Playing Both Sides of the Fiddle

Two-sided-fiddlerThe other day I quoted a rate to a client. The rate came from a credit union, which shall remain nameless.

To my surprise, the client emailed me later that day to say the rate I quoted him was wrong.

Wrong? “How is that even possible?” I thought. The rate was taken directly off that lender’s most recent rate sheet.

Perplexed, I decided to have a little look-see at this lender’s website.

Low and behold, the lender was publicly advertising—for the world to see—a rate that was nine basis points below its broker rate. And there was no mention of this lower advertised rate in its broker updates. It was almost akin to saying, “We don’t care about your credibility with clients Mr. Broker!”

To be fair, the lender likely set its rates this way because brokers get paid more per deal than its internal mortgage reps.

But that doesn’t help the client, who is now confused and who, at least subconsciously, probably thought I was trying to rip him off.

Nor does it help brokers in general, who can’t in good conscience sell a rate that’s higher than the rate a lender publicly advertises.

Nor does it help a lender cultivate broker loyalty. We all know that lenders favour their internal sales channel, but they don’t have to make it so obvious.

In this case, the credit union would have been wiser to disclose its branch rate to brokers and offer a reduced-compensation option for agents who want to match that rate. Alas, maybe it thinks that brokers wouldn’t want to sell its mortgages if they had to take a pay cut. That’s sad.

Rob McLister, CMT

  1. Sadly, National Bank branches have been doing that forever in Quebec… Especially in September and October when they are late on their numbers.
    It’s the reason why I don’t even consider them and don’t understand why other brokers do. It’s short term thinking to me.

  2. Its interesting you mention this, even though we do not disclose our lenders until after the commitment is signed I would hate for a client to go to the lender’s site to learn about them and find out the broker rate is higher. And there is nothing they can do because they already signed the papers.
    The rate is obviously higher so they can pay our commission however the client may not understand this and be very unhappy with us as a broker.
    Thanks for pointing this out, maybe something will change to keep the business flowing on both sides.

  3. The unfortunate side of the business. We have seen this happening for a while. Trying to win business directly is not a new trick but not telling the facts to the broker is not right.

  4. @Connie- Very interesting comments (to say the least)!!
    Looking to trap a client into a higher rate first, when better rates are available speaks louder to customer service that a MB intends to provide.
    And what about the “borrowers- you dont pay us, lenders do” creed. No, we do – clearly!!

  5. My first deal with Scotiabank, back in 1998 or so, was exactly that way.
    I was in the Re/Max office here in Prince George, and a realtor introduced me to an older woman who said that she had dealt with the Scotiabank all her life and would not deal anywhere else. (I used to see this more commonly than in recent years.) The realtor asked me if I could do the mortgage for her as the bank had told her the rate and that she was good for the money but that they were booked up for days and days yet.
    I said “Sure”, and I took her application and sent the deal in. It was a triple A-1 fantastic deal, but when I got the commitment letter the rate was 10 bps higher. So I crossed it out, put in the rate that she told me that they told her, signed it up and sent it in. The assumptive close!
    The underwriter called me on it, and said that they charged a higher rate when the client came through a broker. I was appalled; biting the hand that feeds them!
    Ted Jones, now of Bayfield, was the BDM at the time. A prince of a gentleman, he straightened it all out for us!

  6. I wonder if someone from Meridi… er, the lender who will remain nameless… will weigh in on this. Ultimately it makes us looks bad to our clients, regardless of when they discover it (either before or after they sign the commitment).

  7. So funny………… remain nameless.
    Anyway it’s nice that the group has a new group of F.I.s to be mad at. It was starting to become boring just listening to the blogosphere only bashing banks.

  8. “And what about the “borrowers- you dont pay us, lenders do” creed. No, we do – clearly!!”
    Actually broker clients generally get the same or better rate despite any compensation differences. This case above is not typical.

  9. I was just surprised you could even figure out what the rate was. Usually you have to call the lenders, meet them in the back ally and know the secret handshake then they will let you know what unpublished rate special is, but don’t tell any one else.

  10. Banks should just get rid of their in house mortgage personnel and embrace the broker side. Much more quality advice for the client and in the end may even save the FI’s money as they wouldn’t have to pay their staff as much, or get rid of staff….

  11. I actually yesterday had a client tell me Mer**n would give him 2.98% for 5 yrs fixed after I had him at 2.99% – he just called them yesterday, a far cry from what they are offering the broker channel.

  12. I have consistently been able to offer clients lower rates than branches because we’re already at the “fully discounted” rate, where the client has to negotiate.
    The bank doesn’t have to pay marketing costs, overhead costs, or nearly as much in staffing costs, and the majorty of deals brought to them (at least by status brokers) are generally approved vs branch level where many more are turned away.
    Why wouldn’t you point out to your clients the benefits of working with a broker, particularly when it comes to pricing?
    I was surpised you didn’t simply not disclose the lender (unless requested) to ensure the client doesn’t approach the bank personally to have them match the rate. That’s what we do.

  13. In response to Patiently Waiting….
    I think you misread my comment, I never trap or trick a client into a rate and I was not suggesting a deal where I locked them into the higher rate but simply relieved to have Rob point this out as I did not know. This ONE particular lender has a different rate posted to direct clients VS the broker rate sheet which could hurt us if we did not know it. My point was that I was unaware and would not be happy if I had gotten them approved and signed, later to find out they offer an even lower rate.
    And majority of our lenders do pay us a commission that is why brokers don’t always pass a fee to the consumer.
    In response to Kyle Green…. I consistently offer lower rates then branches as well, credit unions are different and my comment was directed at this one particular credit union not a bank. And I always highlight the bonuses of working with a broker and my clients are always pleased with the results I get for them.

  14. A certain credit union on the “North Shore” of Vancouver is doing the same thing. Its website has lower rates than its rate sheets.

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