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MCAP’s Pre-Approval Change

The-Mortgage-FilesOne of the most damaging things a broker channel lender can do is lose brokers’ confidence. When that happens, brokers route their business elsewhere.

Confidence was recently shaken in our channel's 5th largest lender, MCAP, when it announced that “status” brokers could no longer apply discretionary discounts to its pre-approval rates.

MCAP’s decision came after extreme volatility in the bond market caused the cost of rate holds (including hedging costs) to rise considerably. The company, which advertises its pre-approvals as the “Best in the industry,” reportedly got inundated with them as rates moved higher in August.

Certainly no one can blame MCAP for changing its pricing policy to reflect cost increases or funder restrictions. The problem is, it apparently changed the allowable discounts on existing pre-approvals. Brokers relied on those discretionary discounts when quoting rates to people.

Now, affected brokers must either:

  • cover the rate difference from their own pocket (not great for broker/lender relations), or
  • tell clients that their rate won’t be honoured (a potential client relationship killer).

(We hear unofficially that some exceptions are being granted to top brokers.)

MCAP is led by some great people and industry folks can sympathize with the company’s pre-app difficulties. But setting expectations that brokers rely on, and then not living up to those expectations, leaves a bad taste in people’s mouths for a long time. MCAP might have come out further ahead by absorbing this hit to protect its brand.

Rob McLister, CMT