Another rate site has brokers frustrated

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Whispers of a new rate site being backed by a deep-pocketed company have made their way across the industry, leaving some brokers frustrated.

“I can tell a lot of brokers find rate sites frustrating; it’s another (force) getting in between you and the customers,” Paolo Di Petta of Di Petta Mortgage told MortgageBrokerNews.ca. “It’s adding an intermediary, which is sort of unnecessary (and) I think it’s going to be a problem for a lot of brokers who are more rate focused and brokers who are dealing with a lot of conventional lenders.”

A broker who wishes to remain anonymous brought the new service – Rates.ca -- to the attention of MortgageBrokerNews.ca and when reached for comment the company’s representative declined to offer comment.  “Currently we are not in a position to discuss specifics,” he told MortgageBrokerNews.ca.

Rates.ca’s offering is being touted in a Powerpoint presentation circulated to brokers and its features seem in line with its competitors.

Rate sites aren’t a new trend. Brokers have been dealing with this type of competition for some time and while are divided on whether they hurt business, one leading broker – who doesn’t use the services provided by rate sites – believes they do.

“I don’t have clients that use their services, I don’t use their services; what the competition does to drive their business is their prerogative,” Mauro Di Cosola of Dominion Lending Centres Mortgage Village said. “Does it hurt my business? I guess it does.”

However, he understands the consumer’s desire to use such services.

“It is frustrating, but that’s the beauty of a market; people, who buy things, want the best price (but) I know that when a client comes to me from a renewal source, they aren’t just coming to me for best interest rate they are coming to me for a holistic service,” Di Cosola said. “I provide not just a mortgage rate. No offense to a lot of these rate shoppers but they will hang up on you once they hear your rate.”

And he’s even found a silver lining in the new trend.

“If anything, these rate sites stop tire-kickers from phoning me and wasting time,” Di Cosola concluded.

  • Paul Mangion on 2013-11-20 8:51:04 AM

    Once again we are doing a great job at racing to the bottom. I think most of North America does this pretty well. I will sit by and watch while the industry implodes. There is money to be made in other people’s misery.

  • Mark on 2013-11-20 8:56:52 AM

    I think that at this point new rate sites are actually a good thing. Lets face it, whether there is one rate site or 10, the effect on brokers is the same. They are all offering rates that have been bought down to the lowest point possible, yielding a very low profit margin. That is why you find that these rate sites are basically dealing with only a handful of brokers who are willing to work for pennies on the dollar. The more rate sites there are, the less business each one of those sites will be getting, lowering their profits even more. Again, this could be an issue for the newbies, but a well established broker has proven to provide their clients a service that they will not get from a rate shopping site.

  • Alphonse Negro on 2013-11-20 8:57:25 AM

    The mortgage brokerage business has in the past taken a short term approach and focused on the best rate... But in reality you are underselling the added value that you bring to your clients. You are mtg facilitators that get buyers into their first home. You are partners when it comes to helping your clients build wealth through mortgages.. Do not fear. We are in a business where relationships are more important than rates.. Forcus on the qualities and skills that you have acquired over the years and not whether you have the right worm. Bait is Bait! Wishing you all great success!

  • LindsJJ on 2013-11-20 9:08:41 AM

    Im not sure why many brokers assume that brokers on ratesites only provide rate and not good service. Why cant they do both? Would a consumer want a broker that provides great customer service OR a broker that provides great customer service and a lower rate? Can some explain to me what a broker that offers better customer service actually looks like compared to a ratesite broker?

  • Mark on 2013-11-20 9:34:36 AM

    LindsJJ, the explanation is very simple. When you have to process triple the volume being a flee market broker to make a living, you have very little time left to actually monitor your client's mortgage once the mortgage is funded. Therefore, should the industry present itself with a better option throughout the term of the mortgage to the client, the flee market broker will not be able to pick up on that as he/she are too busy processing volumes at bottom feeder commissions. The same is true for when the client's mortgage is coming up for renewal. There is only so much time one can spend on insuring that the client gets the best possible rate locked in well in advance of the renewal date.

