Setting Sail for the Future

We’ve spent the last seven years advocating for mortgage brokers. That’s on the public record.

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Why? Because nothing has replaced a skilled mortgage professional who can deal with multiple lenders.

But it would be foolish and self-serving to suggest that other channels, be they retail — e.g., bank and credit union advisors, online discount brokers or direct-to-consumer lenders — cannot provide the value that many consumers seek.

So how does the editor of a mortgage news site balance those two realities when now being part of a broker-centric organization? That question came up Friday in an industry forum and it deserves an answer.

It’s been said that this author believes the future of the mortgage industry is not the broker channel, but rather the direct-to-consumer (DTC) channel. That’s only partly true.

Yes, direct-to-consumer will blossom in time. But, DTC aside, the future of the mortgage industry involves banks. No challenger will overtake six titans, each of which averages over $1 billion of profit every 90 days. Banks control the funding market, they own the leading trusted brands and they have extraordinary intellectual capital. While competitors can win healthy slices of the market, banks will not give up dominance in mortgages.

Mortgage-Brokers-Personal-ServiceSecond, full-service mortgage professionals will always exist (in both broker and retail channels). Personalized one-on-one attention is essential for a range of homeowners including those who crave customized service, those without mortgage experience, income property investors, leveraged investors, credit-challenged borrowers and so on. This author remains a full-service mortgage planner because of a belief in that model.

When assessing the future of the mortgage industry, the more germane question is the growth rate of each channel. Rate wars will increasingly drive mortgage providers to find any way possible to lower costs. For that reason, streamlined direct-to-consumer and deep-discount broker models should lead the race for growth.

Gary-MaurisOn Friday, Gary Mauris, the passionate and inspiringly successful co-founder of Canada’s largest broker franchisor, made his position clear: consumers are “best served” by full-service brokers, adding “I don’t believe someone who picks the consumer direct model should be the voice for the majority of brokers who believe in the full-service model.” (That’s in reference to this author, whose online firm lets consumers choose between full-service and “do-it-yourself.”)

That leads into another question: how should Canada’s association of mortgage professionals position itself? CAAMP’s plan, as we understand it, is to maintain meaningful dialogue from a range of informed views.

For that to be successful, no one industry participant’s voice should be the loudest, for it risks drowning out the voice that guides us, the consumer’s. Any messaging from a broker-centric organization that doesn’t factor in consumer demand for freedom of choice, today’s more educated borrower and the need for originator efficiencies will threaten that organization long term.

Woman Reading FortuneIn business, the majority knows no more about what the future holds than the minority. The majority of stockbrokers pre-E*Trade supported full-service investing. The majority of accountants pre-TurboTax supported full-service tax preparation. The majority of travel agents pre-Expedia supported full-service travel planning.

The models we support today don’t dictate what models consumers adopt tomorrow.

Traditional brokerage models are now under attack, and their profitability is threatened like never before. There is no time left for protectionism, no time for infighting (which consumers see on the Internet, by the way) and no time for hypocrisy (e.g., banks can undercut brokers but brokers can’t undercut brokers).

There is only time for adapting to consumer demands.

This business is in dire and immediate need of more voices that prepare brokers for this changing competitive landscape. Voices that don’t impetuously label new models as “lowest rate at all cost” operations. Voices who understand that most of today’s new models rely on brokers, which is a good thing for our industry. Voices who understand that this is not mutually exclusive with promoting the benefits of full-service brokers.

CAAMP members are and always have been the owners of CAAMP. They have instructed CAAMP loud and clear to provide both them and consumers with “timely and relevant information,” and to be “the leading authority on mortgage issues.”

You cannot be an authority of anything without an open mind. In this context, that means embracing perspectives that might diverge from the majority of full-service brokers. With that approach, CAAMP will remain the premier voice of Canada’s mortgage broker channel and mortgage industry at large. This is the personal view of one who is by no means the voice of CAAMP, just a voice in CAAMP.

