The nation’s biggest credit union, Vancity, is pulling out of the mortgage broker channel.
The Vancouver-based company sent an email to notify brokers this morning. It has been in the mortgage broker channel since 1991, when it acquired Citizens Trust Company. The channel was administered through Vancity’s subsidiary, Citizens Bank, until 2007 when it was transferred directly to Vancity.
When asked why it was leaving, John Derose, Vancity’s Director of Mobile Sales, explained:
As a member-owned financial co-operative we place a high priority on building strong relationships with our members. The business we generate through our mortgage broker channel often does not allow the best opportunity to build these relationships and we want to focus on those channels that do.
We are able to make this move in large part because our mobile [sales force] capacity has grown significantly since the 1990s. Historically, people have used brokers to get mortgage support and advice at the times and locations that suit them best. Now, with our mobile capacity, we have an expert capability to do this in-house.
Finally, the industry as a whole has been moving towards greater transparency and our members and prospective members can always see our rates posted on Vancity.com. This allows people to determine the best rates without necessarily having to use a mortgage broker.
Vancity did have some success with brokers. Reportedly its Victoria, B.C. market penetration was thanks in large part to broker-originated customers.
That aside, and while it’s sad to see a big brand name leave the market, Vancity was truly a marginal player in the broker space. It has been for a long time. As of the first quarter, it was only the 27th largest lender in the channel according to D+H data, a ranking it’s been more or less stuck at for years. Vancity’s overall broker market share was a mere speck at one-tenth of one percent.
Part of that is because of service issues, say Vancouver brokers we interviewed off record for this story. The other part is price competitiveness. Its broker rates have been absolutely horrendous in the last year. Its 5-year fixed, for example, has been over 3.00% for months. Meanwhile, it’s openly advertising 2.79% on its website for the general public.
Clearly the company didn’t want much broker business and we suspect this decision was in the back of its mind for a while. “The mortgage broker channel represents less than 5% of our overall mortgage portfolio,” said Derose. “We are confident we can replace this business through our branches, our call centre and through our mobile mortgage specialists.”
Naturally, brokers have a different take.
“I think it’s regrettable for a couple of reasons,” said Paul Taylor, CEO of Mortgage Professionals Canada, the country’s main broker industry association. “For our member brokers and the growing number of consumers who choose to use a mortgage broker, Vancity will no longer be an option to consider. With the difficulties many consumers are already facing in the real estate market in Vancouver, less financing options is not a good thing.”
Taylor went on to add, “It is also a disappointing that Vancity couldn’t find a way to make their broker relationships work for them…As other new entrants to the mortgage broker channel are finding, brokers offer a great way to access portions of the marketplace that direct marketing often doesn’t reach. Their individual customer relationships also ensure product suitability when presenting options, simplifying internal underwriting and approval processes.”
One of the new entrants Taylor is referring to is Manulife Bank. The bank invested millions of dollars to enter the broker channel earlier this year, and has reportedly been pleased with its performance to date. Brokers currently account for roughly one-third of all mortgage originations in Canada.
“I hope Vancity revisits this decision soon and reconsiders its position,” Taylor added. “As broker market share grows, it’s difficult to understand why any lender wouldn’t want to be a part of it.”