  • Lior, Mortgage Edge on 2013-11-20 9:36:42 AM

    The brokers who are participating on these rate websites need to understand that they not only commoditize themselves by focusing purely on price, which means that as a salesperson you are offering no value whatsoever to your prospects, but they are also providing lenders with an incentive to pay the industry as a whole less on a referral. This in and of itself shows how foolish some of these brokers are because renewal rates at most triple "A" lenders are already at 85% to 90%. So what's your residual plan exactly? You bring the client to a lender for pennies on the dollar, and in 9 out of 10 cases you won't see any future residual income from that deal. If lenders see that brokerages are willing to close these deals for 20 bps, this threatens the pay for the entire industry.

    There is good reason why the banks are not participating on those websites. Razor thin profit margins don't pay the bills and dilute the value proposition. Except that the banks have something else to sell the customer to make up for the initial loss. A Mortgage Broker doesn't. The banks are willing to take a hit on margins now because they know that down the line the likelihood of the client renewing is very high. There is a plan to capture long-term residual income at the expense of short-term loss. Brokers who participate on the rate websites show they are willing to work for almost nothing and have no plan at all for residual income. It is a short-term gain approach that threatens their own livelihood. If the whole industry shuns these websites, they won't exist because the banks are not going to post their discretionary pricing publicly.

  • John Bargis on 2013-11-20 9:44:32 AM

    A race to the bottom it is indeed, and unfortunately there are few at the moment that are oblivious to the serious ramifications the mortgage broker industry will suffer if embraces this model.

    By embracing the rate site model, we would effectively over time be in the exact same position as we are today from a competitive standpoint, with much smaller margins. In other words, we would be placing ourselves in a position of having to working harder, not smarter.

    Further, the rate game through rate sites would very likely lead to the monolines having to rethink their strategy with brokers on the finder's fee front, as well as perhaps considering going client direct as a result of the economics.

    I caution everyone in the industry to think very carefully about the irreversible consequences of getting caught up in the rate site hype, before considering their participation in what will certainly lead to the erosion of their business.

  • Alphonse Negro on 2013-11-20 9:58:12 AM

    I love the fleamarket comment.. It seems this way but it really isnt.. This is my take and please understand that I have been in this business since about 1985 and yes there is a race to the bottom. What I see happening is that some very smart and yes smart brokers have realized that the referral commission ois no longer so great that giving the lowest rate is the door to getting all that volume bonus money that the lenders are giving these smart brokers at the detriment of the mortgage brokers that do focus on relationships, follow up, repeat businness and a great rate... Individuals now have teams working for them so that they can get all this volume bonus income to make up for little or no incentive on the actual mtg. CAAMP has a mtg convention coming up perhaps this is an issue that needs to be addressed in order to stabalize the business and bring integrity to the business. At least in the short run. In the long run technology and the social media will become the source of origination for mtgs. Just look at what is happening in Korea and Australia. As lenders race for profit and sustainability we will have reached the bottom of the independant mtg broker.... These are my comments but I also think our reality today... Focus on winning a new client everyday and forget about what everyone else is doing.. All the pieces will fall into place but in the meantime answer that phone your new client is waiting. :)

  • Mark Brennan on 2013-11-20 10:00:35 AM

    Will these rate sites do more than just show rates? Will they outline any and all restrictions? Allow a side-by-side to compare, or just click here for the cheapest rate alone, offered to you by the highest bidder?

  • Ron Butler on 2013-11-20 10:01:42 AM

    Lior, Everyone is entitled to their opinion. There are many points made here that are valid and worth consideration. I am okay with everything said here in everyone's posts but one word: "foolish" .

    Lior, calling me and those brokers who use these sites foolish is unwise. You can make all the intelligent comments about the economic dangers these sites pose as John does and you can even question the services levels as others have because that is fair question but simply calling us foolish: no, not appropriate.