Rob McLister, CMT (email)

  1. Hey Rob,
    Thanks for the thoughtful response. I agree completely with the comments around having an open mind and avoiding always trying to protect a model, rather than embracing new opportunities. I believe business is like a tree. it has two cycles of life. It is either growing or it is dying.
    I think that anyone who is thriving in this Industry is committed to ongoing education, creativity and innovation. We, like I am sure a lot of others, are looking to launch new opportunities like Insurance and Wealth products and P&C products such as Home and Auto Insurance.
    We also have offices and agents between our two brands that operate a variety of models including direct to consumer, and several who participate in buying down rates so that they can regularly offer the lowest rate as their competitive advantage. (I don’t think those operating these models would necessarily be the right fit for the Editor of this site under its new ownership)
    We are open to change and believe that we actually embrace it. Should the Industry start to dramatically shift towards a different model, I promise you that we will be respond quickly and efficiently, and find ways for the loyal participants of this Industry to capitalize and continue to deliver value and advice to the consumer.
    I think you have been an amazing advocate of the Mortgage Industry, not necessarily an advocate of the full service mortgage broker. And that’s ok, because we all have the right to promote the model that we believe in.
    I didn’t and still don’t believe that someone who chooses the lowest rate, direct to consumer model (as their default model)should be the editor of our National Associations news portal. That would be the equivalent of putting Ron Butler (someone who i like a lot) as Editor. It doesn’t mean he couldn’t do an amazing job, it just means that in todays environment that doesn’t reflect the majority of mortgage professionals who make up the CAAMP membership.
    I believe the Editor should be someone who works exclusively for CAAMP. I would embrace and support a variety of guest columnists, all with valuable insights and opinion.

  2. I’ve been a reader for 3 years and learned a ton. Rob has opinions but if he didn’t I don’t think he’d have the same following. If I had to complain about anything it wouldn’t be objectivity. If anything, the site could probably use a re-do but I don’t come here for aesthetics.

  3. Mr. Mauris you’d do well to read Galbraith. In business the majority is always wrong. You can’t have five wolves and one sheep voting on what to have for supper.

  4. Rob I recall when this site was just an idea. You said when researching to join the broker industry, you could find lots of US material, but no one was compiling information for mortgage brokers in Canada-so you wanted to take on that task. You took it on full time when it generated no income, and have done a tremendous job in building it into a multi-year award winning site. Always professional and politically correct, many in our industry have come to rely on your timely, insightful articles and information. Thank you for your vision and for putting hours and years into making this site what it is today and congratulations on your new role. I can’t think of a better editor.

  5. I think the reference is more “In economics, the majority is always wrong.” which is very hard to source and may actually be more in reference to “There is something wonderful in seeing a wrong-headed majority assailed by truth”
    Point being Economics is different than Business. I agree everyone should read some Galbraith…
    I imagine that the debate would be polite conversation about portion size. However, if it were 5 sheep and one wolf then you might have conflicting views. So the questions remains am I a sheep or a wolf?

  6. Corporate acquisitions generally require board approval and the board must represent shareholder interests. In an organization as politically sensitive as CAAMP, I imagine they would have needed virtually everyone on side with this. That likely answers the question about how the majority feels about the deal.
    That aside I wish you best of luck Rob and Melanie. You perform a valuable industry service and your efforts don’t go unappreciated.

  7. Simply stated Gary is entitled to his opinion. He is overwhelmingly correct on one point; I would be a terrible choice for editor of CAAMP publication, I would likely be the cause of a defamation action by day two.
    On the other hand I think Rob is a great choice, he has amply proven to have the skills, background, temperament and judgement to be an excellent editor of any mortgage publication.
    Gary likely does reflect the viewpoint of many CAAMP members but many other members will respect Rob’s proven ability to provide outstanding objective analysis.
    The fact is: the whole mortgage brokerage business is on the cusp great change in the next 5 years and many of those changes will be very disturbing to the status quo. I understand the trepidations that many mortgage brokers have and I understand those concerns.
    The truth is this: because of technology and demographics the mortgage brokerage business that will arrive in a few years will be radically different than today’s business and huge change is never easy on anyone, even the change agents.

  8. To me “DTC” means any and all independents that sell more than one brand of financial products to consumers.
    As long as financial products are available to these independents, then the DTC channel is an effective way serve the consumers.
    There is alot of room in the DTC arena for differnt types of brokerages, MGAs, and dealerships.
    Products and good service is what consumers need the most and I can only see the DTC market share growing.

