Broker: Expect market share to continue to shrink

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Broker market share shrunk in 2014, and industry players should expect more of the same this year, says one leader.

“This year it may even get worse,” Ron Butler of Butler Mortgage told MortgageBrokerNews.ca.
CAAMP’s annual fall mortgage industry report, released in late November, indicated that broker market share had fallen on a year-over-year basis, a large chunk of which had gone to the big banks.

“For all current mortgages on homes that were purchased during 2014 up to the time of the survey, 61 per cent were obtained from a bank,” the official report states. “Mortgage brokers had a 31 per cent share. Credit unions were the source for six per cent of these mortgages, followed by two per cent from life insurance or trust companies.”

These numbers represent a significant change from the mortgage origination breakdown of just a year ago. In 2013, up until the date of last year’s publication, banks accounted for 42 per cent of mortgage market share, while brokers accounted for 40 per cent.

And Butler expects the trend to continue, mainly due to tightened underwriting that has placed more restraints on mortgage brokers than their banking counterparts.

“The underwriting changes that were forced on us, the branches ignored most of them,” through exceptions they allow for conventional mortgages, Butler said. “If you study OSFI’s guidelines, they talk about exceptions based on client relationships, based on assets; we just don’t get them. It’s as simple as that.

“You ask any mortgage broker in Canada if branches have taken conventional business away from them and they will all tell you that they have.”

Still, it may not be all bleak for brokers in 2015.

Filogix states broker origination business was actually up ten per cent this year, according to Butler.

“I’m not sure whether their numbers are always accurate because we’re not 100 per cent sure how they define those numbers; they define those numbers based on application volume, not closed business. It’s hard to tell how precise they are.”
  • Toto on 2015-01-08 12:38:09 PM

    How was the survey conducted as far as Mortgages closed with banks and Brokers?
    As Brokers, we can close mortgages with some of the "big 5" banks.
    In other words, did the 61% of mortgages that closed with banks include mortgages arranged by brokers and closed with major banks?

  • Jeff on 2015-01-08 12:46:14 PM

    The fact that the banks have more flexible underwriting guidelines than monoline lenders is not in the best interest of the consumer and does not promote fair competition in the industry. Is this not something that regulators should be concerned with?

  • Wow on 2015-01-08 1:00:45 PM

    "exceptions based on client relationships, based on assets"

    This is exactly what is happening in the big banks.

    Brokers have no exception.

  • Jeff on 2015-01-08 1:10:55 PM

    Is this not something that should be made to the attention of the Competition Bureau?

  • Jake Abramowicz on 2015-01-08 1:22:25 PM

    The Butler is right. Branches have such incredible leeway with conventional business it is infuriating, but understandable. When they have built the moat around the client with rrsp, resp, chequing, business, and other accounts, they can make those exceptions because they KNOW the client better than we do. It still feels powerless but that's not to say we still can't bite out a chunk of the biz.

    I'm not worried if our broker share goes up or down to be honest, I'm more concerned about my bottom line and strategy. I know there will always be a misconception about brokers out there, and that's the message we should try to focus on - not anything else.

    We're good people! With good ideas! And good value.

  • Peter Motem http://www.easyapproval.ca on 2015-01-08 1:23:14 PM

    “I’m not sure whether their numbers are always accurate because we’re not 100 per cent sure how they define those numbers; they define those numbers based on application volume, not closed business. It’s hard to tell how precise they are.”

    Think you nailed it there Ron - Could be much of that is more about consumers shopping around and taking broker offers back to their bank to match...

  • Jake Abramowicz on 2015-01-08 1:23:59 PM

    @Jeff, whatever you're worried about, stop. Stop focusing on whining to the competition bureau, and start focusing on building branch relationships, and relationships with both monolines, CUs, and big-brand banks. Because your complaint will fall on deaf ears when brought to the bureau. The big banks' lobby groups are far too strong to concern themselves with 1. complaints, and the banks are too strong to worry about how brokers find it unfair. Find another niche if that's where you're being beat all the time.

    "Criticism is not a strategy" says Jeff Bezos, and I agree 150%.

  • CL on 2015-01-08 1:26:21 PM

    We as brokers have a responsibility to inform the consumer, as if this trend continues it will certainly be a disadvantage not only to the consumer but to the broker industry as well.
    The banks as I see it are trying to shrink the percentage of the brokers market share. They no longer want to compete with the non bank lenders discounts.
    This will leave the consumer with less choice for a competitive product.
    Just look at the changes over the past 5 years
    BMO pulls out of the broker market, Firstline closes, BNS buys ING and again another A lender gone from the broker market.

    If we all enjoy the work we do everyday as mortgage brokers ,we all need to pull together now.