    I can assure you if we ever engaged in a public, one on one debate on this subject I would not be the one who would appear foolish. I have done those debates, at the end nobody would use that word to describe my position.

  • Mark on 2013-11-20 10:17:37 AM

    Ron,
    I am almost 100% positive that Lior was not referring to you as foolish, but rather to the army of agents/brokers who work under your umbrella. They are working on tiny margins and very little compensation, while making you and your company a much greater profit. I guess you can call it an innovative way to run a brokerage, but Lior is correct that long term you will not be able to sustain the sweatshop in this manner. There will surely be other (rates.ca a great example) that will join the ranks of the sweat shop broker. This will continue to destroy the integrity of the business as you will not be able to hire quality brokers but rather cheap paper pushers only. But whose to say, banks have an army of paper pushers working for them processing their deals, they seem to be making money. It's a tough call...i think only way to beat this system, is I guess join them and compete for the paper pushers. That will also come to an end at some point...as rate sites will have to pay more to keep these employees in place, once again contributing to the downward spiral.

  • Marc2 on 2013-11-20 10:23:57 AM

    I participate on the rate sites, and I still give great value and full service advice to all of my clients. Many of the clients I have met via the rate sites have referred me other business as well. I must ask though, what is this "race to the bottom?" What is the bottom? To me this is akin to what happened in the travel industry when Travelocity and Expedia came along, and the travel agents said almost the exact same things, and now, I can't remember a time I was in a travel agency.

    I've been in the banking and mortgage business for a long long time. The current broker industry was built and still to this day lives on "we can get a better rate than the bank will offer you..." Everything was fine when it was us vs them. Now that there is competition within the brokerage industry, people are getting their knickers in a knot. I find this to be laughable and wanting their cake, but no one else is allowed to eat it.

    This is a competitive industry, people can compete using the tools available to them, as they are available to all. Choice is a powerful thing. If you choose to use rate sites to generate clients, good for you, if not, good for you too. Just don't separate the ability to provide service from the ability to offer a lower rate, based on your choice. I remember a time when 75 Bps was high level of commission, so maybe the industry is just getting spoiled a bit now, and not remembering where we came from.

    Oh, and Mark, nice racial profiling statement about Chinatown. Shows your true colors eh? That's professionalism for ya....lol.

  • Ron Butler on 2013-11-20 10:28:11 AM

    Mark,

    It just demonstrates how little this is understood: there are no agents. There are salaried FSCO, FICOM and RECO registered people who are happy with their incomes and normal work hours. They work hard and the Butlers who will speak at some point to almost every client work a bit harder. There is such massive misunderstanding and constant false conjecture amongst other industry people about how rate discounters work; it is really not worth even commenting on these stories.

  • Mark on 2013-11-20 10:43:48 AM

    Ron,
    Again, your model works for you and there is nothing wrong with your approach. Not that you are looking for anyone's approval. You have gone from having brokers/businessmen processing deals, to strictly employees. These employees is where the service aspect down the road beings to suffer. When a broker is his/her own businessman, they have more of an incentive to follow up with past clients, when they get paid the same fixed income, there is no going above and beyond to service the clients interests down the road.

    Marc2,
    Not sure what colors you are talking about, but my statement has nothing to do with profiling. It's a simple fact. Goods purchased in China town are cheap, and they lack in quality. Is there something incorrect about that statement?

  • Mark on 2013-11-20 10:44:06 AM

    Ron,
    Again, your model works for you and there is nothing wrong with your approach. Not that you are looking for anyone's approval. You have gone from having brokers/businessmen processing deals, to strictly employees. These employees is where the service aspect down the road beings to suffer. When a broker is his/her own businessman, they have more of an incentive to follow up with past clients, when they get paid the same fixed income, there is no going above and beyond to service the clients interests down the road.

    Marc2,
    Not sure what colors you are talking about, but my statement has nothing to do with profiling. It's a simple fact. Goods purchased in China town are cheap, and they lack in quality. Is there something incorrect about that statement?