  9. Although I sincerely commend you on your accomplishments with the success of CMT Rob, the acquisition of your site by CAAMP now puts into perspective your biased praises of the organization in past editorials, which will no doubt continue going forward, since it only stands to reason that you simply can’t be critical of your master, regardless of what you say in your press release about no censors, no PC filters and maintaining an independent voice. There is much wrong with CAAMP, and the purchase of your site doesn’t make the real issues facing the industry any better….I’m curious to see how much in depth non-biased reporting you do on the important contributions and causes spearheaded by IMBA, AMBA AND MBABC, under CAAMP command.
    This brings me to the next topic. Good on you for moving onto your new venture, Intellimortgage / Rate Spy, and I do wish you the very best of success in this endeavour. Any plans to utilize CMT to bring to the forefront the challenges rate discount sites bring to the industry and more importantly consumers, or is the site going to be used as an advertising mode by presenting only one side of the rate site model , no different than the article in the Globe and Mail last week, that was written by an associate of yours, Mr. Carrick, which clearly served as an unpaid advertising piece for Intellimortgage, and nothing more. If you’re going to advertise in a newspaper, it should be clearly written as advertisement – not as a self-serving journalistic “article”. I’m sure you aware that the regulators are pushing for more professionalism in the mortgage broker industry, and that they are strongly suggesting at the moment that brokers and agents spend much more time consulting and advising their clients in much detail, and providing several options to choose from with fill disclosure……I think we all agree that there is more room for professionalism in our industry. Have you thought about how the profitability of those participating in the rate site war will be adversely affected?
    John Bargis
    Mortgage Edge

  10. John,
    The reality is that no trade association is everything to all members. This site has been both supportive of CAAMP (e.g., on its advocacy, education and research) and critical of CAAMP (e.g., on policing members and AMP qualifications). That was on the record far before this union was contemplated. Overall, however, acknowledgement of CAAMP’s advocacy and value proposition is amply justified, pun unintended.
    Editorial neutrality was something no one compromised on during the deal process. It’s unfortunate that some would conclude otherwise based on assumptions of what is “no doubt” to come. Either way, those speculations are out of our control so time will be the judge.
    Regarding rate sites, both their benefits and their “other side” have been covered previously. (Use the search function to find related stories.) Important topics like this can always be revisited if folks have a unique angle on them. Moreover, industry participants who can articulate on this — or any other timely topic — are always welcome to write guest posts.
    Regarding the Globe’s story, you’ve made some surprisingly inaccurate, almost reckless assertions. You’ve made them with no knowledge of the circumstances leading up to the story, seemingly no understanding of the person writing it and no assessment of the story’s arguments. That some brokers find the DIY concept (or their portrayal) displeasing is one thing. But arguing that it’s not newsworthy is frivolous, John. Self-directed mortgages (not the RRSP kind) are novel. Their implications for consumers and the mortgage establishment make them newsworthy by default. That would be just as true if anyone else launched this model.
    Lastly, on the topic of “advising…clients in much detail, and providing several options to choose from with full disclosure,” it’s commonly overlooked that these points can be addressed with well planned web-based interfaces, and supplemented by the application process and the client interview (during underwriting). It just takes a bit of lateral thinking.

  11. Props on you for even posting John’s rant. Just keep doing what you do for consumers Rob. Pay no heed to the noise.

  12. “But arguing that it’s not newsworthy is frivolous, John. Self-directed mortgages (not the RRSP kind) are novel. Their implications for consumers and the mortgage establishment make them newsworthy by default. That would be just as true if anyone else launched this model.”
    Rob, I don’t think John meant that direct-to-consumer rate websites are not newsworthy, just that there was an inherent conflict of interest in that story because you are a regular contributor to the Globe and Mail who also happens to run a website that received a great deal of praise in that article. If this was a neutral article about rate comparison websites, which do have a place in our industry for consumers who prefer securing a mortgage that way, then surely a more balanced discussion about the pros and cons of using these sites should have been discussed.
    Carrick’s comment that “the best payday for the broker can mean the client doesn’t get the lowest possible rate” is foolish and shortsighted. As mortgage professionals we both know that given the competition among lenders, most lenders pay the same on the lowest rates minus 5 or 10 bps. Not exactly getting rich by shafting consumers with higher rates as Carrick suggests. Of course, Carrick does not know how our industry works because Carrick is a writer, not a broker. Just because a brokerage does not advertise the same price as brokerages who are participating on rate websites does not mean that clients of that brokerage don’t receive the lowest rates, lower than what is advertised on rate websites.
    You have given consumers terrific advice about their mortgage over the years. That’s why I don’t understand why you would even have Carrick wrap up the article with “your only leverage to minimize your costs: getting the lowest possible mortgage rate.” Really? Given how lenders are placing all kinds of restrictive clauses in mortgages these days, penalties that could add up to tens of thousands of dollars, the fine print is often far more important than the selling price. Such idiotic blanket advice goes against what you have been preaching on this website for the last 7 years.