  • Angela Wong-Liao - Invis on 2015-01-08 1:59:00 PM

    I am wondering with the tightening of the mortgage rules from Ottawa, it has any effect on the market share penetration by our mortgage brokerage channel.

    When banks turn down the deal, our channel certainly have the sources to assist these declined clients from the banks.

  • Angela Wong-Liao - Invis on 2015-01-08 1:59:16 PM

    I am wondering with the tightening of the mortgage rules from Ottawa, it has any effect on the market share penetration by our mortgage brokerage channel.

    When banks turn down the deal, our channel certainly have the sources to assist these declined clients from the banks.

  • Jeff on 2015-01-08 2:09:58 PM

    Jake Abramowicz, I am not worried for the reason that I have been in the industry for about 12 years and have a successful business. I not am I whining to the competition bureau. I have solid strategies which keep my clients away from the banks. If you however, do not care about a level playing field, then you are not thinking clearly. If you ignore a problem like this, it could get worse.

  • CL on 2015-01-08 2:28:34 PM

    Angela , If this is the case and the future of mortgage brokers is only to look after bank turn downs, then again the consumer is the one that will be effected by this . We as brokers will have no choice but to charge high fees for our service just to make a living.
    The tightening of the rules are with every lender, if one A bank approves the deal internally after it was declined when submitted by a broker than we need to push back. We do have a voice we just need to use it more now.

  • @kiltedbroker on 2015-01-08 2:58:54 PM

    I wouldn't be surprised to see broker share continue to drop... Not only do the banks and branches get exceptions based on previous relationships with clients, banks are huge marketing machines with HUGE budgets. They have the means to reach those clients.

    Comparatively, the independent broker has a relatively small marketing budget. However the problem isn't the size of our budgets, it's the fact that it seems every broker is bent on competing directly with the big banks (and other huge industry online rate players) through SEO and traditional big spend advertising.

    If brokers are going to recapture some of the market share lost to the banks last year, we are going to have to be nimble and innovative and connect with our clients in a way banks cant.

    Most successful brokers have been built their business on customer service and referral business. I don't think a departure from this model is a good idea, quite the contrary, we should be figuring out how we can provide BETTER customer service and be MORE referable.

  • Joel Sida Mortgage Broker on 2015-01-08 2:58:55 PM

    Insurers will more approve files coming from a bank instead of a broker just because of volume,,, not a fair game

  • @kiltedbroker on 2015-01-08 3:21:09 PM

    Joel Sida, I have experienced that first had. Worked on a file that was declined by all 3 insurers, then approved at RBC through CMHC. When I made the inquiry of my rep, I got the standard line... "I can't disclose any of the details, but I can say they put together the application in a different way than you did".

    After discussing more in depth with the client afterwards, The banker set up and used funds from a LOC to make the DP 10% instead of just 5%. The best part, they claimed DP from own resources (banker said that because the possession date was more than 90 days out, the funds could be considered own resources). Oh well.

    Equal ground. Nope.

  • KL on 2015-01-08 3:57:50 PM

    Re the 5% to 10% down payment deal - the bank misrepresented the deal to the insurer which is why it went through. That was not a level playing field file. We do have a competitive advantage in the service and knowledge space but we need CAAMP and IMBA to come together as we don't seem to have strong representation.

  • Pierre Bellegarde on 2015-01-08 4:43:57 PM

    could it be that the banks funding the new condos constructions and houses forced the contractors to use their services plus the usual unfair business paractices that they do quietly. so maybe our virtual banks claiming they work for us could do something!!!!!!

  • Donna on 2015-01-08 5:26:50 PM

    I have to say I do not have this problem. In smaller centres we see the branches not being able to attract good Mortgage officers in Branch. This has helped my business. They are not getting the exceptions in the branches in smaller centres brokers are getting the deals done.

  • Walid Hammami on 2015-01-09 11:56:57 PM

    So banks are getting the desperate cases done (sometimes), so what.

    I'd rather get the niche of clients that are not desperate and spend most of my time providing good service to them than fighting a 99% losing case.

    @Kiltedbroker, now you know some bank tricks, maybe you could use them to your advantage (if possible).

    The truth is, Lenders are most of the time fearful of mortgage brokers (and mortgage reps on commission). They got bit so many times with bad mortgages that they are not willing to give away an inch.

    The best thing you can do for yourself is build a name as an honest competent trustworthy partner. And that means you have to let some deals go.

    Tough deals are a challenge, and you need to do some of them but not all of them. Some need to be deferred a few months later until all the winning conditions are met for the client. Don't rush it. Use a CRM to do a follow up and advise the client to stop looking until a few things are set properly. If the client is not willing to play the game then let him go and...move on.

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