  • Alphonse Negro on 2013-11-20 10:44:31 AM

    Mark you may be right, big brokerages are actually hurting the business and the REAL INDEPENDANT MORTGAGE BROKER is actually competing with both the brokerages especially on getting clients based on rate.

    As for banks I am on the otherside of the fence and believe there are no paperpushers.

    However having said that. Lets forget about rates and focus on paper which I will show you is a strenght.. Since falll of 2008 tax payers became victims of a loose mtg industry in most parts of the world and their were huge bailouts whose effect will be felt even 30 40 or more years from now as governments struggle to repay the trillions in bond money raised to repay useless and valuless mtg paper.. Govts are now holding lenders accountable for the quality of mtg business that they put on their books. I can tell you that mortgages are documentation driven and not rate driven anylonger. This is wher all mortgage brokers can have an edge in the business by building on the relationship, gathering the right documentation and reassuring your client that you can get your client through the mortgage process and still get nim or her a great rate.. There is a reason why OSFI was invited to the CAAMP convention and that is to relay the message of how impotrtant that paperwork and documentation is to your industry... Use this to your advantage. Money is made when there is a relationship.. The industry needs to accept that all partners have to share in the relationship and not just for the term of that mtg....

    Focus on building your business on building relationships and sharing the benefits of a client relationship with your lending partners..

    There is business for everyone, clients in these hard times are looking for a successful partnership !

  • Paul Mangion on 2013-11-20 10:49:47 AM

    Just to clarify what a race to the bottom is. Its when you trade income for volume so you do twice the amount of work for the same traditional pay. This works fine until the volume goes away and you find yourself exiting the industry because you can't make enough to live. This is not unique to this industry. Look around you, people buy crappy furniture made in china or cars made offshore. This type of behavior will simply cause more people to take menial jobs and erode our customer base. Cheers

  • John Bargis on 2013-11-20 12:39:08 PM

    This type of exchange is exactly what rate sights are promoting.

    Lets keep in mind that participation in rate sight transactions not only forces the broker to significantly reduce their margins with bought down rates - it also comes with a hefty price tag to be a part of regardless of whether or not one ends up with the deal. This isn't so bad when rate sites represent a smidgen of the business in the grand scheme of the mortgage industry. Now multiply that times the number of brokers in our industry, and include the lenders in the mix. This can't be a good thing.

    We also need to take into consideration rate sites that engage in both the broker space and this deep discounting craziness. The outcome to all of this inevitably will not be favourable to our profession. It actually only serves to diminish our value in the mortgage space as professionals.

    If we allow this hype to continue for the sake of rate sites profiting, we will all be fighting for smaller piece of the pie for much less....and that's a fact.

  • Blair Anderson on 2013-11-20 6:08:08 PM

    Every market is ultimately defined by the consumer, and we all know how diversified they can be. If you want to buy a 50 inch flat screen TV at the lowest possible price, you can go to any number of big box stores. You don’t even have to visit the stores, you can purchase directly from their websites. Same goes for amazon.com. But if you require some research and dialogue with a knowledgeable sales representative, who can guide you and open your mind to other considerations, you should probably consider some more hands-on, boutique alternatives.

    The mortgage market is no different. Just decide what consumer you want to service and market yourself accordingly. At the risk of sounding self-serving, I started an online alternative to rate sites for mortgage originators that doesn’t buy in to the “race to the bottom” culture. Instead, the website represents an investment by leading industry professionals in a culture of education, collaboration, and innovation. Consumers are encouraged to invest 4 to 12 months researching their mortgage before they apply, and reap the rewards. That is the philosophy behind www.MortgaeResource.ca.

    Yes Mark, consumers can compare rates side-by-side, along with many more features and less talked about metrics. Consumers can also research the mortgage professionals in their city, across Canada, to learn more about them and the markets they serve. I could go on, better you visit the site…

    If buying down rates, flee market brokering, is not for you, register your free account on MortgageResource.ca and market yourself to consumers looking for a more relationship oriented experience.