  13. Hi Lior,
    You’re an excellent broker and I’ve always appreciated your comments. But this makes three people now at Mr. Bargis’s firm that have positioned this issue unfairly.
    John’s point was clear so there’s no misinterpretation. That is, that the article “served as an unpaid advertising piece…and nothing more.” He has every right to that opinion. It just happens to be unsupportable and wrong. (For further background on this, call me any time at 416-913-0377.)
    Any suggestions that I somehow had any control over the copy of this story are absurd and reflect poor judgment on those making the accusations.
    Would I have written it differently? You bet I would. But if we’re being honest with ourselves, Carrick’s suggestion that compensation makes some mortgage advisors do the wrong thing is absolutely valid. Moreover, as you know, compensation and influence in this business is not limited to finder’s fees.
    Do all bankers and brokers fall prey to this practice? Certainty not, and that should never be suggested. There are so many amazing consumer advocate brokers in this business that it makes me proud to be a part of it. But Carrick’s statement on its face is nonetheless factual.
    The biggest problem is that typical consumers often have no way of knowing who the “good guys” truly are. So it’s natural that some have interest in an option that assertedly takes potential conflict out of the game.
    Again, don’t get me wrong, we ourselves maintain a full-service operation where agents get paid finders fees and receive status benefits. But we put controls on it, for fear of even the appearance of recommendation bias. For those who are interested, I’m always happy to share how we do things. Call me any time…

  14. I just have to say this: I am so tired of mortgage brokers saying that they are always offering their clients lower rates than they offer on their websites. Why would a mortgage broker have such a low opinion of the consumer’s ability to detect foolishness. The consumer gets the fact that the mortgage broker will only offer the low rates when challenged to do so.
    If a mortgage broker wants to offer low discounted rates PUT THEM ON YOUR WEBSITE.
    I won’t even get into the concept of mortgage brokers who have removed rates from their websites ALTOGETHER. Yeah, that’s right, brokers who had put their rate offerings front and center for a decade have now stripped them off their websites.
    If a mortgage broker wants to run their practise that way fine: its a free country, but please don’t try to put it over on smart consumers that the rate info is being suppressed so they can offer super low rates when people call and ask for them. It just defies belief.

  15. @Ron I’m a relatively new agent (3 yrs)and I have elected to not put rates on my site. I don’t do it to try and trick anyone or in hopes that I will only have to offer my best rate when someone pressures me but rather to avoid spending a lot of time and energy explaining to people why they can’t get the rate I have posted.
    For many reasons a client may not qualify for the absolute best rate I can post. Amortization, LTV, downpayment source, transaction type, income type, and of course credit history are just a few of the reasons why I may have to offer my client a little something different. Once I know all the parameters I deliver the absolute best rate I can for a product they qualify for. And of course with my AAA clients who fit the mold as laid out by the lender, this turns out to be the lowest discounted rate.
    You may not agree with my practice but my reasons for doing so are far different than the ones you posted above. I have no doubt that some brokers may operate in the manner you describe above but I certainly don’t think that not posting rates automatically equals shady, deceptive, and unprofessional.
    I don’t think of mortgages as a commodity where one price is available to all. Whether this is a good analogy or not, I think of it more as if I was hiring someone to landscape my backyard. Would he give me a quote sight unseen over the phone or would he want to know a little bit about what’s going on back there before committing to a plan and a price?
    Anyway, the point of my post is that I don’t care either way whether someone posts or doesn’t post rates. It’s a matter of personal preference and for me I just don’t like to entice and then disappoint.
    Sidenote: If I could post a range of rates on my site that would be the middle ground that makes me happiest. I would love to post “5yr fixed ranging from 2.84%-3.19%” This is already how I open the rate conversation in person or over the phone but as I said, I’m a relative newbie and until I can source the funds to ditch the corporate website I have for free, then I am stuck making the best of it’s limitations. :-(

