division after acquiring First Marathon Mortgage in 2002. (Interestingly, First Marathon is relaunching a new broker lender in February.) ING and Scotia are hoping to move some ING BDMs and underwriters to other positions within their organizations, but job losses are to be expected.

Today’s ING news follows the closure of FirstLine’s broker arm by CIBC in July. FirstLine was previously the largest broker lender in Canada.

“This was inevitable from the day that Scotia bought ING, and anyone who thought otherwise does not understand why banks buy other banks,” says Ron Butler of Butler Mortgage.

“All of us in the channel need to understand we are entering a down cycle in our business, end of story. Likely, it is going to get a fair bit worse before it gets better, and better may be seven years away. We can moan and cry and assign blame with a vengeance but smart business people just suck it up, change the way they operate and work harder.”

Hugh, however, remains positive on the broker channel. “Everyone outsources portions of their business for economic reasons,” he says. “Brokers are a variable cost for lenders.”

For its part, Scotia stated today: “Rest assured that Scotiabank remains fully committed to the broker market.” And why shouldn’t it? It benefits from a #1 ranking in broker market share, a ranking that should strengthen in 2013.

Rob McLister, CMT