Association: Rule change could increase pressure to buydown

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A rumoured rule change around fee disclosure will eat away at broker commissions and lending options, argues the MBABC.

“The implications are pretty significant because it will pressure brokers to buydown more business,” Samantha Gale, MBABC CEO, told “Because the whole concept is for brokers to disclose and break down commissions, it will put more pressure on them to take lower commissions.”

Not only that, argues Gale, but the big banks could potentially exit the broker channel due to the increased level of competition.

“The banks will move to protect their branches because they won’t be able to compete with the broker bought-down rates,” she said.

The Mortgage Broker Regulator’s Council of Canada recently released its autumn newsletter, and in it mentioned FICOM’s plans to change detailed disclosure for mortgage brokers.

“FICOM is preparing to require brokers to provide more detail regarding compensation,” the council said in the newsletter. “The additional information is intended to shed light on the incentives and compensation structures for mortgage brokers.”

Gale says FICOM has not yet released any information about what the change would actually constitute. is working with FICOM to attain further information.
  • Dave on 2015-10-20 10:19:51 AM

    More nonsense my business doesn't need. Like we haven't lost enough commission already over the last few years? Rebate clients legal fees and appraisals too? Any money going to be left for us ? There's absolutely no reason to disclose commissions or incentives to clients in the mortgage industry. If they get a good deal and professional service, thats all they want to know.

    Will the banks disclose their profits on every mortgage too?

  • Ron Butler on 2015-10-20 10:25:24 AM

    Odd that Ms. Gale thinks that banks will suddenly leave the broker channel over bought down rates when it has been going on for 4 years. Also interesting to see she thinks that brokers will feel pressure to buy down rates.

    I see brokers making comments in MBN every week that their clients buy in to the advice and service levels that brokers provide and rate or commissions are not part of the equation.

    If brokers are doing a great job why would there be any issue with the client knowing the broker's compensation?

  • Gord on 2015-10-20 10:48:21 AM

    The notion that the banks wont be able to compete with bought down rates is absurd. I think we all know that this is the banks money, they can drop the rate if they like, as low as they like and (especially if they dont have to pay the broker) it's still profitable for them.

    This is a bad idea, transparency for the sake of transparency. FICOM has received no consumer complaints and yet will provide the channel with another competitive disadvantage. The worst part of it is, if all we do is show our clients the top line, they will believe (in some cases) that is what we get to keep and that we are overpaid. What about splits and expenses?

    Furthermore there is no benefit to the consumer. No one knows how much the dentist that fixes your teeth makes, the salesman that sells you the TV makes, the lawyer who completes your purchase makes - they only know what it costs them. Clients should be advised when they are being charged fees or when the rate they get relates directly to the compensation received, otherwise it's not relevant.

    FICOM, please consider what you are proposing here, it's not in the clients interest, it's not in your licensed members best interest... might be time for some reflection.

  • cvmortgages on 2015-10-20 11:01:14 AM

    In today's skeptical world, I fear the clients will assume they are somehow paying more for their mortgage so that we can make our fees. This could actually devalue the perception of our service as 'free' and drive some clients back to the banks. No good can come from this.

  • steve on 2015-10-20 11:44:50 AM

    Is this much ado about nothing? If the scope is targeted at B or private lending like Optimum where the broker is paid 50 bps and then some brokers charge extra to make a reasonable pay. Or small mortgages where pay is low and brokers charge a fee for their time.
    I think we need to see what the target is before getting too excited

  • Paul Therien - CENTUM on 2015-10-20 12:18:17 PM

    In all fairness and with the utmost respect...

    To the comments made by Gord. Dentists do disclose how much they get paid for the work they do because they bill the client. Even when insurance pays the bill they are legally required to give a copy of the bill to the customer.

    and by Dave - Banks also disclose how much they make on the mortgage, it is in the disclosure document for the mortgage.

    I agree that sometimes there is such a thing as too much, as in the case of having to fill our multiple documents to satisfy one requirement. Last time I checked however brokers were required to disclose their earnings to the consumer, including incentive, they were not required to disclose specific amounts in all cases, so I am guessing that is what FICOM is looking at doing having not yet read the proposed legislative changes. That being said, if, in completeing the form 10 there has to be a number put in place as opposed to simply saying that there is fees earned...

    I think that perhaps this will only prove troublesome in the event that a broker charges additional fees to the consumer?

  • James Snider on 2015-10-20 1:13:00 PM

    Wouldn't it then be prudent to then also have the Bank Loans officers disclose their incomes / benefits / vacation pay / holidays / bonus & commissions. To disclose that their mandate is that they work for the bank and not the borrower to obtain best rate of return for bank would be the truth would it not ?

    Isn't that what disclosure is about ... true transparency to create a balanced competition in the marketplace ?

    Someone please tell me how these Institutions are still able to saddle / burden borrowers with additional non updated debt serviced credit extension without the KYC ( know your client ) qualification process ? ... talk about Shadow style banking ...

  • Ron Butler on 2015-10-20 5:28:09 PM

    Paul makes some good points.

    I would suggest that some clients who are simply salaried employees with great credit ratings and a big down payment might wonder why a mortgage broker is making $7260.00 to process the paperwork on a $660K mortgage, especially if the number is in very large print.

  • Paul Therien - CENTUM on 2015-10-21 12:24:18 PM

    Hi James, In regards to your comment about bank mortgage specialists. It's not a bad thought process except I think that there is a key point missing in your comments. Bank reps are technically employees of the lender that is granting the mortgage whereas independent brokers are not.

    Essentially it means that independent brokers are being paid by a third party, bank reps are being paid by their employer.

    Not making excuses, just simple truth.

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