  • Alphonse Negro on 2013-11-20 6:35:11 PM

    A propos des commentaires de Blair Anderson,
    Belle site. J aimerais savoir si vous est actif au Québec... Mes intenytions sont d etre dominant dans le marché du courtage hypothécaire. :) merci de me revenir.....

  • Blair Anderson on 2013-11-20 6:47:26 PM

    Hey Alphonse, sorry my french is not so good (thank god for google translate). Yes, we are active in Quebec. We currently have 10 professionals registered in Quebec. There is room for many more. Please email me if you want additional information.

    blair@anderson.ca

  • Alphonse Negro on 2013-11-20 6:55:52 PM

    Thk you for getting back to me. I will email you. I am alegend having beem a mortgage lender since 1987 way before the industry took off.. This probably makes me a legend however I still have to proof myself everyday and with everydeal so I emphasize with everyone chatting on rate issues.. My goal is to dominate the mtg market in Montreal both amongst anglophones and francophones.. I will be emailing you. I did like what I saw on your sight. Congratulations

  • Harsh on 2013-11-21 9:04:09 AM

    In any market, there will be competition - and people will think of different ways to capture larger portion of the market. So, what is new here? Of course, some of the market-approaches will simply fizzle down while others will change the face of the market. No matter what, the market will arrive at a new 'balance' and will continue until someone else throws a new rock in to create further ripples. Of course, every time this happens, it causes anxiety due to the fear of losing your own market share. Eventually, I think there are two (among many) important things to think about. One- Is this going to benefit the client? and two-how can I re-position myself to adjust and take advantage of the new reality. There are so many experienced brokers here on the forum - and I am really learning from the comments. My compliments to all of you!

  • Dianne on 2013-11-21 10:42:41 AM

    You don't pick a Financial advisor based on the price of the stocks or investment so why would you pick a Debt Advisor (which we are) by rate? Sell your service not your rate.

  • Lior, Mortgage Edge on 2013-11-25 9:02:53 AM

    Marc2:

    "I participate on the rate sites, and I still give great value and full service advice to all of my clients."

    How exactly when they are shopping you on price? Whenever the buyer-seller relationship is focused on price, especially from the onset, your prospects clearly not care about the "full service" value you provide because full service has a premium. After all, more time, more number crunching, more comprehensive needs analysis, possibly multiple meetings, etc.

    Also, when you refer to full service, what do you mean exactly? What service are you offering that someone else (i.e. your competitor)? The reality is, Marc, if you drop your pants by going to the lowest comp, you add no value whatsoever. If you are just participating for the sake of bringing in the fish (sic), then in the eyes of most of your prospects you just undermined your credibility. Either way it is a losing proposition and as JB mentioned, there are long-term consequences to the industry as a whole.

  • Marc2 on 2013-11-25 10:59:38 AM

    Lior, your comments are short sighted. Price and advice / service are mutually exclusive. Just because I offer Canadians the best price possible, and I have figured out what I am fine in accepting for commission for my work, doesn't de-value the knowledge and advice I provide. Yes, clients call me based on the rate, but through conversation, they still have questions and ask for advice for different situations. This is what you are missing. You think that price is the only discussion, when it isn't. It is a major part of the discussion, but not the only part. In no way does it undermine my credibility. If this were so, the whole broker industry, that was built on offering lower rates than the retail banks on the street has no credibility. I always laugh when people like you will slam the banks for the rates they offer and shout that brokers offer better rates, but as soon as there is competition of the same effect within the broker industry, well, "it's wrong, it devalues, etc..."

    This industry was built on a rate war with the banks. As I stated before, the rate sites are not going away, (ask a travel agent, did Expedia and Travelocity go away?), some will choose to embrace the model, just as some banks embraced the broker industry when they realized they were not going away either.

