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Mortgage Broker News | 16 Aug 2011, 10:00 AM Agree 0
Exclusivity agreements: It’s a controversial idea, but one whose time may have come, with IMBA President Albert Collu kicking off an industry dialogue on contracts that would penalize clients for using brokers to get better rates at the banks.
  • Ad Lakhanpal, Mortgage Broker, Mortgage Alliance | 17 Aug 2011, 03:25 AM Agree 0
    This is a serious issue and must be addressed. Exclusivity may be a long debate but to start with, if an agreement is signed at the time of signing the commitment that a penalty, equivalent to est. finders fee, will be payable if the client does not complete the deal. I am sure it will improve client retention.
  • Michael Cameron | 17 Aug 2011, 03:37 AM Agree 0
    How about improving client retention by being better than your competitor? While there may be some merit to this approach I see it opening up a window to more abuse than anything.

    If it is an issue for you then don't quote rates until you meet with the client. Make a meeting at your office a way to get them to commit. If they will come to your office for a meeting and you are good at what you do, you likely won't have a retention issue.

    I still think we all need to be much better at what we do before we start looking at this as a 'best practice'.
  • Ron De Silva - RMAI | 17 Aug 2011, 03:43 AM Agree 0
    I would like to see some commentary from the other stakeholder in the mortgage transaction; the mortgage lender. The lender loses in their resource management when deals walk. Any thoughts from lenders on what can be done on a collaborative effort to retain a propspect?
  • Sean Binkley | 17 Aug 2011, 03:46 AM Agree 0
    If you treat your client right, service them well, you don't need an exclusivity agreement. I would never sign a document saying I have to pay someone a commission even if they don't do the job to my satisfaction. I would not expect my client to either. Do you lose one now and again - yep. Doesn't happen often - learn from it and move on.
  • Ron Butler | 17 Aug 2011, 04:12 AM Agree 0
    While I completely understand the thought process that is behind the concept of the exclusivity agreement and I have been through the pain of having deals snatched back by the branch at the last minute myself; I oppose the idea in general and would never use it in my practise for "A" deals.

    The key to any such contract is enforcement and the final solution to contract enforcement when all else fails is always litigation. I believe that Realtors have a whole bunch of previous case law on their side in this debate. I really doubt that we do.

    Setting that aside, the other aspect is that we would be litigating to be paid for a transaction that in the end we did not actually complete and no matter how much advice we gave and how many rate offers we presented; we did not arrange the deal that actually closed.

    You are left with problem of what to do when this litigation goes public. Does any of us want to take the call from the local newspaper or TV reporter asking us to comment on taking a member of the public to court over a deal that we did not actually close? Do any of us need a Facebook attack about litigating our clients? Do we need Google reviews from clients we have taken to Small Claims Court?

    I think we really need to take the long view on this one. Rate wars will end some day but having our provincial regulators wondering why we are litigating members of the public who came to us looking for help may haunt us for decades.
  • Jake | 17 Aug 2011, 04:41 AM Agree 0
    Ron I agreed completely! This is the last thing we need right now. So you lose a client now and then but if the client walks thank him and he'll maybe feel bad enough to send you a friend. If you treat your Clients with respect they won't walk.
  • James Loewen, RMA | 17 Aug 2011, 04:46 AM Agree 0
    Agree with several points, Ron: some feedback from lenders would be helpful given not only the broker is "losing" the deal as lender completed work as well.
    In regards to agents/realtor using exclusivity forms: the BEST agents I have worked with, do NOT have clients sign these until making an offer on a specific home AND that home only! That is earning their clients business through service and advice, instead of through forced agreement.

    Differentiate and add service to increase your attrition rates instead of clients signing a document.

    Lastly realize that as we lose clients to branches, they too lose clients to brokers and ask yourself: Do I want a book of clients that do not see value in my service and will simply refer others that simply play me against their branch?

    Move on to someone recognizing your value and keep spreading the word, broker is better!
  • Ron De Silva - RMAI | 17 Aug 2011, 05:08 AM Agree 0
    @ James....quoting you.... "Lastly realize that as we lose clients to branches, they too lose clients to brokers".... Well said, James!!!! It's the free market demonstrating its most fundamental principle: competition.
  • David O'Gorman Principal Broker, MortgageLand | 17 Aug 2011, 05:34 AM Agree 0
    This NOT an issue about exclusivity or being good at retaining a client. The fundamental issue is the law of agency and who you claim, and who you appear, to work for, the client or the lender. Realtors in most parts of the country have been thoroughly educated as to the ramifications of their agency relationship & responsibilities to their clients & others.