  16. @ Jeff, all of your comments make sense. Consider this: too many mortgage brokers who HAVE exactly that facility you mentioned you wanted: to show the range of rates available; have taken rates off their websites. What does that tell you?
    As a new agent keep this in mind: the way we think about mortgages is not always the way the consumer thinks about mortgages. When you have talked to 20K consumers like I have you find out it is mainly this: Can I get the mortgage? What is the rate? Can I make pre-payments? Sure there are a hundred other little things that can come up but rate is always there front and centre.

  17. As a mortgage consumer – I find Mr. Butler’s comment refreshing. Dear full service brokers : I do not want a fridge magnet, a pen, a cup of coffee and/or for you to hold my hand. Rate, portability, ability to refinance, potential penalties, pre-payments, if one must – the ability to skip-a-payment, discharge fee, online access (or not) are really variables that are that difficult to figure out. – Increasingly for us lay ‘common folks’. I would never bother to play games with those that don’t post their rates. Why ? On the off chance that they can and will play ball with big dogs.

  18. It is interesting that this site attracts intelligent and thoughtful ( albeit conflicting)and respectful views from brokers ( and the public) who share some depth to their opinions while ( mostly) avoiding personal attacks. Yet other sites seem bent on exploring egos with less sharing of facts. And yet many of the contributors here are there as well?
    Glad there are options available in life

  19. Thanks for running this site Rob. The reason I read it, as neither a broker nor having any other involvement in the real estate business other than an interest, is because while you have a focus and a bias (as we all do), you are also reasonable and discuss both sides of a story.
    I am somewhat concerned about whether you will be able to maintain that with CAMP holding the purse strings, but that remains to be seen. I have never seen an acquisition announcement that did not strongly state that independence will be maintained, and yet it rarely is. I hope CMT is the exception to this, as it would terribly boring if reduced to an industry rag.
    Thanks for the insight, and good luck for the future.

  20. I don’t see mortgages ever being as simple as buying a trip on Expedia or using Turbo Tax. Those are both simple purchases that don’t require any qualification.
    Banks are always looking for ways to cut costs but I doubt direct to consumer mortgages will ever become mainstream.

  21. Michael, I think in 5 years over 50% of all mortgages will be done entirely without the applicant physically meeting with anyone. That does not mean totally online. There will telephone conversations and emails and web chat but the changes in tech and demographics makes it clear that people getting in a car to go somewhere to do financial transaction will become a thing of the past.

  22. I disagree with many of the interpretations of full SERVICE mortgage brokerages. Not to be picky, but I interpret the products being offered of say first, second, residential, commercial and perhaps even related products by a brokerage as a move to ONE STOP MORTGAGE BROKERAGES
    When I use the term full SERVICE brokerages, my list of services relate not to what products I offer, but how the consumer can access me. So FULL SERVICE to me means the consumer could meet me at my office, deal with me through the internet, handle all contacts by telephone, or meet me at a convenient place of their choosing. I am talking about a brokerage normally, not a specific person, as we, the brokerage would then have persons or systems in place to allow multiple access methods to our (multiple, if we chose) products. Shopping, via a full service format caters to the consumers’ preference. Introducing a new service (like DTC or telephone interview applications) would not be at the expense of any and all the client experiences and protections that I have now or would want in the future. If I could not provide the protections and experiences necessary to meet my defined level of professionalism, the service would not/ should not be provided.
    Based upon my definition, I don’t believe that aspiring to full service is some grandeur vision; just a greater opportunity to access more clients. And further, should my services offered be narrower than full service, that they are by design NOT less in quality or more suspect in protecting or meeting clients’ needs.
    I consider Banks only now moving to full service, where they have not been; I consider real estate brokerages resistant to offering full service, and ultimately this will lead to dramatic, and painful ( for some) changes in that industry over the next 10 years.

