A Canadian financial powerhouse is endorsing the mortgage broker distribution model. Manulife Bank, a subsidiary of Manulife Financial — one of Canada’s largest companies — will start making its mortgages available through brokers in 2016.
The launch is expected to happen early in the new year, in time for the all-important spring market. The move gives brokers access to the popular Manulife One (M1) product as well as Manulife Select mortgages (only high-ratio Manulife Select mortgages for now).
The news is a major win for the channel. Manulife is a globally respected brand and a strong balance sheet lender. Its feature-rich product line will augment the superior choice that brokers already afford consumers. Its entrance is a vote of confidence for mortgage brokers, who the bank says are uniquely adept at selling specialized financial products like the M1.
But unlike most new players in our space, Manulife says it’s coming to the channel from a different angle. “We want to help brokers help people get out of debt,” says Jeff Spencer, Vice President, Retail Sales, Manulife Bank and Trust, and a former mortgage broker himself. “Manulife One is not just a line of credit. It’s a way for clients to manage their financial lives.”
Spencer is partly referring to the M1’s interest offset functionality, which lets you combine debt and savings/income into one account. Incoming cash flow (like your paycheque) reduces your debt balance, even if only temporarily, in order to save interest. Here’s more on that.
The M1 also features:
- A revolving line of credit
- A LOC credit limit that grows automatically with each mortgage payment
- Multiple sub-accounts for multiple fixed-rate and/or LOC portions
- Full banking with the second-biggest ATM network in Canada
To date, only a small minority of brokers have been able to refer business to Manulife, and on a very limited basis with limited compensation. Under the new model, Manulife will pay finders’ fees “competitive with the rest of industry,” including paying brokers on the authorized limit of its Manulife One account, and potentially paying a bonus for deals with a minimum amount in a fixed-rate M1 account.
The M1’s two main negatives are the lack of a discounted variable-rate option and its $14 monthly fee. That fee includes full banking and unlimited Manulife One sub-accounts, however, whereas its arch-rival National Bank’s All-in-One has a $6 fee per account.
Manulife’s entry will create formidable competition in the broker channel for National Bank, the only other national lender with an interest-offset product. It’ll also take a bite out of Scotiabank’s and MCAP’s volume, each of which distribute their own readvanceable mortgages through brokers.
Manulife will work with select brokers only and require them to go through a 2- to 3-hour professional development process. “We want to make it a bit more of an exclusive club to deal with Manulife,” Spencer says. Brokers can get more info at Manulife’s CAAMP Expo booth in Toronto on November 15 and 16.
The company plans to outsource its underwriting to a third party, just like TD has done with First National. Manulife couldn’t disclose who its underwriting partner is at this point but promised to announce it on or before the official broker launch.