    In general, neither the mortgage brokerage industry nor the people who regulate them, have a foggy clue about the laws of agency.
    How can a principal broker sign an agreement with an institutional lender that indicates the brokerage is a "non-exclusive agent" of the FI, & in the next breath tell a borrower "our firm is working exclusively for you"? Hundreds have.

    As for the comment about a 2.5% penalty,my friend Albert is way off base. The home buyer has signed a "Buyer agency agreement" so the real estate registrant legally works only for the buyer & the buyer agrees to pay the 2.5 % commission, IF the seller does not agree to pay it. This is very similar to the mortgage brokerage industry, working for the borrower but paid by the lender.It is definately not a penalty.
    If I may make a suggestion, that provincial brokerage association's leadership, pool some money and hire W.F. Foster, a law prof at McGill Law School, and the "godfather of agency law" in Canada, so they thoroughly understand the whole situation and have some intelligent direction before they make a proposal to the industry.


    As for not selling rates, who is drinking "bank flavoured Kool-Aid"?...this industry took off like a rocket in the 90's when non-bank lenders came to the table with rates that were lower than the banks and only offered those low rates through mortgage brokers. The First Nats of the world helped us have an industry.
    Money is a commodity and from a consumer's perspective a dollar borrowed from First Nat only differs from the dollar borrowed from RBC by the price paid for it & penalties to get out of it.

  • Carlo | 17 Aug 2011, 05:47 AM Agree 0
    It is definitely an on-going challenge that we face and I believe it would be exbremely difficult to execute an exclusivtity agreement protocol with the many accompanying issues..And, I agree that it is up to us to deliver that exceptional service and advice experience to retain as much of the business as possible. However, I do believe we need the innovative and creative and collaborative input and support from our lender partners to deliver on that experience..What can we do together to make the experience exceptional?. How do we make an often uncomfortable underwriting methodology a prudent credit worthiness methodology where we can differentate ourselves with a unique, simple and easy and value added experience...egs...do not send a 750 + beacon conventional client to their bank for proof of down payment.We as brokers can and must deliver on the advice piece but to be most effective and truly differentiating, we need the collaboration and support of our lender partners on the service piece.
  • Ingrid Menninga- JOLT Marketing | 17 Aug 2011, 05:52 AM Agree 0
    There are other ways to build loyalty with clients than to "strong arm" them with a binding agreements. A simple way to build loyalty is to meet your clients face to face and say fairly seriously that you will be "100% dedicated to getting them the best mortgage for their needs". In return ask for their dedication to you. Everyone will reveal their cards - rate shoppers won't commit and those that really are serious will have no problem telling you they are.


    In terms of exclusivity agreements, if anything, I suspect that most clients would rather sign a deal with a large bank - that they don't necessarily like, but have some feeling of security with - than sign a biding agreement with a smaller, and sometimes relatively unknown, mortgage brokerage.
  • David O'Gorman | 17 Aug 2011, 06:29 AM Agree 0
    To James Loewen...realtors who ask for the Buyer Agency Agreement to be signed just before an offer is being made are not necessarily acting in the buyer's best interests.There isn't any legal relationship between a realtor & a buyer until that doc is signed...once it is signed there is a formal & legally binding relationship...so do I want a realtor who is NOT working for me showing me properties? How do I know he/she is acting in my best interest, unless it is in writing?
    Unfortunately there are people in our society that will want everything from you without appropriate compensation. We don't sell mortgages, we sell the hours in our day & the knowledge between our ears. If we choose to give our time and knowledge away, then that is our choice. But when it is taken from us, without consent & compensation, then is it different then any other form of theft?
    There have been multiple dozens of realtor-related buyer agency cases through the Ontario Courts, some are won, some lost.In the cases where the registrant was sucessful it was because they had fulfilled their end of the bargain i.e. explained the contract, diligently showed properties that met the buyer's requested needs and when buyer's circumstances or expectations changed, they & the client amended the agreement.

