One broker tired of doing all the work and watching the client jump ship to a big bank matching rate is reigniting the debate on exclusivity agreements.
“How can we get clients to show loyalty?” asks Jim Black, principal broker for Dominion Lending Centres
Mortgage Excellence in Lethbridge, Alberta. “We don’t get paid until the deal is done. I’d estimate that for $100 million of committed deals we’ve done, we’ve had another $30-$35 million committed that didn’t close and have gone to the bank.”
Black – who is frustrated by clients who use his services for free only as a means to gain leverage with the banks for a better mortgage rate – is considering having clients sign a broker agreement, an agreement that would recognize and reimburse the broker for all of this work.
It is a debate that was sparked by then-IMBA
president Albert Collu
, who urged a dialogue with members back in August of 2011 on penalizing clients for using brokers to get better rates at the banks.
Collu told MortgageBrokerNews.ca that “mortgage brokers across Canada invest much time and effort into providing sound advice and pricing for clients are left uncompensated for those efforts when clients take all that hard work to their branch.”
For Black, it is a story that keeps recurring.
“We’re in the process of putting this together, a broker agreement committing the client to pay $500 should they decide to walk away from a deal,” says Black. “I’m still not sure we’re going to do that (have a broker agreement), but it would address the question of the integrity of a client who is using a broker. Seeing the client walk away after all of that hard work is very frustrating. Sure, it is their right and it is a free world – but I have to pay for an office and a staff on my team. I can’t do this for free.”
Ideally, Black says that an organization like CAAMP
should step up to the plate and create some type of mechanism to reimburse brokers who do all the legwork but see none of the money.
“This is an enormous amount of business we’re losing,” he says. “That $30 million, those are real numbers; we need an organization like CAAMP
to step up and do this, create some sort of agreement or protection for brokers. And really, it would benefit the consumer too – as so many jump at that half a per cent from the bank, only to pay the price down the road.”
Black, who estimates that his business is split 50/50 between chartered banks and monolines and alternative lenders, remembers when it was much easier for mortgage brokers to compete against the big banks on rate alone.
“I remember when we were half to a full point better than the banks,” he told MortgageBrokerNews.ca. “But now, the banks are just as competitive on rate, equal to ours or even better – especially when a client comes to them and says ‘beat this’. We as brokers have added a tremendous amount of value to what we offer compared to a few years ago.”
But Black does stress that maintaining client loyalty goes beyond having them sign loyalty oaths, and that brokers need to continue to educate and inform clients so that they can make the right decision.
“That is the biggest challenge we face,” he says, “they (the client) just don’t know and they should know what is involved in getting a mortgage loan. They don’t know the process or how the process works. Nobody likes to admit they don’t know something – but if we can properly explain the benefits of what we have to offer, we’ll be rewarded with a lifetime of business.”