  23. I am of the opinion it is exactly the opposite, especially if your office also offers other services such as financial planning, asset protection, insurance, etc. There is a reason why the banks are investing many millions in the branch network, upgrading branches, concierge service, more emphasis on customer service. Is it because they think more transactions will be done online and not face to face? A community-based approach and strong referrals are always going to triumph paying tens of thousands every month purchasing leads online. Should we make it easier for our customers to contact us online? Of course. Should we have an option where, for instance, a client wants to Skype with us for advice as oppose to meeting in person? Absolutely. Should we give consumers as much information as we can? You bet! But even with all of that, the fact is online origination represent a very small share of mortgage volume and this will continue to be the case. Lenders can put an end to the party of rate driven sites at any time by limiting buy downs. And FSCO’s new KYC disclosure requirements, where Agents and Brokers will need to spend more time with their clients and advising them on their mortgage, will make it increasingly difficult for rate driven websites to remain efficient.

  24. Lior, please, your are a good broker but please put this constant refrain of FSCO legislating discount brokerage out of business to rest.
    It is such a ridiculous waste of time and simply untrue. We discount rates to benefit the public and do just as good or better a job of disclosure and suitability study as any mortgage broker and so does True North and so does Jim T. at Advent and so does Rob at Intellimortgage.
    Please just stop, it makes no sense to constantly repeat something that’s not the case. You are too smart a person for that.
    The banks are changing too. The last set of AGMs for the banks featured a focus on mobile apps, improvements in Call Centers and a discussion that future consumers will want to stop going to branches and communicate with the with banks online from the comfort of their homes.
    As much as you may want to wish the future away it will still show up, right on time.

  25. Hi folks,
    Thanks for the support and for sharing your perspectives.
    @Michael Curry
    The more qualified the borrower, the simpler the user interface (and the lower the barrier of entry for someone with resources). That’s why competition in the “AAA”-credit space might get bloody in the next few years. But will DTC become mainstream? Absolutely not, at least not soon. This assumes one defines DTC as non-face-to-face online lender origination.
    Re: “I certainly don’t think that not posting rates automatically equals shady, deceptive, and unprofessional.”
    Agree wholeheartedly.
    If I had to bet, we may see many more brokers pull rates off their sites because they don’t want to appear less competitive than online discounters. That strategy has risks and rewards, but one thing is for certain: with no advertised rates, a broker’s site must convey a powerful call to action and a unique compelling value proposition. Otherwise it’s just an electronic business card.
    Regarding your idea of posting rate ranges (e.g., 2.84% to 3.19%), I love that idea. It’s a great way to spark a client conversation. It does have technical challenges however. For one, most rate tables and rate sites are not designed to handle rate ranges. That’s far from an insurmountable obstacle, but it may slow adoption of range-based quotes.
    @Bruce Davison
    No doubt, definitions of full service will rapidly evolve.
    We’d all do well to remember this truism -> “…The way we think about mortgages is not always the way the consumer thinks about mortgages.”
    Banks as a whole are investing tens of millions in their online channels. They know that today online origination is the crumb that fell off the bread table. In time, it will be a slice. Give it 10-20 years and maybe it’s half a loaf. :)
    On buydowns, lenders already limit them. That move will cost them market share in time, so hopefully they reconsider. Don’t forget, though, many brokers offer cash back to lower the effective rate, and there’s no controlling that, other than refusing to deal with online brokers all-together. And that just doesn’t make business sense. Online will, in time, deliver huge volumes of AAA-credit borrowers to online-friendly lenders. Shutting that off would just benefit a lender’s competitors.
    As for FSCO, they do an amazing job protecting consumers but they understand the importance of maintaining competition and choice for borrowers. Hence, I doubt they’d derail the online model with onerous regulation. In the investment space, suitability is effectively addressed by every non-face-to-face broker in Canada (iTrade, Questrade, QTrade, etc.). That same model can exist successfully in the online mortgage space.

  26. I have been a subscriber on your site the last few years and have always found your reports to be germane,current and focused on pertinent issues to industry participants.
    There are various channels out there that work and will deliver the product to consumers, some will work better than others; but choice is an important asset.
    Ultimately for CMT and its readership, if you continue to provide the same level of insight and balance that I have generally noted, then it should be taken as a job rather well done. All the very best.

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