Many expect a slower housing market to trim mortgage volumes in 2013. That’s due in part to stricter mortgage rules and housing valuation concerns.
We hear anecdotal reports from some lenders that seasonally adjusted volumes are already down in the first three weeks of 2013.
As a lender in this dull winter market, the overriding goal is to maintain growth. But there’s also a fleeting opportunity to attract business from ING Direct brokers, who will soon be cut off.
On top of that, some lenders are anxious to maintain sufficient volumes of high-ratioinsured mortgages. For one thing, high-ratio mortgages are cheaper to fund. Moreover, some lenders must send insurers at least 50% high ratio business in order to be allocated valuable bulk insurance.
For the reasons above, now is an opportune time for lenders to run promotions and regear broker compensation programs. And that’s exactly what the #2 and #3 broker lenders (First National and MCAP) are doing.
First National, the second largest broker lender, has just started a promotion that pays brokers 10 bps more on all insured mortgages.
First Nat. has also increased ongoing compensation and “created a tighter link between volume and funding percentages,” says National Director of Sales Ben Kawa.
These changes reverse First Nat.’s August 2012 cut in 5-year finder’s fees, which is refreshing given the recent downtrend in broker compensation. (It’s not known how much that 5 bps cut hurt First National’s volumes, but it couldn’t have helped.).
First Nat. also continues to welcome volume pooling. That’s where multiple brokers team up to build their volume and qualify for volume-based benefits. Pooling-friendly lenders are valuable to smaller agents but they’re criticized by some bigger brokers.
One of those large brokers is Jim Tourloukis of Advent Mortgage Services in Unionville, Ontario. Tourloukis says that granting status benefits to pooling brokers is akin to a lender “paying money for nothing.”
“I would like to see the pooling go away as it is clear that the industry, via the creation of (volume) consolidators, has found a way to take advantage of lenders,” says Tourloukis. He estimates pooling is costing lenders in the “high millions,” and advocates efficiency-based bonuses instead of corporate volume bonuses.
Others defend pooling, as long as it is efficient. That’s the approach First National has taken.
“We’re not saying you can’t have 400 people pooling,” Kawa says. “We’re simply trying to drive smart volume.”
First Nat. wants what every other lender wants: efficiency. So it has restructured its Wizard status program to incentivize that goal. First Nat. brokers doing at least $20 million in volume can now earn up to 14 bps more (in Wizard Spending Account and Wizard Commission Rewards) by maintaining a high funding ratio.
(“Funding ratio” refers to the percentage of approved mortgages that close. Roughly 75% is an industry average.)
MCAP is also running a limited-time 10 bps finder’s fee promotion. It launched about a week before First National’s offer, and it’s also for insured mortgages only.
MCAP’s broker promo is expected to run until mid-February, says Vice President of Sales Gino Tieri.
The company has also bolstered its broker status program by adding:
More MPoints — MCAP’s MPoints incentives are now paid to all brokers on all 5-, 7- and 10-year products. (MPoints can be used for things like buying down rates for clients, covering client’s mortgage fees, or covering marketing expenses).
Simplification — MCAP now has three volume tiers (Associate, Partner and Ambassador) instead of five, a great improvement since the prior model was overly complicated.
Better rates — MCAP’s pricing over the last few quarters has been more consistently competitive than we can ever remember. Now, its middle-tier (“Partner”) brokers get even better rates—rates normally reserved for Ambassador brokers.
MCAP is also the sole broker-only lender with a line of credit (if only it were automatically readvanceable).
“We continue to be focused on the broker channel as it is our single source of revenue; so we continue to invest,” says Tieri. “MCAP has been in the broker market for over 20 years, which hopefully sends a message about how stable an organization we are, and how committed we are to the broker community.”