The industry's most outspoken veteran

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Ron Butler has some controversial opinions about the challenges currently facing the industry – and he doesn’t care what you think about them.

Ron Butler, founder of Verico Butler Mortgage, is one of the country’s highestfunding brokers. He relies on a controversial low-rate, high turnaround, commissionbased model that has drawn the ire of his compatriots across the country. And he’s perfectly fine going against the grain. “I enjoy pissing people off,” he says, “and I enjoy being right.”

Market outlook
Butler has worked in sales positions since he was in his early 20s and founded Butler Mortgage in 1997, so he’s lived through various evolutions – and devolutions – of the mortgage industry. Because of this, he recognizes that the industry today is facing its fair share of challenges, despite years of consistent growth.

“We’ve experienced 20 years of straight increases in property values, with a tiny dip in ’08 that lasted about six months,” he says. “People in their 30s and 40s today don’t know a market that isn’t on the up. That may change in the next 24 months. If you’re used to the idea that your house will go up 5% to 10% a year, what are you going to do if it goes up 0%? Or even goes down?”
It’s a situation that many homeowners – and, indeed, brokers – have never had to face.

“For mortgage brokers, we’re all here for activity,” Butler says. “There is virtually no renewal system in this business – people say there is, but it is really 1%. If we rely on day-in, day-out activity, what happens when sales fall?”

That’s a lot of doom and gloom to consider, but Butler believes all brokers should look toward the future with eyes wide open.

“The two things brokers should be thinking about are the possibility that prices won’t continue their continuous ramp up and the possibility that underwriting standards will continue to get tighter and tighter in this business,” he says. “Those two things happening at once won’t be too pleasant.” 

Those changes would likely make it tougher to do non-income-verified deals at every major lending institution, Butler says. “There will be pressure to do less rental business; there will be higher standards; there will be continuing pressure on [debt ratio guidelines], continuing pressure on down payment requirements.”

And these changes, Butler says, could force many brokers out of the industry. “Even though the people who are doing not much business now will simply quit, people who are doing a lot of business now will be doing much less,” he says. “It’s not a welcome thing.”

The benefit of buy-downs However, with every challenge comes a new opportunity, Butler points out.
“The reality of life, as indicated by the FICOM proposition, is that people being paid 115-125 basis points to complete a document and fund a mortgage with somebody else’s money does not make sense,” he says. “That’s the future. What is Uber? Uber is something that was simply a better idea, more convenient. All the talk of no licensing, no insurance, is just clutter. If you like the system better, and if it’s more convenient for you, you don’t care.” For his part, Butler has gotten ahead of the game by relying on a rate buy-down model that results in lower commissions but higher volumes. That business is predi- cated on making just 35 basis points per transaction.

“If you spend time with tech people and the people who are changing the world, what
they talk about endlessly is re-engineering from the consumer – starting with the consumer and working out, instead of starting from profit and hoping it touches the consumer.”

It’s a controversial stance, but Butler believes this business structure will become even more prevalent in the future as more and more clients embrace technology and the ease provided by operating digitally.
“Wouldn’t it be nicer if the client just got the best possible deal and didn’t have to meet anybody to do it?” he says. “Someone online or on the phone could meet with them – something that is efficient and easy to do.”

However, he remains skeptical about the average broker’s willingness to adapt to this way of doing business. 

“Nine out of 10 brokers are so wedded to their model of earning 125 basis points on every file,” he says. “How is anybody going to function on 35? If you want to give better rates than broker ABC is offering, you can’t cling to legacy models.”

  • Blair Goodman on 2016-04-07 10:47:41 AM

    I agree with Ron the industry is changing, however, his Uber comparison is ridiculous unless he's suggesting mortgages can be written and funded by unlicensed individuals....oh ya he already does this. Secondly the best thing for our industry is for lenders to eliminate buy downs all together. Buy downs are a questionable ethical practice that in my opinion weakens a persons position of integrity. How can you possibly do it for one client and not all? Don't all clients deserve the best product for their needs and not one that may sink them in the future? We all know it's not about rate...well most professionals do. I will give Ron credit for one thing, creating the race to the bottom, which only benefits lenders as their average rate of return increases and their cost of facilitating mortgages decreases....

  • Jesse D on 2016-04-07 10:59:57 AM

    Butler is right. I don't subscribe to his model day to day albeit I will provide the lowest rate when I can although I have clients look at other features as well. After all, we commit to providing the best suited product to our clients when we get licensed. This works for Butler, so all the best to him and all the best to everyone else with different models. n we really say that anyone is right or wrong when they are looking out for their client's best interests?

  • John Bargis on 2016-04-07 6:35:38 PM

    Ron Butler is going to be Ron Butler regardless of what anyone says.

    Although his model caters to a small group of non-repeat clientele (as Ron himself has admitted), who are for the most part looking for the "No Frills" no consultation type product with more onerous restrictions and financial penalties, statistically speaking the large majority of consumers prefer to be properly informed and advised on their available mortgage options, which requires time and effort on the part of a qualified professional mortgage broker.

