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.
Andrew Ramdeholl, DUCATo 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.
Related: DUCA & Brokers – This Should Be Good
I have been a Member of “The DUCA” for 30 years. Sharp business managers, with an attitude to keeping costs low, while passing a deal along to the members.
Staying away from Morweb & D+H, to help reduce costs, & increase the cross selling benefits are typical of their hands on management style.
Other credit unions & monolines could learn much from their style…brokers & other lenders could also benefit greatly from getting “off the pipe”.
Some great points in this article: we as mortgage brokers need to start thinking about how to force efficiencies into our channel so we can pass the benefits on to the consumer. It starts with figuring out with what our lenders need to reduce their costs so the client can get a better deal. Get away from high cost the D&H electronic fax system and do more of the real underwriting for the lender at the broker end. This represents the future.
Andrew and the entire DUCA team should be commended for the innovative lending program that they have created. By focusing on efficiency, both internally and externally, they have been able to deliver a market leading product. The future of the industry is bright if reputable lenders like DUCA continue to use the broker channel, to lead their growth initiatives.
Does anyone know what lenders have to pay to receive deals from Expert/D+H?
Do brokerages have to pay D+H also?
I heard lenders pay something like 5 or 6 basis points. Brokers pay nothing. In fact, I heard D+H kicks back some of their take to broker houses in the form of marketing dollars or the like.
DUCA’s management has really put their best foot forwarding with creating such a cost effective model. I know clients are impressed and we are seeing them grow their relationship with DUCA beyond just mortgages.
DUCA has shown that even with a low cost, high efficiency approach it doesn’t have to come at the expense of broker or client services – Both have been fantastic! Congratulations Andrew and the whole DUCA team on a very successful year.
Duca has been a terrific nitche lender for a long time
Great to have a follow up report to a “new” concept, that a year later is still very positive. Rare ……..and good to hear about.
The entire team at DUCA has done a great job at implementing the lending program that they have created. The focus on efficiency delivers a market leading product. Excellent customer service from start to finish. Congratulations to Andrew and his team.
I wonder what the delinquency rate is on that portfolio. And how many instances of fraud and misrepresentation?