DUCA Broker Services (DBS) made a splash last April when it entered the broker market with ultra-aggressive pricing offered to select brokers only. The move took chutzpah for the 60-year-old credit union, for multiple reasons.
For one, interest margins in DUCA’s broker channel were (and still are) unusually narrow by industry standards. That was the trade-off for pricing full-featured 5-year mortgages 10-20 basis points lower than almost every other lender in the country. Sustaining that model required extraordinary efficiencies—including what other lenders deem inconceivable, letting brokers underwrite their own deals.
On top of that, the company risked alienating hundreds of brokers due to its exclusivity partnership with just five firms (now eight).
But despite those hurdles, the innovative model championed by Andrew Ramdeholl, DUCA’s VP, Commercial Banking & Broker Services, has been highly successful. Lending in the GTA alone, DUCA generated $500+ million in mortgages through December 31, 2014. That’s from only a handful of brokerages in just eight months. And DUCA processes that deal flow with just a tiny fraction of the personnel of its competitors.
To pull that off, Ramdeholl demanded maximum efficiency from his brokers. And it worked. DUCA’s submit-to-fund ratio is now 92.8%, which is dramatically better than the 55-65% industry norm.
“The DUCA Broker Services channel has been and continues to be a profitable source of business,” Ramdeholl says. “With our securitization ability as well as deposit generation efforts, DUCA is well positioned for an even more aggressive stance this year.”
Critical to enhanced profitability is getting mortgage customers into other products. “A primary focus for DUCA has been its cross-selling abilities. As the DBS platform has been originating clientele with higher-than-average net worth, the conversion of their full banking relationship is key to adding further profitability to this broker-driven channel. Efforts to date have yielded thousands of DUCA products being distributed to these new members.”
And the quality of clients referred by DUCA-approved brokers supports that goal. “Our program is originating more settled, financially mature clients,” Ramdeholl says.
The company provided these stats:
DUCA’s broker-originated clients average a $396,540 household net worth. That’s more than double the Big 5 banks, according to 3rd-party statistics cited by Ramdeholl.
Average loan size has been approximately $387,000, which is also about double the average Canadian mortgage size.
94% of brokered applicants have been salaried/employed with fully provable income.
The average borrower’s credit score is 712.
Over 71% of broker applications have been purchases.
Since launching last year, DUCA has made a variety of enhancements to its program, including:
Adding bridge financing.
Reducing its rate buydown cost.
Improving turnaround times to 12-24 hours.
That last point is especially notable given that DUCA doesn’t even use standard deal-submission technology (i.e., D+H Expert and/or MorWeb).
Having access to extra-competitive lenders like DUCA may someday be essential for brokers to compete in an increasingly aggressive rate market. Here’s to hoping the company keeps enhancing its broker model for years to come—and opens it up to more brokerages in the process.