Broker forecast: Banks have advantage in 2014

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One leading broker is staring into his crystal ball and forecasting another year of competitive advantage for the bank branch in one or two key areas.

“It’s going to be a very tough year for mortgage brokers (and) I think the continuing underwriting challenges and the continuing changes to the nuts and bolts of underwriting are going to make it harder and harder to do refinancing,” Ron Butler of Verico Butler Mortgages told “On the purchase side they’re going to make it tougher for brokers to do purchases but frankly I think the banks will find a way to get around some of the minute changes in the rules.

“Whereas we’re not going to get away with it.”

Underwriting has been a hot-button issue for brokers in 2013, with lenders implementing roadblocks for many borrowers, especially self-employed Canadians. It’s an issue believed to affect mortgage brokers more negatively than bank specialists who, according to Butler, seem more adept at finding a way around the issue.

“At the end of the day, the microscopic things that just kill us (brokers) have to do with the new treatment of debt ratios … how the lender treats what the client’s debt is versus what it says in the credit bureau,” Butler said. “The branches have always found a way to get around that. I’ve been doing this for 20 years and they’ve always found a way to deal with those issues.”

That branch flexibility doesn’t  extend to all deals, leaving brokers a competitive advantage in some areas, argues Butler.

“They can’t always deal with pricing issues,” he said. “But if they’ve got a great client with a conventional mortgage… with a ton of history in their branch, positive credit history, good assets, they can do things we just can’t.”

This is part one of a two-part forecast for 2014. Check back on Monday for part two.

  • Drew on 2014-01-03 7:55:23 AM

    Concur, a good branch Relationship goes a long way.

  • Vince Gaetano on 2014-01-03 8:09:34 AM

    Ron, I agree with you. Self-employed clients coming up for renewal in 2014 will be stonewalled when requesting refinancing. The qualifying criteria changes will result in self-employed clients to "stay where they are" and take the renewal rate after realizing they may not qualify under the new rules. Branches, provided they are bright and think outside the box, will be able to offer unsecured lending facilities such as loans and unsecured debt to high beacon score clients where qualifying criteria is not scrutinized as much. This flexibility will provide an advantage to the branch network. At the same time, it will keep the mortgage broker community sharper. Best of luck in 2014 to all.

  • Kent Farnsworth on 2014-01-03 8:18:25 AM

    Yes it can be incredibly frustrating competing with the banks when they can do some things us as brokers just can't do. One thing in particular is giving them a LOC to pay off higher monthly debt that is also coincidentally enough left over to cover their down payment...

  • on 2014-01-06 6:05:25 PM

    Wow brokers and mortgage specialists are realizing that the tables have turned on them.
    Mortgage origination business is very costly for lenders and margins are not what they were. Bank branches are doing an exceptional job of developing realtions with existing new clients, maintaining and reinforcing that relationship so that the client does leave through the back door at the end of the term..
    Mtg brokers are scrambling to reinvent themselves and now talk insurances, investments,etc and perhaps some mortgage brokers may re invent themselves as financial planners. There are still great opportunities for mortgage brokers and mortgage specialists but the key is what is the added value that comes with the mortgage client being referred.. Banks have a different type of appetite for mortgages and for risk..
    There is an old saying that says take care of your banker and he will take care of you. STOP SELLING THE NOTION OF RATES. 2014 is not about rates but about relationships... Those that are quick to understand this will be very successful going forward. Wishing everyone across the industry great success.

    These are my personal observations!

  • on 2014-01-06 6:07:26 PM

    does leave through the back door

    meant to say: doesn`t leave through the back ( that is how bad it was and is )

  • Ron Butler on 2014-01-07 7:20:02 AM

    Seems a bit odd, Alphonse is apparently with BMO the first bank to nationally advertise highly discounted "no frills" 5 - year rates and yet he says: not about rates.

    Makes you say.............. hhhhmmmmm.

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