Banks have A-business cornered?

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Another big bank has joined the ranks of lenders offering a sub-three per cent five-year fixed rate; signalling the growing importance to alternative lending to the mortgage broker industry, according to one player.

“We’re seeing more and more brokers exiting the A-market; I’m seeing more private (lenders) out there, more B-lenders and the banks are killing us in the A-space,” Joe Walsh of Dominion Lending Centres Bedrock Financial Group Inc. told MortgageBrokerNews.ca. “Banks have begun focusing more on their retail lending and if they wanted to they could blow us out of the water.”

“They can undercut us and that’s a reality.”

The big banks make headlines when they make substantial rate cuts. Most recently, TD Bank became the latest to offer a sub-three per cent five-year fixed rate. Of course, Scotiabank shook the industry with its 2.97 five-year fixed rate; the lowest five-year rate offered by a bank this year.

The sub-three per cent trend was started by BMO in 2012, when it offered its 2.99 per cent five-year “no friller” fixed rate.

And it’s the alternative lending space that many industry players – including one network head – believe holds the key to success for years to come.

“I … believe that those who embrace the regulatory changes that have occurred in the past two years will reap great rewards,” Albert Collu, president of Mortgage Architects told CMP in its Hot List issue. “These rewards will be attained by brokers who have widened their appetite and proficiency of alternative mortgages.”

However, there are still brokers thriving within the A-space; especially the tenured professionals who have built a large client base over several years.

“I’m lucky because I’ve been doing this for over 30 years and I’ve built trust among my clients,” Bruce Hale of The Mortgage Centre told MortgageBrokerNews.ca. “My A-rate is no different from the A-rate down the street at the big banks and the banks still want to play in the B-space as well.

“They’re playing both side of the fence.”
 
  • Better than the banks on 2014-06-04 11:22:31 AM

    Make sure your clients are aware of the difference in penalty calculations with bank mortgages. Take identical data (i.e.; mtg amount, rate, and time remaining in term) and compare penalties using the bank's online penalty calculator vs. a lender such as First National's penalty calculator. As long as you include the discount from the posted or published rate in the penalty calculation with the bank, it will scare your clients away from bank mortgages, especially if you mention that 100% of customers do not intend to break a mortgage prior to the end of the term, but statistically the majority of them do. Also, stop sending your deals to branch operated banks if you want to build long term relationships with your clients.

  • Ron Butler on 2014-06-04 12:23:17 PM

    Brokers must continue to fight for "A" business. If we all re-position to "B" how will our "A" lending partners continue to support our channel.

    Every business goes through cycles, welcome to the down cycle. Tough underwriting, strong competition, loss of products, commission compression, the list is long.

    We have to battle for our share of "A" business. We need to become more efficient, more productive, more nimble and creative, learn to live with what is likely permanently lower revenue per deal.

    It's no fun but too many great people have worked too hard for too many years to abandon the "A" mortgage space to competitors now.

  • M. Robertson on 2014-06-04 12:45:52 PM

    I think it is important to remember that “in the old days” credit was harder to obtain. Max LTV for conventional was 75%, Max GDS 32%, Max TDS 40% - with no exceptions. Self employed people had to provide THREE YEARS of company financial statements and Tax returns with their NOA’s to get a mortgage. WAAAAY back when, GDS and TDS calculations were based on income net of tax, that’s right folks, NET OF TAX. CMHC would not insure to 95% on purchases, max was 90% - and they only insured first time homeowners. In the old days… well originally brokers were where you went when you could not get a mortgage from a bank. In the 90’s all of a sudden there were broker specific lenders who offered lower rates than the banks, so brokers had rate on their side. The banks lost market share, and now they are standing up and saying “Hold on a minute… we want that back.” Welcome to the new world.

    Brokers spend a LOT of time lamenting how difficult it is to get a mortgage, and how much harder they have to work to get a deal done now compared to before. But… isn’t that the WHOLE POINT of a mortgage broker? To do the work so the client doesn’t have to? To be a solution when the customer does not fit in the box? To provide consumers with education? Or am I missing something? If the broker doesn’t want to do the work, then… why would a consumer deal with one? In the old days… well originally brokers were where you went when you could not get a mortgage from a bank. In the 90’s all of a sudden there were broker specific lenders who offered lower rates than the banks, so brokers had rate on their side.

    They can’t get a better rate anymore, and in most instances it is actually faster and easier to just walk into the bank you have been dealing with for 10 years. Banks don’t hire people who do not have university educations these days, so although not specifically trained as in depth as a mortgage broker, the mortgage specialists that work at a bank are not stupid people. Also, given how many companies (including brokerages) that brag when they get a high producing bank specialist - - well if they are good enough to recruit to be independent brokers, they can’t be as ignorant as people always claim, now can they?

    This article is just another forum for brokers to complain and truthfully whine. It is easier to complain than to roll up our sleeves and get the job done. In the end however, if you want to be successful and stay in the business… you have to suck it up and do the work. Sometimes that means you have to change the way you do business.

  • Ann on 2014-06-04 12:55:16 PM

    Regarding M.Robertson remarks: Well said and Agreed

  • Angela Wong-Liao - Invis Inc on 2014-06-04 6:49:23 PM

    As a prudent mortgage professional, we have to be able to offer both "A" & "B", that is why we are unique in comparing with a bank rep. I fully agree with M Robertson who pretty well sums up what I believe in. Let us work hard and get our clients happy because happy clients means more future business.

  • Angela Wong-Liao - Invis Inc on 2014-06-04 6:49:31 PM

    As a prudent mortgage professional, we have to be able to offer both "A" & "B", that is why we are unique in comparing with a bank rep. I fully agree with M Robertson who pretty well sums up what I believe in. Let us work hard and get our clients happy because happy clients means more future business.

  • Walter on 2014-06-05 8:00:10 AM

    As A client why do I need you, sorry.
    In my brunch I have all my finances in one place.
    I have great rate, no appraisal to pay, no legal fees....
    For me mortgage broker is for B lending, may be for commercial.
    For private funds I go directly to Lawyer. We all know lawyers do private mortgages and my trust to the lawyer much higher.
    Sorry,

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