    The reality is that the mass majority of consumers still very much appreciate and prefer the full service interaction with a qualified mortgage professional. When you break the numbers right down over the term of a mortgage, the small difference in cost for the "Full Service" model without question yields a greater value to the borrowing public, vs that of a deep discount "No Frills" model whereby the consumer is pretty much getting what they pay for. Lets also keep in mind that the discount brokerage houses themselves typically at times employ "bait and switch" tactics, that ultimately don't offer the client the best rate they thought they bargained for in the online ad they responded to.

    I recall an exchange on line with Mr. Butler approximately 3 years ago, when he claimed that in 5 years 75% of all consumer mortgages would be originated on line....Well we're 2 years away from that prediction and the industry is nowhere near that mark. So let's all take a deep breathe and take what Ron says with a grain of salt. Because as much as Ron deserves credit for most of his accomplishments, he's simply way off the mark on this one.

    We saw the discounting game form in the Real Estate space, yet Re/Max and Royal Lepage continue to thrive and still retain the vast majority of the market share.

  • Jake Abramowicz on 2016-04-08 9:48:17 AM

    Gotta love Ron's reviews online.

    Google, 2.3/5.,1,,

    Yelp 1/5.

    Butler may not care what you think, and clearly he does not care what the public thinks either.


  • Evan on 2016-04-08 10:04:45 AM

    I do not always agree with the position that Ron takes, but in this case I do have to agree with him. Uber as an example and one that Blair claims is ridiculous.

    First off... Blair - most mortgage brokers in Canada are glorified fax machines. You take the application from the client, send it to a lender for approval, and then gather up the documents and send them to the lender for approval. Outside of having access to more lenders, the reality is that is your main differentiation - Unless you are Ron, and buying down the rates for every customer, you are not offering your customers better rates than the banks - and you haven't been for years.

    The broker market was built on the predication that the rates were lower than the banks, any seasoned broker knows this as the simple truth. IN the 90's all you ever heard was "we can beat the banks" - fast forward to 2016 and unless you are buying down the mortgage you can't. Ron, instead of complaining how unfair it is that the banks are now competing, have unlicensed employees, etc. looked at the world and said... "instead of trying to change everyone else, I am going to change my model."

    He did it, he is very successful, and you know what... there is absolutely nothing in the world from stopping someone creating a fully self-service model for the consumer other than trying to figure out what that model is. Why? Because the consumer does not need a license to do it for themselves.

    You wait, someday there will be a technology developed that will make mortgage brokers redundant, just as there is more and more technology that is making other traditional jobs redundant. People will always claim that people want the hand holding and the service, they said it when self-serve checkouts (now more than double the transactions than a traditional cashier) were introduced, they said it when ATM’s were introduced, they said it with online trading, with auto manufacturing, and in almost every other industry around the world. Guess what… the people who claimed the consumer would never stand for it… were all wrong.

    It's going to happen. You can fight it all you want, but change is coming, it is looming over our industry like a great blazing sun… the thing is that nobody is really paying it much attention… yet. Like it or not change is coming, and there is nothing you can do to stop it.

  • John Bargis on 2016-04-08 5:04:34 PM

    Jake....The public online reviews you've posted on the Butler model through Google and Yelp by the very consumers they apparently "Advocate" for, are exactly what consumers should look forward to when they're looking to for the "No Frills" (we'll just process your mortgage model), vs that of the full service/advice model.

    As for Butler's support behind FICOM's new initiative, based on the public on-line reviews, I would suspect his motives to be more self serving to accommodate his model, and not so much to serve the best interest of consumers as he so vehemently claims.

    As I stated in an earlier article last week on MBN, FICOM needs to seriously and carefully consider the irreversible fallout from their new proposal of the Form 10, including the very real possibility of an increased number of legitimate complaints related to lack of service and consumer expectations, vs their concern on disclosure that I'd be willing to wager are minute and insignificant. There is no doubt that the brokerage industry has added a huge value and benefited consumers on both the pricing a product fronts, as is evidenced by our growing numbers - I say to all, be careful what you wish for before it's too late!!!

  • Ross Taylor on 2016-04-13 10:53:09 AM

    Anyone who is a leader in their space deserves my respect. Ron's model is not for me, but then neither is his target market - I kinda cringe when I receive an unsolicited phone call and all the caller wants to know is my best rates.

    Experience has told me my success with such clients is about as good as Ron's is with renewals!

    Give me the difficult mortgages; the ones with hair on 'em; hard to verify income, bad credit, multiple properties etc.

    Let me prove my value proposition as being much more thanas a "glorified fax machine" as some wag suggested above, and I and others like me will survive and thrive in this new era.

    These bank turn down clients do not hassle much about rates and fees. They NEED our services.

    Kudos to brokers like Zvika Shluper at DLC Mortgage Masters who was a very early adopter of this sort of business model, and is on a race to the top of the industry himself right now.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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