    Realtors don't always have to sue to get paid under buyer agency agreements. Most of the time just having a standard agreement produced by a trade association in straight forward English is enough to collect...and if you have to resort to the courts, if you have provided the service under the agreed upon terms, you will likely be paid. No rational business person wants to go to court if it can be avoided, and a properly worded, equitable contract will likley get you your honestly & hard-earned money,before you get to court.
  • jq | 17 Aug 2011, 06:47 AM Agree 0
    @james and Ron, I agree, we are not the only one in business and we are competing against big 5, myself lose a client after giving them my best service right after they sign the commitment as bank rep offer them some perks, still client has the final say on the deal where they want to go, comes renewal/refinance (maybe) they will realize they're stuck with that high interest servicing branch. I am firm believer that if you lose one, two or more will come. Cheers :)
  • Paul Mangion | 17 Aug 2011, 07:54 AM Agree 0
    I have used an agreement with clients for quite some time. I agree with David on many issues and have no problem having clients sign the documents. I pick and choose who I will enforce the contract with if it becomes necessary. The worst offenders who blatently lie to your face can expect collection action. In all casses I settled with the clients. There is one more point I would like to stress and that is the fact that many mortgage brokers go around and try to steal deals and even send them to the same lenders but with lower fee's so in a sense you have done all the work for another agent to get paid and when you tell them the client signed an agreement they advise the client that there is no way I can collect. So lets not just pick on the banks since the same problem exists among us!
  • BC Broker | 17 Aug 2011, 09:35 AM Agree 0
    As for BC and Ficom regulations, I do not believe any fee agreement will hold up in court. Heck we can not even keep a private fee if the borrower backs out within 48 hours after the money is advanced and decides they do not want the money anymore....let alone backing out before money is actually advanced. FICOM will only allow you to keep reasonable costs incurred....not a penny more. Losing clients unfortunately is part of this business. Instead of whining find out why they left you and find a solution. If you can not think of a solution may I recommend trying for a secured bank job !!
  • Jenny | 17 Aug 2011, 11:51 PM Agree 0
    I agree with this exclusivity agreement. I've been saying this for YEARS! There are many clients who just call to get rate quotes, go through an application and have no intentions of going through with your services in the end and just use that info and go straight back to the bank! I think this will be a HUGE change in our industry and if realtors do this I think we should be able to as well!
  • Stan | 18 Aug 2011, 01:14 AM Agree 0
    What I see here, all old 10, 15, 20 and more years they oppose cos they say they are so smart that is You not clients fault. Those Brokers or Agents don't care cos they are on the market long enough and their wheel of fortune spinning fast enough( I hear same in my Brokerage of 70 of us but for rest who is up to 5 or 10 years the true, loosing customer after You spend Long Time to educate inform put together Blueprints on the table, hurts and hurts badly cos next day is going to be less bread on the table, so I don't want to be rut or ignorant but get the dam glasses of and look to reality ,average of mortgage broker or agent is approx. $25,000.00 so only small percentage making real money in this industry that's the reason we should be protected and rewarded for our time and good efforts and 100% commitment to the client. so next time You all reach milliners who don't care how many Jack's A.... You loose in 1 day to the Bank,think what You posting we should be 1Industry not1 bunch smart and reach individuals who they don't care about anything and anyone ales in the industry You work for it You should be protected that on the and of day If those smart individuals turn around and run somewhere ales cos You make them Mortgage Smart They Must pay for Your Time. Amen to It.
    Respectfully to You All and Mortgage Industry.
    Stan
  • Stan | 18 Aug 2011, 01:18 AM Agree 0
    I would Like to see solution not a criticism
    Stan
  • Gord McCallum - First Foundation | 18 Aug 2011, 03:41 AM Agree 0
    I appreciate everyone's comments on here but I really think that David O'Gorman is on the right track.

    We've wrestled with this at times as a company because, until you actually try it, you never truly know what you can expect.

    From our experience, even when you offer fantastic service and competitive rates - often lower than the branch - there is a percentage of the population that will choose a competitor regardless. That's ok - that means that we have a functioning market economy where people are free to choose.

    However, the nature of commerce requires that a business transaction be a benefit to both the provider of the service (Broker / Agent) and consumer of the service (Borrower).

    In my opinion, defining a value for the services and the work provided - after all, you've generated value for the consumer by quoting a rate that is now matchable - is essential and if properly disclosed, documented, and contracted with the borrower, a good business practice.

    We've implemented a nominal fee system for our time on refinances and switches that is due and payable IF and only if we obtain an approval for a client according to their wishes, only to have them walk away. This covers some of our time and effort - it's below what we would make on a commission but at least we're covering off some of our time.

    From our experience, we were skeptical at first and thought there might be lots of objections, but in practice less than 1% of clients object (they probably wouldn't have used us anyway), the overwhelming number of clients sign and our funding ratio - particularly on switches - has gone up substantially as a result. We've only had to enforce the payment twice and because we do it via credit card, collection has never been an issue.

    It's not a hard sell as many might imagine.

    I think as Brokers, if we value our time and our expertise, we need to be ok with having the self-confidence to contract with the client so the relationship properly benefits both parties. We've always had a good carrot - but sometimes you need a stick.
  • Michael Cameron | 19 Aug 2011, 01:07 AM Agree 0
    Stan, Appreciate your perspective and you are correct in that the veterans do need to step back view from all sides. That said, I do not opposed the idea because I think I am "so good". I am concerned about the idea because the requirements to become a broker are very low, which in turn opens up the potential for abuse by under-trained and inexperienced brokers.

