One of the most touted value propositions we express as mortgage brokers is choice. Brokers can compare dozens of lenders whereby lender reps push only one brand: their own.
Having a wide array of lenders allows broker clients to enjoy more customized financing solutions. That’s important because one lender doesn’t fit all. A given bank, monoline or credit union may have punitive penalties, restrictive porting policies, poor blend and increase options and so on. Customers need choice, and our industry depends on it.
That’s why I’ve always found stats like this—from FSCO, Ontario’s broker regulator—to be surprising: Roughly one in five brokerages finance more than 50% of their mortgages with just one lender.
Now, some of this can be explained in cases where licensees must register as brokers under the Act, but essentially act as lenders. But many are just everyday brokers who choose to funnel the bulk of their mortgage volume to one supplier.
Maritz discovered a similarly eye-opening stat in 2011 when it found that 90% of the typical broker’s volume goes to just three lenders. That’s profound for an industry that promotes consumer choice.
This raises important issues:
- Firstly, if you’re a broker who does over half your business with one lender and/or 90% of your business with three lenders, and you boast something like “We have access to more than 40 lenders” on your website, your marketing is deceptive at best.
- It’s a sad commentary when full-time brokers are forced to route their volume mainly to 1-3 lenders in order to access competitive pricing and service. Most brokers would prefer to sell the best product and rate for each unique client, if they could. But too many can’t. They don’t have the deal flow to get those rates and products.
- This reinforces how critical it is for lenders to embrace deal desks (a.k.a., Central underwriting hubs), so that up-and-coming brokers can access status pricing/products while ensuring lender efficiency.
- Similarly, it underlines how vital it is that ALL brokerage networks operate professional deal hubs. It’s unbelievable that some national firms still don’t have them. Those who don’t are doing a massive disservice to their small and mid-sized broker members who are handicapped by their volumes.
One more thing on that topic. For you brokerages who run these desks, please don’t fleece your agents by pocketing the volume bonus and efficiency bonuses. Charge a flat, transparent and fair fee (e.g., 5-7 bps, minimum $100) that’s commensurate with your actual processing costs.
Lender access is sacred. Deal desks should be a service to agents, not a fat profit centre for broker networks, which already earn splits and/or franchise fees. If you superbroker owners out there want the bottom 80% of your agents to prosper, and you want to support young brokers entering the business, start thinking long-term and strategically on this issue.
Brokers may someday lose the rate war, but if we play our cards right, one battle we’ll never lose is product selection. We have to use this benefit to our advantage as an industry by helping smaller/newer brokers access more products efficiently, and with fewer volume commitments.