Direct-to-Consumer Marketing in the Spotlight

Marketing FBCertain mortgage brokers almost take it personally when a broker channel lender competes against them.

They condemn lenders who keep their best specials for in-house sales reps and sidestep brokers by paying real estate companies directly for client referrals. Lenders who engage in these practices irritate brokers, such that many brokers route their business elsewhere in retaliation.

The greatest friction occurs when a lender positions itself as being “broker focused,” but then advertises rate deals that are only available to its internal reps. Brokers hate this with a capital “H.” They view it almost as discriminatory pricing.

From the lender’s viewpoint, however, expanding their marketing is not optional. And no one can blame them. Most lenders simply can’t afford to rely solely on brokers.

That brings us to a recent and curious initiative from Street Capital. Street, the third biggest brand in the broker channel, has been advertising great rates directly to consumers via non-broker partners.

Here is one of it’s recent ads:


This rate, which was advertised earlier this month, was lower than virtually all normal broker rates at the time. Although Street notes that the rate was “outdated” and should have been pulled.

The company does confirm, however, that it has been advertising rates below its standard broker rates. And it says brokers can match those rates if they use commission buy downs.

But Street has also gone a step further. It is also providing cash rebates of up to $1,500 to customers who go direct. It then processes affiliate-referred clients in-house using its own licensed mortgage agents.

“We are diversifying channels by creating an affinity network,” explained Chris Reid, Senior VP of Street Capital’s affinity program. He added that it’s a completely separate origination strategy with a separate marketing budget from the broker channel.

Comments in the “I Love Mortgage Brokering” forum (where we first heard about this) were mostly against this practice. But, if we’re being honest here, this is a case that doesn’t warrant a lot of finger wagging, for various reasons:

1. These are not unbeatable rates (Street is advertising prime – 0.45% today). If Street doesn’t cater to customers at these rates, some other lender or broker definitely will.
2. Street is not mass marketing these specials. If it were running TV commercials, press releases and newspaper ads, that would be harder to swallow.
3. Lenders already compete against brokers through their retention departments, which often quote far more cutthroat rates than this little promo.
4. Street’s management are tasked with building shareholder value. To do that, they must boost originations and post constant year-over-year growth. This is one obvious way to achieve that.
5. At least Street gives brokers the opportunity to offer/match its affiliate rates, which is more than brokers can say for some lenders (anyone recall a recent 1.69% promotion?).

Ultimately, lenders who compete hard against their broker partners will always take heat. It’s a trade-off that costs them broker business in exchange for more profitable retail business. The best thing lenders can do in such cases is be transparent about these programs with brokers.

Street has approached its affiliate channel in a mostly reasonable way. If you’re a broker who’s threatened by this news, know that it’s part of a bigger trend…and it is just the beginning. Direct-to-consumer online marketing is still in the tweenie stage. By the time it reaches “adulthood,” we might just miss the days when buying down a rate actually let us match a lender’s mercenary pricing.

  1. What brokers can do to get and keep “their” clients except advise and guide?

    There is no way we can compete with big guys – lenders & banks with rates, we offer our knowledge and experience, but with clients so rate sensitive – how long we can keep doing so?

    For some it will just push towards fraudulent deals, but then again maybe this is just the bigger picture to shut down broker channel completely?

  2. We as brokers must take a stand. If brokers boycott channel lenders that don’t give us their best deals, maybe they will think twice about screwing us.

  3. Absolutely correct. The broker channel as a whole needs to understand it’s value. Consumer education regarding monolines and specific lenders typically begins with a broker. If the same lenders are then turning around and dabbling in ‘screwing’ their channel partners in this manner, they need a clear unified message sent back – which is Avoid Avoid Avoid!

  4. Instead of angry petulance, try fighting for the consumer’s business, better efficiency, discounted rates, modern advertising, reinvestment in our own businesses. Being angry at a company for making a competitive offer to the public makes no sense. Every day of the year Scotia, TD, National Bank, all the Credit Unions make offers to the public at specific pricing, sometimes that pricing is lower than what they offer us, sometimes they don’t even let us sell the product at all. So what! Move on and fight for the consumer’s business. Mortgage brokers keep complaining that they want complete loyalty from the lenders when they rarely are utterly loyal to those same lenders; this is simple hypocrisy. Stop complaining and give the public a better deal on your own.

  5. Brokers have a choice on who to support and for various reasons. What brokers do need to remember is history repeats itself. In Canada that means small banks will get eaten up by larger banks at some point most likely and I firmly believe down the road Street Capital (Bank) will be no different. This is one reason why Street also got away from the renewal and trailer model prior to getting their bank status. For those newer in the industry that may not remember Firstline Trust and their tagline “the brokers advocate”. Well where did that get everyone who thought FLT lived by those words. Most of those at Street Capital came from Firstline Trust and they did a fine job of getting brokers to support them again so kudos to them but be careful trying to retain those clients once the bank status kicks in.

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