    The other issue is the fact that we are fighting an uphill battle on consumer confidence in our channel and the first time this type of thing goes to litigation it adds another black eye to our channel.

    I think we have a lot more work to do in raising the level of professionalism for our channel as a whole before we start looking at this as a 'best practice' for the channel.

    The reality, as you put it, is because most are not trained or mentored well enough to move that income level up. So until we can get better training, supervision and accountability across the board I will oppose the idea as a blanket solution.
  • Murray Savage | 19 Aug 2011, 03:40 AM Agree 0
    I have no problem with the lender trying to keep a client at the end of the mortgage term. My only arguement is that if they must offer the broker the same rates and same incentives that the Customer Service Dept will offer. Don't tell me one rate, and then offer my client a lower rate. We are both trying to get the deal done with the best interest of the client in mind. Lenders should NOT 'cut out' the broker and offer better rates. this especially is true when the only reason the client went to that Lender is because the Broker brought them there originally. We are the Mortgage Originators
  • Doug Pfeiffer - Spectrum Financial Services | 19 Aug 2011, 03:57 AM Agree 0
    You must be nuts to want to "regulate" such agreements. Keep government out of it! Haven't you had enough regulation already? In the words of contract law, "All persons of full age and competent understanding shall be afforded the utmost liberty to freely contract, absolutely, and those contracts when entered into voluntarily shall be held sacred, and enforced by courts of justice." Exercise your rights to contract, people, before we lose those rights altogether.
  • Stan Olech | 19 Aug 2011, 03:58 AM Agree 0
    Thank You Michael for comment on my tots,
    Most of us are trained well; comparable to Bank-mortgage specialists, we all are 100% more trained with mortgage info and products. If you ask any Q.in the bank they going to get back to You because they don't know, but this is not the issue,the real issue is loosing Your client to the Bank after You have done every thing possible. Banks most likely never give better rates, but usually match and we would have protection at least when clients sign commitment with us before.
  • Luigi Orlando | 19 Aug 2011, 04:22 AM Agree 0
    In the past I remember having to pay $ 75 or 150 dollars when a client wanted to apply for a mortgage application and it would be returned to them if we couldn't help them or returned to them after the deal was closed. Just a thought it shows us the client is serious enough.
  • Rachelle...A Lender perspective... | 19 Aug 2011, 05:24 AM Agree 0
    Very interesting comments everyone. I would say, coming from a monoline lender, the mortgage originator is our voice to the client. We pay you communicate our products, polices and message. That's why the finders fee is paid to begin with. The bank doesn't pay a finders fee to a client who comes into the branch because they did the work to retain the clients themselves. As mortgage originators, I hope that the majority of you realize you're worth so much more than just a rate. If you're selling just rate, then you're in the wrong business.
    While these agreements are an interesting topic, and I may agree with them on specific types of deals, I think the bottom line is to look at what you are doing to differentiate yourself from the banks. Do you offer financial advice that goes beyond the mortgage payment but goes as far as helping them find the best financial advisor, helping with household budgets etc? I know an originator that has 1 meeting with each client once a year to go over where they are financially and review how he can help them.
    I can bet you no mortgage specialist does that.
    Keep up the hard work guys.
  • Ad Lakhanpal, Broker, Mortgage Alliance | 19 Aug 2011, 05:40 AM Agree 0
    This problem affects brokers as well as the lenders.I agree that the consumer should be free to shop around. However,once they settle on a deal provided by a bank or a broker, and sign a commitment,it should be enforceable as a legal contract,with penalties for breach.Both,lenders and brokers, invest a lot of time in getting to a commitment stage, and are bound by it if the client accepts it. However, this is a one sided deal and is unfair because the client can walk away any time without penalty. If we can influence a change, and put some teeth into a signed commitment,it will mitigate this problem to a large extent.
  • Roze, Be better then the competition | 20 Aug 2011, 12:26 AM Agree 0
    Competition is a healthy way for our industry to stay on our toes. Exclusivity agreement is not going to be productive to our industry or the answer to losing clients. We need to differentiate ourselves from the big banks by providing to our clients our professionalism, product knowledge and personal service. Sitting down with your client, listening to their needs both present and future. Hearing where they would like to be in 5 years or more. Remaining in contact with them once the mortgage has closed. We're here to help them reach those goals, regardless of the rate. Service is the number one aspect we can offer in huge leaps and bounds. If you're losing your clients you may want to re-asses your interviews with clients. Learn from what you are not doing. You won't need to bind your clients by tying them up with "exclusivity agreements". It'll backfire. You provide the service, your client will be back and they will return with family and friends. If you lose some.. take that information and learn from it.
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