Banks soliciting more than just Realtors for referrals

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Brokers are increasingly frustrated by these big bank referral programs.

It’s not just real estate agents sending referrals to the big banks, according to one industry player who is noticing a growing trend among other financial services professionals.

“Banks are now not only paying commissions to Realtors for bringing mortgage deals to them, but to financial planners and insurance agents as well,” Walid Hammami, a Quebec-based broker with Dominion Lending Centres, told MortgageBrokerNews.ca.

It is unclear how exactly these referrals are structured. While it may be happening, it is not nearly as prevalent – or perhaps as formalized -- as Realtor referral programs, which have been in place for years. These programs have long frustrated brokers who believe they are self-serving and ignore a client’s best interest.

“They are doing their clients a disservice,” George Macris of CHDLA Mortgage told MortgageBrokerNews.ca, noting the agents send clients to lenders who offer fewer products than brokers. “It also often results in more credit checks for the client -- since the agents refer them to more than one bank -- which means more hits to their (rating).”

And while Realtor referrals are nothing new, it appears those agent players may be feeling a growing sense of entitlement when it comes to fees.

“When Realtors call me the first thing they ask is how much commission I will give them,” Macris said. “The agents expect and think they deserve the .5% commission from the banks; it’s not all agents, though.”

Most recently, many brokers felt snubbed when one of its own big bank partners sent an email blast to British Columbia real estate agents soliciting referrals.

However, others note these agreements are perfectly legal and the prerogative of the big banks. 
  • Rick (Mortgage Mentor) Robertson on 2015-08-25 10:23:41 AM

    Walid.....This has been an on-again, off-again game for the 21 years that I have been a broker. There's likely a lengthy article on the advantages and disadvantages to the borrower in those types of referrals.

    Lenders offering to pay realtors is actually the root of how our industry got started. Some bright realtors back in the late 80's realized the best use of their time was to focus on just handling the financing referrals for all the realtors in their office..... I know that the deep roots of what VERICO is today came out of one of the principals positions in HomeLife Realty. Same with Dominion's Chris Kayat at Realty World.

    Here in BC, a realtor receiving compensation for such a referral must disclose the dollars & cents of all commissions they earn as part of a real estate transaction. This means that not only does the borrower (buyer) see how much the realtor is getting from that referral, but also the seller of the home sees the compensation the realtor is getting. Any undisclosed earnings are considered Secret Commissions and illegal.

    I'm not going to write them all out again here, but for more on why a borrower shouldn't follow such a referral, see all the previous comments from prior weeks and months that my friend Ron Butler has written on the advantages of using a Mortgage Broker.

  • steve on 2015-08-25 12:33:18 PM

    Love to see some disclosure laws where the realtor has to explain the personal benefit of choosing that particular referral.
    the system is logical, but may not be ethical. This is where government, brokers and real estate boards can step in to ensure proper disclosure

  • RANJIT DHILLON CENTUM on 2015-08-25 3:22:49 PM

    I think as professionals everyone should respect others, When a client approaches us and informs that they are also working with another mortgage professional, we would not entertain them till they are not happy with the other broker.
    And with the banks they would solicit the clients even when they are going to get a draft made to the lawyer for down payment 2 days before closing, not at all professional, lot of my clients would tell me that banks tried to lure them.
    A sensible realtor would always look at professional with more choices, compared to some greedy ones who would just attracted to the banks when they through the bait of referral fee.

  • Walid Hammami on 2015-08-25 9:56:40 PM

    Rick....I hear you.

    Just imagine in another industry let's say medical where somebody from the plumbing industry starts a business where he refers clients to doctors and he refers only to those who pay him that wouldn't make sense, the plumber has no added value, he does not make a diagnostic and the refers to the appropriate medical specialist.

    That's what is happening in the mortgage industry we are not organized enough to stop this.

    We are not getting the respect we deserve and with money they can diminish our added value.

    It gets worse, I know a general contractor that self financed the construction of a 4 condo-plex, he went to a bank and told them he will refer them the buyers if they pay him 50 bps, they agreed.

    So now we have to stop dealing with financial planners, contractors, insurance agents, realtors because they don't need us. They will need us only for the tough deals and that's what became of us, the lender of last resort.

    The problem goes deeper, brokers are cutting their commission to get the deals done, our added value is being reduced to that (I personally don't buy back rates..so far ).

    We will need to work together and get respect like doctors and lawyer.

    After all no one is getting paid for legal advice if he is not a lawyer nor anyone getting paid for a diagnostic if they are not a physician.

    It is sad to see that in our industry you don't need a licence to get paid for a mortgage.

  • Ron Butler on 2015-08-26 8:05:19 PM

    Walid, honestly, North Korea would be a great fit for someone who wants commerce curtailed. If you are holding yourself out to the public as dealing in mortgages you must be licensed in most provinces, if you point a mortgage prospect at a source for a mortgage and that source pays you, in many cases that is just free enterprise (for some people to accept payment they may have disclosure issues).

    We have to quit talking about lawyers and doctors in this forum. No one here spent 10 years to become a surgeon, no one here had to pass the bar exam. In Ontario the course took 12 hours and the test has an 93% pass rate. Get Real.

    Ultimately why don't we as mortgage brokers quit crying about others poaching what we see as "our" business and simply offer such a great value proposition that we cannot be touched.

  • Rob Campbell on 2015-08-27 11:11:59 AM

    What Ron said.

  • Walid Hammami on 2015-08-27 12:40:40 PM

    Ron, let me clarify my position.

    I am not worried about the immediate situation, I am worried about the long term effects of where we're headed.

    You might not have the same horizon as I do. You might be looking at this just for the next couple of years or depending on how close to retirement you are.I am here for another 30 years at least and I am fully invested in it.

    Surgeon or not, there is nothing wrong in getting ourselves organized.

    Let me give you a Scenario and tell me what kind of value proposition you have prepared for this (adapted to your business model):

    Banks after swallowing some of the virtual lenders, drop compensation to 50 basis points total.

    Waiting for your realistic reply :))

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