Radius Launches the Right Kind of Status Program

Radius-FinancialWholesale lender Radius Financial has been steadily gaining market share. Fourth quarter data from D+H suggests the company is the 15th biggest broker lender—up from 23rd one year ago.

This week, the company launched its new Affinity Program for mortgage brokers. The best thing about it is that it avoids certain conflicts inherent in other industry incentive methods.

Radius’s Affinity program gives loyal brokers:

  • Free Switches – The customer’s legal and appraisal fees are covered on transfers.
  • Priority Underwriting – Affinity broker applications get sent to the “top of the pile” for faster turnaround.
  • Rewards Points – Brokers can spend these points on customer rewards, marketing, travel vouchers or other business uses.
  • Discount Points – Brokers get 25,000 discount points for every $10 million of closed mortgages. These points are generally used to buy down a customer’s rate or offset closing costs. Brokers can also charge higher rates on one deal, earn and “bank” points, and then use those points for rate buy-downs on future deals. (This is admittedly somewhat controversial, since some clients pay higher rates so that other customers benefit, at the broker’s discretion.)
  • Rate-hold pre-approvals.
  • Dedicated Underwriters.

But one thing Radius doesn’t do is give status brokers better rates or higher commissions. That ensures that customers of lower volume brokers don’t lose out when their application is sent to Radius.

Ron-SwiftIt also means brokers can choose Radius because it’s the right fit for the client, not because they have to meet volume minimums to stay competitive or earn better pay. Lender volume requirements force smaller brokers to choose between a client’s needs and a lender’s expectations. And that’s a trade-off with negative side effects for the broker industry, agrees Ron Swift, Radius Financial’s CEO.

By providing its best rates and compensation to all brokers, the company also reduces pooling. That’s where smaller brokers combine their volume with larger brokers. “When you get into pooling, efficiency and deal quality suffer,” says Swift. “That defeats the purpose of a status program.”

He adds: “…It was important to ensure that any broker who wants to work with us isn’t disadvantaged with rate.” The goal was to “recognize brokers for loyalty without disadvantaging the customer.”

Some may wonder why lenders don’t scrap expensive perks and simply offer lower rates. The truth is, these perks are usually less costly than rate discounts.

Moreover, high volume brokers expect better treatment, and courting them is good business. “Top producing brokers are more cost efficient in many ways,” adds Swift, who notes that high volume brokers had been asking Radius for more privileges.

Radius obliged and now awards top tier status in return for $10 million per year in closed mortgages. While doing so, it also keeps its doors wide open to the small guy. “As a broker, everyone’s got to start somewhere,” Swift says.


Rob McLister, CMT

  1. “Brokers can also charge higher rates on one deal, earn and “bank” points, and then use those points for rate buy-downs on future deals.”
    Well that’s just ridiculous. Be careful here. The broker model to begin with is going to come under increasing pressure as lending margins shrink and lenders compete hard for dwindling buyer pool. The one advantage the broker network has is that the general public (perhaps naively) believes brokers “work for them”. You lose that perception and business gets even tighter than it already will.

  2. Radius isn’t the only lender with discount points and banking points is nothing new. You have to remember that not all applications are straightforward. When a client is hard to place, a broker’s skill can make the difference between that person getting approved with an “A” lender like Radius or an Alt-A lender with higher rates. In those cases, charging a higher rate can be justified. You can then use those banked points to give someone with pristine credit a lower rate.

  3. Don’t the Big Banks do this all day, every day!! They send out mortgage renewal letters at posted rates. Then when called on it, they drop their rate to 3.15%. If a customer is a good negotiator, he gets down to 2.99%. A smart consumer will go to a mortgage broker and get 2.79%. So if he goes back to his bank…what do they do?? They pull the used car salesman routine and say ” Let me talk to my manager about that”. Then they match the rate. The banks’ practices are dishonest and despicable!! Yet Canadians are okay with it because the bank has the word ‘Royal’ in it. Maybe it’s okay to get screwed when it’s the King is doing it to us.
    How does the bank’s routine compare to what ‘Old Broker’ said: “When a client is hard to place, a broker’s skill can make the difference between that person getting approved with an “A” lender like Radius or an Alt-A lender with higher rates. In those cases, charging a higher rate can be justified.”
    I’d say Old Broker is being compensated for his hard work and expertise…while the Big Bank is simply ripping off clients. And who are they conning? Usually their most loyal and most helpless clients; the ones who don’t know any better…older seniors, new immigrants, people who don’t understand our finl system and make the mistake of TRUSTING their banker!! Banksters work for their bank, NOT the client!!

  4. Unrelated question.
    If I get a 25 year amortization and 5 year term, at renewal can I get a 25 year amortization again? Or is that considered a refi and needs to have 65% LTV?

  5. Yes you can re-amortize to 25 years at renewal. It would be considered a refinance and you would need an LTV of 80% or less.

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