    I have been in this business for a long time, on all sides of it. Trust me, I add value and give the proper advice to all of my clients, and they send me referrals on a daily basis. I have no problems offering a discount, and making sure they are truely getting the best rate and mortgage package for their situation possible, and one that makes sense for both sides. If you don't like it, that's your problem not mine.

    Let's have a challenge, same client, same person, dealing with each of us, and let them decide, who gives "full service" and if price decreased the level of service and attention.

    Have a great day,

  • Alphonse Negro on 2013-11-25 11:09:41 AM

    Embrace the rate reality it is what it is! Focusing on the complete relationsgip in terms of what are the clients current needs, what aspects of their goals will impact their future banking needs and bring to your lending partner a relationship that is win win for bother the broker and lender will make for a very successful career. Gone or almost gone are the days of rate wars, think about the reality via what is the lenders cost of funds and what is the real message that the OSFI sending.. A solid relationship on a good footing makes for a healthy partnership. it eases Mr Flahertys concerns and makes your client wanting to come back to you for that sound advise....... If you look at the overall picture the small broker will be the winner as they grow their business one client at a time opposed to one deal over the phone at a time..... Wishing all my new friends across this great land called Canada all the success as we move into 2014!

  • Alphonse Negro on 2013-11-25 11:09:53 AM

    Embrace the rate reality it is what it is! Focusing on the complete relationsgip in terms of what are the clients current needs, what aspects of their goals will impact their future banking needs and bring to your lending partner a relationship that is win win for bother the broker and lender will make for a very successful career. Gone or almost gone are the days of rate wars, think about the reality via what is the lenders cost of funds and what is the real message that the OSFI sending.. A solid relationship on a good footing makes for a healthy partnership. it eases Mr Flahertys concerns and makes your client wanting to come back to you for that sound advise....... If you look at the overall picture the small broker will be the winner as they grow their business one client at a time opposed to one deal over the phone at a time..... Wishing all my new friends across this great land called Canada all the success as we move into 2014!

  • Lior, Mortgage Edge on 2013-11-25 11:59:01 AM

    "This is what you are missing. You think that price is the only discussion, when it isn't. It is a major part of the discussion, but not the only part."

    Really Marc? If price is a major part of the discussion then most likely IT IS the discussion.

    http://vimeo.com/69388675

  • Walid on 2013-11-27 5:41:21 PM

    How about this: What if lenders stop rate buydowns, some like national bank do not allow it.
    If that happens brokers will need to pay the client for business. They will run deep into cashflow problems.

  • Alphonse Negro on 2013-11-27 7:50:24 PM

    Good evening everyone. Harsh, great observations and advise and yes Lior you are quite right relationships are very important..
    I would refer everyone to my observations of 25 Nov 2013 at 11:09:41

    This is the reality: Ones edge/advantage are the personilized character traits they bring to their clients like being personal, knowledgeable, creible and quick to reply to your clients needs..

    The market is really changing and the lenders have the upper hand and they look at their cost of funds, at their liquidity, at the relationship the mortgage will bring the lender.
    We are in a very crowded field and its as if their are too many players on the ice....

    Dont dwell on the rate. Focus on building your client base, retaining it and going after repeat business..

    At the moment there is a lack of buyers in many markets, mortgages are not driven by rates or a race to the bottom but driven on profitability and documentation.. The biggest advantage one can offer a realestate agent today is the ability to get a quick approval without conditions and to ensure that all of the documentation is accurate and available so that the respective lending compliance departments release the instructions so than later... Too many things can go wrong if left to the last moment... Clients as well need to understand that yes a good rate is important but will they qualify and do they have the appropriate documentation..
    Next time someone asks you what is the rate, say 10%... Its an ice breaker ..HeHeHe. I do it with some clients and I usually close at a competitive rate.

    On another note has anyone considered going into wealth mgt ( financial planning ) . It seems that there is a need and the field is not as crowded plus you already have a client base....

    Keep working your markets, dont be dettered by negative comments or another rate site.. Stake your ground, own it and enjoy your successes one client at a time!
    Bon nuit!

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